It’s that time of year where we’re all starting the Year End Countdown, and madly collecting documentation for budgeting purposes as well as Annual Audits. Here are two things you should start getting together NOW to make the audit process run smoothly.
1. Your Organization’s Board Minutes for the Year
You’ll need the full year’s worth of Board Minutes pulled together in an accessible resource. Many of our clients provide them electronically via DropBox, Google Docs, or some similar document storage service. Nonprofit Numerics will need these documents to submit to your CPA’s as part of the Annual Audit.
2. Related Party Transactions of the Organization
What’s a “related party”?
A related party is anyone who can directly or indirectly significantly influence or control another party. Related Party Transactions are financial transactions between parties with inter-linking relationships. So, consider anyone who serves as a director, officer, or key employee of your organization or any of its affiliates. Your organization has to consider related party transactions involving the organization in which a related party has a substantial influence over the affairs of the organization.
Here’s an example. Your nonprofit buys a piece of equipment from a reputable local company. No problem, right? What if the company employs the wife of a staff member who didn’t have any authority over the equipment purchase? Still no problem? Wellllllll …… if you didn’t buy the equipment at the best price available, and the transaction wasn’t reviewed and approved by the right person, then you actually might have a problem.
Related parties must:
- Disclose in good faith the material facts concerning their interest in the proposed transaction; and
- refrain from participating in deliberations and votes on the proposed transaction.
The Board of Directors must:
- Consider alternative transactions not involving a related party;
- approve the transaction by no less than a majority vote of the directors present at the meeting; and
- contemporaneously document the basis for approval.
What do we need for your Annual Audit? A list of any Related Party Transactions and the above-listed details on each. Again, using an online storage service like DropBox or Google Docs is helpful, as Nonprofit Numerics will need to report on these transactions for your Audit.
For more on Related Party Transactions, and a guide for nonprofits on this issue, see the full article on nonprofitresourcehub.org.
