August 2008
Connecticut Charities can
Reduce Audit Fees
Tight
budgets call for creative ways to save money. Audit fees
should not be immune to such fiscal scrutiny. Indeed, while
the auditor should never compromise his or her audit
standards, all audits should be performed as efficiently as
possible. Luckily, in Connecticut, charities have the
ability to reduce audit fees and still comply with the
state’s registration requirements.
This article does not suggest a reduction in service level
with respect to the organization’s financial statement.
Although reviews and compilations may be acceptable for
some, if the organization is required to register with the
State of Connecticut / Department of Consumer Protection and
if its qualified gross revenues are more than $200,000, the
organization must include an audit with its registration.
However, the Annual Charity Registration Application defines
“audit” in a nontraditional manner, and that definition can
be the catalyst that could enable the auditor to reduce his
or her fees.
In general, the Application states that the financial report
of an organization which received more than $200,000 in
gross revenue must be accompanied by an opinion of any
independent licensed public accountant or certified public
accountant. The Application states that this requirement
may be satisfied in either of two ways: Option A - the
opinion may refer to a set of financial statements, or
Option B - the opinion may refer directly to the IRS form.
Option B essentially allows the auditor to avoid the
expression of an opinion on the charity’s financial
statements. Moreover, Option B allows the charity to avoid
the preparation of financials under Generally Accepted
Accounting Principles including all the related disclosures
required under GAAP. Thus, Option B can save the charity
thousands!
With Option B, the auditor can rely on special audit
guidance. The guidance spells out procedures that should be
employed and the language that must be used in his or her
report if the report refers to the organization’s Form 990.
If the financial statements in Form 990 are NOT in
conformity with GAAP, the auditor should consider whether it
is appropriate to issue a special report. Generally,
the special report may only be used if the financial
statements and reports are intended solely for use by those
within the entity and one or more regulatory agencies.
Option B is not for every charity. There are tradeoffs.
For example, if GAAP financial statements are important to
the management, the board, creditors, regulators and
supporters of the organization, Option B may be
inappropriate. Nevertheless, Option B should be at least
considered as it may enable the organization to minimize
audit fees.
If you have
any questions, or if you require any additional information
please feel free to contact Vincent Ruocco, LLC, CPA at
203.932.2931.
~~~~~~~~~~~~~~~~~~
