Nonprofit Advisor UHY Advisors Mid-Atlantic MD, Inc.

December 2007
Vol. 1 • No. 1

6851 Oak Hall Lane

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Columbia, MD 21045

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410-720-5220

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www.uhy-us.com

Updates, News &

Observations on the
2007 AICPA
National Not-For-
Dear Readers, Profit Industry
Great news! In early September, we joined UHY
Advisors, the country’s thirteenth largest profes-
Conference
B. Jennine Anderson sional services firm.
By B. Jennine Anderson
The merger is particularly good news for our nonprofit clients because
we will be able to offer new, specialized services in addition to the
superior core audit and tax services you have come to expect from
Peacock, Condron, Anderson and Co. We now have depth in IT audit
T he AICPA Not-for-Profit Indus-
try Conference was once again
held at the Grand Hyatt Washington
and risk assessment, forensic and valuation services and internal in Washington, D.C., and was once
audits. We can even help you get ready for your audits as we have spe- again sold out. Year after year this
cialists in alternative investment accounting and valuation, and FIN 48. conference is a great opportunity to
not only hear from great speakers
One of the more compelling reasons for merging our firm and about the latest developments in
expanding our capacity was that our own clients have become more audit standards, accounting and tax
sophisticated, with a number of them doing business internationally.
We now have expanded capacity to support these needs. Not only are continued on page 2
we able to draw upon affiliated international firms who are members
of UHY International, we have practice groups specializing in areas WE HAVE YOUR
of importance to organizations operating internationally such as FINANCIAL SOLUTIONS
transfer pricing and Foreign Corrupt Practices Act compliance.
You may know us as CPAs, but
Overall, we’ve been really happy with the merger, as PCA and UHY
UHY has a full staff of account-
have kept our best qualities intact. Essentially, we’re the same as we
ing professionals who can pro-
were the day before the merger, but with more capabilities. Since,
vide excellent support to your
we’re now operating as UHY Advisors Mid-Atlantic MD, Inc. for our
accounting department. If you
tax and business consulting work, expect to see some changes in the
need to supplement your staff
look of our upcoming newsletters.
with accounting clerks, book-
keepers, or experienced CPAs,
just call us and we’ll help.
We also provide consultation
B. Jennine Anderson
services, design of internal
Managing Director
controls, operating procedures
UHY Mid-Atlantic MD and accounting systems.

For information contact Jennine Anderson at 410-720-5220 or email janderson@uhy-us.com

UHY Advisors brings specialists in nonprofit solutions in accounting, audit and tax.

2007 AICPA National
Not-For-Profit Industry
Conference
continued from page 1
affecting nonprofits, but also to hear
about real-life experiences from
other attendees. Here are some of the
very interesting tidbits I picked up
this year.
Tax Exempt Bond Monitoring
As any of you who have gone
through the process of borrowing via
a tax exempt bond issuance know,
there is a lot you must do to success-
fully complete the transaction. Most
likely, you focused on the paperwork
for months. Then you went to settle-
ment. You had your financing and
you could relax. Or could you?
The big message of this session is
that organizations cannot relax.
There are things to do and remem-
ber throughout the life of the financ-
ing and beyond.
For example: 1) Records, including all
invoices supporting qualified expen-
ditures, must be retained for the life
of the financing, plus three years. 2)
Someone must monitor issuance
costs and make sure that last-minute
fees do not throw the total outside the
allowable range of two percent. 3)
Someone must be vigilant over the
use of the property over the years.
The property must be used only for
exempt purpose of the 501(c)(3): no
unrelated business activity, no pri-
vate use, no religious use. 4) Someone
must monitor the life of the property
purchased with the proceeds and
make sure that payback is timed so
that the life of the issue is less than
120 percent of the life of the project.
None of this seems that difficult.
However, think about the transi-
tions that occur in organizations
over 15 or 20 years: boards and
management change, revenue
streams change, the world changes,
missions change. It is very impor-
For information contact Jennine Anderson at 410-720-5220 or email janderson@uhy-us.com
tant that bond monitoring be set up
as a well-documented process that
is performed regularly so that when
changes occur, the system is there to
catch violations.
The IRS does perform compliance
audits of bond issues and, in the
future, they will be sending ques-
tionnaires to a sample of borrow-
ers. Regular monitoring will help
you if you are selected for audit or
the sample.
Finally, the proposed new IRS Form
990 has a Schedule K that asks for
information on tax exempt bonds.
Cliff Gannett, the Director of the Tax
Exempt Bonds Division of the IRS
and co-presenter of this session, said
that they will be using this Schedule
to aid in their enforcement efforts.
Personal Use of Cell Phones
I told you about this issue last year
and during the year I received numer-
ous phone calls from clients asking for
a practical method of tracking person-
al use of cell phones. I did not have
one. Well, given the turnout for this
session and the ensuing discussion, it
appears that it isn’t only my clients
having trouble figuring a way to be
both compliant and practical.
Unfortunately, the presenters did not
offer a practical solution. However
they did identify methods they felt
would not be approved by the IRS.
So, in lieu of direct guidance on what
to do, here’s a list of what not to do:
1) Issue a blanket written statement
to users that all personal use is pro-
hibited. 2) Add a flat annual amount
to the user’s W-2, irrespective of
usage. 3) Apply a flat percent to all
invoices and add that to the user’s
W-2, irrespective of usage. 4) Charge
the user for any fees in excess of the
flat monthly fee levied under the
organization’s plan.
A method that would be approved is
to have the user analyze each invoice
and document business use. The per-
sonal minutes would be charged to
December 2007
Vol. 1 • No. 1
the user at the flat rate charged for
additional minutes. The organization
that did it this way had only 20 users.
Another attendee from a much larger
organization said that they would
have to hire a dedicated employee
just to deal with cell phone expense
allocations. In response, one of the
presenters suggested they do what
others have done: give an allowance
and gross up for the taxes and have
the users purchase their own phones
and plans. Practical and compliant.
SAS 112
Last year we learned at the confer-
ence about the upcoming changes to
the management letter. I reported to
you that auditors would have more
findings than in the past. A very
important concept was the auditor
could not be part of an organiza-
tion’s internal controls over finan-
cial reporting. The session on SAS
112 this year was very interesting
because we have been living with it
for several months now. Attendees
from organizations confirmed that
there were more comments, as did
the auditors. One point emphasized
is that it is not a bad thing for the
auditee to call the auditor through-
out the year to discuss issues. That
may demonstrate that the organiza-
tion is appropriately assessing the
risk of certain transactions with
respect to financial reporting.
On a personal note, I had dinner
with an acquaintance who manages
a foundation. She was somewhat
upset that she had received a man-
agement letter with significant defi-
ciencies as she had never been writ-
ten up in the past. In addition to a
deficiency because of auditor pro-
posed AJEs, one comment related to
management’s lack of monitoring of
its alternative investment portfolio.
That’s all for this issue. Stay tuned.
In our next newsletter, I’ll be sharing
tidbits about alternative invest-
ments that I gathered at the recent
AICPA conference.