Oversight Board. St. Petersburg, Fla. Contact:
1-2: National Construction Industry Conference, American Institute of CPAs. Las Vegas.
1-2: Estate & Financial Planning Conference,
Florida Institute of CPAs. Sheraton Ft. Lauderdale Airport Hotel, Ft. Lauderdale, Fla. Contact: (850) 224-2727 or www.ficpa.org/cpe.
5-7: National Conference on Current SEC and
organizations. Such usage, however, must remain in compliance with the organization’s
With larger organizations, the use of committees by the board can effectively provide
focus and expertise in key areas. Common
committees include executive, finance, audit,
fundraising and technology. Each committee
can provide specific attention to its task and
report its recommendations to the board as
a whole, thus streamlining board meetings,
reducing unneeded deliberation, and keeping the board engaged.
Having an audit committee that is separate
from the finance committee is a practice arising from Sarbanes-Oxley. While not always
feasible based on the size of an organization,
those groups that use an audit committee
benefit from improved financial reporting
and increased risk assessment ability.
Each board member must understand and
be focused on the organization’s mission. The
mission should be reiterated at every board
meeting to remind participants of why they
are donating their valuable time and efforts.
Planning regular board retreats can be an instrumental tool in maintaining that crucial
focus. Such events enable members to reflect
upon the mission, generate new ideas, and
renew their drive in serving the organization.
Board members set the tone for those working and volunteering for the organization,
and their commitment will set an example.
PARTICIPATION AND ENGAGEMENT
An effective board of directors requires en-
gaged participation in meetings and func-
tions, and involvement in events that promote
the mission of the organization. Innovative
technological advances — such as smart-
phones, Skype and Web portals — enable
PCAOB Developments, AICPA. Washington,
D.C. Contact: www.cpa2biz.com.
5-10: Consultants’ Training Institute, NACVA.
Westin Beach Resort and Spa, Fort Lauder-
dale, Fla. Contact: www.nacva.com/events.
asp or (800) 677-2009.
12-15: Principles of Fraud Examination, As-
sociation of Certified Fraud Examiners. Aus-
tin, Texas. Contact: www.acfe.com.
5-6: Valuation & Litigation Services Confer-attendance at meetings even when physical
attendance is not possible.
Understanding and implementing best
practices is instrumental in providing quality governance for a nonprofit organization.
Best practices will both further the nonprofit’s
mission and help with what could be a paramount factor for future existence — assessment of risk. Identifying factors that could
jeopardize the organization will enable the
board to address needs before negative effects are felt. The risk factors can be broken
down into four areas: organizational, investment, fraud, and inherent risk.
With the implementation of Statements of
Auditing Standards Nos. 103 through 112 on
risk assessment, auditor strategy was changed
to require a more in-depth understanding of
the organizations they audit and to identify
areas that create the greatest risk of material
Through documenting financial systems,
understanding internal controls, and trans-
actional walk-throughs, auditors have sub-
sequently shifted the auditee’s focus toward
overall organization risk. Boards have be-
come acutely aware of factors not previously
considered at length, such as internal control
ence, Florida Institute of CPAs. Sheraton Ft.
Lauderdale Airport Hotel, Ft. Lauderdale,
Fla. Contact: (850) 224-2727 or www.ficpa.
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deficiencies, economic and industry factors,
and effects of related-party transactions.
A volatile stock market creates significant
risk for organizations with endowments or
invested reserve funds. Consideration of investment risk is fundamental to ensure that
accumulated assets of the organization are
protected, and the board serves as the steward
for those assets and maintains responsibility.
The board should have an investment policy
that can endure volatile periods. Having a
“market-reactive” approach is irresponsible,
as significant losses might be sustained that
cannot be recovered. The constant monitoring of the investment portfolio is vital to ensuring the appropriate diversity of holdings,
for both principal maintenance and growth.
The risk of fraud is omnipresent, and it often occurs from the most unexpected source.
Boards must understand the opportunities,
incentives and mindset from which fraudulent activity arises. A solid system of internal
controls can mitigate the risk and potential of
its occurrence. In addition, the establishment
of a whistleblower policy can assist in uncovering fraud rooted within the organization.
There are factors outside the control of the
organization that can create significant risk
to its wellbeing. Understanding inherent risk
will help insulate the organization from these
risks by directing the board to make adjustments to help manage it.
The struggling economy has caused a decrease in available donations and support,
thus opening the need for new and innovative funding methods. Competition from
organizations with similar missions creates
the need for differentiation; otherwise, both
support and availability of beneficiaries will
be redirected elsewhere.
There is no one way to instill proper governance practices in a nonprofit. There are,
however, many over-arching principles that
apply to all types and sizes of organizations.
Understanding and implementing those
principles is the first step toward IRS compliance, public confidence and, most important,
furthering the nonprofit in its mission. AT
The Internal Revenue Service has posted
the instructions for the estate tax form for
people who died in 2010, the year that the estate tax was not in effect for many taxpayers.
It also granted tax filing and penalty relief
to large estates of people who died in 2010,
saying their heirs will have until early 2012
to file the necessary tax returns and pay any
estate taxes owed. The IRS is also providing
penalty relief to certain beneficiaries of large
estates on their 2010 federal returns.
Under the original Bush tax cuts of 2001,
the estate tax was effectively gone for people
who died in 2010. The tax cut extension that
was passed last December reinstated the
estate tax for those who died in 2010, but
it allowed their executors to opt out of the
estate tax, and instead elect to be governed
by the repealed carryover basis provisions of
the 2001 law. That choice is supposed to be
made by filing Form 8939.
The instructions for Form 706, which were
posted last month, note that executors of estates of decedents who died in 2010 may make
a special election to apply modified carryover
treatment. If the special election is made, the
estate will not be subject to federal income
tax and Form 706 should not be filed.
Alternatively, for decedents who died between Jan. 1, 2010, and Dec. 16, 2010, the due
date for Form 706 was originally September
19. (For those who died later in the year, the
due date is nine months after death.) The
applicable exclusion amount is $5 million
(a credit equivalent of $1,730,800), and the
maximum estate tax rate is 35 percent. The
applicable rate for generation-skipping transfers is zero. Prior gifts must be calculated at
the rate on the decedent’s date of death.
The tax relief granted by the IRS is designed
to give large estates, normally those over $5
million, more time to comply with some of
the key tax law changes enacted late last year.
Revised versions of the estate tax forms are
now available on IRS.gov, and the carryover
basis form will be released this fall, the IRS
noted. Under the relief, large estates that opt
out of the estate tax will now have until Tuesday, Jan. 17, 2012, to file Form 8939. This special carryover basis form, required of estates
making this choice, was previously due on
Nov. 15, 2011. More details are available in
Notice 2011-76, on IRS.gov. AT
BY MICHAEL COHN