Alan Dickinson, CPA, PFS

Jack W. Hansbury, CPA

October 26, 2000

Attn: Steve Quesenberry

This letter is to answer the questions that came out of the annual meeting of the Mid-Atlantic Association of RC&D Councils. I am going to list the question that was asked and below it list the answer to the question.

1. What are the ramifications of council's using foundation, state or local money that is put into interest bearing accounts?

The only limitation you have is your by-laws or restrictions the foundation, state or local agency places on those funds. If there are no restrictions the money can be placed into an interest bearing account.

2. What about using the interest for things such as salaries, equipment, etc.? Especially with regards to Council audits.

Once again the only restriction on utilizing the interest would be what the foundation, state or local agency has in the grant or the RC&D's by-laws. If the council is having an audited financial statement prepared, the auditors will look at the councils by-laws for guidance on how the funds are to be used and will look at the grant from the foundation, state or local agency to see if there are any restrictions on the funds.

3. What are the requirements for an audit? Should they be yearly?

The requirements for an audit are based on councils' by-laws and also based on the grants they are receiving. Some grants require the recipient to have an audited financial statement. Audits are normally done on a twelve-month basis and they are done in accordance with the councils' year-end. If the councils' year-end is December 31 the audit would be completed shortly after December 31 and would report on the twelve months ended December 3 1. In rare occasions audits can be for a period of less or more then a twelve-month period if a specific agency requires such action.

4. Can Council people perform an audit or should a CPA from outside the organization perform the audit?

An audit is performed by an independent Certified Public Accountant. One of the requirements is that the individual performing the audit must be independent of the organization. There are two other types of financial statements, one is a compiled financial statement and the other is a reviewed financial statement. Either one of those financial statements do not require that the individual preparing the financial statement be independent. However, if they were not independent then they would have to disclose it in the report that is issued with the financial statement.

5. What are the requirements for a 990 and who should complete the form a CPA or the Council?

A Form 990 is required if the non-profit organization receives $25,0000.00 or more in grants or revenue generated during the twelve-month period ending with their year-end. An individual of the Council can complete a 990 or a Certified Public Accountant can. There is no requirement that a Certified Public Accountant complete the 990, unless your by-laws or the grant states that the 990 has to be completed by a Certified Public Accountant.

6. What are the different types of audits, what are there requirements, what can they be used for and what is acceptable by funders?

There is only one kind of audit, an audited financial statement that is issued by an independent Certified Public Accountant. There are two other types of financial statements that can be issued one is a compiled financial statement the other is a reviewed financial statement. A compiled financial statement is compiling the information provided by the organization into a financial statement without any type of verification. A reviewed financial statement is one step up from a compilation. The individual preparing the reviewed financial statement is required to perform certain type of tests to make sure that the information provided is reasonable. If anything does not appear to be reasonable based on the auditor's judgment and past experience then he is required to investigate those items that appear questionable. The type of financial statement that you are required to have depends on your by-laws or the requirements in the grants that you are receiving from a foundation, state or local agency. If there are no requirements stated in your by-laws or in the grants, then you may utilize a compilation.

7. Are there one or more inter-net web sites that would be beneficial to Councils that help explain financial management?

I am not aware of any specific inter-net web site that would explain financial management. One of the things I caution you to be aware of is who is the individual or organization that is posting the information to the web site. Only use those web sites that are provided by reputable organizations. Should you have a question on a specific web site I would be more than happy to take a look at it and give you my opinion on that web site.

8. How can you find a responsible CPA and what should we look for in credentials?

Every state contains a society that CPA's belong to for instance the New Jersey Society of CPA'S. Within that society there are committees for non-profit organizations. Your best bet is to contact the Society within the state your organization is located and find out whom is the chairman of the non-profit committee. Talk with that individual and they may be able to help you find a CPA that can assist you. Also, every state has a Board of Accountancy that regulates Certified Public Accountants. If you have a question regarding a particular Certified Public Accountant you may contact the State Board of Accountancy and find out if there are any complaints that were registered against the Certified Public Accountant. As far as credentials, you want a CPA that is experienced in dealing with non-profit organizations, and with organizations that receive grants from foundations, state and localities. You should ask the CPA for a list of non-profits that he or she has provided services to. You should contact those organizations and find out what their experience has been with the CPA.

9. Are there one or more inter-net web sites that deal with by-laws?

I am not aware of specific sites that deal with by-laws. I am sure you can find many sites that deal with by-laws and how to structure your by-laws. Once again be aware of who is posting that information on the web site and make sure it is from a reputable source. If you find a specific web site and would like me to take a look at it and give you my opinion on it, I would be more than happy to do so.

If you have any additional questions or would like to discuss any of the above questions with me in person or on the telephone, please do not hesitate to contact me at the above address or at phone number (856) 697-3258.

Sincerely,

Jack W. Hansbury

Certified Public Accountant