A foundation is an organization created especially for the purpose of supporting one or more other organizations or causes. There are public foundations and private foundations. Many foundations are affiliated with operating organizations that they support (e.g., college and university foundations, hospital foundations, church or denominational foundations, etc.). Private foundations are often formed by an individual, a family, or a business for the purpose of making grants to operating charities, churches, and other publicly-supported 501(c)(3) organizations. Private foundations are subject to an array of tax laws that apply uniquely to them, and that are very different from the laws that apply to public foundations or public charities. Our team at BMWL has extensive experience serving foundations – both public and private. Many foundation leaders have come to BMWL for services because of our strong reputation for helping them make sure the financial bases are covered. They often come to us after working with another accounting firm, and they share with us that they were concerned that their previous firm was not bringing matters to their attention that needed to be addressed. After asking around among leaders in the nonprofit community, they learned that BMWL is well known for just that – taking a comprehensive and highly professional approach to providing services that include communicating important matters to our clients on a proactive and consistent basis.
A large private foundation sought our assistance in providing independent auditing services. The foundation had previously been served by a “Big Four” accounting firm. In addition to serving as the foundation’s independent audit firm, we have assisted the foundation in addressing accounting matters related to investing in “alternative investments” such as hedge funds, limited partnership interests, and other similar assets. Our firm also advises the foundation with respect to key tax compliance matters.
A large financial institution served as trustee of a sizable private foundation. The financial institution was concerned that there were compliance issues that were not being adequately addressed. The foundation engaged BMWL to assist in identifying and addressing the issues and to audit the financial statements. One of the “Big Four” international accounting firms had previously provided services for the foundation. Our team identified significant compliance issues requiring attention and proactively assisted the foundation in addressing those issues. As a result of our efforts, the foundation received large refunds from the Internal Revenue Service for taxes that had been overpaid in prior years.
Another key area in which we assist our foundation clients is addressing their practices for establishing and documenting executive compensation and addressing the issue of related party transactions. It is critically important for foundations to handle executive compensation properly. Additionally, the tax laws for private foundations prohibit many types of related party transactions. Improper handling of these important matters can result in negative publicity as well as possible (very significant) penalties for both the foundation and the individuals involved. Our BMWL professionals can help your foundation successfully navigate the rules related to executive compensation and related party transactions – and reduce the risk to your foundation and its leaders.
We assist numerous foundations in areas such as internal controls; board governance matters; risk management; foreign grant-making and direct foreign activities; expenditure responsibility documentation; corporate structure analysis; federal, state, and local tax compliance; representation before tax authorities; and much more.
Foundations exist to support other organizations or people with specific needs. Our BMWL team has extensive experience serving foundations of all types, including both private and public foundations. BMWL serves as the accounting firm for numerous excellent foundations of all sizes, including small foundations and others with asset bases of several hundred million dollars. The fact that all of our clients have as their mission improving the lives of others in some way is a powerful inspirational force for our entire team! Our highly-motivated team has extensive experience serving foundations in a variety of ways.
The BMWL Difference
When selecting an audit firm, it can be difficult to discern the differences among firms. After all, every firm says they are great at what they do, and they promise to provide excellent service. BMWL’s overall approach to serving your foundation is very different from that of other firms and involves a unique and exclusive combination of elements:
We do much more than respond to your questions about issues on your radar screen. We come alongside your team to help you identify important issues that are not on your radar screen. And, we provide clear recommendations for practical solutions to address the issues.
Audits
An audit is the highest level of assurance BMWL can provide with respect to an organization’s financial statements. Audited financial statements provide the organization’s governing body with the auditor’s opinion that the financial statements are presented fairly, in all material respects, in conformity with the method of accounting utilized. The opinion offers reasonable but not absolute assurance with respect to the financial statements to which it applies.
In an audit, BMWL obtains an understanding of the organization’s internal control and assesses fraud risk as it relates to the financial statements. We also corroborate the amounts and disclosures included in the financial statements by obtaining audit evidence through inquiry, physical inspection, observation, third-party confirmations, examination, analytical procedures and other procedures. An audit engagement performed by BMWL also includes an assessment of certain aspects of tax compliance by the organization.
In obtaining an understanding of internal control, BMWL typically focuses significantly on the cash processing activities of an organization, including the processes for receiving cash (whether in currency, check, or electronic form), the processes for accounting for cash, and the processes for disbursing cash either to suppliers or employees.
An audit performed by BMWL typically results in the following reports:
Reviews
Reviewed financial statements provide the organization’s governing body with comfort that, based on BMWL’s review, we are not aware of any material modifications that should be made to the financial statements for the statements to be in conformity with the method of accounting utilized. A review is substantially less in scope than an audit, and does not require obtaining an understanding of internal control, assessing the risk of fraud, or testing the organization’s records.
In a review engagement, BMWL performs procedures (primarily analytical procedures and inquiries) that will provide a reasonable basis for obtaining limited assurance that there are no material modifications that should be made to the financial statements.
A review performed by BMWL typically results in the following reports:
Compilations
A compilation represents the most basic level of service BMWL provides with respect to an organization’s financial statements. In a compilation engagement, we assist management in presenting financial information in the form of financial statements without undertaking to obtain or provide any assurance with respect to the financial statements. In a compilation, BMWL complies with applicable regulatory standards, which require us to have an understanding of the industry in which the client operates, obtain knowledge about the client, read the financial statements, and consider whether the financial statements appear appropriate in form and free from obvious material errors.
A compilation does not contemplate performing inquiry, analytical procedures, or other procedures ordinarily performed in a review; or obtaining an understanding of the organization’s internal control; assessing fraud risk; or testing of accounting records. Compiled financial statements may be prepared without disclosures (notes to the financial statements). The compilation report provides no assurance with respect to the financial statements.
A compilation performed by BMWL typically results in the following reports:
Financial Foundations Engagement
The Financial Foundations EngagementSM offered by Batts Morrison Wales & Lee is particularly suited for organizations that want to address the foundational elements of financial management and oversight but are not ready to have a full audit of their financial statements. The Financial Foundations EngagementSM is designed for affordability – with fees payable over an easy-to-manage five-month period. Highly-experienced and well-trained members of our team will provide the specific services described below.
Internal Control Assessment
Our team will work to understand and document your organization’s internal control processes for handling cash receipts and disbursements, including payroll. We will address your procedures for handling and processing cash receipts from the point of collection through bank deposit to recording in the accounting records; procedures related to cash disbursements from the point of initiation to authorization for payment to disbursement and recording in the accounting records; and certain aspects of control procedures related to payroll, general ledger maintenance, and other financial activities of the organization. Our team will discuss with you and issue a report describing our observations and recommendations.
BMWL Tax Shield Compliance AssessmentSM
The BMWL Tax Shield Compliance AssessmentSM includes inquiries by our team related to federal tax compliance risks and opportunities. We will report to you matters that we identify which we believe warrant your attention in the following areas:
Internal control and tax compliance advisory services
BMWL offers advisory services to assist an organization’s management in identifying internal control vulnerabilities as well as tax compliance risks and opportunities. Each such engagement is tailored specifically to the needs of the organization we are serving, and is designed to offer practical and helpful recommendations for reducing risk or for taking advantage of untapped opportunities.
In performing an internal control and tax compliance advisory services engagement, BMWL’s team makes inquiries of appropriate members of an organization’s management and staff and inspects documents and records as deemed appropriate for the specific engagement. Internal control and tax compliance advisory engagements address many of the types of internal control and tax compliance matters that BMWL would typically address in an audit engagement. The report issued in connection with an advisory services engagement is not an opinion – rather it is a summary of observations and practical recommendations.
– Church Finance: The Church Leader’s Guide to Financial Operations
– Nonprofit Financial Oversight – The Concise and Complete Guide for Boards and Finance Committees
– Board Member Orientation – The Concise and Complete Guide to Nonprofit Board Service
– Unrelated Business Income and the Church – The Concise and Complete Guide
– Unrelated Business Income and the 501(c)(3) Public Charity – The Concise and Complete Guide
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