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Chap015 - CHAPTER 15 NOT-FOR-PROFIT ORGANIZATIONS...

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CHAPTER 15: NOT-FOR-PROFIT ORGANIZATIONS – REGULATORY, TAXATION AND PERFORMANCE ISSUES OUTLINE Number Topic Type/Task Status (re: 12/e) Questions: 15-1 Importance of laws and regulations to auditors Explain 15-1 revised 15-2 Government's authority over a NPO Identify, explain 15-2 revised 15-3 Tax-exempt categories Identify 15-3 revised 15-4 Failure to qualify for exemption Explain 15-4 revised 15-5 Public charities and private foundations Distinguish 15-5 revised 15-6 Limitations on political activity and PACs Describe 15-6 revised 15-7 Unrelated business income tax - UBIT Explain 15-7 revised 15-8 Intermediate sanctions Define 15-8 revised 15-9 Annual compliance on Form 990 Identify 15-9 revised 15-10 Inside and outside Board members Discuss 15-10 Cases: 15-1 Establishing an NPO Recommend New 15-2 UBIT and indirect costs Evaluate 15-2 15-3 Performance measures of largest NPOs Internet 15-3 revised 15-4 9/11, accountability, and restricted gifts Internet New Exercises/Problems: 15-1 Various Multiple Choice New 15-2 Public charity Compute 15-2 15-3 Lobbying expenses Describe 15-3 15-4 UBIT Evaluate 15-4 15-5 Gift shop and UBIT Compute 15-5 revised 15-6 Intermediate sanctions Determine 15-6 15-7 Merger of two human service organizations Identify 15-7 revised 15-8 Performance measures - American Red Cross Compute New 18
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CHAPTER 15: NOT-FOR-PROFIT ORGANIZATIONS - REGULATORY AND TAXATION ISSUES Answers to Questions 15-1. Auditors are asked to express an opinion not only on whether an entity presents financial statements that are fair and in accordance with generally accepted accounting principles, but also as to whether the organization has complied with laws and regulations. Apart from the audit function, accountants may be engaged for other attestation services or for the preparation of specialized financial reports to oversight bodies, such as the state and federal governments. 15-2. A state government grants legal existence to a not-for-profit entity in the form of a nonprofit corporation or a charitable trust. With that right comes the responsibility for the government to monitor the actions of the NPO’s managers, and for the agency to report to the government. The public looks to the state to monitor the charitable organization so it operates for the public good. A tax-exempt entity is only exempt from federal income taxes because it has applied to the Internal Revenue Service for that privilege. Congress gave the I.R.S. the power to grant tax-exempt status to qualifying nonprofit organizations, and with that power, the responsibility to monitor organizations’ managers to ensure that the assets the public entrusts to the tax-exempt group are safeguarded and funds are spent for tax-exempt purposes. 15-3. Note: Not all of these are examples of "real" organizations.
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