Governance Issues

In prior postings, we discussed the reasons an external independent auditor would request their client to sign a management representation letter as well as who should sign the letter. In this post, we will discuss the typical content of the letter.

The letter itself, including the written representations, should be addressed to the auditor. Because the auditor is concerned with events occurring through the date of his or her report, the representations should be made as of the date of the auditor’s report.

Good record keeping enables ministers to easily take advantage of all the tax credits available under the IRS code. To avoid the last minute crunch of getting all your records together at tax time, organizing and maintaining certain records are very important skills to develop. To get started I have listed a few important things that Ministers would want to keep track of during the year to make tax time easier.

Finally, below is a summary of the final four schedules that may need to be attached to the new Form 990.

New Schedule K was added for organizations with an outstanding tax-exempt bond issue greater than $100,000. The schedule covers information previously required on the balance sheet. In addition, the use and investment of proceeds and relationships with outside advisors will be reported.

During the NACBA conference I briefly attended a session facilitated by Glenn Woods and Bill Gruenewald that discussed issues relating to Mega-Churches. One of the key issues for churches of all sizes is record retention.

Churches are classified as a charitable organization under the IRS code. They are defined as a 501(c)(3) organization and they are not required to apply for an exemption, (Form 1023) with the IRS. However many churches voluntarily elect to apply for exemption.