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CFC
MEMORANDUM 2003-1
MEMORANDUM FOR LOCAL FEDERAL
COORDINATING COMMITTEES AND APPLICANTS TO THE CFC
| FROM: |
MARA
T. PATERMASTER, DIRECTOR
OFFICE OF CFC
OPERATIONS |
| RE: |
RECONCILIATION OF THE IRS
FORM 990 AND AUDITED FINANCIAL STATEMENTS |
The
purpose of this guidance is to clarify the requirements for reconciliation of
the IRS Form 990 and the audited financial statements when the revenue and
expenses on these two documents differ.
ISSUE:
CFC regulations at 5 CFR Part 950.203(a)(3) require that the
IRS Form 990 and audit cover the same fiscal period and, if revenue and expenses
on the two documents differ, these amounts must be reconciled in an accompanying
signed statement by the certified public accountant who completed the audit.
Organizations have asked if
they need to have a certified public accountant (CPA) perform the reconciliation
of the IRS Form 990 and the audited financial statements if the reconciliation
is not completed in the IRS Form 990 or if a financial manager within their
organization can perform the reconciliation.
The following is a clarification of when a reconciliation of the IRS Form
990 under 5 CFR Part 950.203(a)(3) is required.
The IRS Form 990 and audited
financial statements must be reconciled in an accompanying signed statement
by the CPA who completed the audit if:
Ø
Lines 12 and 17 in Part I of the
IRS Form 990 are different from the
audited financial statements and Part IV-A and Part IV-B are not completed.
Ø
Lines 12 and 17 in Part I of the
IRS Form 990 and Line a in Parts IV-A and IV-B are different
than the total revenues and expenses on the audited financial statements.
In these instances the IRS
Form 990 is either incomplete or in error and an independent third party, the
CPA, must reconcile and explain these differences.
If the CPA who completed the audit is not available, it is acceptable to
use another CPA within the same firm to provide the reconciliation and
signed statement.
The only instance when an
organization’s management may provide a clarification is if Lines 12
and 17 or Line a in Parts IV-A and IV-B do not equal the revenues and
expenses in the audited financial statements because certain categories
of revenues and expenses on the audited financial statements have to be added
together to equal the totals in the IRS Form 990.
We understand that certain
categories of revenues and expenses on the audited financial statements may have
to be added together to equal the total revenues and expenses that are listed on
the IRS Form 990, either on Lines 12 and 17 of Part I or on Lines a of Part IV-A
and IV-B. For example, categories of
revenues and expenses such as unrestricted, restricted or changes in temporarily
restricted net assets may have to be added together to equal the amounts in the
IRS Form 990. If this is the case,
an appropriate management representative (e.g. officer, director, trustee or
chief financial officer) may provide an explanation of the calculation and
categories that were used in arriving at the totals on the IRS Form 990
referenced above.
Please contact us if you have further questions.
Thank you.
Address questions or comments to cfc@opm.gov
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