Planned Parenthood Finance Directors

1. Planned Parenthood Finance Directors Risk Assessment Standards and Changes to the 990 Presented by: Gelman, Rosenberg & Freedman Certified Public Accountants Terri McKnight, CPA, Director, Audit Department Richard J. Locastro, CPA, JD March 26, 2008

2. Eight New Auditing Standards • Collectively referred to as the “Risk Assessment SAS’s” # 104 - #111 • Effective for all audits of financial statements for fiscal years beginning on or after January 1, 2007 • Requires changes in the audit process • Increased effort by your organization and CPA firm Gelman, Rosenberg & Freedman, CPAs

3. What is Risk Assessment? • More focused audit approach using the COSO internal framework: • Control Environment • Risk Assessments • Control Activities • Communication and Information • Monitoring Gelman, Rosenberg & Freedman, CPAs

4. What are the Requirements? • Obtain a more in-depth understanding of the organization and its operating environment • Identify specific risks of material errors or fraud occurring and remain undetected by you along with the actions you are taking to mitigate those risks • Perform a rigorous assessment of the risks of material misstatements of your financial statements based on that understanding • Link the assessment with the resulting audit procedures • Meet new documentation requirements Gelman, Rosenberg & Freedman, CPAs

5. What will CPA firms do differently? • Perform more up-front time planning the audit • Perform new, required planning procedures • Evaluate internal control in more depth • Reevaluate materiality levels • Test some accounts differently • Communicate more internal control deficiencies Gelman, Rosenberg & Freedman, CPAs

6. Perform new, required planning procedures • Ask more questions about your business risks, responses, and –performance measures • Formally discuss the risk of material errors • Observe more of your procedure and controls • Inspect more documents and records Gelman, Rosenberg & Freedman, CPAs

7. Perform new, required planning procedures (cont’d) • Consider what can go wrong at a more detailed level to identify specific risk of error or fraud • Assess the identified risks • Link the risks to our audit procedures Gelman, Rosenberg & Freedman, CPAs

8. How will the Risk Assessment Standards Impact you? • Request more information and documentation • The demands on your personnel will increase Gelman, Rosenberg & Freedman, CPAs

9. Key Internal Control Elements • Control environment – everyone’s roles and responsibilities are clearly defined • Accounting System • Methods and records established to identify, assemble, analyze, classify, record and report on transactions • Maintains accountability for the related assets and liabilities • Accounting Principles Gelman, Rosenberg & Freedman, CPAs

10. Key Internal Control Elements Document accounting policies and procedures, including: • Cash management • Procurement policies • Disbursement policies • Budgeting and monitoring • Reporting • Payroll • Chart of accounts • Investment policies Gelman, Rosenberg & Freedman, CPAs

11. Key Internal Control Elements Document accounting policies and procedures, including: • Financial statement presentation and disclosures • OMB Circular A-133, A-122 requirements • Grant requirements • Revenue recognition • Account reconciliations • Fraud and fraud indicators • Conflict of interest • Allowable and unallowable costs associated with grants • Credit card policies Gelman, Rosenberg & Freedman, CPAs

12. New Form 990 • Still in “draft” status • New Form 990 and background information available on IRS website: www.irs.gov/charities/article/0,,id=176637,00.html • Effective Date • Years beginning on or after 1/1/08 • Transition period if gross receipts < than $1MM and assets <$2.5MM • Bond reporting on Schedule K delayed for 1 year (limited reporting in 2008) Gelman, Rosenberg & Freedman, CPAs

13. New Form 990 • Much more detailed reporting • GRF estimate of time (both client and GRF) to prepare 990 will increase 50%-100% in first year Gelman, Rosenberg & Freedman, CPAs

14. New Form 990 • “Transparency” • Emphasis on Governance and Compensation • 11 page Core form • 16 “schedules” that are filed, if applicable Gelman, Rosenberg & Freedman, CPAs

15. New Form 990 • Changes from first “draft” • Eliminates ratios, percentages from Summary page • Moves Program Service description to Page 2 (from Page 10) • Checklist (Page 3) of Required Schedules Gelman, Rosenberg & Freedman, CPAs

16. New Form 990 • Changes from first “draft” (cont’.) • More opportunity to provide “supplemental” information • Revised governance and compensation sections • Less detailed reporting on some schedules Gelman, Rosenberg & Freedman, CPAs

17. New Form 990 • Core form, Part VI - Governance, Management, and Disclosure • “Best practices” – not required by Internal Revenue Code • Independence issues • Oversight – was Form 990 provided to governing body before filing? Describe review process. Gelman, Rosenberg & Freedman, CPAs

18. New Form 990 • Core form, Part VI - Governance, Management, and Disclosure (cont’.) • Whistleblower policy? • Document retention/destruction policy? Gelman, Rosenberg & Freedman, CPAs

19. New Form 990 • Part VII, Compensation • Must use W-2 amounts (calendar year) • Detailed reporting on officers, former officers, and independent contractors Gelman, Rosenberg & Freedman, CPAs

20. New Form 990 • Schedule A – Public Charity Status and Public Support (no major changes) • Schedule B – Schedule of Contributors (no changes) • Schedule C – Political Campaign and Lobbying Activities Gelman, Rosenberg & Freedman, CPAs

21. New Form 990 • Schedule D – Supplemental Financial Statements • Donor Advised Funds • Conservation Easements • Art Collections and Similar Assets • Trust, Escrow, and Custodial Arrangements • Endowments Gelman, Rosenberg & Freedman, CPAs

22. New Form 990 • Schedule D (cont’.) • Investments • Other assets • Other liabilities • Reconciliation to Financial Statements • Supplemental information Gelman, Rosenberg & Freedman, CPAs

23. New Form 990 • Schedule E – Schools • Schedule F – Statement of Activities outside of U.S. • Schedule G- Fundraising and Gaming Activities • Schedule H - Hospitals Gelman, Rosenberg & Freedman, CPAs

24. New Form 990 • Schedule I – Grants and other assistance in the U.S. • Schedule J – Compensation • Policy questions about setting and monitoring compensation • Payments for “perks” such as first- class travel, club dues, housing, companion travel Gelman, Rosenberg & Freedman, CPAs

25. New form 990 • Schedule K – Tax Exempt Bonds • Issue descriptions • Proceeds • Private Business Use • Arbitrage Gelman, Rosenberg & Freedman, CPAs

26. New Form 990 • Schedule L – Transactions with Interested Persons • Excess benefit transactions • Loans to/from Interested Persons • Grants to/from Interested Persons • Business transactions involving Interested Persons Gelman, Rosenberg & Freedman, CPAs

27. New Form 990 • Schedule M – Non-cash contributions (detailed descriptions of types of property) • Schedule N – Liquidation, Termination, or Significant Disposition of Assets • Schedule O – Supplemental Information (for longer explanations) Gelman, Rosenberg & Freedman, CPAs

28. New Form 990 • Schedule R – Related organizations and unrelated partnerships • Disregarded entities • Related tax-exempt entities • Related partnerships • Related corporations • Unrelated partnerships Gelman, Rosenberg & Freedman, CPAs

29. New Form 990 • Next Steps • Have management try to complete it now to identify: • “Challenging” questions • New information that will need to be collected for 2008 • Have Board perform detailed review of management draft so that there are no surprises Gelman, Rosenberg & Freedman, CPAs

30. Taxation of Benefits • IRS increased scrutiny on benefits • Automatic excess benefit transactions • Items covered: cell phones, computers, cars • Other perks Gelman, Rosenberg & Freedman, CPAs

31. QUESTIONS? Gelman, Rosenberg & Freedman Certified Public Accountants 4550 Montgomery Avenue Suite 650 North Bethesda, MD 20814 301-951-9090 www.grfcpa.com Terri McKnight, CPA, Director, Audit Department Richard J. Locastro, CPA, JD, Principal, Nonprofit Tax Department Gelman, Rosenberg & Freedman, CPAs