Nonprofit Advisor s

UHY Advisors Mid-Atlantic, Inc.

February 2008
Vol. 1 • No. 2

s
6851 Oak Hall Lane Suite 300 Columbia, MD 21045 410-720-5220 Fax 410-381-2524 www.uhy-us.com

age value, account for, audit and

Alternative report on than more traditional New Form
investments such as CDs, bonds and
Investments publicly traded equities. 990 Released!
by B. Jennine Anderson, Director We heard several important mes- by Matt Duvall, Senior
sages. For example, the auditors

I n our last news-

letter, I covered
a number of inter-
esting tidbits that
I picked up from
the AICPA Not-
for-Profit Indus-
try Conference
B. Jennine Anderson held in Washing-
ton, D.C., this year. There’s one
more key subject from the confer-
ence that I want to address: alterna-
tive investments.
As a point of reference, multiple ses-
sions on alternative investments
were offered at the conference. I
attended them all! Alternative Invest-
ments: Accounting and Auditing,
Alternative Investments: Tax Reporting
Implications and Management Pro-
cedures for Alternative Investments.
The rooms were packed for each
session. It didn’t matter much if par-
ticipants were the accountants from
the nonprofits or the auditors ... or
the tax specialists. They were all
struggling with this issue. Alter-
native investments are growing in
importance in nonprofit portfolios,
and they are more difficult to man-
were reminded that a confirmation is
not sufficient evidence of the valua-
tion of these investments. The infor-
mation on the confirmation is sup-
plied by the investment manager
who is not exactly an “independent”
source. Other techniques must be
used to audit the verification of value
by management. Note that manage-
ment is to do the verification, and the
auditor’s job is to audit that verifica-
tion. If management does not present
auditable evidence to the auditor,
then the auditor may have to put a
scope limitation in the auditor’s
opinion. Verification of investment
values by management must consist
of more than just accepting the value
stated on the statement prepared by
the investment company.
In short, the subject of alternative
investments is an area in which
organizations may need to obtain out-
side help in order to prepare for audit.
Well, that’s it for this year’s AICPA
Conference wrap-up. Please feel
free to contact me if you need addi-
tional clarification on any particular
subjects addressed here.
I n June of 2007
the IRS released
a discussion draft
of a redesigned
Form 990 for pub-
lic review and
comment. After
considering over
Matt Duvall 650 e-mails and
letters received during the public
comment period, the IRS has issued
the final version of the new Form 990.
continued on page 2
WE HAVE YOUR
FINANCIAL SOLUTIONS
UHY has a full staff of account-
ing professionals who can pro-
vide excellent support to your
accounting department. If you
need to supplement your staff
with accounting clerks, book-
keepers or experienced CPAs,
just call us and we’ll help.
We also provide consultation
services, design of internal
controls, operating procedures
and accounting systems.

For information contact Jennine Anderson at 410-720-5220 or email janderson@uhy-us.com.

UHY Advisors brings specialists in nonprofit solutions in accounting, audit and tax.

Employees May Not Be Split Personalities
by B. Jennine Anderson, Director
F rom time to time we get a ver-
sion of the following question
from clients: “Tom, an employee, is
also good at photography which he
pursues on the side. We want to hire
him to do some photography proj-
ects for us. Since the photography
assignments meet the independent
contractor criteria, we plan to enter
into a contract with him and issue a
1099-MISC at year end for this piece
of work. That’s OK, right?”
We say, NO WAY!
The determination of whether an
individual is an employee or an
independent contractor is done by
New Form 990 Released
continued from page 1
The goals behind the redesign of this
form were 1) to increase the trans-
parency of filing organizations to the
public, 2) to increase their compliance
with government regulations and
3) to reduce the overall filing burden.
Though it may seem difficult to
increase transparency and compli-
ance, while at the same time reducing
the filing burden, the IRS has crafted a
new Form 990 that appears to pro-
gress toward meeting all three goals.
The new Form 990 retains the discus-
sion draft’s core form along with a
series of required supplemental
schedules, depending on the charac-
teristics of the reporting organization.
Now that we’ve successfully merged with UHY Advisors, we’ll be accessing more of the firm-wide resources
available to us. From time to time, we’ll be sending out the UHY Advisors’ nonprofit newsletter in addition to
the Mid-Atlantic newsletter. Just a heads up in case you get a different-looking newsletter now and again.
For information contact Jennine Anderson at 410-720-5220 or email janderson@uhy-us.com.
UHY Advisors brings specialists in nonprofit solutions in accounting, audit and tax.
evaluating ALL tasks performed by
the individual. It is not appropriate
to allocate tasks to the two classifi-
cations and then treat the individual
in two ways. Therefore, you must
include the new photography
assignment with the total tasks and
reevaluate the individual’s classifi-
cation. It is possible, but not likely,
that the photography projects
would shift the preponderance of
evidence toward the individual con-
tractor classification. If it did, ALL of
the individual’s activity would shift,
not just the one part.
To summarize, you cannot treat
one person as both an employee
The core of the form provides
reporting organizations the oppor-
tunity to describe their missions,
exempt activities and exempt
accomplishments at the front of the
form. The new form also provides a
summary of key information; this
provides a “snapshot” of the report-
ing organization’s key financial,
compensation, governance and
operational information. Increased
transparency, check.
The core of the form provides the
reporting organization with a sec-
tion to make assertions regarding
potential federal tax compliance and
filing obligations, plus it collects
important federal tax compliance
information all in one place.
Increased compliance, check.
February 2008
Vol. 1 • No. 2
and an independent contractor. If
you do not reclassify the entire per-
son’s activity, then that person
remains an employee and the addi-
tional payments must run through
payroll.
A last point: The American Payroll
Association Basic Guide to Payroll,
published by ASPEN Publishers,
says that one of the red flags that
will trigger an IRS payroll audit is
“A Form 1099-MISC and Form W-2
are filed for the same worker, or an
employee who previously received
a Form W-2 now receives a Form
1099.” To paraphrase Robert Frost,
that is a road better left untraveled.
The core of the form contains all of
the questions that are applicable to
all reporting organizations and
moves the circumstantial questions
to the supplemental schedules.
Reporting thresholds have also been
increased for several of the sched-
ules. Reduced filing burden, check.
It remains to be seen if filing organi-
zations will find that the new
reporting efficiencies of the new
form compensate for the trans-
parency and compliance upgrades.
The new form will be used for the
2008 tax year (returns filed in 2009)
and will be phased in for smaller
organizations based on gross
receipts and assets. Stay tuned for
more details in future editions of this
newsletter.