When associating with a nonprofit organization an accountant, attorney, prospective board member, partner of major business associate should perform a due diligence check of the organization. Additionally, management should undertake a periodic review occasionally just to check to ensure that the organization’s records are up to date. This checklist is prepared to help make that process more efficient.
- Spreadsheet or listing of directors’ contact information
- clearly defined public and private information
- ID of top officer(s)
- Confirm EIN or SSN of signing officers
- CP 575E EIN from IRS
- 1023
- Accuracy of attestations
- Impact of mission creep
- IRS exemption letter
- Type of organization
- Articles of formation
- Execution
- Provisions for functional governance
- Provisions for change
- Required provision for asset distribution
- Bylaws
- State corporation filing
- State business registration
- State sales tax exemption
- State employment tax registration
- State charities registration
- IRS Annual filings
- Match to bookkeeping records
- State filings
- Consistency of name, address and EIN
- Bookkeeping
- Primary administrator
- Users
- Report only users
- Audit log
- Customized reports
- Cyber security
- Primary and secondary set of records
- Physical security
- Insurance
- Liability
- Workers compensation
- Directors and officers
- Cybercrime
- Licenses for specific lines of business
- Employment contracts
- Professional services contracts
- Bank accounts
- EIN
- Title
- Signing authority
- Online access
- Connected accounts and services
- Trace to automated bookkeeping feed
- Lines of credit
- Credit cards
- Taxes
- Employment taxes
- Sales taxes
- UBI income taxes
My personal belief, discussed with and shared by many of my NJCPA peers, is that a CPA or other professional should not assume a position of management or directorship until due dilligence is completed and a reasonable basis of assurance of legal compliance and operational stability is available.
Over years of conducting this type of due dilligence work for nonprofit organizations, I can’t recall any that did not result in valuable information for management.