Year End Financials

Update from the CPA

 

Denise 
 
"Here is an example of what was happening for years.
 
A Example National Specialty (or area activity) brings in $26,000 in Event income + $20,000 in Fundraising income + $4,000 in Trophy Donations = $50,000 in Total income for the year
Expends: $20,000 in Event Expenses + $15,000 in Fundraising Expense. = $35,000 in Expenses
Receives $3,000 from the General fund as seed money (Which is actually simply a Transfer from one bank account to another).
 
It WAS being reported (for years) as $15,000 as Event income - That's why sometimes we saw negative income amounts and negative expense amounts.
 
Now multiply that times 24 events and activities and the result is both the income and expenses have been understated by a substantial amount (approx $100,000 in both income and expenses) each year as the Treasurer has not received a complete accounting from each of the activities, and the CPA's that were previously preparing the tax returns weren't aware of the netting (probably as they didn't understand the activities of a dog club.)
 
So to more accurately report the income and expenses on the informational returns, the procedure they are performing for each of the three years is:
 
For approx 24 Area committee's bank accounts(and accounts that were not under the Treasurer's jurisdiction)
1) Reverse the netted entries in Quickbooks (historically this has been posted quarterly as just the change in bank account balances)
2) Post the Summary of Activities - Income and Expenses.
3) Track down transfers from one bank account to the other and match.
4) Make sure after the above that the bank account balances are what was reported to the Treasurer as the balance in that bank account.
 
Repeat for the next account.
Repeat for the next year.
 
This results in the Total Income and Total Expenses of the Activity being reported and over 100 Reversing and Adjusting entries for each of the three years."
 

Karen Bodeving, CPA, CGMA

 

GSCA TAX STATUS

6-30-17

The following is our best understanding of the facts available at the time of this posting.

What appears to have happened?

The GSCA recently received a letter from the IRS that revoked our “not for profit” tax status.  We have been working with a CPA for three years trying to restructure the financial reporting of our Area Committees.  The CPA believes that the mailing of our February extension was not received/not received on time, by the IRS and that a computer generated an automatic letter of revocation.

How it came about?

The GSCA is one of a very few parent clubs of AKC that has Area Committees in their structure.  Most parent clubs require regional groups of local dog fanciers to create Independent Clubs to be able to put on events.  Independent Clubs are responsible for their own bank accounts and their own IRS filings.  GSCA Area Committees have bank accounts with money that is the responsibility of the GSCA.  The GSCA is responsible for documenting the income and expenses and including the Area Committee accounts as well as the: General account, Standing accounts and Rescue account, all together and to declare any income/expense from these areas into our yearly tax filings.  Several years ago it became apparent that we were not completing the above very important step with regard to our taxes.  We hired a CPA and began restructuring the financial reporting of the Area Committees and the GSCA.  We had to change the way the Area Committee accounts were set up (you might remember a lot of talk about Area Committee accounts a couple of years ago) and start using QuickBooks to have entries for all accounts of income and expenses (both Area Committee and GSCA main accounts).  Our CPA decided that it was better to file extensions during this time, than to continue to file incorrect tax documents.  So we have filed extensions for the last three years in anticipation of all years due being filed at the same time, once they were completed after the restructuring

What we are doing about it?

Our CPA has all three years of 990EZ information in her hands at this time.  She is currently getting our 3 years of filings together to send in all at once.  Once this step is complete, we can ask for our “not for profit” status back.  We will probably have a fine to pay for being late with the extension that was due in February.  Our CPA feels that since we have lost money in the last few years that there probably won’t be penalties.  She also believes that this will take six months to a year to rectify.

How do we make sure this never happens again?

The Board is currently working on modifying our Policies & Procedures Manual to include cross checks between the Finance Committee and the Board. This documentation is being updated to ensure that everyone understands their volunteer job better and to define some treasury work product guidelines.

How does this loss of status affect us?

We are currently assessing this very important topic.  We are considering consulting with a tax attorney to understand whether we should alter our current practices.

Are the two Foundations affected?

The two nonprofit foundations have no tax affiliation with GSCA, and there is no impact on the Foundations as a result of the GSCA's current situation. The Foundations each have their own separate tax ID number and file separate taxes. Donations to the GSCA Foundation for Health and Wellness and donations to the GSCA Rescue Foundation remain fully tax deductible.

Please be assured that the Board and I take this lapse in follow through very seriously.  We were so close to the completion of the Area Committee restructure and finally being able to incorporate all the GSCA monies into our taxes.  We will continue to complete the three years of taxes and to ask the IRS for our not for profit status back. This status will be updated/expanded after review by the Finance Committee and by our CPA as more detail becomes available. As we have more information about how this affects us, we’ll keep you updated through our webpage and newsletter.  Thank you for your continued patience and support.

 

Denise Paquette

GSCA President

[email protected]

OBO GSCA Board of Governors

 

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