Internal:Audit

Basic background: Audit committee's charter and responsibilities

• Wikimedia DC has a standing Audit Committee of 3 or more Directors who shall conduct an annual review of the financial records of the Corporation. (from the Bylaws)
• Wikimedia DC's Audit Committee has five members, listed here
• We are "auditing", (or reviewing) this document centrally: Annual financial report (2014–2015)
• Peter believes: (a) we do not know now of any specific problem needing to be investigated ; (b) we can therefore divide up some some background tasks like the ones below, and (c) arrive at a consensus that we did appropriate diligence
• At a top level, the committee's main task is to look at WMDC's financial records (which includes the detailed accounting records in QuickBooks, plus the summary financial statements in our annual financial report) and verify their accuracy.
• In other organizations, an "audit committee" would generally be a Board committee interfacing with EXTERNAL auditors. This is what it means at WM PL and WM FR, and in corporations. However we are a small non-profit so our audit committee is to conduct an "internal audit" only, which is a much lighter thing.
• the committee's main task is to look at WMDC's financial records from 2014-2015 -- the detailed accounting records in QuickBooks, plus the summary financial statements in our annual financial report -- and verify their accuracy.
• presumably also our bank and paypal statements
• I hope, also, the policies and obligations of the Audit Committee overall
• Successful conclusion looks like this: the committee should produce some sort of statement to the effect of "we looked at the records and think that they're accurate" and attaches it to the financial report for 2014-2105 (aka FY2015).

Likely sub-tasks in first round

1. Do either (a) an exhaustive comparison of the underlying bank/debit/PayPal/etc. transactions against the QuickBooks records, or (b) selective spot checks, or some other form of verification. If we find a problem, work with Walter and Kirill to update/correct it. Essential outcome of this committee.
2. Verify that a reconciliation occurred of bank/paypal with QuickBooks at the end of the fiscal year. If we find a problem, work with Walter and Kirill to update/correct it. Essential outcome of this committee.
3. Review key Bylaws, ARTICLE X - FISCAL CONTROLS (edited to focus on audit issues): (1) Disbursements over $25 shall be made only by check drawn on the Corporation's bank account or by electronic means, except where a resolution of the Board allows for cash disbursements in excess of $25 for specific purposes. Any disbursement over $5 shall be supported by voucher or receipt. All checks, drafts, notes and evidence of indebtedness of the Corporation shall be signed by either the Treasurer or the President. Disbursements in excess of $2,500 shall require the signature or written approval of both the President and the Treasurer. (2) Annual Budget. Prior to the commencement of each fiscal year, the Board shall prepare an estimated budget for the following fiscal year for the approval of a majority of those present and voting at a membership meeting. 4. Capital Expenditures. Capital expenditures in excess of $1,000 must be approved by a majority of those present and voting at a membership meeting. Approval of a line item in the annual budget shall constitute membership approval of a capital expenditure.
4. Evaluate: Broadly, were the Fiscal Controls specified in the bylaws followed, as best we know? Should they be revised?
5. Specifically: Was an Annual Budget proposed and approved as specified? Should the rules about the annual budget be changed?
6. Research and revise Fiscal control policy 7.1 to replace "financial records . . . consistent with US GAAP . . . particularly . . . FAS 116 (Accounting for Contributions Received and Contributions Made) and FAS 117 (Financial Statements of Nonprofit Organizations). by something like "the treasurer should maintain financial records that will enable financial statements to be prepared that are consistent with US GAAP FAS 116 and FAS 117." That incorporates two changes: (a) GAAP applies to statements not records ; (b) it is not appropriate/feasible for a small nonprofit to actually meet the GAAP requirements, he thinks, which require lengthy precise footnotes that we have not included and should not bother to include. (There is a discussion among accounting specialists about whether there SHOULD be a "light" version of GAAP, but right now there isn't one.) Therefore we should focus the assertion on those bits of GAAP that we are trying to match -- 116 and 117 -- but even these are 200-page documents, which we should skim before we commit to them so we know what we're talking about
7. Revise 7.7 to add something like "look for other nonprofits and what standards they use."
8. Revise 6.4 to say something like "All solicitation documents shall accurately report [the 501©3 status] of the organization." The current assertion make us responsible for too much -- the tax status of the donor's income and the on the tax deductibility of donations made to Wikimedia DC in the donor's jurisdiction --- for example, we should make no such assertion for foreign donors.
9. Review Fiscal control policy beyond that point?
10. Look over our past Annual Financial Reports, and examine any substantive changes in the report for 2014-2015. Do we know why those changes were made and are we comfortable with the changes?
11. Research task: Maybe look at another nonprofit to see what standards they say they use.
12. Review Whistleblower Policy -- it assigns tasks to us. Review it ; if we have received any significant reports of illegal activity that we are taking action. (Brainstorm here.)
13. Review Non-discrimination policy -- assigns a responsibiilty to chair of Audit committee ; claim: it's been satisfied.
14. Review Delegation of Authority Policy, especially article (3), and Talk:Delegation of authority policy -- do we think the policy was followed, based on our limited information?
15. Review Record retention policy -- for the purposes of this Policy, the President, the Secretary, the Chair of the Audit Committee, or any legal counsel retained by Wikimedia DC shall be authorize : (g) External audit reports.
16. Review our tax submission to the IRS, make sure somebody on our committee knows who wrote it and sent it
17. Review this movement-wide report on finances: Movement-wide Financial Report -- Walter was an author
18. Review our grant submissions and reports m:Grants:PEG/WM_US-DC from 2014-2015-- any red flags, or anything we should verify with the bank/paypal/quickbooks systems? spot checks?
19. Draft a statement from this round of the audit committee to be attached to the 2014-2015 financial report. A model one is the one at the top of the Annual Financial Report for Fiscal Year 2011–12 (which was basically written by Matt Bisanz who I believe is a CPA) (in other years our audit committees have not produced such statements) Peter believes that statement should be updated to say (a) we're a 501(c)3 now; (b) we checked and the organization did stay within the 501(c)3 bounds regarding advocacy expenditures; (c) we are reporting this correctly (according to policy) to our donors.

Second round

• Meet again in 2-4 weeks
• Review what got done ; decide what needs still to be done, to be redone, to be followed up
• Draft a Report from the Audit Committee, phrased so we can all in good conscience sign on to it (or if that fails, we work out another procedure like a vote and a minority report)
• after 2 weeks more, agree on Report or revise it

History of Wikimedia DC's treasurers, presidents, and audit committees

• James was treasurer at launch of Wiki DC until Feb 2013
• Peter was treasurer starting as of the Feb 2013 board meeting, before Trish
• Audit committee was chaired as of 3/2013 by Kirill ; who exactly was on it?
• Our bookkeeping was in GNUcash software up through Sept 30 2013. Since then, it's in QuickBooks online.
• In May 2014 Peter approved Kirill's Form 1023 submission to the IRS, associated with tax-exempt status (right?)
• Trish Melikian was treasurer in the 2014-2015 year. She's in touch. When did she start and end as treasurer?
• Walter became treasurer after that and is treasurer now

Bibliography of WM DC records and related

• Wikimedia DC Annual financial report (2010–2011)
• Wikimedia DC Annual financial report (2011–2012) -- note the Report from the Audit Committee, a model to emulate this year
• Wikimedia DC Annual financial report (2012–2013)
• Wikimedia DC Annual financial report (2013–2014)
• Wikimedia DC Annual financial report (2014–2015)
• The chapter's grant reports to WMF are on meta: m:Grants:PEG/WM_US-DC
• Accounts/platforms: Wikimedia uses Wells Fargo, Paypal, Square (?), QuickBooks online (for bookkeeping, automatically draws from the bank) ; and Dropbox for receipts. WM DC uses no other platforms for money -- right? Must agree amongst ourselves on this statement.
• WM Poland and WM France have *external* auditors. WM DC does not. I believe WM NY does not.
• Wikimedia Australia keeps their financial numbers online at xero.com. Online has the advantage I guess that several of them can access the info, at least with read-only access. Cost maybe $360/year -- note they have much more revenue than WM DC does. For more, talk to treasurer John Vandenburg or previous treasurer now president Charles Franklin. Thanks for Charles Gregory, with whom I spoke at Wikimania 2013.
• Movement-wide report on finances: Movement-wide Financial Report -- Walter was an author