Internal:Audit

Basic background: Audit committee's charter and responsibilities

• Wikimedia DC has a standing Audit Committee of Directors to conduct annual reviews of its financial records, per the Bylaws
• Wikimedia DC's Audit Committee now has five members, listed here
• 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 and our audit committee is to conduct an "internal audit" only, which is a much lighter thing.
• In 2016, the committee's central task is to verify the accuracy of WMDC's FY2015 accounting records in QuickBooks, and the summary financial statements in our annual financial report.
• A 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).
• Peter can get to the QuickBooks files and one Dropbox directory. Walter may have access to WMDC's bank and Paypal statements and to the final Dropbox directory.
• Treasurers in the period to be audited were Peter Meyer and then Trisha Melikian. So Peter is a respondent to the audit and should not be chair.
• There are also other obligations of the Audit Committee which we can conveniently square off against now.

Likely sub-tasks

1. Figure out who has access to the various files we need and shares what we need, perhaps on Dropbox. (Peter to share on Dropbox with all the committee.)
2. Main task: 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 in 2016.
3. 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 in 2016.
4. Review what audit committees for nonprofits are supposed to do. See #Background on audit committees of nonprofits list below under Bibliography. (Robert and Walter both.)
5. 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. Before Oct 1 each year, the Board shall prepare an estimated budget for the Oct-Sept for the annual membership meeting to vote to approve. (4) Capital expenditures over $1000 must be approved by a majority at the annual membership meeting. Approval of a line item in the annual budget constitutes membership approval of a capital expenditure.
6. Evaluate: Broadly, were the Fiscal Controls specified in the bylaws followed, as best we know? Should they be revised? Specifically: Was an Annual Budget proposed and approved as specified? Should the rules about the annual budget be changed?
7. Research and revise Fiscal control policy 7.1 to replace "financial records . . . consistent with US GAAP . . . particularly . . . FAS 116 and FAS 117." My accountant-professor friend identified two problem with this phrasing: U.S. GAAP overall is big and heavy and unsuitable for a small nonprofit basically, and we aren't meeting its standards which call for detailed footnotes. Also it applies to financial STATEMENTS not financial RECORDS. Therefore he suggests to replace this sentence by something narrower and more achievable like "the treasurer should maintain financial records that will enable financial statements to be prepared that are consistent with U.S. GAAP FAS 116 (Accounting for Contributions Received and Contributions Made) and FAS 117 (Financial Statements of Nonprofit Organizations)." I'd like to work on that with someone and propose something to the Board. (My friend said 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 U.S. GAAP that we are specifically trying to meet. (Peter)
8. Revise 7.7 to add something like "The treasurer shall keep a register of fixed assets owned by the chapter." (A minor thing; we have just a WiFi device and a few other odds and ends. Somebody should have an official list.) (Peter)
9. Revise 6.4 to be revised say something like "All solicitation documents shall accurately report [the 501(c)(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. (Peter)
10. Review Fiscal control policy beyond that point?
11. 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?
12. Research task: Look at another nonprofit to see what standards they say they use -- is it GAAP FAS 116 and 117, or something else?
13. 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.) (John)
14. Review Non-discrimination policy -- assigns a responsibiilty to chair of Audit committee ; claim: it's been satisfied. (John)
15. 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? (John)
16. 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 . . . (g) External audit reports. (John)
17. Review our tax forms submitted to the IRS for this 2014-2015 period; make sure somebody on our committee knows who wrote it and sent it ; do they make sense when matched up with the 2014-2015 annual financial report? (Walter to share tax form on Dropbox.)
18. Verify that we didn't spend much on advocacy per our tax-free requirements. This is straightforward. Just need to verify we spend much less than 20% on advocacy of legislation, and did not endorse or financially support political candidates. (Peter to gather evidence.)
19. Review this movement-wide report on finances: Movement-wide Financial Report -- Walter was an author (Peter and Robert and John)
20. 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? (John)
21. 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) org 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. (Peter)
22. New receipts, post-FY2015, are on podio.com not Dropbox. (John and Robert need invites ; Peter get James to send one.)
23. Additional task: Get receipts/records from Trisha who was treasurer from June-Sept 2015 and share on Dropbox. (Peter)

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 (2010) until at least the board meeting of Feb 9, 2013
• Peter was treasurer starting as of the Feb 2013 meeting or perhaps just before the March 2013 one, until June 21, 2015 board meeting
• Trisha Melikian was treasurer starting June 21, 2015 until Dec 6, 2015. She's in touch.
• Walter became treasurer at the Dec 6 2015 board meeting and is treasurer now.
• Audit committee history

• Chair as of 3/2013 was Kirill
• Just before 6 Dec 2015 board meeting Audit committee was: Kirill (Chair), Peter, Emily
• On or around 6 Dec 2015 board meeting Audit committee became: Peter Meyer (Chair), Robert Fernandez, Emily Temple-Wood
• On or around 21 Feb 2016 board meeting Audit committee became: Peter Meyer (Chair), Robert Fernandez, Walter Gómez Segura, Emily Temple-Wood
• As of April 10 2016 meeting Audit committee became: Peter Meyer (Chair), Robert Fernandez, John Sadowski, Walter Gómez Segura, Emily Temple-Wood

Other financial history events

• Our bookkeeping was in GNUcash software from 2010 or 2011 through Sept 30 2013. Since then, it's in QuickBooks online.
• Sept 2013: Our chapter's articles of incorporation have an updated statement of specific purposes, phrased to match IRS requirements for tax-exempt charities:
• Dec 2013: new Fiscal control policy, mainly describing what treasurer should do.
• Circa May 2014: Kirill's IRS Form 1023 for IRS, Application for 501(c)(3) recognition. Organizations file this form to apply for recognition of exemption from federal income tax under section 501(c)(3).

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
• Key WMF grants terminology: PEG--the kind of grants we get ; APG -- bigger annual grants our chapter president aspires to get ; TPS--travel grants for individuals ; IEG--project grants for individuals

Background on audit committees of nonprofits

• National Council of Nonprofits. Internal Controls for Nonprofits. 1 page.
• National Council of Nonprofits. What does an audit committee do?. 2-3 pages.
• NFP Audit and Accounting blog. 2010. does a nonprofit organization need an internal audit function?.
• Nonprofit Answer Guide. What about audits? Does a nonprofit need to have one? What kinds are there?
• Grantspace. Where can I learn more about nonprofit audits?
• Jeffrey S. Gittler; Kevin Ryan. Roles and Responsibilities of Nonprofit Audit Committee Members. Guidestar / Citrin Cooperman. Aug 2011.
• Virginia Society of Certified Public Accountants. 2011. Audit Guide for Audit Committees of Small Nonprofit Organizations. 7 pages.
• Nonprofit Accounting Basics. Audit glossary.