Quiz 13: Auditing, Tax-Exempt Organizations, and Evaluating Performance

Using the annual financial report obtained for Exercise 1-1, answer the following questions: a. Examine the auditor's report. Is the auditor identified as an independent CPA firm A state audit agency Other Is the wording of the auditor's report the same as illustrated in this chapter Does the scope paragraph indicate exactly what is covered by the auditor's opinion If the auditor is expressing an opinion only on the basic financial statements, what responsibility is taken for the combining and individual fund statements Is the opinion unmodified If not, what are the qualifications b. Does the annual financial report contain a single audit section If not, does the report refer to the existence of a single audit report If so, does the report include a Schedule of Federal (and State) Financial Assistance Are all of the reports illustrated in this chapter included Can you identify the major programs, if any

Go to the Better Business Bureau's Wise Giving Alliance website (http://www.bbb.org/us/charity/). Click on "List of National BBB Wise Giving Reports," select a charity, and open the full report. Be sure to select a charity that provides financial information. a. State the name of the organization and its mission. b. What are the two largest programs in terms of expenses c. What are the two largest sources of funds d. Calculate the program expense ratio. e. Calculate the fund-raising efficiency ratio.

Using the annual financial report obtained for Exercise 1-1, answer the following questions: a. Report the following ratios, using the formulas appearing in Illustration 13-4 as a guide: (1) Financial Position (government-wide, governmental activities) (2) Financial Position (General Fund) (3) Quick Ratio (government-wide, governmental activities) (4) Leverage (government-wide, primary government) (5) Debt Service Coverage (enterprise funds) (6) Debt Service to Total Expenditures (governmental fund-basis) (7) Debt per Capita (government-wide, primary government)* (8) Debt to Assessed Value of Property (government-wide, primary government) b. Write a memorandum, based on the ratios you calculated in part ( a ) of this problem, giving a recommendation as to whether to purchase (1) general obligation or (2) revenue bonds of your governmental unit.

Use the Internet to locate your state's site for reporting school district "School Report Cards." Select a school district or individual school and answer the following: a. What measures of service inputs are presented on the report card b. What measures of service outputs are presented on the report card c. What measures of service outcomes are presented on the report card d. What information is presented to provide comparisons between the school selected and other schools in the state

Presented below are the computed amounts of ratios for the Village of Elizabeth example appearing in the chapter. a. Using the financial statements provided in Illustrations 2-5 through 2-11, compute ratios for the City of Salem. Assume the population of Salem is 52,000 and the fair value of property totals $970 million. b. For each ratio, indicate which of the two governments has a stronger financial position.

Presented below are financial statements (except cash flows) for two not-for-profit organizations. Neither organization has any permanently restricted net assets. a. Calculate the following ratios: • Program expense. • Fund-raising efficiency. • Working capital. b. For each ratio, explain which of the two organizations has the stronger ratio.

With regard to the Government Auditing Standards: a. Differentiate among the different types of professional engagements. b. Assume you are auditing a city that has a summer youth employment program. List some factors you might investigate in terms of (1) financial statement audits and (2) performance audits.

You have been assigned the task of writing the audit report for the City of X. The scope includes the basic financial statements, although the report is attached to a complete Comprehensive Annual Financial Report. a. Write the opinion paragraph. b. Differentiate among opinions that are unmodified, qualified, adverse, and disclaimed. Give examples of situations that might cause you to (1) qualify an opinion, (2) issue an adverse opinion, and (3) disclaim an opinion.

With respect to the Single Audit Act of 1984 and amendment of 1996 relating to state and local governments and not-for-profit organizations: a. Distinguish between major and nonmajor programs. b. List the criteria used to determine whether an entity is subject to the Single Audit Act. c. List the audit reports that should be included in a single audit report.

A local government has five federal grants. Expenditures amounted to $2,000,000 during the year, as follows: Describe how you, as an auditor, would determine major programs for audit, assuming ( a ) the local government is not a low-risk auditee, and ( b ) the local government is a low-risk auditee.

With regard to tax-exempt organizations: a. Define a 501(c)(3) organization. b. Define a public charity.

With regard to filing requirements for 501(c)(3) organizations: List the three types of Form 990 and indicate the size of the tax-exempt organization to use for each.

With regard to Unrelated Business Income Tax (UBIT), answer the following questions: a. Which four conditions will automatically exempt entities from UBIT b. What are some exceptions to UBIT provided by legislation c. How is UBIT computed What deductions are allowed

You and a few friends have decided to establish a not-for-profit organization in your community to help provide shelter and food to the homeless and transients. Outline the steps you would take to obtain tax-exempt status, avoid paying unrelated business income tax, and so on. Consider the creation of a related entity, a foundation, as a part of your planning.

With regard to service efforts and accomplishments reporting, define the following terms: a. Service efforts. b. Service accomplishments. c. Inputs. d. Outputs. e. Outcomes. f. Efficiency measures. g. Cost-outcome measures.

What is the role of a bond-rating agency

Describe the purpose of ratio analysis. What is common-size analysis

Identify the three categories of users of governmental financial statements and describe the information needs of each.