This is the case even if a cash-based IRS Form 990 reconciles with an audited financial statement prepared using the accrual method. Box J on the first page of the Form 990 must be checked indicating that the accrual (not cash or "other") method of accounting has been used. You may want to provide instructions (below) to staff reviewing the financial disclosure documents of local applicants.įor agencies with $100,000 or more in revenue on line 12: Both the IRS Form 990 and the audited financial statements must be prepared using the accrual method. This is consistent with instructions appearing in Item 5 of the CFC Local Unaffiliated Instructions. Because there is no need to reconcile the IRS Form 990 with an audit, the IRS Form 990 does not have to be prepared using the accrual method. These agencies do not have to provide an audit. The regulations do provide an exception to the audit requirement for local applicants with less than $100,000 in revenue (see 5 CFR §950.204(a)(2)(ii)). The figures shown for revenues and expenses on both documents must reconcile and both documents must be prepared using the accrual method of accounting. CFC regulations also require applicants to provide a copy of their IRS Form 990 for the same fiscal period. This means only the accrual method of accounting is acceptable. The financial statements must be prepared using Generally Accepted Accounting Principles (GAAP) and must be audited using Generally Accepted Auditing Standards (GAAS). The policy with respect to the accrual method requirement is applied differently, depending upon the amount of annual revenue appearing on line 12 of the Form 990.ĬFC regulations require applicants with $100,00 or more in revenues to submit a copy of their most recent audited financial statements.
Several LFCCs and PCFOs involved in the local application process have asked us to clarify the requirement for CFC applicants to prepare their financial disclosure forms and reports (specifically, the IRS Form 990 and audited financial statements) using the accrual method of accounting. CFC Memorandum 2001-02 MEMORANDUM FOR PRINCIPAL COMBINED FUND ORGANIZATIONS (PCFOs) FROM:
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