All clients are looking for lower fees and cost-cutting measures from their CPAs. That's a no-brainer. But do nonprofit organizations have higher expectations around what support and resources they receive from their most trusted advisors?
Most firms will say yes. But how involved a firm gets with a client in terms of its volunteerism depends on the particular services being rendered.
"Clients scream for low fees, then hit you up for a table at the fundraiser or a sponsorship in their event books," said Harvey Hoskins, managing director of Hoskins & Co. in Nashville, Tenn. "Other firms have the same problem. [Clients] don't expect too much in terms of time. In this marketplace, it is almost taken for granted that you will contribute."
A BALANCING ACT
The challenge for firms serving nonprofits is balancing the professional standards and independence around the services they are hired for, and showing support for a client who is serving the community.
According to David M. Rottkamp, CPA, a partner and not-for-profit niche practice leader at Grassi & Co. in Jericho, N.Y., there are no professional standards that prohibit a firm or its employees from volunteering or supporting a client. However, perception and appearance in fact are very important: "You must retain your independence and not allow the perception of 'buying an opinion.'"
When CPAs do sit on the board of a nonprofit client, their firm is prohibited from performing any attest services for that organization. Non-attest services such as bookkeeping, advisory services and forensic accounting may be acceptable. However, the CPA firm must ensure that it is compliant with the American Institute of CPAs' Ethics Interpretation 101-3. Non-attest services are still subject to the organization's conflict-of-interest policies, according to Rottkamp.
According to the AICPA's Code of Professional Conduct, during the period covered by the financial statements or during the period of an engagement, a firm, partner or professional employee of the firm cannot be a director, officer, employee or under management of any kind. Taking on the role of promoter, underwriter or voting trustee also impairs independence, according to the AICPA.
However, a CPA can serve as an "honorary director" under certain circumstances, provided that the position is clearly honorary and it is understood that the person cannot vote or otherwise participate in board management functions. Any use of that individual's name in letterheads or documents must be identified as such as well.
William Hagaman Jr., managing partner and chief executive of WithumSmith+Brown in Red Bank, N.J., said that partners at his firm are frequently asked to be treasurer, or to serve on audit committees and investment committees of nonprofits that are not their clients. His firm asks all partners to serve on boards as a part of giving back to their communities. The firm has 67 partners who sit on approximately 110 not-for-profit boards, which span the gamut from hospitals to local theater groups.
"Through this participation, we are able to gain a better feel for the responsibilities of management, further develop leadership and decision-making skills, and feel gratified for making an impact on the communities in which we work and live," Hagaman said.
Rottkamp, who sits on the board of the MS Society's Long Island Chapter, said that clients don't necessarily expect you to give back, but the support is appreciated. "Donating and 'giving back' are similar - whether it's discounting your fees or providing some extra help, firms tend to support their nonprofit clients," he said.
David Schroepfer, executive officer at Lindgren, Callihan, Van Osdol and Co. in Rockford, Ill., said that most of his firm's clients expect a financial donation, while expectations around other resources, such as time, sponsorship for events and a reduction in fees, tend to be optional. He also said that firm employees can volunteer with clients during the audit process "as long as it's not in a management decision-making capacity."
Hoskins holds a similar philosophy: "I do not believe that it really impairs independence. It could depend on what you are doing. If, for example, you were working at the client's fundraiser, then you should not be in a role where you are counting funds. That almost could be seen as acting in a manager role and be seen to impair independence."
"Clearly we don't have firm employees or their family members sitting on the boards or board committees of our clients," said Mary Jalbert, an audit principal in the health care and nonprofit industry group at Berry Dunn McNeil & Parker in Portland, Maine, a firm where 25 percent of its business comes from serving nonprofit organizations. "We have a very rigorous independence review annually so that any potential conflicts are unearthed, and an independence check is part of our new-client review process."
Berry Dunn encourages its people to volunteer, and as a result some employees have found that their interests and the mission of the firm's clients overlap. "A large portion of our client base are not-for-profit organizations, so making a meaningful contribution to each of them each year wouldn't be possible," Jalbert said. "When we can, we do support events through sponsorship or participation. It's difficult because we can't support everyone every year, so we look to make sure we're allocating our resources fairly."
Many employees at Daszkal Bolton regularly volunteer at the Boca Raton Chamber of Commerce, according to Michael Daszkal, managing partner of the South Florida firm, where nonprofit clients make up 8.5 percent of their business. He said, in general, that volunteering at his clients' organizations is fine - depending on what type of volunteer work is involved. He said that employee volunteerism at the COC - though that organization is a client - does not impair the firm's independence or objectivity in any way because no one is sitting on its board of directors.
However, though Daszkal does acknowledge that there is no stated obligation to donate to clients, he does feel an obligation to give back in some way to charitable clients. "It is not a requirement," he said. "Our firm discounts fees, makes outright donations or attends events as sponsors. I am careful with these activities to ensure we do not impair our independence as CPAs while doing so."
Sarah Krom, a supervisor at Cowan, Gunteski & Co. in Toms River, N.J., said that she's never had a nonprofit client ask for a donation for the firm. Instead, they typically are interested in advice on management and cost-cutting strategies, and a professional courtesy of fee reductions. "Our firm does encourage community and charitable service, and we allow our employees the freedom to dedicate their time and money to the causes that are important to them," she said.
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