When is a financial audit? That’s the question the Escambia Children’s Trust faces when it considers whether to reinstate the last year of its mental health grant for New World Believers’ H.O.O.P.S. (Healthy Opportunities and Options Promoting Success)–which totals $585,685.
NWB Financials
To receive approval, NWB submitted its 2024 Form 990 tax return, audit report and liability insurance certificate on Sept. 9. See NWB Audit.
- Possible Red Flag: A Certified Public Accountant did not issue the audit report. The audit was conducted by Justina Royster of Reliable Tax & Financial Services. See NWB – Audit Letter.
The audit letter says the auditors “conducted the audit in accordance with International Standards on Auditing.” Royster wrote that the audit evidence is “appropriate to provide a basis for the opinion.
- She stated, “It is the opinion of the auditor that the financial statements provided in this financial audit report present the financial position of the company and its financial performance and cash flow for the current year.”
Another Even Bigger Possible Red Flag
Royster stated in the audit letter that the accompanying financial statements of the company included Statement of Comprehensive Income, Statement of Changes in Equity, Statement of Financial Position and Notes to the Financial Statements for the Year ended Sept. 30, 2024, as well as a summary of the accounting policies and other information.
- NWB founder Rodney Jones only sent the Escambia Children’s Trust its Statement of Activities (Income Statement), Statement of Financial Position and Notes to the Financial Statements for the Year ended Sept. 30, 2024. Did Royster’s audit report include a Statement of Changes in Equity, a summary of the accounting policies and other information, but Jones didn’t send them to the Trust?
The Escambia Children’s Trust approved the $585,685 grant at its December meeting. The Trust has since suspended the grant due to Rodney Jones being removed from the program as a result of a Department of Juvenile Justice investigation.
A CPA’s Take
I asked a local CPA to review the audit. He sent me this note:
In Florida, you must be a Certified Public Accountant (CPA) licensed in Florida to perform official financial statement audits, as only CPAs are licensed for this specific assurance service, especially for government, non-profits, and other entities legally required to have audits. While regular accountants can do bookkeeping or compilations, an audit requires a CPA’s license to guarantee financial statement accuracy, a distinctive role of CPAs.
Key Requirements for Audits in Florida:
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- CPA License: An independent CPA must conduct the audit.
- Legal Mandates: Many entities, like local governments and charities above certain contribution thresholds, are legally required to have audits performed by CPAs.
- Specialized Services: Auditing is a regulated service distinct from basic accounting or tax prep, requiring specific licensing and adherence to auditing standards.
In essence, if a financial statement requires an “audit” (an official, independent verification), a Florida-licensed CPA is required to provide that service.
AICPA Example
The American Institute of Certified Public Accountants (AICPA) has an example of an Independent Auditor’s Report for a nonprofit.
The opinion statement is for a clean audit: “We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of XYZ Not-for-Profit Organization and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.”
The Trust’s Dilemma
The Escambia Children’s Trust must decide whether to accept any report that states it is an audit, regardless of whether a CPA performs the audit, and whether the report lacks all the required AICPA financial elements. How many other non-CPA audits has the Trust accepted?
What are your thoughts?
I would like to hear from attorneys and CPAs on their thoughts about the audit report submitted by NWB. Would you have given any company – profit or nonprofit – $580K based on it?