Good Fiscal Governance and Avoiding ( or if that doesn ’ t work , preparing for ) an IRS Audit
checks may be able to be reviewed online . There should be internal verification of deposits as well . The person doing the reconciliation should be sufficiently knowledgeable of the activities of the district or local and its vendors to recognize unauthorized payments . Any unusual payments should be brought to the attention of the entire board of directors of the district or local .
The district or local should adopt a written conflicts of interest policy to ensure that members , officers and directors do not receive excess benefits or unreasonable compensation for services provide . The PDA and the IRS have example policy forms for adoption .
A written whistleblower policy should also be adopted to encourage reporting of wrongdoing or waste without recrimination . Doing this ensures that the district or local ’ s board of directors are informed by employees or members of activities that are a violation of the bylaws , conflicts of interest policy and any other policies or even possible criminal acts or violations of the Internal Revenue Code . A sample whistleblower policy is available upon request from PDA .
In the past , record retention was sometimes difficult and even costly due to demands upon staff and space . Today , with the use of electronic media most PDA district and local society records could be included in one CD-ROM , or at least one DVD , which can contain thousands of documents . However , many records can be safely discarded after a period of years where space does become a problem . Following is a suggested abbreviated document retention and destruction policy for consideration by a district or local society :
• Tax records and returns for at least 7 years
• Leases , deeds , significant contracts and other such documents permanently
• Other contracts , at least 4 years after expiration of the contract
• Personnel records at least 7 years
• Workmen ’ s compensation and other insurance policies permanently
• Financial statements and underlying accounting journals and ledgers ( cash receipts and disbursements , general ledger ) permanently
• Minutes permanently
You should select a certain month of the year to accomplish your record destruction . At that time , all items that have exceeded their retention period should be destroyed . For physical records and documentation , shredding is the preferred practice . For electronic records and files , you should consult with your IT provider to determine the appropriate way of destroying the records . Recognize merely deleting a file or email and removing it from your trash bin will not remove the item from your computer . In the event you receive a lawsuit or learn that the filing of one is imminent , you should immediately stop the destruction of any and all records that have the potential of being relevant to the litigation .
Alternative record retention policies are available upon request from PDA or organizations such as the Pennsylvania Institute of Certified Public Accountants .
Hopefully , the foregoing will be helpful in enabling your component to refine its operations and be prepared should the IRS come knocking . Should a district or local society be contacted by the IRS , PDA ’ s CEO should be informed , as PDA may have information on resolving issues that have been raised before and successfully resolved by trade associations or even other PDA component societies .
The district or local should develop a procedure to train its directors and officers about the operations of the organization as well the responsibilities of their office . As volunteer organizations , a lot of reliance may be placed on the limited staff ( executive director ) or outside consultants ( bookkeepers , attorneys , part-time membership coordinator ). Reliance on these individuals without accurate understanding of the operations by the directors or officers creates an environment ripe for abuse or neglect .
About The Authors
Thomas J . Weber , Esq . ( a shareholder in the Harrisburg law firm Goldberg Katzman , P . C .) serves as general counsel to PDA and PDAIS . He devotes a substantial portion of his practice to dental-related matters and frequently writes and lectures on legal issues pertinent to dentists .
Arnold B . Kogan , Esq . is of counsel to Goldberg Katzman , P . C . and focuses his practice on federal and state tax issues and sophisticated business and real property matters .
Lisa A . Ritter , CPA , CFE , is a Partner at Maher Duessel Certified Public Accountants . Ms . Ritter is the auditor for both PDA and PDAIS .
Camille Kostelac-Cherry , Esq . is the Chief Executive Officer of the Pennsylvania Dental Association .
46 November / December 2010 • Pennsylvania Dental Journal