McMinnville officials may loosen the audit requirements by organizations seeking financial funding.
“Since we have tightened up on our nonprofits requiring they have an audit, it has come to our attention that we are really starving some people that can’t afford to do an audit or not much more than a cursory audit with their CPA as required by the 501(c)3 status,” said Aldermen Everett Brock.
The city requires specific information from organizations that request monetary donations. Among information that must be submitted prior to a contribution being made is an audit of the organization’s finances.
Finance Committee members met to consider what to do to rectify the situation.
Brock said there is a legal loophole due to “audit” not being defined.
“We’ve found a loophole,” said Brock. “It all drops back to what you want to define an audit as. An audit can be done by someone in accounting. It doesn’t have to be a CPA.”
Alderman Ben Newman agreed.
“I think it can be an internal thing, as long as they have verified the expenses and incomes are accurate,” said Newman.
City attorney Tim Pirtle says the state requires an audit from any nonprofit organization requesting government funds, but does not define audit.
“The statute does and still requires certain financial information to be provided for the city recorder in order for that entity, that nonprofit or charitable organization, to receive public funds from a municipality,” said Pirtle. “That statute does not define what an audit is, who has to conduct it or how it is to be conducted. There is no requirement in the law the audit must be performed by a CPA or public accountant.”
Pirtle did urge officials to use caution when they trust.
“Not to sound like a lawyer,” Pirtle said, “but you know we have to be mindful because every time you go to the comptroller’s website, they have posted stories of fraud. People who have taken advantage. Cannon County had a $29,000 embezzlement just in the past 60 days. It happens.”
Newman suggested a policy change.
“If we’re giving people $4,000 and they have to spend $3,200 that makes no sense,” said Newman. “If we’re giving $1,000, they can’t afford to go get an outside audit. I think the law requires that someone verifies that the numbers are accurate and match their income and expenses.”
Any change to the policy as it pertains to monetary contributions would be retroactive to the city’s last budget cycle of 2016-17.