Arts Fund Financials - Audits & Statements of Review
If you are applying for a financial grant from the Arts Fund, you will be required to provide three years of financial documenation. Depending on your budget level for each year, you will be asked for an Audit, a Statement of Review, or unaudited internal financials. Please read below to make sure your CPA is preparing the right type of document.

Who can perform audits or statement of review?
What is an audit?
What is a statement of review?
What are the components of a audits and statements of review?
What are compiled financial statements?

CERTIFIED PUBLIC ACCOUNTANTS (CPAs)
Audits and Reviews of financial statements can only be performed by independent, licensed Certified Public Accountants (CPAs). You can check online with the Georgia Secretary of State to determine if a CPA firm is licensed in the State of Georgia.

AUDITED FINANCIAL STATEMENTS – Required for Arts Fund applicants with annual operating budgets between $500,000 and $1,500,000.

Audited financial statements are the product of a CPA's highest level of assurance services. In an audit, the CPA performs verification and substantiation procedures. These verification and substantiation procedures may include direct correspondence with creditors or debtors to verify details of amounts owed, physical inspection of inventories or investment securities, inspection of minutes and contracts, and other similar steps. Also, the CPA gains a knowledge and understanding of the entity's system of internal control. When the audit is completed, the CPA's standard audit report states that an audit was performed in accordance with generally accepted auditing standards, and expresses an opinion that the financial statements present fairly the entity's financial position and results of operations. This is known as the expression of "positive assurance."

STATEMENTS OF REVIEW – Required for Arts Fund applicants with annual operating budgets between $100,000 and $500,000.

Reviewed statements require that the CPA perform inquiry and analytical procedures. Upon completion, a report is issued stating that a review has been performed in accordance with AICPA professional standards, that a review is less in scope than an audit, and that the CPA did not become aware of any material modifications that should be made in order for the statements to be in conformity with generally accepted accounting principles, or if applicable, another comprehensive basis of accounting. This is known as the expression of "limited assurance." Reviewed financial statements are often required for Organizations that have bank loans or grants with third parties who do not require audited statements. A review is less expensive than an audit.

COMPONENTS OF FINANCIAL STATEMENTS (both Audits and Reviews)
The following is a list of the components of financial statements prepared under GAAP (generally accepted accounting principles) for non profit organizations. Financial statements that come with a CPA’s review or audit letter would have the same components:

• A letter from the CPA (Review Report or Audit Opinion)
• A Statement of Financial Position (the equivalent of a balance sheet for an for profit)
• A Statement of Activities (the equivalent of an income statement or profit and loss for a for profit)
• A Statement of Cash Flows
• Footnotes to the financial statement (there are required disclosures that have to be made in any Organization’s financial statements – including a narrative description of the nature of the Organization, purpose, legal structure, significant accounting policies, etc.)

COMPILED FINANCIAL STATEMENTS – Not acceptable for Arts Fund applicants with annual operating budgets over $100,000. For organizations under $100,000, only internal financial statements are necessary – it is acceptable but not necessary to engage a CPA

Compiled financial statements represent the most basic level of service CPAs provide with respect to financial statements. In a compilation, the CPA must comply with certain basic requirements of professional standards, such as having a knowledge of the client's industry and applicable accounting principles, having a clear understanding with the client as to the services to be provided, and reading the financial statements to determine whether there are any obvious departures from generally accepted accounting principles. It may be necessary for the CPA to perform "other accounting services" - such as creating your general ledger, or assisting you with adjusting entries for your books - before the financial statements can be prepared. Upon completion, a report on the financial statements is issued that states a compilation was performed in accordance with AICPA professional standards, but no assurance is expressed that the statements are in conformity with generally accepted accounting principles. This is known as the expression of "no assurance." Compiled financial statements are often prepared for Organizations that do not need a higher level of assurance expressed by the CPA. A CPA who is not independent of the Organization may compile financial statements.

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This information was prepared for the Metropolitan Atlanta Arts Fund by
Tabb & Tabb
Certified Public Accountants
50 Hurt Plaza, Suite 995
Atlanta , Georgia   30303