By: Eltife S.B. No. 1215
(In the Senate - Filed March 9, 2005; March 21, 2005, read
first time and referred to Committee on Business and Commerce;
April 11, 2005, reported adversely, with favorable Committee
Substitute by the following vote: Yeas 9, Nays 0; April 11, 2005,
sent to printer.)
COMMITTEE SUBSTITUTE FOR S.B. No. 1215 By: Eltife
A BILL TO BE ENTITLED
AN ACT
relating to financial records and to audits or reviews of certain
charitable nonprofit corporations; providing a penalty.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Sections A and B, Article 2.23A, Texas
Non-Profit Corporation Act (Article 1396-2.23A, Vernon's Texas
Civil Statutes), are amended to read as follows:
A. A corporation shall maintain current true and accurate
financial records with full and correct entries made with respect
to all financial transactions of the corporation, including all
revenue [income] and expenditures, in accordance with generally
accepted accounting principles [practices].
B. Based on these records, the board of directors shall
annually prepare and [or] approve [a report of] the financial
statements [activity] of the corporation for the preceding year.
The financial statements [report] must conform with generally
accepted [to] accounting principles [standards as promulgated by
the American Institute of Certified Public Accountants] and must
include a statement of financial position and the related
statements of activities by functional classifications, a cash flow
statement [support, revenue, and expenses and changes in fund
balances], and a statement of functional expenses[, and balance
sheets for all funds].
SECTION 2. The Texas Non-Profit Corporation Act (Article
1396-1.01 et seq., Vernon's Texas Civil Statutes) is amended by
adding Article 2.23C to read as follows:
Art. 2.23C. FINANCIAL STATEMENTS AND AUDIT OF CERTAIN
CHARITABLE CORPORATIONS. A. A charitable corporation shall have
the corporation's financial statements required by Section B,
Article 2.23A of this Act, for the preceding fiscal year audited or
reviewed by an independent certified public accountant in
accordance with generally accepted accounting principles. An audit
is required for a charitable corporation that receives or accrues a
total gross revenue of $750,000 or more. A review is required for a
charitable corporation that receives or accrues a total gross
revenue of $500,000 or more but less than $750,000. For the
purposes of this section, a corporation's total gross revenue does
not include grants from and proceeds of contracts with a
governmental agency or entity that requires an accounting for money
received. A charitable corporation not required by this section to
have the corporation's financial statements audited or reviewed may
choose to have such an audit or review conducted.
B. If a charitable corporation is under the control of
another corporation, the controlling corporation may prepare
consolidated financial statements to satisfy the requirements of
Section B, Article 2.23A of this Act, for the controlled
corporation.
C. A charitable corporation required to have an audit or
review of the corporation's financial statements under Section A of
this article shall make the financial statements and the audit or
review report available for inspection by the attorney general and
the public at the corporation's registered office or principal
office in this state as provided by Article 2.23A of this Act and in
the manner prescribed for Internal Revenue Service Form 990 by
Section 6104(d), Internal Revenue Code of 1986. The financial
statements and audit or review report must be completed and made
available before or by the following deadline:
(1) for financial statements, not later than nine
months subsequent to the end of the fiscal year for which the
financial statements relate; and
(2) for the audit or review report, not later than nine
months subsequent to the end of the fiscal year for which the audit
or review report relates.
D. The board of directors of a charitable corporation
required to have an audit or review of the corporation's financial
statements under Section A of this article shall review and
determine whether to accept the audit or review.
E. A corporation that does not have an audit or review
conducted as provided by Section A of this article commits an
offense. An offense under this section may be punishable by a fine
of not less than $100 or more than $1,000. Each day the violation
continues constitutes a separate offense.
SECTION 3. Section 22.352, Business Organizations Code, is
amended to read as follows:
Sec. 22.352. FINANCIAL RECORDS AND ANNUAL REPORTS. (a) A
corporation shall maintain current and accurate financial records
with complete entries as to each financial transaction of the
corporation, including revenue [income] and expenditures, in
accordance with generally accepted accounting principles.
(b) Based on the records maintained under Subsection (a),
the board of directors of the corporation shall annually prepare or
approve [a] financial statements [report] for the corporation for
the preceding year. The financial statements [report] must conform
to generally accepted accounting principles [standards as adopted
by the American Institute of Certified Public Accountants] and must
include:
(1) a statement of financial position [support,
revenue, and expenses];
(2) a statement of activities by functional
classifications [of changes in fund balances];
(3) a cash flow statement; and
(4) a statement of functional expenses[; and
[(4) a balance sheet for each fund].
SECTION 4. Subchapter H, Chapter 22, Business Organizations
Code, is amended by adding Section 22.3551 to read as follows:
Sec. 22.3551. FINANCIAL STATEMENTS AND AUDIT OF CERTAIN
CHARITABLE CORPORATIONS. (a) A charitable corporation shall have
the corporation's financial statements required by Section 22.352
for the preceding fiscal year audited or reviewed by an independent
certified public accountant in accordance with generally accepted
accounting principles. An audit is required for a charitable
corporation that receives or accrues a total gross revenue of
$750,000 or more. A review is required for a charitable corporation
that receives or accrues a total gross revenue of $500,000 or more
but less than $750,000. For the purposes of this subsection, a
corporation's total gross revenue does not include grants from and
proceeds of contracts with a governmental agency or entity that
requires an accounting for money received. A charitable
corporation not required by this subsection to have the
corporation's financial statements audited or reviewed may choose
to have such an audit or review conducted.
(b) If a charitable corporation is under the control of
another corporation, the controlling corporation may prepare
consolidated financial statements to satisfy the requirements of
Section 22.352 for the controlled corporation.
(c) A charitable corporation required to have an audit or
review of the corporation's financial statements under Subsection
(a) shall make the financial statements and the audit or review
report available for inspection by the attorney general and the
public at the corporation's registered office or principal office
in this state as provided by Section 22.352 and in the manner
prescribed for Internal Revenue Service Form 990 by Section
6104(d), Internal Revenue Code of 1986. The financial statements
and audit or review report must be completed and made available
before or by the following deadline:
(1) for financial statements, not later than nine
months subsequent to the end of the fiscal year for which the
financial statements relate; and
(2) for the audit or review report, not later than nine
months subsequent to the end of the fiscal year for which the audit
or review report relates.
(d) The board of directors of a charitable corporation
required to have an audit or review of the corporation's financial
statements under Subsection (a) shall review and determine whether
to accept the audit or review.
(e) A corporation that does not have an audit or review
conducted as provided by Subsection (a) commits an offense. An
offense under this subsection may be punishable by a fine of not
less than $100 nor more than $1,000. Each day the violation
continues constitutes a separate offense.
SECTION 5. This Act applies to a nonprofit corporation
beginning on the date of the end of the corporation's first fiscal
year ending on or after September 1, 2005.
SECTION 6. (a) Except as provided by Subsection (b) of
this section, this Act takes effect September 1, 2005.
(b) Sections 3 and 4 of this Act take effect January 1, 2006.
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