Legal Compliance Audit

Form of Organization

If a form of organization has not been selected, review and discuss advantages/disadvantages of
various forms of organization (e.g., corporation, limited liability company)

Corporations and Governance

Review Articles/Certificate of Incorporation and Bylaws

Review Board of Directors committee structure and committee charters

Review Board of Directors and committee minutes

Review corporate structure, including affiliates and joint ventures

Verify that state corporate filings, including annual reports, have been made

Review whether corporate registration and/or filings should be undertaken in other jurisdictions

Review governance-related policies, including conflicts and ethics

Review insurance coverage

Federal Tax Law Compliance

Tax-exempt status, including IRS determination letter

Form 990 compliance and preparation for 2010 filing requirements

Communications with the IRS

Political campaign activities


Unrelated business income

Related organizations and their activities

Excess benefit transactions

Rebuttable presumption

Automatic excess benefits

Public vs. private foundation status

Other Federal Regulatory Compliance

Foreign Corrupt Practices Act

U.S. trade controls

Export controls

Economic sanctions


Government grants and contracts

Lobbying registration and disclosure; Byrd Amendment likely referenced in grants

Foreign bank accounts

State and Local Tax

State tax-exempt determination letter and tax filings

Unrelated business income

Sales, privilege, excise, franchise taxes

Employment taxes and workers compensation

Fundraising and Access to Capital

State fundraising registration and reporting

Planned gift activities -- charitable gift annuities, split interest trusts

Internet solicitations

Federal tax law substantiation requirements

Access to loans and equity investments, including program related investments

Website and Internet

Review website; review procedures for content monitoring

Determine whether domain names infringe on another organization’s trademarks or servicemarks

Use of trademarks

Third party content

Consents for use of content and website links

Privacy policy and confidential information

Charitable solicitations

Compliance with IRS lobbying and political campaign activity rules

Review policy for links to/from other sites

Intellectual Property

Verify status of trademarks, trade names, domain names, and copyrights

Determine whether other proprietary information should be protected

Review policies and third party agreements relating to non-disclosure of confidential information and ownership of intellectual property created by employees and contractors

Review procedures for maintaining confidentiality of trade secrets

Review licenses, contracts and other agreements relating to intellectual property and computer software to which the organization is a party or a third party beneficiary

Grants likely to have IP provisions that would include provisions re allocation of rights and requirements for protection of rights.

Document Retention Policies

Should the organization have a retention policy?

Review existing policy for both hard copy and electronic documents

Check grants for document retention requirements and then check policy for conformance.

Verify the existence of a policy against altering, destroying, or concealing documents in the event of an anticipated or known government audit or investigation


Review policies re public statements and speaking to the media

Human Resources and Employee Benefits

Review employee manuals, handbooks and policies

Review whether individuals are properly classified as employees and independent contractors

Review compliance with federal requirements for documentation of citizenship of employees

Review compliance with federal and state laws prohibiting various forms of discrimination

Review job application form, standard job posting and recruiting materials

Review employment contracts and letter agreements

Review procedures and practices for use of temporary workers

Review procedures and practices for terminating employees

Review FLSA compliance issues

Review compliance with Family and Medical Leave Act

Review existing tax qualified benefit plans

Review non-qualified deferred compensation plans

Review fringe benefits

Review severance plans or policies

Verify filing of all IRS/DOL forms

Review recordkeeping for EEO/AAP compliance


If organization planning to lease space, guidance on key issues

If organization has entered into a lease, review to determine compliance with its provisions

Consider option provisions and dates for exercise


Review significant contracts and schedule notification of contract renewal dates

Verify compliance with representations and warranties

Determine policy for internal contract review, external review by counsel, execution of contracts

Determine whether there are contracts with related parties and whether there was compliance with procedures for disclosing conflicts of interest

Determine whether there are business relationships not covered by a written agreement


Review internal/external audit procedures

Review management letter for the last three independent audit cycles

Review internal control procedures

Review audited financial statements for last three cycles


Existing or threatened lawsuits

Legal Barriers

Legal barriers that affect day-to-day operations

Consider other legal barriers, including barriers to growth and success



Full Name and Signature of Auditor