Fund Manager Year-End Compliance To-Do List
Year end is quickly approaching and fund managers are gearing up for compliance season. Fund managers should anticipate potential hurdles and work with their audit and tax teams to make sure they are meeting deliverable dates. Learn key steps to complete the compliance work as efficiently as possible.
Start conversations early
Engage with your fund administrator, tax, and audit teams about timing of deliverables and expectations. Proper planning will help maintain the goal of getting financials and K-1s to your limited partners (LPs) timely.
Review your underlying books and records
Investments — Reconcile investment activity and verify underlying support is consistent with reporting. Funds reporting on a U.S. GAAP basis are required to have investments stated at fair value. Look at all investments made beyond the last six months and organize relevant financial reporting information to support fair value adjustments. In today’s economic environment, leaving investment at cost is not sufficient based. When needed, engage an advisor to help determine your investments’ fair value.
Capital allocations — Review your monthly or quarterly allocation schedules and verify activity is consistent with your limited partnership agreement (LPA). The allocation schedule will have a direct impact on the K-1s, so it’s important your LPs get what they signed up for. Don’t forget to review ending capital balances and confirm each partner’s percentage of capital is consistent with their respective ownership percentage.
Transactions with the GP — Review management fees and any incentive allocations earned by the genal partner. Since these transactions directly impact limited partner capital, it’s important amounts are calculated based on the LPA provisions.
Communicate with your LPs
All of this work is to give your LPs confidence in you as a fund manager and in their investment. Be proactive in your communication to them and let them know when timelines shift.
How we can help
It’s important to get through the compliance season in a timely and effective way. You’ve done all the heavy lifting — raising funds and deploying capital. We’re ready to leverage our collaborative approach and come alongside you to get through this time of year. Our fund administration, audit, and tax teams are available to assist and will be proactive in getting you the deliverables you’ve been preparing for.
Written by Bobby Dormanesh
Craig Arends is a principal at CLA and is the managing principal of CLA's private equity practice. Craig brings a concentration of experience in providing accounting and transaction structuring advice for leveraged recapitalizations, purchase accounting and SEC reporting, assessing quality of earnings, and GAAP accounting. He has far-reaching experience with critiquing financial models and reviewing target companies' financial performance to identify cost reductions and/or operating efficiencies Craig has more than 30 years of experience in public accounting serving public companies, private equity groups, and companies, including a term as principal in charge of a Big Four Capital Markets Group in Moscow, Russia. He has led financial accounting due diligence projects for private equity investor groups and venture capital funds, primarily in the technology, communications, and manufacturing industries, as well as assisting with Foreign Corrupt Practice Act matters ranging from investigation of payments made, validation of compliance with corporate policies, and review of proposed transactions to ensure compliance. When not working, Craig enjoys watching any sports, but his most favorite are baseball, football and soccer.
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