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Sound Financial Stewardship For Your Chorus

Sound Financial Stewardship For Your Chorus. Chorus America Conference June 14, 2013 Seattle, WA Rob Fleming, CPA Clark Nuber P.S. RFLEMING@CLARKNUBER.COM . AGENDA. DUTIES OF BOARD FINANCIAL RESPONSIBILITIES READING FINANCIAL STATEMENTS IRS FORM 990 INTERNAL CONTROLS

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Sound Financial Stewardship For Your Chorus

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  1. Sound Financial StewardshipFor Your Chorus Chorus America Conference June 14, 2013 Seattle, WA Rob Fleming, CPA Clark Nuber P.S. RFLEMING@CLARKNUBER.COM

  2. AGENDA • DUTIES OF BOARD • FINANCIAL RESPONSIBILITIES • READING FINANCIAL STATEMENTS • IRS FORM 990 • INTERNAL CONTROLS • RISK MANAGEMENT

  3. BOD RESPONSIBILITIES • DUTY OF CARE • KNOW YOUR DUTIES • BE INVOLVED • DUTY OF LOYALTY • ACT IN BEST INTEREST OF CHARITY • AVOID SELF-DEALING • DUTY OF OBEDIENCE • OBEY THE LAW • SEEK EXPERT COUNSEL

  4. BOD RESPONSIBILITIES • HIRE, COACH AND EVALUATE THE EXECUTIVE DIRECTOR • DEVELOP MISSION, VISION, VALUES AND POLICIES/PROCEDURES • DEVELOP STRATEGIC PLAN • ASSURE FINANCIAL STEWARDSHIP • FUNDRAISE • BE AN ADVOCATE • ENSURE BOD’S OWN EFFECTIVENESS

  5. WASHINGTON ATHLETIC CLUB • MISSION • TO ENRICH THE QUALITY OF LIFE OF OUR MEMBERS • VISION • TO BE THE PREMIER ATHLETIC CLUB IN AMERICA • VALUES • LEADERSHIP, EXCELLENCE, INTEGRITY, SERVICE, AND SENSITIVITY

  6. COMMON BOARD CONCERNS • ACCOUNTABILITY AND TRANSPARENCY • SUSTAINABILITY • PRUDENT BEHAVIOR • ETHICAL BEHAVIOR • COMPLIANCE WITH LAWS AND REGULATIONS

  7. RECENT EXAMPLES • PENN STATE/SECOND MILE • SUSAN G. KOMEN FOUNDATION

  8. RECENT EXAMPLES • ARCHDIOCESE OF NEW YORK • GEORGETOWN U.

  9. RECENT EXAMPLES • CITY OF DIXON, ILLINOIS • LIVESTRONG FOUNDATION

  10. FINANCIAL STEWARDSHIP GOALS • ACCOUNTABILITY AND TRANSPARENCY • FINANCIAL REPORTS ARE ACCURATE, COMPLETE, TIMELY AND USEFUL • MONITOR INTERNAL CONTROLS • COMMUNICATE WITH AUDITORS

  11. FINANCIAL STEWARDSHIP GOALS • SUSTAINABILITY • REVIEW, APPROVE AND MONITOR OPERATING AND CAPITAL BUDGETS • MONITOR CASH FLOWS (BOTH INVESTMENT POLICIES AND DEBT POLICIES) • PRUDENT BEHAVIOR • EXPENSES ARE REASONABLE AND NECESSARY • APPROVE MAJOR TRANSACTIONS

  12. FINANCIAL STEWARDSHIP GOALS • ETHICAL BEHAVIOR • MONITOR ISSUES RELATING TO CONFLICTS OF INTEREST, CODE OF ETHICS, WHISTLEBLOWER REPORTS, AND EXCESSIVE COMPENSATION • COMPLIANCE WITH LAWS AND REGULATIONS • MONITOR COMPLIANCE REPORTING • IMPLEMENT RECORD RETENTION/DESTRUCTION POLICY

  13. TEXAS INSTRUMENT’S ETHICS TEST • IS THE ACTION LEGAL? • DOES IT COMPLY WITH OUR VALUES? • IF YOU DO IT, WILL YOU FEEL BAD? • HOW WILL IT LOOK IN THE NEWSPAPERS? • IF YOU KNOW IT’S WRONG, DON’T DO IT • IF YOU ARE NOT SURE, ASK • KEEP ASKING UNTIL YOU GET AN ANSWER

  14. DISCUSSION • PICK ONE OF THE EXAMPLES AND DISCUSS WHAT THE BOARD SHOULD HAVE DONE DIFFERENTLY OR WHAT PROCEDURE SHOULD HAVE BEEN FOLLOWED BUT WASN’T.

  15. BEST PRACTICES • NATIONAL • CORPORATE GOVERNANCE PROPOSALS OF SENATE FINANCE COMMITTEE DID NOT BECOME LAW • INDEPENDENT SECTOR IN OCTOBER, 2007 ISSUED “PRINCIPLES OF GOOD GOVERNANCE AND ETHICAL PRACTICE: A GUIDE FOR CHARITIES AND FOUNDATIONS”

  16. BEST PRACTICES • REPORT CONTAINS 33 SUGGESTED PRACTICES • LEGAL COMPLIANCE • EFFECTIVE GOVERNANCE • FINANCIAL OVERSIGHT • RESPONSIBLE FUNDRAISING • SEE FULL REPORT AT Independentsector.org

  17. WHAT IS UNIQUE ABOUT NONPROFITS? • MISSION OTHER THAN TO MAKE A PROFIT • TAX DEDUCTIBLE CONTRIBUTIONS • NO OWNERSHIP • SPECIAL TAX BENEFITS • INCOME TAXES, PROPERTY TAXES, POSTAGE RATES AND LOCAL TAXES

  18. ACCOUNTANTS’ REPORTS • AUDIT - HIGHEST LEVEL • REVIEW - ANALYTICS AND INQUIRY • COMPILATION - NO ASSURANCE • NO ACCOUNTANT’S REPORT – FINANCIALS PREPARED INTERNALLY

  19. Financial Statements

  20. AUDITED FINANCIAL STATEMENTS

  21. COMPONENTS OF FINANCIAL STATEMENTS • STATEMENT OF FINANCIAL POSITION • DETAIL OF ASSETS, LIABILITIES AND EQUITY (NET ASSETS) • REPRESENTS A POINT IN TIME • INDICATES FUTURE CASH FLOW

  22. Statement of Financial Position

  23. Key Information - Statement of Financial Position

  24. COMPONENTS OF FINANCIAL STATEMENTS • STATEMENT OF ACTIVITIES • SHOWS REVENUES AND EXPENSES OVER A PERIOD OF TIME • SHOWS REVENUES BY RESTRICTION • SHOWS EXPENSES BY FUNCTION (PROGRAM AND ADMIN./FUND RAISING)

  25. Statement of Activities

  26. Key Information – Statement of Activities

  27. COMPONENTS OF FINANCIAL STATEMENTS • STATEMENT OF CASH FLOWS • SUMMARY OF CHANGES IN CASH DURING THE PERIOD

  28. Statement of Cash Flows

  29. Key Information – Statement of Cash Flows

  30. Statement of Functional Expenses

  31. Key Information – Statement of Functional Expenses

  32. COMPONENTS OF FINANCIAL STATEMENTS • FOOTNOTES • DESCRIPTION OF BUSINESS AND OPERATIONS • DESCRIPTION OF ACCOUNTING POLICIES • DETAIL OF B/S AMOUNTS • UNUSUAL EVENTS AND CONTINGENCIES

  33. DISCUSSION • WHAT FINANCIAL CONCERNS HAVE YOU HAD AT YOUR ORGANIZATION?

  34. IRS FORM 990 • SAME INFORMATION AS FINANCIAL STATEMENTS • ALSO PROVIDES INFORMATION ON COMPENSATION, DONORS, EXPENSES BY CATEGORY, AND BOARD MEMBERS • 17 QUESTIONS ON CORPORATE POLICIES NOW ON FORM • FORM IS RECEIVING MUCH MORE ATTENTION • IRS REVISED THE FORM FOR 2008

  35. MAINTAINING YOUR EXEMPT STATUS • FOLLOW MISSION • NO POLITICAL ACTIVITY • LIMITED UNRELATED ACTIVITY • NO SELF INUREMENT • COMPLY WITH IRS AND STATE REQUIREMENTS

  36. INTERNAL CONTROLS • ACTIVE INVOLVEMENT BY MANAGEMENT • PERFORM BACKGROUND CHECKS • HAVE TWO PEOPLE PROCESS CASH RECEIPTS • EXAMINE SUPPORT FOR ALL DISBURSEMENTS • SEPARATE CONTROL OF ASSETS FROM ACCOUNTING

  37. INTERNAL CONTROLS • REVIEW UNOPENED BANK STATEMENTS • APPROVE ALL ADJUSTMENTS AND WRITE-OFFS • COMPARE ACTUAL RESULTS TO BUDGETS • RELATE FINANCIAL RESULTS TO SERVICE EFFORTS AND ACCOMPLISHMENTS

  38. ENTERPRISE RISK MANAGEMENT • PROCESS OF IDENTIFYING, MITIGATING AND MONITORING RISKS THAT COULD HAVE A SIGNIFICANT IMPACT ON YOUR ORGANIZATION • Board and management should be asking three questions: • What are our major risks? • How do we know we have identified all risks? • What is our mitigation plan to reduce identified risks?

  39. HOW ARE RISKS IDENTIFIED? • MANAGEMENT OBSERVATIONS • BOARD OBSERVATIONS • INSURANCE ADVISORS • INVESTMENT ADVISORS • BANKERS • ACCOUNTANTS AND AUDITORS • COMPUTER CONSULTANTS • GENERAL NEWS • INDUSTRY PUBLICATIONS

  40. RISK AREAS • FINANCIAL • OPERATIONAL • TECHNOLOGY • GOVERNANCE • STRATEGIC • HUMAN RESOURCES • REPUTATION

  41. TOP 5 CHALLENGES FOR NONPROFITS IN 2012 • PROPOSED LIMITS ON CHARITABLE DEDUCTIONS • SHRINKING GOVERNMENT AID • ATTRACTING YOUNGER EMPLOYEES • DEMANDS FOR RESULTS BY DONORS • SOCIAL ENTERPRISE BUSINESS MODELS

  42. ENTERPRISE RISK MANAGEMENT

  43. ENTERPRISE RISK MANAGEMENT • MITIGATION OPTIONS • AVOIDANCE • SHARE THE RISK • INSURANCE • JOINT VENTURE • REDUCE THE RISK • LIMIT THE INVOLVEMENT • DIVERSIFY • ACCEPTANCE

  44. DISCUSSION WHAT WOULD BE SOME OF THE MAJOR RISKS FOR PENN STATE, SUSAN G. KOMEN, CITY OF DIXON, LIVESTRONG FOUNDATION, GEORGETOWN U. OR THE ARCHDIOCESE OF NEW YORK THAT SHOULD HAVE BEEN ADDRESSED?

  45. Thank You

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