Profitable Solutions for Nonprofits: Board Responsibilities
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Transcript of Profitable Solutions for Nonprofits: Board Responsibilities
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Profitable Solutions for Nonprofits
Board Responsibilities
Hosted by Davis Kinard & Co, PCwith speaker Debra Goodheer, CPA, CVA
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The Need for Governance
• In recent decades, about 2/3 of people surveyed by the Independent Sector expressed confidence in the ethics and honesty of U.S. charities and voluntary organizations
• For individual charities, responses are even more favorable – some higher than 70%
November 10, 2010
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The Need for Governance
• In 2007, 26% of all Americans volunteered in some capacity for a nonprofit activity
• Billions of dollars are donated each year to nonprofits
November 10, 2010
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The Need for Governance
• Government has wisely avoided intruding on how organizations pursue missions, manage programs and structure operations
• Nonprofits have embraced need for standards of ethical practice that preserve and strengthen the public’s confidence
November 10, 2010
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General Guidance for Governance• Board members have a fiduciary duty: – Duty of Due Care– Duty of Obedience– Duty of Loyalty
• Treat assets and operations of the organization with same level of care as your prized possessions
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General Guidance for Governance• Perceived correlation between good
governance and compliance with tax laws
• The IRS created a method of judging an organization’s commitment to good governance by using IRS Form 990
November 10, 2010
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Governance According to the IRS• Questions are posed to expose potential
weaknesses in an organization’s structure, focusing on:– Governing body and management– Compensation– Organizational control– Conflict of interest– Financial oversight– Document retention
November 10, 2010
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Governing Body and Management
• Is there a written mission statement that articulates its purpose?
• Do the by-laws set forth information for its governing body as far as composition, duties, qualifications and voting rights?
November 10, 2010
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Governing Body and Management
• Have the most recent versions of the articles and by-laws been provided, and to whom?
• How many members have voting rights?
• How often did a quorum of voting board members meet during the year?November 10,
2010
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Governing Body and Management
• How often did the full board meet during the year?
• Did the number of meetings meet or exceed the meeting requirements set forth in the by-laws?
November 10, 2010
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Compensation
• Are compensation arrangements pre-approved by an authorized body composed of individuals with no conflict of interest for:– Officers– Directors– Trustees – Key employees
November 10, 2010
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Compensation
• Does the authorized body rely on comparability data in making compensation determinations?
• What data is used?– Exempt organizations– Governmental entities– For-profit entities
November 10, 2010
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Organizational Control
• Are there any family and/or business relationships within the organization?
• Does effective control rest with a single or select few individuals?
November 10, 2010
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Conflict of Interest
• Is there a written conflict of interest policy?
• Does it address recusals?• Is annual written disclosure required?• If actual conflicts were disclosed,
were policies adhered to?
November 10, 2010
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Financial Oversight
• Are procedures in place to ensure assets are properly used and consistent with the organization’s mission?
• How often are financial reports submitted?
• Was IRS Form 990 reviewed by the full board and/or designated committee?
November 10, 2010
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Financial Oversight• Was an independent accountant’s
report prepared?• Were management comments
received?• What actions were taken to adopt
recommendations?
November 10, 2010
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Document Retention
• Does the organization have a written document retention policy?
• Does the organization adhere to this policy?• Does the board document its meetings
contemporaneously and retain this documentation?
• Was this examination hindered by a lack of necessary information?
November 10, 2010
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Areas of General Oversight
• The annual financial budget• All loans to or from the organization• Compensation for senior
management• Expenses, including:– Travel, business meals, cash advances
and discretionary spendingNovember 10, 2010
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Questions
&Answers
November 10, 2010
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Debra Goodheer, CPA, CVA
• 10 years public accounting experience• Practice concentration in financial statement audits for
not-for-profit and governmental entities• Other significant experience includes applying
Government Auditing Standards, specifically compliance auditing utilizing standards established by the “Yellow Book” and Single Audits in accordance with OMB Circular A-133
• Memberships in TSCPA and Abilene Chapter and AICPA
November 10, 2010
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References• Corporation for National and Community Service
– www.nationalservice.gov
• Panel on the Nonprofit Sector: “Principles for Good Governance and Ethical Practice”– http://
www.nonprofitpanel.org/report/principles/Principles_Guide.pdf
• The Chronicle of Philanthropy– www.philanthropy.com
• PPC Publications: “Nonprofit Tax and Governance Guide”– http://download.trainingcpe.thomson.com/NPHT10.pdf
• Internal Revenue Service– www.IRS.gov
November 10, 2010
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