profitable solutions for nonprofits: board responsibilities

Profitable Solutions for Nonprofits

Board Responsibilities

Hosted by Davis Kinard & Co, PCwith speaker Debra Goodheer, CPA, CVA

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%

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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

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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

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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

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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

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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?

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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?

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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

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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

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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?

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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?

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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?

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Financial Oversight• Was an independent accountant’s

report prepared?• Were management comments

received?• What actions were taken to adopt

recommendations?

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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?

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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

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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

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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

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