Effective management of nonprofit investments

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This presentation helps you understand:
1. What is a successful audit?
2. Auditor responsibilities vs. auditee
3. Board of Directors vs. Investment comittee
4. Managing investments
5. What do auditors look for
6. Common management letter comments

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Effective management of nonprofit investments

  1. 1. Effective Management ofNonprofit Investments:The Auditor’s PerspectiveTrevor Williams, CPASenior Audit ManagerSeptember 18, 2012
  2. 2. Effective Management of Nonprofit Investments: An Auditor’s Perspective Trevor W. Williams, CPA Senior Audit Manager, Gelman, Rosenberg & Freedman CPAs  Nearly 20 years of experience with audit functions, contractual compliance rules, regulations and policies  Supervises the overall planning and administration of audit, review and compilation engagements  Nonprofit Involvement: – Board member, MD/DC/VA Chapter of the Lupus Foundation of America – Board member, Mentors, Inc.Trevor W. Williams, CPA • twilliams@grfcpa.com 2
  3. 3. Effective Management of Nonprofit Investments: An Auditor’s Perspective Table of Contents I. What is a successful audit? II. Auditor responsibilities vs. auditee responsibilities III.Board of Directors vs. Investment Committee IV. Managing investments V. What do auditors look for? VI. Common management letter commentsTrevor W. Williams, CPA • twilliams@grfcpa.com 3
  4. 4. Effective Management of Nonprofit Investments: An Auditor’s Perspective I. What is a successful audit?Trevor W. Williams, CPA • twilliams@grfcpa.com 4
  5. 5. Effective Management of Nonprofit Investments: An Auditor’s Perspective Organization is key  Advance preparation  Pull, scan, or copy information requested by the auditor  Maintain a list (or backup copy) of information provided  Make sure supporting documentation is complete and accurateTrevor W. Williams, CPA • twilliams@grfcpa.com 5
  6. 6. Effective Management of Nonprofit Investments: An Auditor’s Perspective II. Auditor vs. Auditee Responsibilities Have a clear understanding of: 1. Your auditor’s responsibilities 2. Your responsibilitiesTrevor W. Williams, CPA • twilliams@grfcpa.com 6
  7. 7. Effective Management of Nonprofit Investments: An Auditor’s Perspective Auditor’s Responsibilities  Gather information about your organization to provide reasonable (not absolute) assurance that your financial statements are fairly presented, in all material respects, in conformity with generally accepted accounting principles.Trevor W. Williams, CPA • twilliams@grfcpa.com 7
  8. 8. Effective Management of Nonprofit Investments: An Auditor’s Perspective Auditor’s Responsibilities (cont.)  Examine on a TEST basis evidence supporting the amounts and disclosures in the financial statements.Trevor W. Williams, CPA • twilliams@grfcpa.com 8
  9. 9. Effective Management of Nonprofit Investments: An Auditor’s Perspective Auditor’s Responsibilities (cont.) Not to prepare schedulesTrevor W. Williams, CPA • twilliams@grfcpa.com 9
  10. 10. Effective Management of Nonprofit Investments: An Auditor’s Perspective Auditor’s Responsibilities (cont.) Not to perform bookkeeping functionsTrevor W. Williams, CPA • twilliams@grfcpa.com 10
  11. 11. Effective Management of Nonprofit Investments: An Auditor’s Perspective Auditor’s Responsibilities (cont.) Not to catch fraud, waste, abuse, etc.Trevor W. Williams, CPA • twilliams@grfcpa.com 11
  12. 12. Effective Management of Nonprofit Investments: An Auditor’s Perspective Your Responsibilities (Management)  Establish and maintain internal controls  Select and apply accounting principlesTrevor W. Williams, CPA • twilliams@grfcpa.com 12
  13. 13. Effective Management of Nonprofit Investments: An Auditor’s Perspective Your Responsibilities (Management)  Establish an accounting and financial reporting process  Ensure fair presentation of the financial statements in conformity with U.S. generally accepted accounting principles  Management decisionsTrevor W. Williams, CPA • twilliams@grfcpa.com 13
  14. 14. Effective Management of Nonprofit Investments: An Auditor’s Perspective Your Responsibilities (Governing Body)  Designate individuals with suitable skill, knowledge, or experience to oversee the programmatic, financial and tax needs of the organization  Establish and maintain internal controls  Monitor financial and programmatic performance (financial reporting)Trevor W. Williams, CPA • twilliams@grfcpa.com 14
  15. 15. Effective Management of Nonprofit Investments: An Auditor’s PerspectiveIII.Board of Directors vs. Investment CommitteeTrevor W. Williams, CPA • twilliams@grfcpa.com 15
  16. 16. Effective Management of Nonprofit Investments: An Auditor’s Perspective Board of Directors  Trustees of the organization’s assets; stewards of public trust – Objective, honest and efficient – Must exercise good decision-making without placing organization at unnecessary riskTrevor W. Williams, CPA • twilliams@grfcpa.com 16
  17. 17. Effective Management of Nonprofit Investments: An Auditor’s Perspective Investment Committee  Smaller sub-group within the larger framework of the board that assists in fulfilling the board’s oversight responsibility for the investment assets of the organization  The committee is responsible for formulating the overall investment policies and establishing investmentTrevor W. Williams, CPA • twilliams@grfcpa.com 17
  18. 18. Effective Management of Nonprofit Investments: An Auditor’s Perspective Finance/Investment Committee  The committee monitors the management of the portfolio for compliance with the investment policies and guidelines and for meeting performance objectives over timeTrevor W. Williams, CPA • twilliams@grfcpa.com 18
  19. 19. Effective Management of Nonprofit Investments: An Auditor’s Perspective Accountability “The state of being accountable, subject to the obligation to report, explain or justify something; responsible; answerable” - Webster’s DictionaryTrevor W. Williams, CPA • twilliams@grfcpa.com 19
  20. 20. Effective Management of Nonprofit Investments: An Auditor’s Perspective IV.Ingredients of Managing Investments  Investment policy  Internal controls and procedures  Adequate approvals of investment decisions  Sufficient knowledge of makeup of investments  Monthly statements  Transaction statements  Annual statementsTrevor W. Williams, CPA • twilliams@grfcpa.com 20
  21. 21. Effective Management of Nonprofit Investments: An Auditor’s Perspective V. What do auditors look for?  Why won’t they just leave us alone?Trevor W. Williams, CPA • twilliams@grfcpa.com 21
  22. 22. Effective Management of Nonprofit Investments: An Auditor’s Perspective What do auditors look for? (cont.)  Current or updated investment policy  Evidence that the Investment Committee is adhering to its charter/roles and responsibilities  Evidence that the organization’s investments are in accordance with the investment policy  Evidence internal controls and procedures exist and are consistently appliedTrevor W. Williams, CPA • twilliams@grfcpa.com 22
  23. 23. Effective Management of Nonprofit Investments: An Auditor’s Perspective What do auditors look for? (cont.)  An understanding about types of investments permitted by law, agreements with donors, endowments, etc.  Whether all aspects of investments have been calculated correctly and properly recorded  If the organization’s investments are managed by a broker/investment advisor, whether that broker/investment advisor has had a service organizations report (aka SSAE 16 – formerly SAS 70)Trevor W. Williams, CPA • twilliams@grfcpa.com 23
  24. 24. Effective Management of Nonprofit Investments: An Auditor’s Perspective Things to Consider Segregation of duties  Small organization with limited resources  Mitigating circumstances (checks and balances)Trevor W. Williams, CPA • twilliams@grfcpa.com 24
  25. 25. Effective Management of Nonprofit Investments: An Auditor’s Perspective Things to Consider (cont.) Adequate resources  Inexperienced/unqualified staff  Accounting and industry training programs and seminarsTrevor W. Williams, CPA • twilliams@grfcpa.com 25
  26. 26. Effective Management of Nonprofit Investments: An Auditor’s PerspectiveVI.Common Management Letter Comments  Incomplete accounting records – No (or infrequent) reconciliation of – investments to general ledger – Unrecorded transactions – Unsupported account balancesTrevor W. Williams, CPA • twilliams@grfcpa.com 26
  27. 27. Effective Management of Nonprofit Investments: An Auditor’s PerspectiveCommon Management Letter Comments (cont.)  Lack of an Official Investment Policy – Outdated – Too conservative/too aggressive – Management not adhering to policyTrevor W. Williams, CPA • twilliams@grfcpa.com 27
  28. 28. Effective Management of Nonprofit Investments: An Auditor’s PerspectiveCommon Management Letter Comments (cont.)  Donor’s intentions not honored (restricted contributions)  Organizations that use a broker/investment advisor should obtain SSAE 16 report and designate someone within the organization to read itTrevor W. Williams, CPA • twilliams@grfcpa.com 28
  29. 29. 4550 Montgomery Avenue, Suite 650N • Bethesda, MD 20814 Connect with Us Trevor W. Williams, CPA Email: twilliams@grfcpa.com Telephone: (301) 951 – 9090 Website: www.grfcpa.com Visit:

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