2. Who are You? Who is a current board member? Who is a current staff member? Who has been in the not for profit industry for more than 5 years? (either as a staff or serving on boards) Who has been in the not for profit industry for less than 5 years? 2
3. What type of Organization? Who represents a 501(c)3 organization? Who represents an organization with gross receipts < $200,000 Who represents an organization with gross receipts < $1,000,000 Who represents and organization with gross receipts > $1,000,000 3
4. Agenda What is the role of the board of directors? What significant areas of the financial statements should we be familiar with? What are the filing requirements for our organization? What do we need to know about audits? 4
5. What is the Role of the Board? Fundraising Strategic planning Oversight of programs The IRS believes that a well-governed organization is more likely to be compliant. 5
6. Oversight of Programs General Oversight Be aware of how the organization is run Be aware of processes potential areas of fraud Have an active role in helping to mitigate risks Fiduciary Oversight Help set financial policies Be familiar with the financial statements Be able to review and understand the form 990 6
7. Policies of a Not For Profit Conflict of interest policy Policy regarding reimbursement of travel and entertainment expenses Executive compensation policy Investment policy 7
8. Assimilation of New Board Members What should you do when you joint a board? How does fiscal oversight work? What is the value of analyzing historical financial information? What are the benefits of board committees? What are strategies for effective board communication? What can staff do to support board members?
9. Agenda What is the role of the board of directors? What significant areas of the financial statements should we be familiar with? What are the filing requirements for our organization? What do we need to know about audits? 9
10. Importance of the Financial Position Enhancement of organization Supports future plans for the organization Deeper understanding of key information Activities of the organization
11. Financial Differences Financial statements Statement of Financial Position Statement of Activities Statement of Functional Expenses Endowments 11
12. Statement of Financial Position Short-term investments Long-term investments Accrued income taxes Net assets Unrestricted Board Designated Undesignated Temporarily Restricted Permanently Restricted 12
13. Statement of Activities Allocations into restricted classes Realized and unrealized gains/losses on investments Assets released from restrictions Expenses 13
15. Endowments Protecting the original contribution Contributions and expenditures Investment income Requirements Policies and standards 15
16. Agenda What is the role of the board of directors? What significant areas of the financial statements should we be familiar with? What are the filing requirements for our organization? What do we need to know about audits? 16
17. What is Required to be Filed? Internal Revenue Service Illinois Attorney General Other states 17
18. The Form 990 Full 990 or 990-EZ 12-page core form & 16 schedules Additional questions on governance, policies, and procedures Navigating the changes
19. AG-990-IL Any 501(c)(3) organization that collects contributions from anyone in Illinois Audited financial statements required if gross receipts is greater than $300,000 19
20. Unrelated Business Income Tax Certain activities by not for profits may be subject to taxes Advertising in publications Rental income Sales of merchandise not directly related to program activities 20
21. Agenda What is the role of the board of directors? What significant areas of the financial statements should we be familiar with? What are the filing requirements for our organization? What do we need to know about audits? 21
22. What Occurs During an Audit? Understanding of entity controls Examination and testing of statement of financial position and statement of activities Fraud inquiries Communication with board of directors 22
23. Communication with the Auditor Review financial statements and footnotes and inquire if additional understanding is necessary Discuss the audit process Ask about areas of possible improvement 23
24. Preparing for an Audit Know your financial statements Be prepared to explain deviations from budgets or significant changes from the prior year Find out what the auditor will need Make accounting staff aware of auditors and need for documents
25. Specializing in Financial Statement Audits, Reviews and Compilations Income Tax Planning, Research and Preparation Pension and Profit Sharing Plans Monthly Accounting, QuickBooks and Accounting Software Setup and Training 25
Editor's Notes
IRS suggests that an ideal board of directors would be between 5 and 7 members and would not be more than 15 members
Discuss at beginning the source of these policies… 990 and how the 990 is structured… with asking if policies & additional information required if necessary
David from people Music and Peter and Cynthia from Museum of Contemporary Art to comment on topics
All board members to comment or supplement throughout section
Permanent endowment – established by a donor restricted gift
Peter & Cynthia to comment on navigating the changes