Board Responsibility for Internal Controls

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Presentation given by Robert Seestadt and Jerry Lindman Oct 27, 2009 for Michigan Association of CPAs.

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  • Fraud Awareness Symposium 2006 November 30, 2006 Jerry Lindman J.D. - lindman@ltu.edu - 248-204-3095 Charitable nonprofits are as susceptible to fraud as business organizations Charities should follow business practices related to fraud prevention The charitable nonprofit sector is growing dramatically Effective fraud prevention at charities requires an understanding of unique management structure
  • Fraud Awareness Symposium 2006 November 30, 2006 Jerry Lindman J.D. - lindman@ltu.edu - 248-204-3095 This SNFC Project was guided by:
  • Board Responsibility for Internal Controls

    1. 1. Board Responsibility for Internal Controls Developing the Tone at the Top Presented by: Robert Seestadt , CPA, Detroit Science Center Design & Exhibits CFOShare LLC Services for Nonprofit Organizations Gerald Lindman J.D., Senior Lecturer, Center for Nonprofit Management, Lawrence Tech University MACPA Accounting Conference October 27, 2009 -- Troy, MI
    2. 2. Agenda <ul><li>Focus is internal controls and governing board responsibilities </li></ul><ul><li>Responsibilities/minimum requirements of board oversight </li></ul><ul><li>Role of policies and procedures for the organizations </li></ul><ul><li>Examples of problem areas </li></ul>
    3. 3. Effective Internal Controls Help With Calls for Improved Accountability <ul><li>Influence of Sarbanes-Oxley Act </li></ul><ul><li>New regulations & scrutiny by Congress/State </li></ul><ul><li>More sophisticated/cautious donors </li></ul><ul><li>Grant making foundations </li></ul><ul><li>Media </li></ul>
    4. 4. The Nonprofit Sector <ul><li>Nonprofit culture is based on trust </li></ul><ul><li>Perception that all are compassionate and ethical </li></ul><ul><li>Bias against implementing internal controls that discourage fraud </li></ul><ul><li>Dishonest people more likely to exploit </li></ul><ul><li>Charities are adopting more business practices </li></ul>
    5. 5. Fraud Prevention Requires Team Approach <ul><li>Boards of Directors are legally responsible </li></ul><ul><ul><li>Need to lead by providing the Tone at the Top </li></ul></ul><ul><li>Nonprofit CEO and staff vital in execution </li></ul><ul><ul><li>Develop and practice internal controls </li></ul></ul><ul><ul><li>Develop good financial reporting to board </li></ul></ul><ul><li>Nonprofit CPA’s provide essential expertise </li></ul><ul><ul><li>Testing of internal controls </li></ul></ul><ul><ul><li>Management letter comments </li></ul></ul>
    6. 6. How to develop the Tone at the Top <ul><li>Boards need to provide leadership regarding internal controls by setting the Tone at the Top </li></ul>
    7. 7. COSO Framework <ul><li>Control Environment </li></ul><ul><li>Risk Assessment </li></ul><ul><li>Control Activities </li></ul><ul><li>Information & Communication </li></ul><ul><li>Monitoring </li></ul>
    8. 8. COSO Framework <ul><li>Control Environment </li></ul><ul><li>Risk Assessment </li></ul><ul><li>Control Activities </li></ul><ul><li>Information & Communication </li></ul><ul><li>Monitoring </li></ul>
    9. 9. Twenty Ways to Mess Up Internal Controls: A field guide for board members © 2009 Robert Seestadt All Rights Reserved
    10. 10. 20. Avoid auditor communication at all costs © 2009 Robert Seestadt All Rights Reserved
    11. 11. 19. Keep employee policies “strategically vague” © 2009 Robert Seestadt All Rights Reserved
    12. 12. 18. Skip out of board training © 2009 Robert Seestadt All Rights Reserved
    13. 13. 17. Have a weak, unsupported whistleblower policy © 2009 Robert Seestadt All Rights Reserved
    14. 14. 16. Leave the president/director alone, they’re busy after-all © 2009 Robert Seestadt All Rights Reserved
    15. 15. 15. Rely on “unwritten” code of conduct © 2009 Robert Seestadt All Rights Reserved
    16. 16. 14. Minutes and meetings are best discussed, not documented © 2009 Robert Seestadt All Rights Reserved
    17. 17. 13. Encourage hiring only “yes” men/women at finance seat © 2009 Robert Seestadt All Rights Reserved
    18. 18. 12. Encourage adoption of new accounting methods every quarter © 2009 Robert Seestadt All Rights Reserved
    19. 19. 11. Audit committees are only for the big guys © 2009 Robert Seestadt All Rights Reserved
    20. 20. 10. Fraud brainstorming is for the weak © 2009 Robert Seestadt All Rights Reserved
    21. 21. 9. Leave expectations undefined for top brass © 2009 Robert Seestadt All Rights Reserved
    22. 22. 8. Avoid using analytical tools for performance measurement © 2009 Robert Seestadt All Rights Reserved
    23. 23. 7. Ignore management / SAS 112 letter © 2009 Robert Seestadt All Rights Reserved
    24. 24. 6. I joined the board to build my resume and have cookies at meetings © 2009 Robert Seestadt All Rights Reserved
    25. 25. 5. Delegate review of performance to the finance committee © 2009 Robert Seestadt All Rights Reserved
    26. 26. 4. Of course we’re understaffed, we’re a nonprofit © 2009 Robert Seestadt All Rights Reserved
    27. 27. 3. Benchmarking is for consultants © 2009 Robert Seestadt All Rights Reserved
    28. 28. 2. Internal auditing is overhead…and we hate overhead © 2009 Robert Seestadt All Rights Reserved
    29. 29. 1. Don’t let a difficult question get in the way of a happy meeting © 2009 Robert Seestadt All Rights Reserved
    30. 30. Nonprofit Services <ul><li>Management letter assistance </li></ul><ul><li>Discussion groups </li></ul><ul><li>Financial mapping </li></ul><ul><li>Ask a CFO / sounding board </li></ul><ul><li>Shared & outsourced services </li></ul>cfoshare.com 248.714.9400
    31. 31. About the Center for Nonprofit Management <ul><li>The Center values and promotes: </li></ul><ul><ul><li>Sound business practices in nonprofit organizations </li></ul></ul><ul><ul><li>Careers and volunteerism in the nonprofit sector </li></ul></ul><ul><ul><li>Social responsibility in all sectors of society </li></ul></ul><ul><li>Offers: </li></ul><ul><ul><li>MBA with Nonprofit Concentration </li></ul></ul><ul><ul><li>Graduate Certificate in Nonprofit Management </li></ul></ul><ul><ul><li>100% Online Coursework Options </li></ul></ul><ul><ul><li>Board Member Training Series, BoardWALK </li></ul></ul><ul><ul><li>Learning Circle for Nonprofit CFO’s </li></ul></ul>

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