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Financial Responsibilities Of Board Members

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Understand the Role of the Board and their Responsibilities for Finances, Identify Financial Risks and how to Minimize them, …

Understand the Role of the Board and their Responsibilities for Finances, Identify Financial Risks and how to Minimize them,
Understand how to assess the Financial Health of the organization and look for Red Flags


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  • 1. Financial Responsibilities of Board MembersPresented by: Scott Haumersen, CPA , Managing Partner
  • 2. What is Governance? “…governance involves the responsibility for the organization’s performance and direction. Governance is primarily an organizational steering function and closely related to the notion of stewardship.” “In essence, governance is about ensuring the fit between the organization’s mission and its activities and performance.” - Anheir Nonprofit Organization: Theory, Management, Practice
  • 3. Objectives of Today• Understand the Role of the Board and their Responsibilities for Finances• Identify Financial Risks and how to Minimize them• Understand how to assess the Financial Health of the organization and look for Red Flags
  • 4. Overview• The Regulatory Landscape• Duty of Care, Loyalty and Obedience• Board Responsibilities and Duties• Reducing Financial Risk• Specific Financial Responsibilities• 10 Bottom Lines of Financial Statement Analysis
  • 5. Board Members’ Duties• Board members must meet standards of conduct when carrying out duties: • Duty of Care • Duty of Loyalty • Duty of Obedience
  • 6. Duty of CareSame level of care as an “ordinary prudent”person would exercise in a like position undersimilar circumstances. • You can take risks, you can and also will be occasionally wrong, but be informed and use common sense. • Risk vs. Reward equation
  • 7. Examples of Duty of Care• Attend Board meetings regularly – CS 11• Make sure minutes reflect attendance – CS 25• Vote independently• Be informed about organizational activities• Delegate only to responsible individuals (staff, auditors, legal counsel, consultants) and follow up regularly – Audit Committees
  • 8. Duty of Loyalty• Board members must give undivided allegiance to their organization when making decisions which affect the organization
  • 9. Examples of Duty of Loyalty• Board members cannot put personal interests above those of the organization – CS 16 • Family • Associated business interests • Other nonprofit interests• Conflicts of Interest – CS 15
  • 10. Duty of Obedience• Duty to ensure organization remains true to central purpose• Keep organization focused, in compliance and make sure it follows its governing documents
  • 11. Examples of Duty of Obedience• Board Members must be in alignment with: • Articles of Incorporation – CS 8, CS 9 • Bylaws – CS 8, CS 9 • Mission Statement – CS 7
  • 12. A Few of the Many Board Responsibilities & Duties• Determine the organization’s mission and purpose• Ensure effective organizational planning – timely budget, strategic plan• Ensure adequate resources – build reserves• Manage resources effectively – may mean making tough decisions, like cutting a program
  • 13. A Few of the Many Board Responsibilities & Duties• Determine, monitor and strengthen the organization’s programs and services• Enhance the organization’s public standing be a cheerleader• Ensure legal and ethical integrity and maintain accountability• Internal Controls – Fraud stories
  • 14. A Few of the Many Board Responsibilities & Duties• Recruit and orient new board members and address board performance• Select chief executive• Support the chief executive and assess his/her performance• Due Diligence• Financial responsibilities – Review financial statements and ask questions
  • 15. Some Examples of Financial Responsibilities• Ask Questions- some examples  Do we have a sound financial plan?  Do we have enough cash?  Are our reserves sufficient?  Are our major expenses in line?  Are we meeting our budget?  Have we paid our payroll taxes?  Are we insured appropriately against risk?  Are we meeting the guidelines of our funders?  How do we compare to our peers- benchmarking?
  • 16. Some Examples of Financial Responsibilities• Develop systems for Monitoring  Are our Internal Controls sufficient?  Do we have Accounting policies and procedures?  Do we have committees responsible for oversight?  Do we have external audits?
  • 17. Reducing Financial Risk• Your involvement will depend on the size and the capability of internal staff• What should the systems of monitoring be?• What is your risk tolerance?• See checklist
  • 18. 10 Bottom Lines of Financial Statement Analysis• Financial literacy is different for all• But…. That doesn’t mean you are not responsible or have to be an expert.• Review 10 Bottom Lines• Sample financial statements
  • 19. Thank You!! Scott Haumersen, CPA, Managing Partner Wegner CPAs 2110 Luann Lane Madison, WI 53713 608.442.1925 scott.haumersen@wegnercpas.com