Finance Operations

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Leading for the Future Conference 2013 - Special Olympics Vermont

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Finance Operations

  1. 1. Finance – Operations & Reports Presented by: Wendy LaPine Kenny, Tom Nold & Bill Huckabay 1 Vermont
  2. 2. Organizational Chart: Finance • Role of the Finance Committee • Financial Statements • Financial Controls • Annual Budget Process • Annual Audit Process • Review and submit 990 to SOI and IRS 2
  3. 3. Finance Committee • Led by the Treasurer • Six board members with financial experience • SOVT CEO • SOVT Finance Manager • Meets at least monthly ‣ 3 Our charter is to oversee the financial, legal and ethical integrity of SOVT’s books, records, and financial reporting processes
  4. 4. Financial and Ethical Integrity Let’s discuss for a minute: • What is financial and ethical integrity? • Your perception of an organization with financial and ethical integrity • Impact on our athletes and programs if our financial and ethical integrity suffers 4
  5. 5. Financial Controls • Separation of Duties • Consistent and understandable financial statements • Monthly variance analysis – comparison to budget and prior periods • Proper Approvals • Payroll changes • Invoice payments • Credit card charges • Board Oversight • Annual Audit 5
  6. 6. Budget Process Budget is developed by SOVT staff Presented to Finance Committee by CEO and Finance Manager Finance Committee is tasked with analyzing the budget, asking tough questions, challenging assumptions, and ultimately recommending the final budget for approval from the full board 6
  7. 7. Audit Responsibilities Selecting the audit firm through an RFP process Fully supporting the audit by ensuring full cooperation from staff and board Reviewing the results of the audit Ensuring that every audit memo is addressed and corrected, and procedures are in place to prevent reoccurrence Signing the financial statements and tax return 7
  8. 8. What’s a 990? Form 990 is an IRS Return for Tax-Exempt Organizations such as ours It contains Governance information as well as Financial information 8
  9. 9. What can you learn from a 990? Mission of an Organization Recent Accomplishments Revenues and source of revenue Expenses ‣ 9 Program costs, fundraising expenses, administrative expenses
  10. 10. What can you learn from a 990? Endowment value Governance of an Organization ‣ Key Employees ‣ Board Members ‣ Existence or lack of policies Employee Information ‣ Number of W-2s issued 10
  11. 11. To Summarize – We Need to be Accredited BY SOI • Implementation of reliable internal control systems for recording and accounting for the receipt and expenditure of funds • Maintain internal control systems that are sufficient to guard against unauthorized and fraudulent acts • Maintain an established accounting system that complies with GAAP • Combine the financial books and records of the Accredited Program and all Programs so they are reflected as a single reporting entity • Ensure all Programs conduct their affairs in accordance with the financial management and reporting standards as outlined in Article 8 of the SOI Official General Rules • Conduct an annual audit • Provide SOI with an annual report, audited financials statements, copy of the 990 tax return 11
  12. 12. What is Certified Public Accounting? • Certified: Licensed to practice by State Boards of Accountancy   150 credit hours of college education (five years)   One to two years of experience   Pass the uniform (national) CPA exam   Continuing education requirements   • Public: Ultimate responsibility is to the public and not the client   • Accounting…   12
  13. 13. What is Accounting? • Two Core Financial Statements: Statement of Financial Position (Balance Sheet) – Shows financial condition at one point in time.   Statement of Activities (Income Statement) – Shows financial performance over one period of time.   •  Two Core Equations:   Assets – Liabilities = Net Assets (Equity) Revenue – Expenses = Change in Net Assets (Net Income)     13
  14. 14. Who is Wallace W. Tapia, P.C.? • A public accounting firm, licensed by the State of Vermont and members of the American Institute of Certified Public Accountants. • Formed in December 1989 by Wallace Tapia – former lead tax partner for exempt organizations at Smith, Batchelder and Rugg. • Over 80% of annual billings to non-profit organizations.  • Four full-time professionals (three CPAs and one QuickBooks Pro Advisor), two part-time CPAs and two administrative personnel. •14 Members of the AICPA, Vermont Society of CPAs and subject to
  15. 15. What is a Financial Statement Audit? Purpose: To express an opinion as to whether an organization’s financial statements are fairly stated in, all material respects, in accordance with U.S. generally accepted accounting principles.  Management Responsibility: “Management is responsible for the preparation and fair presentation of these financial statements in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatements, whether due to fraud or error (italics added).” Auditor Responsibility: “..to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with U.S. generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement (italics added).” 15
  16. 16. What are the Rules and Who Makes Them? • Generally accepted accounting principles (“GAAP”): Determine the form, content and disclosures required for financial statements to be fairly stated. Generally established, for non-public companies (including nonprofit organizations), by the Financial Accounting Standards Board. • Generally accepted auditing standards (“GAAS”):   Set the standards an auditor must use in performing an audit.   Generally established by the Auditing Standards Board.    16
  17. 17. What Makes a Good Auditor (under GAAS)? • The Auditor must possess adequate technical training & proficiency • The Auditor must maintain independence in mental attitude in all matters related to the audit.   • Independence in fact and appearance The auditor must exercise due professional care during the performance of the audit and the preparation of the report. “Professional skepticism is an attitude that includes a questioning mind and a critical assessment of audit evidence. The auditor uses the knowledge, skill, and ability called for by the profession of public accounting to diligently perform, in good faith and with integrity, the gathering and objective evaluation of evidence (Statement on Auditing Standards No. 82).” “The auditor neither assumes that management is dishonest nor assumes unquestioned honesty. In exercising professional skepticism, the auditor should not be satisfied with less than persuasive evidence because of a belief that management is honest (Statement on Auditing Standards No. 82).”   17
  18. 18. What are the Mechanics and Limitations of an Audit?     “An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.” 18
  19. 19. What is Internal Control?   “The system by which an organization provides reasonable assurance that   its(1) financial reports are accurate and (2) its assets are protected from misappropriation.”   1. “management fraud” 2. “employee fraud”   19
  20. 20. What is Fraud? “All multifarious means which human ingenuity can devise, and which are   resorted to by one individual to get an advantage over another by false   suggestions or suppression of the truth.”  Major types of fraud include: • misrepresentation or concealment of material facts • bribery • conflicts of interest • breach of fiduciary duty • theft of money or property Embezzlement: the wrongful appropriation of money or property by a person to whom it has been lawfully entrusted. 20
  21. 21. Why Do People Commit Fraud?     21
  22. 22. What are the Elements of the Internal Control “Integrated Framework”? 1. Control Environment 2.   Risk Assessment Process   3. Financial Reports and Communication 4. Control Activities 5. Monitoring   22
  23. 23. What are the Elements of the “Control Environment”? 1. Integrity and Ethical Values 2. Commitment to Competence 3. Effectiveness of the Board / Audit Committee 4. Management’s Philosophy / Operating Style 5. Organizational Structure 6. Assignment of Authority and Responsibility 7. HR Policies & Procedures Vermont 23
  24. 24. What are the Key “Control Activities”?   1. Capable personnel   Authorization 2. 3. Segregation of duties 4. Controlled access 5. Periodic comparison 6. Error-checking routines   7. Supervision & review     24
  25. 25. What were the Results of the Audit?    An “unmodified” (clean) opinion on the financial statements. •    •A management letter with no “material weaknesses” or “significant deficiencies” identified.     •Preparation of the annual “Form 990” tax return.   25
  26. 26. A Few Reminders…  Use approved forms from the Centralized Guide to Financial Management  Be certain two unrelated Class A volunteers count cash  Obtain a bank check for cash received; this avoids depositing SOVT funds into a personal account (an internal control) Vermont  Rather than using funds to 26 pay for expenses, always
  27. 27. Approved Program Expenses Listed below are examples of expenses approved for payment or reimbursement. This list may not be limited to the following items: • Sports Equipment • Team Uniforms • First Aid Supplies & Training • Parking & Toll Fees • Vehicle Rental & Gas Reimbursement • Postage, Office Supplies • Coaches Training & Training Materials • Meals & Lodging (at approved competitions & events) • • 27 Registration Fees Facility Rental (for practices and at approved events)
  28. 28. IN-KIND CONTRIBUTION FORM Every Program receives support in some form from their community. This   support might be services, reduced costs for items, or budget assistance. Any donation of services, goods or funds that is budget relieving, i.e., the Program would otherwise incur the cost for, is considered an In-Kind Donation. There are two main types: •Non-cash donations of goods Non-cash donations of goods are donations of items other than cash that are tangible. A donation of sports equipment, food, and use of a local high school’s gym are all perfect examples of In-Kind Donations (even if a portion of the expense is donated). While these donations have a value, it is sometimes difficult to quantify how much they are worth. The best way to calculate their worth is to either ask the donor or find out how much it would cost to buy the item from a store or rent the space from the vendor. Finding this information is important for the donor, as well as the SOVT Office. The donor needs this information in order to receive a tax deduction for their gift. The value of the item(s) should match the amount listed on any thank you note that is sent to the donor. It is essential for the SOVT Office to properly account for this gift. 28
  29. 29. • Donation of time by professionals Accounting procedures dictate that only a donation of time from a specialist counts as an In-Kind Donation of time. A good example is a doctor who donates his time for physicals, a certified sports official’s time or the PE instructor who serves as the Games Director for a local competition. The value of this gift is the hourly rate that this person would normally be paid for their service multiplied by the number of hours they volunteer. The easiest way to find out the hourly rate for this person is by asking them. Volunteers who serve in roles that are not related to their profession, such as a secretary volunteering as a timer for the local games, cannot be included. 29
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