The Need for Governance
• In recent decades, about 2/3 of people
surveyed by the Independent Sector
expressed confidence i...
The Need for Governance
• In 2007, 26% of all Americans
volunteered in some capacity
for a nonprofit activity
• Billions o...
The Need for Governance
• Government has wisely avoided intruding on
how organizations pursue missions, manage
programs an...
General Guidance for Governance
• Board members have a fiduciary duty:
– Duty of Due Care
– Duty of Obedience
– Duty of Lo...
General Guidance for Governance
• Perceived correlation between good
governance and compliance with tax laws
• The IRS cre...
Governance According to the IRS
• Questions are posed to expose potential
weaknesses in an organization’s structure,
focus...
Governing Body and Management
• Is there a written mission statement that
articulates its purpose?
• Do the by-laws set fo...
Governing Body and Management
• Have the most recent versions of the articles
and by-laws been provided, and to whom?
• Ho...
Governing Body and Management
• How often did the full board meet
during the year?
• Did the number of meetings meet or
ex...
Compensation
• Are compensation arrangements pre-approved
by an authorized body composed of individuals
with no conflict o...
Compensation
• Does the authorized body rely on comparability
data in making compensation determinations?
• What data is u...
Organizational Control
• Are there any family and/or business
relationships within the organization?
• Does effective cont...
Conflict of Interest
• Is there a written conflict of interest policy?
• Does it address recusals?
• Is annual written dis...
Financial Oversight
• Are procedures in place to ensure assets are
properly used and consistent with the
organization’s mi...
Financial Oversight
• Was an independent accountant’s
report prepared?
• Were management comments received?
• What actions...
Document Retention
• Does the organization have a written
document retention policy?
• Does the organization adhere to thi...
Areas of General Oversight
• The annual financial budget
• All loans to or from the organization
• Compensation for senior...
Questions
&
Answers
November 10, 2010
Profitable Solutions for Nonprofits:
Board Responsibilities Slide 19 of 21
Debra Goodheer, CPA, CVA
• 10 years public accounting experience
• Practice concentration in financial statement audits fo...
References
• Corporation for National and Community Service
– www.nationalservice.gov
• Panel on the Nonprofit Sector: “Pr...
Profitable Solutions for Nonprofits: Board Responsibilities
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Profitable Solutions for Nonprofits: Board Responsibilities

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We discuss the legal and ethical responsibilities of boards of directors. Make sure your organization is judged by the IRS as having a strong commitment to good governance, and solidify your positive public perception.

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Profitable Solutions for Nonprofits: Board Responsibilities

  1. 1. The Need for Governance • In recent decades, about 2/3 of people surveyed by the Independent Sector expressed confidence in the ethics and honesty of U.S. charities and voluntary organizations • For individual charities, responses are even more favorable – some higher than 70% November 10, 2010 Profitable Solutions for Nonprofits: Board Responsibilities Slide 2 of 21
  2. 2. The Need for Governance • In 2007, 26% of all Americans volunteered in some capacity for a nonprofit activity • Billions of dollars are donated each year to nonprofits November 10, 2010 Profitable Solutions for Nonprofits: Board Responsibilities Slide 3 of 21
  3. 3. The Need for Governance • Government has wisely avoided intruding on how organizations pursue missions, manage programs and structure operations • Nonprofits have embraced need for standards of ethical practice that preserve and strengthen the public’s confidence November 10, 2010 Profitable Solutions for Nonprofits: Board Responsibilities Slide 4 of 21
  4. 4. General Guidance for Governance • Board members have a fiduciary duty: – Duty of Due Care – Duty of Obedience – Duty of Loyalty • Treat assets and operations of the organization with same level of care as your prized possessions November 10, 2010 Profitable Solutions for Nonprofits: Board Responsibilities Slide 5 of 21
  5. 5. General Guidance for Governance • Perceived correlation between good governance and compliance with tax laws • The IRS created a method of judging an organization’s commitment to good governance by using IRS Form 990 November 10, 2010 Profitable Solutions for Nonprofits: Board Responsibilities Slide 6 of 21
  6. 6. Governance According to the IRS • Questions are posed to expose potential weaknesses in an organization’s structure, focusing on: – Governing body and management – Compensation – Organizational control – Conflict of interest – Financial oversight – Document retention November 10, 2010 Profitable Solutions for Nonprofits: Board Responsibilities Slide 7 of 21
  7. 7. Governing Body and Management • Is there a written mission statement that articulates its purpose? • Do the by-laws set forth information for its governing body as far as composition, duties, qualifications and voting rights? November 10, 2010 Profitable Solutions for Nonprofits: Board Responsibilities Slide 8 of 21
  8. 8. Governing Body and Management • Have the most recent versions of the articles and by-laws been provided, and to whom? • How many members have voting rights? • How often did a quorum of voting board members meet during the year? November 10, 2010 Profitable Solutions for Nonprofits: Board Responsibilities Slide 9 of 21
  9. 9. Governing Body and Management • How often did the full board meet during the year? • Did the number of meetings meet or exceed the meeting requirements set forth in the by-laws? November 10, 2010 Profitable Solutions for Nonprofits: Board Responsibilities Slide 10 of 21
  10. 10. Compensation • Are compensation arrangements pre-approved by an authorized body composed of individuals with no conflict of interest for: – Officers – Directors – Trustees – Key employees November 10, 2010 Profitable Solutions for Nonprofits: Board Responsibilities Slide 11 of 21
  11. 11. Compensation • Does the authorized body rely on comparability data in making compensation determinations? • What data is used? – Exempt organizations – Governmental entities – For-profit entities November 10, 2010 Profitable Solutions for Nonprofits: Board Responsibilities Slide 12 of 21
  12. 12. Organizational Control • Are there any family and/or business relationships within the organization? • Does effective control rest with a single or select few individuals? November 10, 2010 Profitable Solutions for Nonprofits: Board Responsibilities Slide 13 of 21
  13. 13. Conflict of Interest • Is there a written conflict of interest policy? • Does it address recusals? • Is annual written disclosure required? • If actual conflicts were disclosed, were policies adhered to? November 10, 2010 Profitable Solutions for Nonprofits: Board Responsibilities Slide 14 of 21
  14. 14. Financial Oversight • Are procedures in place to ensure assets are properly used and consistent with the organization’s mission? • How often are financial reports submitted? • Was IRS Form 990 reviewed by the full board and/or designated committee? November 10, 2010 Profitable Solutions for Nonprofits: Board Responsibilities Slide 15 of 21
  15. 15. Financial Oversight • Was an independent accountant’s report prepared? • Were management comments received? • What actions were taken to adopt recommendations? November 10, 2010 Profitable Solutions for Nonprofits: Board Responsibilities Slide 16 of 21
  16. 16. Document Retention • Does the organization have a written document retention policy? • Does the organization adhere to this policy? • Does the board document its meetings contemporaneously and retain this documentation? • Was this examination hindered by a lack of necessary information? November 10, 2010 Profitable Solutions for Nonprofits: Board Responsibilities Slide 17 of 21
  17. 17. Areas of General Oversight • The annual financial budget • All loans to or from the organization • Compensation for senior management • Expenses, including: – Travel, business meals, cash advances and discretionary spending November 10, 2010 Profitable Solutions for Nonprofits: Board Responsibilities Slide 18 of 21
  18. 18. Questions & Answers November 10, 2010 Profitable Solutions for Nonprofits: Board Responsibilities Slide 19 of 21
  19. 19. Debra Goodheer, CPA, CVA • 10 years public accounting experience • Practice concentration in financial statement audits for not-for-profit and governmental entities • Other significant experience includes applying Government Auditing Standards, specifically compliance auditing utilizing standards established by the “Yellow Book” and Single Audits in accordance with OMB Circular A-133 • Memberships in TSCPA and Abilene Chapter and AICPA November 10, 2010 Profitable Solutions for Nonprofits: Board Responsibilities Slide 20 of 21
  20. 20. References • Corporation for National and Community Service – www.nationalservice.gov • Panel on the Nonprofit Sector: “Principles for Good Governance and Ethical Practice” – http://www.nonprofitpanel.org/report/principles/Principles_Guide. pdf • The Chronicle of Philanthropy – www.philanthropy.com • PPC Publications: “Nonprofit Tax and Governance Guide” – http://download.trainingcpe.thomson.com/NPHT10.pdf • Internal Revenue Service – www.IRS.gov November 10, 2010 Profitable Solutions for Nonprofits: Board Responsibilities Slide 21 of 21

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