THE GOVERNING BOARD:Financial Responsibilities<br />Presented to: Arts and Business Council<br />Tuesday, September 28, 20...
Who are You?<br />Who is a current board member?<br />Who is a current staff member?<br />Who has been in the not for prof...
What type of Organization?<br />Who represents a 501(c)3 organization?<br />Who represents an organization with gross rece...
Agenda<br />What is the role of the board of directors?<br />What significant areas of the financial statements should we ...
What is the Role of the Board?<br />Fundraising<br />Strategic planning<br />Oversight of programs<br />The IRS believes t...
Oversight of Programs<br />General Oversight<br />Be aware of how the organization is run<br />Be aware of processes poten...
Policies of a Not For Profit<br />Conflict of interest policy<br />Policy regarding reimbursement of travel and entertainm...
Assimilation of New Board Members<br />What should you do when you joint a board?<br />How does fiscal oversight work?<br ...
Agenda<br />What is the role of the board of directors?<br />What significant areas of the financial statements should we ...
Importance of the Financial Position<br />Enhancement of organization<br />Supports future plans for the organization<br /...
Financial Differences<br />Financial statements<br />Statement of Financial Position<br />Statement of Activities<br />Sta...
Statement of Financial Position<br />Short-term investments<br />Long-term investments<br />Accrued income taxes<br />Net ...
Statement of Activities<br />Allocations into restricted classes<br />Realized and unrealized gains/losses on investments<...
Statement of Functional Expenses<br />Classification<br />Actual vs. allocation<br />14<br />
Endowments<br />Protecting the original contribution<br />Contributions and expenditures<br />Investment income<br />Requi...
Agenda<br />What is the role of the board of directors?<br />What significant areas of the financial statements should we ...
What is Required to be Filed?<br />Internal Revenue Service<br />Illinois Attorney General<br />Other states<br />17<br />
The Form 990<br />Full 990 or 990-EZ<br />12-page core form & 16 schedules<br />Additional questions on governance, polici...
AG-990-IL<br />Any 501(c)(3) organization that collects contributions from anyone in Illinois<br />Audited financial state...
Unrelated Business Income Tax<br />Certain activities by not for profits may be subject to taxes<br />Advertising in publi...
Agenda<br />What is the role of the board of directors?<br />What significant areas of the financial statements should we ...
What Occurs During an Audit?<br />Understanding of entity controls<br />Examination and testing of statement of financial ...
Communication with the Auditor<br />Review financial statements and footnotes and inquire if additional understanding is n...
Preparing for an Audit<br />Know your financial statements<br />Be prepared to explain deviations from budgets or signific...
Specializing in Financial Statement Audits, Reviews and Compilations<br />Income Tax Planning, Research and Preparation <b...
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Financial Responsibilities of the Governing Board

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A basic overview to for individuals who are more financially experienced in regards to fiscal responsibilities of board members.

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  • 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 &amp; 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 &amp; Cynthia to comment on navigating the changes
  • Financial Responsibilities of the Governing Board

    1. 1. THE GOVERNING BOARD:Financial Responsibilities<br />Presented to: Arts and Business Council<br />Tuesday, September 28, 2010<br />
    2. 2. Who are You?<br />Who is a current board member?<br />Who is a current staff member?<br />Who has been in the not for profit industry for more than 5 years? (either as a staff or serving on boards)<br />Who has been in the not for profit industry for less than 5 years?<br />2<br />
    3. 3. What type of Organization?<br />Who represents a 501(c)3 organization?<br />Who represents an organization with gross receipts < $200,000<br />Who represents an organization with gross receipts < $1,000,000<br />Who represents and organization with gross receipts > $1,000,000<br />3<br />
    4. 4. Agenda<br />What is the role of the board of directors?<br />What significant areas of the financial statements should we be familiar with?<br />What are the filing requirements for our organization?<br />What do we need to know about audits?<br />4<br />
    5. 5. What is the Role of the Board?<br />Fundraising<br />Strategic planning<br />Oversight of programs<br />The IRS believes that a well-governed organization is more likely to be compliant.<br />5<br />
    6. 6. Oversight of Programs<br />General Oversight<br />Be aware of how the organization is run<br />Be aware of processes potential areas of fraud<br />Have an active role in helping to mitigate risks<br />Fiduciary Oversight<br />Help set financial policies<br />Be familiar with the financial statements<br />Be able to review and understand the form 990<br />6<br />
    7. 7. Policies of a Not For Profit<br />Conflict of interest policy<br />Policy regarding reimbursement of travel and entertainment expenses<br />Executive compensation policy<br />Investment policy<br />7<br />
    8. 8. Assimilation of New Board Members<br />What should you do when you joint a board?<br />How does fiscal oversight work?<br />What is the value of analyzing historical financial information?<br />What are the benefits of board committees?<br />What are strategies for effective board communication?<br />What can staff do to support board members?<br />
    9. 9. Agenda<br />What is the role of the board of directors?<br />What significant areas of the financial statements should we be familiar with?<br />What are the filing requirements for our organization?<br />What do we need to know about audits?<br />9<br />
    10. 10. Importance of the Financial Position<br />Enhancement of organization<br />Supports future plans for the organization<br />Deeper understanding of key information<br />Activities of the organization<br />
    11. 11. Financial Differences<br />Financial statements<br />Statement of Financial Position<br />Statement of Activities<br />Statement of Functional Expenses<br />Endowments<br />11<br />
    12. 12. Statement of Financial Position<br />Short-term investments<br />Long-term investments<br />Accrued income taxes<br />Net assets<br />Unrestricted<br />Board Designated<br />Undesignated<br />Temporarily Restricted<br />Permanently Restricted<br />12<br />
    13. 13. Statement of Activities<br />Allocations into restricted classes<br />Realized and unrealized gains/losses on investments<br />Assets released from restrictions<br />Expenses<br />13<br />
    14. 14. Statement of Functional Expenses<br />Classification<br />Actual vs. allocation<br />14<br />
    15. 15. Endowments<br />Protecting the original contribution<br />Contributions and expenditures<br />Investment income<br />Requirements<br />Policies and standards<br />15<br />
    16. 16. Agenda<br />What is the role of the board of directors?<br />What significant areas of the financial statements should we be familiar with?<br />What are the filing requirements for our organization?<br />What do we need to know about audits?<br />16<br />
    17. 17. What is Required to be Filed?<br />Internal Revenue Service<br />Illinois Attorney General<br />Other states<br />17<br />
    18. 18. The Form 990<br />Full 990 or 990-EZ<br />12-page core form & 16 schedules<br />Additional questions on governance, policies, and procedures<br />Navigating the changes<br />
    19. 19. AG-990-IL<br />Any 501(c)(3) organization that collects contributions from anyone in Illinois<br />Audited financial statements required if gross receipts is greater than $300,000<br />19<br />
    20. 20. Unrelated Business Income Tax<br />Certain activities by not for profits may be subject to taxes<br />Advertising in publications<br />Rental income<br />Sales of merchandise not directly related to program activities<br />20<br />
    21. 21. Agenda<br />What is the role of the board of directors?<br />What significant areas of the financial statements should we be familiar with?<br />What are the filing requirements for our organization?<br />What do we need to know about audits?<br />21<br />
    22. 22. What Occurs During an Audit?<br />Understanding of entity controls<br />Examination and testing of statement of financial position and statement of activities<br />Fraud inquiries<br />Communication with board of directors<br />22<br />
    23. 23. Communication with the Auditor<br />Review financial statements and footnotes and inquire if additional understanding is necessary<br />Discuss the audit process<br />Ask about areas of possible improvement<br />23<br />
    24. 24. Preparing for an Audit<br />Know your financial statements<br />Be prepared to explain deviations from budgets or significant changes from the prior year<br />Find out what the auditor will need<br />Make accounting staff aware of auditors and need for documents<br />
    25. 25. Specializing in Financial Statement Audits, Reviews and Compilations<br />Income Tax Planning, Research and Preparation <br />Pension and Profit Sharing Plans<br />Monthly Accounting, QuickBooks and Accounting Software Setup and Training<br />25<br />

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