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Financial Responsibilities of
           Board Members
Presented by: Scott Haumersen, CPA , Managing Partner
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
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
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
Board Members’ Duties

• Board members must meet standards of
    conduct when carrying out duties:

    • Duty of Care
    • Duty of Loyalty
    • Duty of Obedience
Duty of Care

Same level of care as an “ordinary prudent”
person would exercise in a like position under
similar circumstances.

  • You can take risks, you can and also will
    be occasionally wrong, but be informed
    and use common sense.
  • Risk vs. Reward equation
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
Duty of Loyalty

• Board members must give undivided
  allegiance to their organization when
  making decisions which affect the
  organization
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
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
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
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
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
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
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?
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?
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
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
Thank You!!


 Scott Haumersen, CPA, Managing Partner

             Wegner CPAs
            2110 Luann Lane
           Madison, WI 53713
             608.442.1925

    scott.haumersen@wegnercpas.com

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Financial Responsibilities Of Board Members

  • 1. Financial Responsibilities of Board Members Presented 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 Care Same level of care as an “ordinary prudent” person would exercise in a like position under similar 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