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
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