Non-Profit Fiscal Governance
Shawn Gillon, CPA
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GENERAL GOVERNANCE
2
Corporate Governance

Corporate governance refers broadly to the rules, processes, or laws
by which businesses are operated, regulated and controlled.

A well-defined and enforced corporate governance structure, at least
in theory, works for the benefit of everyone concerned by ensuring
that the organization adheres to accepted ethical standards and
“Best Practices,” as well as to formal laws and regulations.

One
of
the
most
significant
and
valuable
developments
of
the
post-Sarbanes-Oxley
Act
environment has been the emergence of governance
“Best Practices” designed to enhance and improve
corporate responsibility and governance.
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Corporate Governance

Adoption of, and adherence to, “Best Practices” may reduce an
organization's exposure to potential corporate, charitable and tax
challenges.

Guidelines have been developed to assist nonprofit organizations
respond to the current “corporate responsibility” environment.

“One size does not fit all” - the structure’s design is
within the prerogative of each organization's Board of
Directors based upon a variety of facts and
circumstances unique to that entity.
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Corporate Governance

Also relevant to the corporate governance structure will be an
access to a pool of willing Director candidates. Organizations based
in smaller communities cannot reasonably be expected to have
multiple committees, filled exclusively with independent Directors.
5
Corporate Compliance

Regulations have closed most of the loopholes for all enterprises for profit and nonprofit.
Does the organization have a written Conflict of Interest Policy?
 Does the organization have a written Whistleblower Policy?
 Does the organization have a written Document Retention and
Destruction Policy?
Organizations must develop, adopt, and disclose a formal process to
deal with complaints and prevent retaliation.



Organization leaders must take any employee and volunteer
complaint seriously, investigate the situation, and fix any problems or
justify why corrections are not necessary.
6
Board Responsibilities

Duty of Care

Act in good faith.

Act with a level of care that an ordinarily prudent person would
exercise in like circumstances.

Act in the best interest of the organization.
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Board Responsibilities

Ensure that minutes are recorded and approved of all discussions
and actions in meetings of the Board and committees acting on
behalf of the Board.

Provide for an orientation program for new Directors
and a development program for all Directors. Among
other
things,
these
programs
should
include
presentations by executive management on the
organization's mission, challenges, opportunities and
strategic plans; code of conduct and corporate
integrity program; and internal and external auditing
processes.
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Board Responsibilities

The Board must also plan for succession to the position of the
Board Chair, other Board positions, and the position of the Executive
Director

Board members must set the tone. They must be fully engaged,
assertive, and accountable in carrying out their fiduciary
responsibilities.
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Board Responsibilities






Define the organization’s mission and vision.
 Who are we helping?
 How are we helping them?
Help with planning and implementation, monitor progress.
Select executive director.
Support executive director.
Recruit new members and assess board performance.
Provide financial oversight.
 Have an experienced finance professional.
 Prepare budgets.
 Prepare financials.
 Understand the 990.
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Board Responsibilities


Ensure legal and ethical standards are maintained.
Assist with fundraising and ensuring adequate funding.
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Best Practices










Pay attention! Be active!
Periodic formal self assessments, including retreats.
Term limits or other means to keep things fresh.
Build board around the organization’s vision and mission.
Board diversity.
Understanding roles.
Have an agenda.
New board member orientation.
Have a mission statement.
Be involved in the finances.
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FISCAL GOVERNANCE
13
Audit Committee

Probably not applicable to most in this room

The Audit committee should be composed entirely of independent
Directors.

The Audit committee should have at least one member who is a
"financial expert," defined in terms of thorough education and
experience as a public accountant or controller or similar position,
with sufficient accounting expertise.
14
Audit Committee

Audit committee should include a charter under which it is directly
responsible for the appointment, compensation, and oversight of the
audit accounting firm (which shall report directly to the audit
committee).

In addition, the Audit committee must have
procedures for the receipt, retention, and treatment
of
complaints
regarding
accounting,
internal
accounting
controls,
audit
matters
and
for
confidential anonymous submissions by employees of
concerns regarding questionable accounting or
auditing.
15
Budgeting

Annual budget
 Start with last year
 Build in known changes
 Build in anticipated changes
 Be realistic!
 Update when necessary
 Get board approval
 Monitor budget-to-actual
 Use as an evaluation tool
16
Cash Flow Projections





Look at timing of budgeted expenditures
Look at timing of budgeted receipts
Analyze ability of the organization to meet short-term cash needs
Be aware of cash restrictions
What if there is a liquidity problem?
 Develop calendar of key payment due dates
 Review AP for critical vendors to pay first
 Identify additional cash sources
17
Budgeting – First Year Issues


No prior year budget-to-actual
Where to start?
 Tie to your vision / mission
 Think of common revenue streams
 Board donations
 Community donations
 Special events
 Fundraisers
 Think of common expenditures
 Salaries or consulting fees for any paid employees
 Space usage
 Supplies, printing
 Insurance
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Form 990





Be familiar with the form
Know the different types (990 vs. 990-EZ)
Know what’s public information
Have good information available for your CPA to keep costs low
Be aware of the deadlines and extensions available
19
Internal Controls







Have a procedure in place for all things cash:
 No signature stamp!
 Limit authorized signers
 Have a threshold for dual signatures
 Have a policy for payments to self
 Have monthly bank reconciliations prepared and reviewed
Consider having a dollar threshold over which multiple bids are required
Use a general ledger software package
Understand proper document retention policy
Have access to a financial professional
Begin creating a processes and procedures manual to document everything
Create personnel and conflict of interest policies
20
Fundraising

Be aware of any restrictions on funds received!
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Financial Reports




To the extent practical:
 Prepare balance sheet
 Prepare income statement
 Prepare cash flow statement
Understand each statement
Be familiar with important ratios and metrics
 Program vs. admin expenditures
 Cash on hand
 Receivables and payables
Monitor budget-to-actual
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Financial Reports

Ask the right questions:
 Do we currently have a profit or loss?
 Where do we stand compared to budget?
 Are there any key trends in our revenues or expenses we should be
aware of?
 Is our cash flow projection showing sufficient cash to last the year?
 Is money being spent in accordance with our strategic plan, mission,
and vision?
 Are we getting our money’s worth from our executive director and
vendors?
 Are we filing all of the appropriate forms timely?
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Document Retention

See handout
24
Considerations for Larger Organizations



Audit committee
Compensation committee
Nominating and Governance committee
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Thank You!
Shawn Gillon, CPA
One Spring Street
New Brunswick, NJ 08901
sgillon@withum.com
732.828.1614