Financial Responsibilities of Board Members February 21-23, 2012 Ft. Worth, TX Ingrid Danler, CFM Associate Director Operations, ASFPM

Today’s Objectives 1.Understand role of Board and their responsibilities for finances; 2.Identify Financial Risk and how to minimize them; 3.Assessing financial health and looking for red flags. 2

What is governance? “In essence, governance is about ensuring the fit between the organization's mission and its activities and performance.” -Anheir, Non-Profit Organization: Theory, Management, Practice 3

Board Member Duties Board members must meet standards of conduct when carrying out duties: Duty of Care Duty of Loyalty Duty of Obedience 4

Duty of Care Same level of care as an “ordinarily prudent” person would exercise in a like position under similar circumstances. Example….you can take risks, and you can also be occasionally wrong, but you should be informed and use common sense. 5

IRS Check Sheet reference Duty of Care means: Attend Board meetings regularly – CS11 Make sure meetings reflect attendance – CS25 Be informed, vote independently, and follow-up regularly. 6

Duty of Loyalty Board members must give undivided allegiance to their organization when making decisions that affect the organization. 7

IRS Check Sheet reference Duty of Loyalty means: Board members cannot put personal interests above those of the organization – CS16  Family  Associated business interests  Other nonprofit interests Conflicts of interest – CS18 8

Duty of Obedience Board members have a duty to ensure that the organization remains true to its central purpose. Keep organization focused, in compliance and make sure it follows its governing documents. 9

IRS Check Sheet reference Duty of Obedience means: Board members must be in alignment with:  Articles of Incorporation – CS8, CS9  Bylaws – CS8, CS9  Mission Statement – CS7 10

Board Financial Responsibilities 11 Ask Questions such as: 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 adequately against risk? How do we compare to our peers – benchmarking?

Specific responsibilities 12 Organizational Budget Strategic Plan Build reserves Manage resources Assure organizational Internal Controls maintained Accounting policies and procedures External audits Committee responsible for oversight Monitoring Fraud Triangle Opportunity INTERNAL CONTROLS Rationalization (can’t control) Pressure (can’t control)

Financial Statements 13 Financial literacy is different for everyone…… But….that does not mean that you are not responsible or have to be an expert. Duty of Care Duty of Loyalty Duty of Obedience Photo Courtesy of FEMA

Conclusion Many thanks to: Wegner LLP, CPAs & Consultants Madison, WI 14