1. Presented by: Brian Carter, CPA Partner Mauldin & Jenkins, LLC Karen Jubrail Vice President of Development Glazer Children’s Museum 1

2. Who are your donors? Financial ratios to consider Other important financial statement items Governance issues 2

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4. Your donors are whoever provides the funding for your organization Government Agencies Federal State Local Corporations Foundations 4

5. Your donors are whoever provides the funding for your organization General Public Contributions Membership Dues Fee for Service Board Members 5

6. What is important to your donors depends on who your donors are Many donors are reviewing your organization’s 990 tax return through sites such as Guidestar, Charity Navigator, etc. Government agencies are mostly concerned with grant compliance 6

7. Current ratio Current assets divided by current liabilities Should be 1.0 or higher Debt to equity ratio Total debt divided by total net assets The higher the number the more leveraged the organization is 7

8. Working capital ratio Unrestricted net assets divided by total expenses Should be 1.0 or higher Program expenses as a percent of total expenses Should be greater than 75% 8

9. Administrative expenses as a percent of total expenses Should be less than 15% Fundraising expenses as a percent of total expenses Should be less than 10% 9

10. Fundraising efficiency Total fundraising expenses divided by total contributions Should be less than $0.10 These ratios are just a few of the many that can be used to review the financial health of your organization 10

11. Your organization should select several key performance metrics that are relevant to your industry or are representative of outcomes in your strategic plan Financial, operational or programmatic Help you tell your story Benchmark with other similar organizations 11

12. Unrestricted Net Assets should be positive Indicates a history of net income and good management of resources Positive change in net assets (i.e. net income) Positive operating cash flows Does the organization have cash reserves? 12

13. Is the organization’s cash uninsured due to bank concentrations? Unlimited FDIC insurance is no longer available Is there a high degree of uncollectible accounts receivable Is there a significant amount of bad debt expense or a large allowance for doubtful accounts 13

14. What percentage of the organization’s investments are invested in alternatives? As a general rule of thumb less than 10% is a conservative amount Is the revenue stream of the organization concentrated in a one or two funding sources or donors? 14

15. Is the organization’s mission identified in the footnotes? Does the stated mission actually align with what the organization does on a day to day basis? Is the organization involved in any litigation? 15

16. 16 Are there any outstanding lines of credit and is there any availability to cover seasonality in funding? Are there significant changes in revenue or expense from year to year? What are the restrictions on endowment funds and how are they managed?

17. Are there any covenants on long-term debt and was the organization in compliance with those covenants? 17

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19. Independent Board of Directors A majority of the board of directors should be independent IRS definition of an independent board member Member was not compensated as an officer or other employee of the organization or a related organization Member did not receive total compensation or other payments exceeding $10,000 during the tax year from the organization or related organization as an independent contractor 19

20. IRS definition of an independent board member (continued) Neither the member, nor a family member of the member, was involved in a transaction with the organization that is required to be reported on Schedule L Neither the member, nor a family member of the member, was involved in a transaction with a taxable or tax exempt related organization that is required to be reported on Schedule L If the member flunks any of these 4 items, he/she is not independent 20

21. Board review of financial statements and tax returns The board and/or a committee of the board should review and approve the audited financial statements and tax returns before they are issued. 21

22. Board review of financial statements and tax returns (continued) Form 990, Page 6, Part VI, Question 11a – Has the organization provided a complete copy of this Form 990 to all members of its governing body before filing the form? Form 990, Page 6, Part VI, Question 11b – Describe in Schedule O the process, if any, used by the organization to review this Form 990 22

23. Board review of financial statements and tax returns (continued) Form 990, Page 12, Part XII, Question 2c – Does the organization have a committee that assumes responsibility for oversight of the audit, review or compilation of its financial statements and selection of an independent accountant? 23

24. Does the Organization have any loans to/from board members or management? Loans to/from board members or management is discouraged and not good governance. Form 990, Page 4, Part IV, Question 26 – Was a loan to or by a current or former officer, director, trustee, key employee, highly compensated employee or disqualified person outstanding as of the end of the organization’s tax year? 24

25. Does the Organization have any loans to/from board members or management (continued)? If yes, Schedule L, Part II is required to be completed Must report details on loans, advances and receivables 25

26. Does the organization have a policy for: Conflict of interest Whistleblower Document retention and destruction Conflict of interest Form 990, Page 6, Part VI, Question 12a – Did the organization have a written conflict of interest policy? 26

27. Conflict of interest (continued) Form 990, Page 6, Part VI, Question 12b – Were officers, directors or trustees and key employees required to disclose annually interests that could give rise to conflicts? Form 990, Page 6, Part VI, Question 12c – Did the organization regularly and consistently monitor and enforce compliance with the policy? If yes, describe in Schedule O 27

28. Whistleblower Form 990, Page 6, Part VI, Question 13 – Did the organization have a written whistleblower policy? Three keys to policy Employees know the policy exists Employees know how to use the policy Instances are reported to a member of the board or some other independent person, not management Management may be the person conducting fraud, illegal acts, etc. 28

29. Document retention and destruction Form 990, Page 6, Part VI, Question 14 – Did the organization have a written document retention and destruction policy? Make sure policy complies with recommended IRS guidelines for document retention and destruction 29

30. Compensation Issues Form 990, Page 6, Part VI, Question 15 – Did the process for determining compensation of the following persons include a review and approval by independent persons, comparability data, and contemporaneous substantiation of the deliberation and decision? If yes, describe in Schedule O. CEO or top management official Other officers or key employees 30

31. Compensation Issues (continued) Form 990 requires disclosure of the salary for any current officer, director or trustee regardless of the amount From the organization or any related organization Form 990 requires disclosure of the salary for any former officer, director or trustee if more than $100,000 From the organization or any related organization 31

32. Compensation Issues (continued) Form 990 requires disclosure of the salary for the five current highest compensated employees other than officers, directors and trustees who received compensation of more than $100,000 from the organization or a related organization For purposes of 990 reporting, the top management official and top finance official are considered officers. 32

33. Compensation Issues (continued) Is the board of directors compensated? Generally discouraged Could make them non-independent Excessive compensation issues Many donors are reviewing 990 tax returns and making their own determination if executive compensation is excessive. 33

34. Are your financial statements and tax returns posted to your website? Part of Charity Navigator’s transparency score Timeliness of audit and tax filings How soon after year end is the audit completed? Do you extend your tax return or file by the original due date? 34

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