{"id":14544,"date":"2013-12-08T16:46:14","date_gmt":"2013-12-08T21:46:14","guid":{"rendered":"https:\/\/www.glensfalls.com\/glensfallsbusinessjournal\/2013\/12\/responsibilities-of-nonprofit-boards.html"},"modified":"2013-12-08T16:46:14","modified_gmt":"2013-12-08T21:46:14","slug":"responsibilities-of-nonprofit-boards","status":"publish","type":"post","link":"https:\/\/www.glensfalls.com\/glensfallsbusinessjournal\/2013\/12\/responsibilities-of-nonprofit-boards\/","title":{"rendered":"Responsibilities Of Nonprofit Boards"},"content":{"rendered":"
\n
\n\"nonprofit\n<\/div>\n
Frank Venezia, director at Marvin and Co. PC, which has an office in Queensbury\n<\/div>\n<\/div>\n

By Frank Venezia , CPA<\/p>\n

Oversight and management of financial
\nresources is a major concern for all nonprofit
\norganizations, regardless of whether they are
\na small, all-volunteer group or large national
\nassociation.<\/p>\n

Over the past three decades, while working
\nwith hundreds of regional nonprofit
\norganizations, I have noticed that it is not
\nuncommon for board members and leaders
\nof nonprofit agencies to be unfamiliar with
\ntheir financial management systems.<\/p>\n

The purpose of this piece is to outline
\nthe board’s role in fiscal management, the
\nimportance of being able to read financial
\nreports, and how to increase accountability
\nand oversight. The easy-to-understand examples
\nand suggestions, which are featured
\nbelow, can be readily implemented in any
\norganization.
\nProfits in a nonprofit. One of the most important issues I stress with clients is to not think of their organization as a nonprofit. Instead, consider it as a business that is exempt from taxes. The board and management must approach it that way as well to ensure profitability.<\/p>\n

Identify the goals of your financial reporting system. In order to create a successful financial reporting system, it is imperative to accurately record all financial transactions and provide a system of checks and balances (also known as internal control), as well as data to assist the board with fiduciary responsibility and stewardship. The system should also assist staff with fiscal management — whether that’s by cost reporting to regulatory bodies, funding sources and donors, or assisting with budget and grant development. Timely and accurate financial reporting is necessary to support outstanding loans and lines of credit with banks and other lenders.<\/p>\n

Establish board’s financial roles and responsibilities. It is paramount that board members set the tone at the top with ethical and behavioral standards. Toward that end, all board members need to recognize the organization’s financial goals, exempt purpose, mission and activities, and remain faithful to them. Fiscal performance should be monitored on a monthly basis, as well as compliance with laws and regulations. As each new board member joins, they should be encouraged to exercise independent judgment, ask questions and challenge management.<\/p>\n

In doing so they will help to create accountability and internal control through periodic inquiry and evaluation and by reviewing and approving budgets and operating results.<\/p>\n

Set a budget. This is the first step in the fiscal cycle. A budget is a strategic document and part of the comprehensive plan. It is not just numbers based on past results. Rather, it should have a formal and reasoned basis that provides focus for an organization. A budget requires deliberate planning and execution and should be done at the appropriate level.<\/p>\n

Establish financial reporting goals. Goals should be timely, relevant, and accurate. This includes identifying the status of the organization’s financial position, income, expense, bottom line, cash position\/ projections, budget to actual comparisons, utilization and other statistical information.<\/p>\n

It is important to gather enough information to act in good faith and exercise a degree of diligence, while at the same time being cognizant of information overload.<\/p>\n

How does your board monitor financial performance? Prior to your monthly board meetings the treasurer should distribute the monthly financial statements to the board for review.<\/p>\n

At the monthly meeting the treasurer should explain any significant deviations from budgeted to actual performance. This is the time for board members to ask questions about the statements and ensure they have a clear understanding of the statements and general financial position of the organization.<\/p>\n

A member of the executive committee should also meet on a regular basis with key management to stay abreast of the organization’s overall operations.<\/p>\n

Internal controls. To prevent instances of fraud from taking place, boards should brainstorm about how abuse could occur in the organization. To do this, they need to put themselves in the shoes of a thief. One common fraud is called a “ghost employee” on the payroll. In this scenario, individuals write checks for themselves or their friends, or make personal purchases using the organization’s account.<\/p>\n

To combat this type of scam, it’s important to implement segregation of duties, where cash receipts are separate from bank reconciliation, billing and accounts receivable, and checks require two signatures — neither of which belong to individuals involved in entering fiscal data, printing, or mailing checks.<\/p>\n

Additionally, someone who has no access to the bank account should perform the bank reconciliation, and the payroll report should be reviewed by someone who was not involved with inputting the payroll data. An approval process should also be enforced, which ensures that more than one set of eyes is reviewing payroll, payments to vendors, billings and claims.<\/p>\n

Interaction with external auditors. The audit committee should interface with the external auditor as part of the planning process to understand the scope of the audit, the significant findings, audit difficulties encountered and results.<\/p>\n

By putting these simple steps into practice, nonprofit boards can effectively manage their financial reporting systems, ensure accountability, and optimize their productivity, while setting the standard for ethical execution of responsibilities.<\/p>\n

Venezia, CPA, is a director at Marvin and Company PC, which has offices in Queensbury and Latham, and has a history of meeting the accounting, auditing and tax planning and preparation needs of more than 100 nonprofits throughout the state. Venezia can be reached at fsv@marvincpa.com, or by calling 785-0134.<\/p>\n

Photo Courtesy of Marvin And Company PC<\/p>\n","protected":false},"excerpt":{"rendered":"

Frank Venezia, director at Marvin and Co. 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