Transcript Slide 1

Association Financial
Management
Timothy Krause, CPA FACMPE
Outline
• Sarbannes Oxley
• New Form 990 Requirements
• Accounting & Record Keeping
• Internal Control
• Banking
• Insurance
What is SOX?
• Compliance legislation passed in 2002 to
prevent financial malpractice and accounting
scandals (e.g. Enron, Quest, Worldcom)
• Named after Senators Paul Sarbannes and
Michael Oxley
What is Sox (continued)
• Also referred to as “The American
Competitiveness and Corporate
Accountability Act of 2002” or the “Public
Company Accounting Reform and Investor
Protective Act”
Why Do We Care About SOX?
• SOX affects American Publicly traded
companies and regulates what boards
must do to ensure audit independence
• Only two provisions of SOX directly affect
nonprofits…..
SOX for Nonprofits
Whistle Blower
• It is a federal crime for anyone to “knowingly, with
the intent to retaliate, take any action harmful to
any person…for providing to a law enforcement
officer any truthful information relating to the
commission of a federal offense.”
Record Retention
• It is a federal crime to alter, cover up, falsify, or
destroy any document or make a false entry in
accounting records with the intent of obstructing
a federal investigation.
SOX Relevance to Nonprofits
• Nonprofits should consider implementing
certain practices established by SOX
• These practices can improve a nonprofit’s
internal controls, financial management,
and provide needed transparency for
financial activities
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Practices for Nonprofits to
Consider
Increase number of board members
Implement a code of ethics policy
Ensure that internal control is adequate
Evaluate financial savvy of board – conduct
training if necessary
• Develop written policy for records retention
• Have access to at least one financial expert
on the board
• Implement a conflict of interest policy, and a
whistleblower policy
Other SOX Recommendations
• Add independent members to the board
• Include on the board:
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Attorney
Banker
CPA
Insurance expert
• Could be non-voting members
• Could be part of an advisory board
New Form 990 - Good News!
• New filing requirements will not apply to
most state MGMAs
• Every association here will be required to
file a Form 990 – EZ in 2009
• Very little change to Form 990 - EZ
New Form 990 - Bad News
• Many state MGMA associations will have
to file Form 990 in 2010 and later years
• Gross receipts > $500,000 – file in 2010
• Gross receipts > $200,000 – file in 2011
• 8 out of 30 survey respondents reported
revenue of $200,000 or greater
Requirements of New Form 990
• Additional disclosures are required and
many new questions must be answered
• A “Governance Section” was added to
promote transparency and encourage
compliance and accountability
Questions on the New 990
• Was a copy of the Form 990 provided to the
organization’s governing body before it was
filed? All organizations must describe in
Schedule O the process the organization
uses to review the Form 990.
• 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?
Accounting & Recordkeeping
• Financial statements should be prepared,
reviewed, and understood by the board
• Budget should be prepared and compared
with financial statements
• Financial reports should include income
and expense by event or activity
Internal Control - Purpose
• To:
– Safeguard assets
– Promote accuracy, reliability & timeliness
– Verify information and detect errors
– Provide a needed level of confidence
– Promote efficiency
Internal Control - Types
• Authorization and Approval
• Documentation and Recording
• Deterrents and Detection
• Segregation of Duties
• Control of third-party documents
• The person who prepares or signs checks
should not open the bank statement
Internal Control - Policies
• The person who prepares the checks
should not also sign
• The person who approves payments
should not prepare checks
• A board member cannot approve payment
to him/her self
• The person who prepares checks should
not prepare the bank reconciliation
Internal Control – Policies
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(continued)
A board member always reviews the bank
statements
A budget should be prepared and compared
periodically with financial statements
All bills and expense reimbursement
vouchers should be approved by a member
of the board
Policies should be in writing
Your CPA can assist you with sound policies
Internal Control
Independent Review
• Audits
• Agreed Upon Procedures
Association Has a Budget
Frequency Percent
Count
Yes
21
70.0
No
9
30.0
30
100.0
Total
Association Utilizes CPA
Services
Count
Yes
Frequency Percent
20
69.0
No
9
31.0
29
100.0
Total
Missing System
Total
1
30
Association Has Written
Guidelines for Financial Internal
Controls
Count
Yes
No
Total
Missing System
Total
Frequency Percent
21
72.4
8
27.6
29
100.0
1
30
Frequency of Budget
Comparisons
Frequency Percent
Count Monthly
7
38.9
Quarterly
6
33.3
Annually
4
22.2
Other
1
5.6
Total
18
100.0
Missing System
12
Total
30
Banking – FDIC Protection
• Parking your extra cash
– Money market accounts
– Make sure you maximize interest earned
– During 2009 $250,000 is protected
• Non-interest bearing accounts during 2009
– Unlimited protection as long as bank participates in
FDIC’s temporary Liquidity Guarantee Program
Banking - Signatures
• Forgery – in general
– A bank will reimburse the account if….
• You report the forgery within 30 days of receiving
the bank statement
• You file a police report
• Signatures – in general
– Signatures are not reviewed by the bank
– Banks do honor do honor dual signature
requirement
Banking - Electronic
• Online banking
– Very efficient way to pay bills
– Easy for board members to review bank
statements
– Easy for board members to review and
release payments
– One problem – Internal Control
Remote Processing of Deposits
• Checks are scanned and transmitted to
the bank
• Check are still “live” and must be safeguarded
• Checks can be shredded once your know
your account has been credited
Association Uses Electronic
Banking for Payment of Bills
Frequency Percent
Count
Yes
No
Total
5
16.7
25
83.3
30
100.0
Association Accepts Credit Card
Payments
Frequency Percent
Count Yes
No
Total
25
83.3
5
16.7
30
100.0
Insurance
• Association Professional Liability
– D & O (Directors and Officers)
– Association
– Staff
– Any person acting on behalf of the association
Insurance
• General Liability
– Personal injury
– Damages to premises
– Employment practicess
Insurance
• Fidelity Bonding (crime coverage)
– Protects against theft or embezzlement
• Employees
• Directors
• Management personnel
• Others with access to cash
Insurance
• Cyber Insurance
– Protects against the loss of electronic data
• Viruses
• Hack Attack
• Intellectual property theft
• Protects against the loss of personal data
– Identity theft
– Confidential information
– Credit Card Information
Association Has Directors and
Officers Insurance
Count
Yes
Frequency Percent
27
96.4
No
1
3.6
28
100.0
Total
Missing System
Total
2
30
Cash Reserves
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•
•
•
•
•
Equal to one year’s expenses
Whatever is left over
Discretionary – up to the Board
Equal to future conference costs
AMC Best Practices
No response
10
5
4
3
1
7
DOCUMENT AVAILABILITY
All copies of handouts provided at today’s
presentation will be available on our
website at www.kkb-cpa.com. They will be
available on the main page after Monday.
The complete association survey results will
also be available on the same page.
Timothy E. Krause, CPA, FACMPE
Gregory E. Pfanstiel, CPA, CFP
[email protected]
[email protected]
950 S. Cherry St., Suite 200
Denver, CO 80246
Phone 303-815-1100
Fax
303-815-1101
www.kkb-cpa.com