P2P Introduction to Financial Management Best Practices

[Pages:9]Introduction to Financial Management Best Practices

PRESENTED BY GLENDA Y. HICKS, CPA FOR PARENT TO PARENT OF GEORGIA, INC.

REGION 3 PTAC FEBRUARY 27, 2014

Learning Objectives

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Identify policies and internal controls for integrity and accountability Understand financial tools and infrastructure that support financial soundness Understand the impact of sound accounting practices on:

Audit requirements Funder reporting Managing programs and services efficiently Transparency and accountability

Glenda Y. Hicks, CPA 2014

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"Donors don't give to groups they don't trust"1

Former Executive Director of the Indiana University Center on Philanthropy and former President of Indiana University Foundation

Glenda Y. Hicks, CPA 2014

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Key Players

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Board

Board

Management

Management

Employees

Employees

Employees

Volunteers

Management

Employees

Volunteers

Glenda Y. Hicks, CPA 2014

Good Governance

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Board's 3 primary roles

Set direction Ensure resources Provide oversight

COSO Framework (Committee of Sponsoring Organizations)

Joint initiative Amer. Acctg. Assoc, AICPA, Financial Executives International, Assoc. of Accountants and Financial Professionals in Business, and Institute of Internal Auditors

Sarbanes-Oxley

Glenda Y. Hicks, CPA 2014

Key Risks

Types of Risk2

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Additional Risks

Strategic risk: impact goals and mission

Operational risk: impact ability to manage day-today

Financial risk: impact assets Compliance risk: impact ability to comply with laws and regulations

Glenda Y. Hicks, CPA 2014

Revenue risk: diversity of sources

Contractor risk: independent or employee

Interdependency risk: alignments with other organizations

Data risk: information technology

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Why Controls?

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To assist management in orderly and efficient conduct of its operations Adherence to management policies and procedures Safeguarding of assets Prevention and detection of fraud and errors Accuracy and completeness of accounting records. Timely preparation of reliable financial information Inspire confidence in the organization by its funding partners and beneficiaries

Glenda Y. Hicks, CPA 2014

Basic Principles

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Initiate Authorize Process Record Report

Financial Statements

General Ledger Cash, Fixed Assets, Net Assets, Payables, Revenue, Expense

Summary Journals Cash receipts, cash disbursements,

Payroll, general, fundraising

Source Documents Vendor invoice, receiving report, pledge form, time sheet,

Grant invoice, donation check

Glenda Y. Hicks, CPA 2014

Federal Guidance

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Federal grant compliance and single audit (OMB A-133: Audits of State & Local Governments and Nonprofits)

Expenditures over $500,000

Cost allocation plans (OMB A-122: Cost Principles for Nonprofits)

Allowable costs Administrative overhead

Administrative requirements for grants and agreements (OMB A-110)

Financial mgt., property stnds., procurement, reports, etc.

Glenda Y. Hicks, CPA 2014

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COSO ()

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Various guides (Framework, Monitoring) sold through AICPA from $35 to $90 Defines internal control as "...a process effected by an entity's board of directors, management and other personnel, designed to provide reasonable assurance regarding achievement of objectives in the following categories:

Effectiveness and efficiency of operations Reliability of financial reporting Compliance with applicable laws and regulations"

Glenda Y. Hicks, CPA 2014

Internal Control

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Is a process Effectiveness is a state or condition Varies by organization size Can be more or less formal/structured depending

Glenda Y. Hicks, CPA 2014

Definitions

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Control environment-tone, values, integrity, philosophy, skills training, authority, ethics, responsibility Risk assessment-internal and external mgt. of desired objectives (Spreadsheet) Control Activities-policies, procedures, authorizations, reconciliations, verifications, security (Checklist) Information & Communication-identify, capture, communicate, internal and external info., timely, open and honest, good and bad news Monitoring-assess quality over time, evaluate, supervision Key Control Terms: efficient, effective, safeguard, prevent, detect, comply, accurate, timely, training

Glenda Y. Hicks, CPA 2014

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Inherent Risks

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Human error Collusion Management Override Changing Conditions

Glenda Y. Hicks, CPA 2014

Considerations for Limited Staff

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? As separation of duties becomes less possible, more emphasis must be placed on: Review of Supporting Documentation Limiting access to facilities/assets Transaction Authorization Department Reconciliation Mandatory vacations Use of bonded external service providers, especially janitorial & security Background checks, criminal history review Strong accounting system Use of board members Use of administrative staff and other department staff

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Sarbanes-Oxley

15 Whistleblower policy

Illegal to punish whistleblowers in any manner Criminal penalties for retaliation Correct problems quickly Anonymous reporting Complaint procedures Document Destruction (Records and Retention Policy) It is a crime to alter, cover up, falsify or destroy any document (or persuade someone else to do so) to prevent use in an official proceeding Policy:

Hardcopy E-files Voicemail Back-up procedures Archiving

Glenda Y. Hicks, CPA 2014

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Best Practices

Accounting policy and procedure manual Budget Budget vs. Actual Dashboard reports Segregation of duties Conflict of interest policy Whistleblower policy Document retention and destruction policy Sufficient knowledge, training, and experience Cross departmental orientations

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Authorizations Reviews Periodic verifications of results Reconciliation of balances Physical security of assets Computer and program controls (access, changes, exception reporting) Supervision commensurate with competence Regular review of financial reports Monthly financial statements

Glenda Y. Hicks, CPA 2014

Impact of Sound Accounting Practices

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Audit requirements

Clean opinion (unqualified--present fairly) Qualified-except for this one thing Adverse-significant exception Disclaimer-cannot opine

Management letter comments SAS 115 "Communicating Internal Control Related Matters Identified in an Audit" Must be in writing to those charged with governance

Glenda Y. Hicks, CPA 2014

Impact of Sound Accounting Practices

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Cost and timeliness of engagement Less risk less extensive testing faster turnaround

lower cost

Glenda Y. Hicks, CPA 2014

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Impact of Sound Accounting Practices

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Funder Reporting

Repeat funding New funding Increased funding Confidence/Trust

Glenda Y. Hicks, CPA 2014

Impact of Sound Accounting Practices

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Managing programs and services efficiently

Accurate information for decision making Timely information for decision making Program specific fundraising needs

Drive the fundraising plan Cost intensive programs and services

Eliminate/Consolidate/Collaborate Mission accomplished reporting

Glenda Y. Hicks, CPA 2014

Impact of Sound Accounting Practices

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Transparency and Accountability

Confidence/Trust Increased giving Increased grants Increased visibility and improved reputation Readily available statistical information

Proposals Inquiries Compliance reporting Disclosure (website, annual report, newsletter)

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Impact of Sound Accounting Practices

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Transparency, continued

Readily understood as to what you do and what you do with the money Data for comparability with peers

Glenda Y. Hicks, CPA 2014

The Nonprofit Trinity

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Accountability--Do you know?

Transparency--Are you letting us know?

Compliance--Can we trust you?

Glenda Y. Hicks, CPA 2014

Helpful Websites

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Georgia Center for Nonprofits, (or your state's equivalent) National Center for Charitable Statistics, nccs. Charity Navigator, Independent Sector, The Nonprofit Times, Internal Revenue Service, BoardSource publications, IRS Webinars,

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