Financial Policies & Procedures for Non-Profit Organizations

Transcription

1 Financial Policies & Procedures for Non-Profit Organizations Jefferson A. Holt Presenter Date

2 Mission of Pro Bono Partnership of Atlanta: To maximize the impact of pro bono engagement by connecting a network of attorneys with nonprofits in need of free business legal services. 2

3 Pro Bono Partnership of Atlanta Eligibility & Other Information In order to be a client of Pro Bono Partnership of Atlanta, an organization must: Be a 501(c)(3) nonprofit. Be located in or serve the greater Atlanta area. Serve low-income or disadvantaged individuals. Be unable to afford legal services. Visit us on the web at We host free monthly webinars on legal topics for nonprofits To view upcoming webinars or workshops, visit the Workshops Page on our website Join our mailing list by ing rla@pbpatl.org 3

4 Legal Information: This workshop presents general guidelines for Georgia nonprofit organizations and should not be construed as legal advice. Always consult an attorney to address your particular situation. All rights reserved. No further use, copying, dissemination, distribution or publication is permitted without express written permission of Pro Bono Partnership of Atlanta. CIRCULAR 230 DISCLOSURE: To comply with Treasury Department regulations, we inform you that, unless otherwise expressly indicated, any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties that may be imposed under the Internal Revenue Code or any other applicable tax law, or (ii) promoting, marketing or recommending to another party any transaction, arrangement, or other matter. 4

5 Introduction 5

6 Significant Diversions A Washington Post analysis of filings from 2008 to 2012 found that... more than 1,000 nonprofit organizations checked the box indicating that they had discovered a significant diversion of assets.... Just 10 of the largest disclosures identified by The Post cited combined losses to nonprofit groups... that potentially totaled more than a half-billion dollars. 6

7 7

8 Ideas to Exclude from Your Plan This is not a business. I can rely on someone else to ensure our financial resources are protected. Who needs a plan? We ll play it by ear! Our non-financial activities (board development, HR) have nothing to do with our financial health. 8

9 Threshold Questions Type of legal organization? Organizational values? Type of corporate compliance program? 9

10 Adopt a Financial Policy Accounting method Financial statements CPA Firm Budgeting Investment policy Contributions Expenses Checks Credit Cards Form

11 Overview of Topics Oversight and control of staff Segregation of authority over financial matters Budgeting & cash flow management strategies Expense management and record keeping Handling checks and other financial data Miscellaneous legal/practical considerations 11

12 Oversight & Control of Staff Hire and keep good people. Draft and adhere to detailed job descriptions. Follow established financial procedures. 12

13 13

14 Segregation of Duties Budgeting Staff Proposes Budget Board Committee Recommends Budget Board Approves Budget 3P Documents Adherence to Budget 14

15 Segregation of Duties Bill Payment Staff Member Submits Check Request CFO Approves Check Request 3P Issues Check ED and CFO Sign Check 3P Reconciles Payment of Check 15

16 Segregation of Duties Deposits ED Retrieves Mail, Documents Income CFO Prepares Deposit ED or CFO Delivers Deposit 3P Reconciles Deposit 16

17 Budgeting and Cash Flow Management 17

18 Budgeting & Cash Flow Management Financial Plan for Achieving an Organizational Mission Increase Revenue or Decrease Expenses Compile Data to Accurately Predict Income and Expense Timing is EVERYTHING! No Substitute for Your Understanding 18

19 Budgeting and Cash Flow Management Begin With Your Board: Ensure Skills and Expertise are Varied Avoid the Legacy Board Staggered Terms Formally Acknowledge Conflicts of Interest Specialize in Trade Create (and Use) a Finance Committee Expand Institutional Knowledge of Budget 19

20 Budgeting and Cash Flow Management INCOME Code Account Annual Budget January (Budget) January (Actual) JAN VARIANCE YTD TOTAL YTD VARIANCE % BUDGET 1000 Sales Revenue $ 20, $ 1, $ 1, $ $ 1, $ % 1100 Sponsorship $ 10, $ $ $ (200.00) $ $ (200.00) 3.00% TOTAL $ 30, $ 1, $ 1, $ (100.00) $ 1, $ (100.00) 5.33% EXPENSE Code Account Annual Budget January (Budget) January (Actual) JAN VARIANCE YTD TOTAL YTD VARIANCE % BUDGET 2000 Lease Payment $ 12, $ 1, $ 1, $ - $ 1, $ % 2100 Electric Bill $ 1, $ $ $ 8.00 $ $ % 2200 Compensation $ 16, $ 1, $ 1, $ - $ 1, $ % TOTAL $ 30, $ 2, $ 2, $ 8.00 $ 2, $ % Developing and maintaining a detailed cash flow report is the most important thing you can do to understand, protect, and preserve your fiscal resources. 20

21 Budgeting and Cash Flow Management 21

22 Budgeting and Cash Flow Management Create Opportunities for Accountability Explain variances in monthly memo to your newly formed Finance Committee Encourage questions at quarterly Board Meetings Board Approval of Financial Statements Make Budget Updates Part of Staff Meetings 22

23 Segregation of Funds Properly account for every dollar Avoid commingling of accounts Ensure loans are given on commercially reasonable terms and at arms length Spend ordinary funds as defined by budget; spend foundation funds as defined by Investment Plan (avoid temptation to mix) 23

24 Staff Expenditures Clearly define appropriate expenditures To reimburse or not to reimburse...? Establish Reimbursement Procedures Clearly define procedures for being reimbursed Adhere to established procedures Assign Credit Cards to Select Employees Manage credit limits Define appropriate expenditures Define post-expense receipt collection procedures 24

25 Credit Cards 25

26 Credit Cards Truth In Lending Act (Reg. Z) Review Contract With Credit Card Issuer Review Contract With Credit Card Processor Review Statements Regularly and Promptly Communicate Variances to Card Issuer 26

27 Fundraising Treat earmarked donations as requested Confirm every donation with a written response letter indicating whether anything of value given Potentially register with GA Secretary of State and other state agencies if you solicit donations from the general public 27

28 Investment Policy Purposefully choose your financial manager. Develop a relationship with your financial manager. Meet at least annually with your financial manager. Don t ignore your Foundation financial statements. Make strategic and planned capital purchases. 28

29 Protecting Your Physical Plant Review your insurance needs annually Conduct an IT audit at least annually (consider the value of leasing and licensing compared to buying) Properly store blank checks, credit cards, petty cash Update passwords on a regular basis Close the blinds 29

30 Document Retention Have Your Corporate Documents Readily Available Articles of Incorporation and Determination Letter from IRS Minutes and Board Resolutions Determine what types of records you produce Determine the amount of time to retain your records Properly discard of stale records Seek legal advice if needed (HIPAA, Sarbanes-Oxley) 30

31 Protecting Yourself 31

32 Protecting Yourself: Advice From David Protect Yourself through segregation of duties and having backup that support financial decisions Protect the Company have a general understanding of financial operations Protect Today have a complete understanding of CASH flow Protect the Future & Company Strategy Strive to understand how financial decisions today impact the future and company direction 32

33 Closing Thoughts Establish Your Own Policies and Procedures (the Plan ) Develop a Broad and Comprehensive Plan But, Make the Plan Simple, Clear, and Realistic Involve Decision-Makers and Decision-Implementers in Developing and Reviewing the Plan Stick to the Plan and Understand Cash Flow Review the Plan Annually Amend the Plan as Necessary 33

34 Questions? 34

35 For More Information: If you would like more information about the services of Pro Bono Partnership of Atlanta, contact us at: Phone: Fax: