2. Organizational
Chart: Finance
• Role of the Finance Committee
•
Financial Statements
•
Financial Controls
•
Annual Budget Process
•
Annual Audit Process
•
Review and submit 990 to SOI and
IRS
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3. Finance
Committee
• Led by the Treasurer
•
Six board members with
financial experience
•
SOVT CEO
•
SOVT Finance Manager
• Meets at least monthly
‣
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Our charter is to oversee the financial, legal
and ethical integrity of SOVT’s books, records,
and financial reporting processes
4. Financial and
Ethical
Integrity
Let’s discuss for a minute:
• What is financial and ethical integrity?
• Your perception of an organization with financial and
ethical integrity
• Impact on our athletes and programs if our financial
and ethical integrity suffers
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5. Financial
Controls
• Separation of Duties
• Consistent and understandable financial statements
•
Monthly variance analysis –
comparison to budget and prior
periods
• Proper Approvals
•
Payroll changes
•
Invoice payments
•
Credit card charges
• Board Oversight
• Annual Audit
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6. Budget Process
Budget is developed by SOVT staff
Presented to Finance Committee by CEO and Finance
Manager
Finance Committee is tasked with analyzing the
budget, asking tough questions, challenging
assumptions, and ultimately recommending the final
budget for approval from the full board
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7. Audit
Responsibilities
Selecting the audit firm through an RFP process
Fully supporting the audit by ensuring full cooperation
from staff and board
Reviewing the results of the audit
Ensuring that every audit memo is addressed and
corrected, and procedures are in place to prevent
reoccurrence
Signing the financial statements and tax return
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8. What’s a 990?
Form 990 is an IRS Return for Tax-Exempt
Organizations such as ours
It contains Governance information as well as Financial
information
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9. What can you
learn from a
990?
Mission of an Organization
Recent Accomplishments
Revenues and source of revenue
Expenses
‣
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Program costs,
fundraising expenses,
administrative expenses
10. What can you
learn from a
990?
Endowment value
Governance of an Organization
‣ Key Employees
‣ Board Members
‣ Existence or lack of
policies
Employee Information
‣ Number of W-2s issued
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11. To Summarize – We Need
to be Accredited BY SOI
• Implementation of reliable internal control systems for recording and accounting
for the receipt and expenditure of funds
• Maintain internal control systems that are sufficient to guard against
unauthorized and fraudulent acts
• Maintain an established accounting system that complies with GAAP
• Combine the financial books and records of the Accredited Program and all
Programs so they are reflected as a single reporting entity
• Ensure all Programs conduct their affairs in accordance with the financial
management and reporting standards as outlined in Article 8 of the SOI Official
General Rules
• Conduct an annual audit
• Provide SOI with an annual report, audited financials statements, copy of the
990 tax return
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12. What is Certified Public
Accounting?
• Certified: Licensed to practice by State Boards of Accountancy
150 credit hours of college education (five years)
One to two years of experience
Pass the uniform (national) CPA exam
Continuing education requirements
• Public: Ultimate responsibility is to the public and not the client
• Accounting…
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13. What is Accounting?
• Two Core Financial Statements:
Statement of Financial Position (Balance Sheet) – Shows
financial condition at one point in time.
Statement of Activities (Income Statement) – Shows
financial
performance over one period of time.
• Two Core Equations:
Assets – Liabilities = Net Assets (Equity)
Revenue – Expenses = Change in Net Assets (Net Income)
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14. Who is Wallace W. Tapia,
P.C.?
• A public accounting firm, licensed by the State of Vermont and
members of the American Institute of Certified Public
Accountants.
• Formed in December 1989 by Wallace Tapia – former lead tax
partner for exempt organizations at Smith, Batchelder and
Rugg.
• Over 80% of annual billings to non-profit organizations.
• Four full-time professionals (three CPAs and one QuickBooks
Pro Advisor), two part-time CPAs and two administrative
personnel.
•14 Members of the AICPA, Vermont Society of CPAs and subject to
15. What is a Financial
Statement Audit?
Purpose:
To express an opinion as to whether an organization’s financial
statements are fairly stated in, all material respects, in accordance with
U.S. generally accepted accounting principles.
Management Responsibility:
“Management is responsible for the preparation and fair presentation of these financial
statements in accordance with U.S. generally accepted accounting principles; this
includes the design, implementation, and maintenance of internal control relevant to
the preparation and fair presentation of financial statements that are free from
material misstatements, whether due to fraud or error (italics added).”
Auditor Responsibility:
“..to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with U.S. generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement
(italics added).”
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16. What are the Rules and Who Makes
Them?
• Generally accepted accounting principles (“GAAP”):
Determine the form, content and disclosures required for
financial statements to be fairly stated.
Generally established, for non-public companies (including nonprofit organizations), by the Financial Accounting Standards
Board.
• Generally accepted auditing standards (“GAAS”):
Set the standards an auditor must use in performing an audit.
Generally established by the Auditing Standards Board.
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17. What Makes a Good Auditor (under
GAAS)?
•
The Auditor must possess adequate technical training & proficiency
•
The Auditor must maintain independence in mental attitude in all matters related to
the audit.
•
Independence in fact and appearance
The auditor must exercise due professional care during the performance of the audit
and the preparation of the report.
“Professional skepticism is an attitude that includes a questioning mind and a critical
assessment of audit evidence. The auditor uses the knowledge, skill, and ability called
for by the profession of public accounting to diligently perform, in good faith and with
integrity, the gathering and objective evaluation of evidence (Statement on
Auditing Standards No. 82).”
“The auditor neither assumes that management is dishonest nor assumes unquestioned
honesty. In exercising professional skepticism, the auditor should not be satisfied with
less than persuasive evidence because of a belief that management is honest
(Statement on Auditing Standards No. 82).”
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18. What are the Mechanics and Limitations of an Audit?
“An audit involves performing procedures to obtain audit evidence about
the amounts and disclosures in the financial statements. The procedures
selected depend on the auditor’s judgment, including the assessment of
the risks of material misstatement of the financial statements,
whether due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the entity’s preparation
and fair presentation of the financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the entity’s
internal control. Accordingly, we express no such opinion. An audit also
includes evaluating the appropriateness of accounting policies used and
the reasonableness of significant accounting estimates made by
management, as well as evaluating the overall presentation of the financial
statements.”
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19. What is Internal Control?
“The system by which an organization provides reasonable assurance that
its(1) financial reports are accurate and (2) its assets are protected from
misappropriation.”
1. “management fraud”
2. “employee fraud”
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20. What is Fraud?
“All multifarious means which human ingenuity can devise, and which are
resorted to by one individual to get an advantage over another by false
suggestions or suppression of the truth.”
Major types of fraud include:
• misrepresentation or concealment of material facts
• bribery
• conflicts of interest
• breach of fiduciary duty
• theft of money or property
Embezzlement: the wrongful appropriation of money or property by a
person to whom it has been lawfully entrusted.
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22. What are the Elements of the Internal Control
“Integrated Framework”?
1. Control Environment
2.
Risk Assessment Process
3. Financial Reports and Communication
4. Control Activities
5. Monitoring
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23. What are the Elements of the “Control
Environment”?
1. Integrity and Ethical Values
2. Commitment to Competence
3. Effectiveness of the Board / Audit
Committee
4. Management’s Philosophy /
Operating Style
5. Organizational Structure
6. Assignment of Authority and
Responsibility
7. HR Policies & Procedures
Vermont
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24. What are the Key “Control
Activities”?
1. Capable personnel
Authorization
2.
3. Segregation of duties
4. Controlled access
5. Periodic comparison
6. Error-checking routines
7. Supervision & review
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25. What were the Results of the
Audit?
An “unmodified” (clean) opinion on the financial statements.
•
•A management letter with no “material weaknesses” or “significant
deficiencies” identified.
•Preparation of the annual “Form 990” tax return.
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26. A Few Reminders…
Use approved forms from the
Centralized Guide to
Financial Management
Be certain two unrelated
Class A volunteers count
cash
Obtain a bank check for cash
received; this avoids
depositing SOVT funds into a
personal account (an
internal control)
Vermont
Rather than using funds to
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pay for expenses, always
27. Approved Program Expenses
Listed below are examples of expenses approved for payment or
reimbursement. This list may not be limited to the following items:
•
Sports Equipment
•
Team Uniforms
•
First Aid Supplies & Training
•
Parking & Toll Fees
•
Vehicle Rental & Gas Reimbursement
•
Postage, Office Supplies
•
Coaches Training & Training
Materials
•
Meals & Lodging (at approved
competitions & events)
•
•
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Registration Fees
Facility Rental (for practices and
at approved events)
28. IN-KIND CONTRIBUTION
FORM
Every Program receives support in some form from their community. This
support might be services, reduced costs for items, or budget assistance.
Any donation of services, goods or funds that is budget relieving, i.e., the
Program would otherwise incur the cost for, is considered an In-Kind
Donation. There are two main types:
•Non-cash donations of goods
Non-cash donations of goods are donations of items other than cash that
are tangible. A donation of sports equipment, food, and use of a local high
school’s gym are all perfect examples of In-Kind Donations (even if a portion
of the expense is donated). While these donations have a value, it is
sometimes difficult to quantify how much they are worth. The best way to
calculate their worth is to either ask the donor or find out how much it would
cost to buy the item from a store or rent the space from the vendor. Finding
this information is important for the donor, as well as the SOVT Office. The
donor needs this information in order to receive a tax deduction for their gift.
The value of the item(s) should match the amount listed on any thank you
note that is sent to the donor. It is essential for the SOVT Office to properly
account for this gift.
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29. • Donation of time by professionals
Accounting procedures dictate that only a donation of time from a specialist
counts as an In-Kind Donation of time. A good example is a doctor who
donates his time for physicals, a certified sports official’s time or the PE
instructor who serves as the Games Director for a local competition. The value
of this gift is the hourly rate that this person would normally be paid for their
service multiplied by the number of hours they volunteer. The easiest way to
find out the hourly rate for this person is by asking them. Volunteers who serve
in roles that are not related to their profession, such as a secretary
volunteering as a timer for the local games, cannot be included.
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