Vermont

Finance – Operations &

ReportsPresented by: Wendy LaPine

Kenny, Tom Nold & Bill Huckabay

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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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Finance Committee

• Led by the Treasurer• Six board members with financial experience

• SOVT CEO• SOVT Finance Manager• Meets at least monthly‣ Our charter is to oversee the financial, legal

and ethical integrity of SOVT’s books, records, and financial reporting processes

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Financial and Ethical IntegrityLet’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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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 Audit5

Budget Process

Budget is developed by SOVT staffPresented to Finance Committee by CEO and Finance

ManagerFinance 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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Audit Responsibilities

Selecting the audit firm through an RFP processFully supporting the audit by ensuring full cooperation

from staff and boardReviewing the results of the auditEnsuring 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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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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What can you learn from a 990?Mission of an OrganizationRecent AccomplishmentsRevenues and source of revenueExpenses‣ Program costs, fundraising expenses, administrative expenses

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What can you learn from a 990?Endowment valueGovernance of an Organization‣ Key Employees‣ Board Members‣ Existence or lack of policies

Employee Information‣ Number of W-2s issued

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To Summarize – We Need to be Accredited BY SOI

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• 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

 

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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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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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.

• Members of the AICPA, Vermont Society of CPAs and subject to bi-annual peer review (related to attestation services).

 

  

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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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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 non-profit 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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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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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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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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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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Why Do People Commit Fraud?

  

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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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Vermont

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 Structure6.Assignment of Authority and

Responsibility7.HR Policies & Procedures

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What are the Key “Control Activities”? 

 

  

1. Capable personnel

2. Authorization

3. Segregation of duties

4. Controlled access

5. Periodic comparison

6. Error-checking routines

7. Supervision & review

 

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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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Vermont

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)

Rather than using funds to pay for expenses, always deposit the total revenue received

Timely submission of paperwork to office

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Approved Program ExpensesListed 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)• Registration Fees• Facility Rental (for practices and

at approved events)Any purchase/expense questions should be

reviewed with the Finance Manager

 

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IN-KIND CONTRIBUTION FORM 

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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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• 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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