of 29 /29
Effective Management of Nonprofit Investments: The Auditor’s Perspective September 18, 2012 Trevor Williams, CPA Senior Audit Manager

Effective management of nonprofit investments

Embed Size (px)

DESCRIPTION

This presentation helps you understand: 1. What is a successful audit? 2. Auditor responsibilities vs. auditee 3. Board of Directors vs. Investment comittee 4. Managing investments 5. What do auditors look for 6. Common management letter comments

Text of Effective management of nonprofit investments

  • 1. Effective Management ofNonprofit Investments:The Auditors PerspectiveTrevor Williams, CPASenior Audit ManagerSeptember 18, 2012

2. Effective Management of NonprofitInvestments: An Auditors Perspective Trevor W. Williams, CPASenior Audit Manager, Gelman, Rosenberg & Freedman CPAs Nearly 20 years of experience with audit functions,contractual compliance rules, regulations and policies Supervises the overall planning and administration ofaudit, review and compilation engagements Nonprofit Involvement: Board member, MD/DC/VA Chapter of the Lupus Foundation ofAmerica Board member, Mentors, Inc.Trevor W. Williams, CPA [email protected] 3. Effective Management of NonprofitInvestments: An Auditors Perspective Table of ContentsI. What is a successful audit?II. Auditor responsibilities vs. auditeeresponsibilitiesIII.Board of Directors vs. InvestmentCommitteeIV. Managing investmentsV. What do auditors look for?VI. Common management letter commentsTrevor W. Williams, CPA [email protected] 3 4. Effective Management of NonprofitInvestments: An Auditors Perspective I. What is a successful audit?Trevor W. Williams, CPA [email protected] 5. Effective Management of NonprofitInvestments: An Auditors Perspective Organization is key Advance preparation Pull, scan, or copy information requested bythe auditor Maintain a list (or backup copy) of information provided Make sure supporting documentation iscomplete and accurateTrevor W. Williams, CPA [email protected] 5 6. Effective Management of NonprofitInvestments: An Auditors Perspective II. Auditor vs. Auditee ResponsibilitiesHave a clear understanding of:1. Your auditors responsibilities2. Your responsibilitiesTrevor W. Williams, CPA [email protected] 7. Effective Management of NonprofitInvestments: An Auditors PerspectiveAuditors Responsibilities Gather information about your organization to provide reasonable (not absolute) assurance that your financial statements are fairly presented, in all material respects, in conformity with generally accepted accounting principles.Trevor W. Williams, CPA [email protected] 7 8. Effective Management of NonprofitInvestments: An Auditors PerspectiveAuditors Responsibilities (cont.) Examine on a TEST basis evidence supporting the amounts and disclosures in the financial statements.Trevor W. Williams, CPA [email protected] 8 9. Effective Management of NonprofitInvestments: An Auditors PerspectiveAuditors Responsibilities (cont.)Not to prepare schedulesTrevor W. Williams, CPA [email protected] 9 10. Effective Management of NonprofitInvestments: An Auditors PerspectiveAuditors Responsibilities (cont.)Not to perform bookkeeping functionsTrevor W. Williams, CPA [email protected] 10 11. Effective Management of NonprofitInvestments: An Auditors PerspectiveAuditors Responsibilities (cont.) Not to catch fraud,waste, abuse, etc.Trevor W. Williams, CPA [email protected] 11 12. Effective Management of NonprofitInvestments: An Auditors Perspective Your Responsibilities (Management) Establish and maintain internal controls Select and apply accounting principlesTrevor W. Williams, CPA [email protected] 12 13. Effective Management of NonprofitInvestments: An Auditors Perspective Your Responsibilities (Management) Establish an accounting and financial reporting process Ensure fair presentation of the financial statements in conformity with U.S. generally accepted accounting principles Management decisionsTrevor W. Williams, CPA [email protected] 13 14. Effective Management of NonprofitInvestments: An Auditors Perspective Your Responsibilities(Governing Body) Designate individuals with suitable skill, knowledge, or experience to oversee the programmatic, financial and tax needs of the organization Establish and maintain internal controls Monitor financial and programmatic performance (financial reporting)Trevor W. Williams, CPA [email protected] 15. Effective Management of NonprofitInvestments: An Auditors PerspectiveIII.Board of Directors vs. Investment CommitteeTrevor W. Williams, CPA [email protected] 15 16. Effective Management of NonprofitInvestments: An Auditors PerspectiveBoard of Directors Trustees of the organizations assets; stewards of public trust Objective, honest and efficient Must exercise good decision-makingwithout placing organization atunnecessary riskTrevor W. Williams, CPA [email protected] 16 17. Effective Management of NonprofitInvestments: An Auditors PerspectiveInvestment Committee Smaller sub-group within the larger framework of the board that assists in fulfilling the boards oversight responsibility for the investment assets of the organization The committee is responsible for formulating the overall investment policies and establishing investmentTrevor W. Williams, CPA [email protected] 18. Effective Management of NonprofitInvestments: An Auditors Perspective Finance/Investment Committee The committee monitors the management of the portfolio for compliance with the investment policies and guidelines and for meeting performance objectives over timeTrevor W. Williams, CPA [email protected] 18 19. Effective Management of NonprofitInvestments: An Auditors Perspective AccountabilityThe state of beingaccountable, subject tothe obligation to report, explain or justify something;responsible;answerable - Websters DictionaryTrevor W. Williams, CPA [email protected] 20. Effective Management of NonprofitInvestments: An Auditors PerspectiveIV.Ingredients of Managing Investments Investment policy Internal controls and procedures Adequate approvals of investment decisions Sufficient knowledge of makeup of investments Monthly statements Transaction statements Annual statementsTrevor W. Williams, CPA [email protected] 20 21. Effective Management of NonprofitInvestments: An Auditors PerspectiveV. What do auditors look for? Why wont they just leave us alone?Trevor W. Williams, CPA [email protected] 22. Effective Management of NonprofitInvestments: An Auditors PerspectiveWhat do auditors look for? (cont.) Current or updated investment policy Evidence that the Investment Committee is adhering to its charter/roles and responsibilities Evidence that the organizations investments are in accordance with the investment policy Evidence internal controls and procedures exist and are consistently appliedTrevor W. Williams, CPA [email protected] 22 23. Effective Management of NonprofitInvestments: An Auditors PerspectiveWhat do auditors look for? (cont.) An understanding about types of investments permitted by law, agreements with donors, endowments, etc. Whether all aspects of investments have been calculated correctly and properly recorded If the organizations investments are managed by a broker/investment advisor, whether that broker/investment advisor has had a service organizations report (aka SSAE 16 formerly SAS 70)Trevor W. Williams, CPA [email protected] 24. Effective Management of NonprofitInvestments: An Auditors PerspectiveThings to ConsiderSegregation of duties Small organization with limitedresources Mitigating circumstances (checks andbalances)Trevor W. Williams, CPA [email protected] 24 25. Effective Management of NonprofitInvestments: An Auditors PerspectiveThings to Consider (cont.) Adequate resources Inexperienced/unqualified staff Accounting and industry training programs and seminarsTrevor W. Williams, CPA [email protected] 25 26. Effective Management of NonprofitInvestments: An Auditors PerspectiveVI.Common Management Letter Comments Incomplete accounting records No (or infrequent) reconciliation of investments to general ledger Unrecorded transactions Unsupported account balancesTrevor W. Williams, CPA [email protected] 27. Effective Management of NonprofitInvestments: An Auditors PerspectiveCommon Management Letter Comments (cont.) Lack of an Official Investment Policy Outdated Too conservative/too aggressive Management not adhering to policyTrevor W. Williams, CPA [email protected] 27 28. Effective Management of NonprofitInvestments: An Auditors PerspectiveCommon Management Letter Comments (cont.) Donors intentions not honored (restricted contributions) Organizations that use a broker/investment advisor should obtain SSAE 16 report and designate someone within the organization to read itTrevor W. Williams, CPA [email protected] 28 29. 4550 Montgomery Avenue, Suite 650N Bethesda, MD 20814Connect with UsTrevor W. Williams, CPAEmail: [email protected]: (301) 951 9090Website: www.grfcpa.comVisit: