November NPFM Meeting: Detecting Fraud

Organizations regularly assess, through annual audits and other processes, whether they have adequate controls in place to prevent fraud but less effort is made to see if fraud is actually taking place.  Typically, CFOs and others responsible for safeguarding a nonprofit’s assets have not been educated in what to look for.  Often, one hears details of a fraud and the reaction is, “Wow, it never would have occurred to me to look at…”  All too often, after a case of fraud has been detected, people reveal that they ignored “red flags” they should have paid attention to.

 

John Mulvaney, Practice Leader for White Collar and  Government Enforcement Practice, Corporate Recovery and Litigation Services at CBIZ will provide concrete information on what you should be reviewing on a regular basis, what are typical “red flags”, and what to pay attention to if you suspect fraud.  He will also describe what he, in his role, focuses on in the course of a fraud investigation.  John is a former FBI agent and will have many interesting stories to tell us.

October NPFM Meeting: Liquidity and Reserves – Is Our Nonprofit Positioned for Success?

Is your nonprofit ready to share with the public how you mange liquidity within your organization? Nonprofits will have to implement accounting standards update 2016-14 presentation of financial statements of not-for-profit entities beginning December 31, 2018.  With this implementation comes new disclosures on liquidity that lead to an increased level of transparency in the financial statements and will force organizations to ask tough questions about how their liquidity and reserves are positioned currently and in the future.  In this interactive session participants learned about the required disclosures for liquidity and discussed the considerations many organizations are discussing as to how it relates to their current liquidity and reserve strategies.

Presenters from CliftonLarsonAllen, LLC:

Tim Warren, CPA: Tim has over 16 years of experience providing auditing, accounting, consulting, and tax services to nonprofit organizations including higher education, housing, social service organizations, membership based-organizations, community-based organizations, foundations and arts/cultural organizations. Tim has also assisted organizations on strategic implementation of new accounting standards including the new nonprofit reporting framework and revenue recognition.

Melissa Murphy, CPA: Melissa has over four years of experience auditing, accounting and consulting with an emphasis on nonprofit organizations, including those with Single Audit and Yellow Book compliance requirements. She has worked with many nonprofit organizations including human service organizations, healthcare, community based and associations. Melissa also has a strong background in 990 preparation and compliance.

Materials:
NPFM Oct Meeting – Liquidity
Liquidity Disclosures

September 27 NPFM Meeting

Behind Every Thriving Organization is a High-Functioning CFO
AAFCPAs, in collaboration with The Boston Chapter of Financial Executives International (FEI-Boston), conducted a survey of over 250 Chief Financial Officers (CFOs) in an effort to capture what issues are currently ‘top of mind’ for senior financial executives in the Northeast region of the United States.  Not surprisingly, the role of the CFO continues to become increasingly complex and strategic.  Findings include the importance of the relationship with the CEO, growing expectations from diverse constituencies, having more impact across departmental lines, struggles with human resource limitations and challenges in accessing meaningful, on-demand data.

Matthew Boyle, Chief Marketing Officer and Partner, AAFCPAs presented on the findings of a survey conducted by AAFCPAs on the changing roles of the CFO.  AAFCPAs, in collaboration with The Boston Chapter of Financial Executives International (FEI-Boston), conducted a survey of over 250 Chief Financial Officers (CFOs) in an effort to capture what issues are currently ‘top of mind’ for senior financial executives in the Northeast region of the United States.  Not surprisingly, the role of the CFO continues to become increasingly complex and strategic.  Findings include the importance of the relationship with the CEO, growing expectations from diverse constituencies, having more impact across departmental lines, struggles with human resource limitations and challenges in accessing meaningful, on-demand data.  Matthew led the meeting participants in a discussion, considering their own roles and how best to meet common challenges.

Some findings from the survey are as follows.

  • The success of the CFO in an organization depends on his/her relationship with the Chief Executive Officer. The CEO continues to expect the CFO to play a leading role in almost all aspects of corporate strategy, beyond just financial considerations.
  • The CFO needs to have a relationship with diverse agency constituencies, who have increasing expectations about the role of the CFO. CFOs must be the master of managing multiple priorities and collaboration with other organizational centers.
  • The CFO has impact and needs support across department lines. A strong financial team is very important and it is increasingly difficult to hire good staff in a very tight labor market.  In order to attract good team members, if you cannot offer a competitive salary, you really have to sell the mission and culture of the organization.
  • One of the biggest challenges of the CFO is to be able to access meaningful data, on demand, and interpret and present it in a meaningful way to assist the CEO in planning and decision making and to help the company reach revenue expansion and growth goals

Sometimes, the CFO cannot access the necessary date in a meaningful way.  When businesses evolve, businesses processes and policies need to evolve also.  The CFO need to have a good grasp IT and a good relationship with the IT manager (if the CFO is not in charge of the function).  The business processes and IT are inextricably linked.   When you do not know what you need from IT or how to get at it, then it is probably time to hire a specialist. When planning changes to IT or any meaningful agency policies or processes, the CFO needs to be in involved in the planning process at the beginning.

Report Here: AAFCPAs’ 2017 CFO Survey Report

June 2018 NPFM Meeting: Developing an Affirmative Action Plan (and Why You Should)

Do you know what an Affirmative Action Program is?  Many folks confuse having non-discrimination policies with having an Affirmative Action Program.  Many don’t realize that a written Affirmative Action Plan sets specific targets for recruitment, hiring and advancement, tracks progress data, and must be updated regularly.

Often nonprofit organizations undertake “Diversity” or “Equity and Inclusion” initiatives and would benefit from following a structured, data-driven, and comprehensive approach.  Affirmative actions include training programs, outreach efforts, and other positive steps. These procedures should be incorporated into the company’s written personnel policies.  For those receiving federal funds, affirmative action must be taken by covered employers to recruit and advance qualified minorities, women, persons with disabilities, and covered veterans.

Virginia Capezio, a Senior Human Resource Consultant with TriNet (a professional employer organization) presented to our group.  Virginia is considered to be TriNet’s expert on Affirmative Action.

May 2018 – Federal Funding Compliance: Best Practices for All Organizations

Hui-Ting Grady, CPA  and Olga Yasinnick CPA, MBA  from AAF CPA’s gave a presentation about what you need to know if your organization receives Federal funds, is hoping to do so, or simply wishes to use the federal regulations as a standard for “best practices.”  Hui-Ting has extensive experience providing assurance solutions to diverse nonprofit organizations, including: affordable housing development projects with HUD requirements, multi-service human & social services providers, and behavioral health agencies. Olga specializes in driving high-energy audit teams, and advising sophisticated nonprofit organizations, including multi-services human & social services providers, community development corporations (CDCs) and their affordable housing development projects.

If your agency receives less than $750K in Federal funding, through Direct Federal funding, pass through the State, or pass through another organization, you are subject to the traditional GAS yellow book audit. Organizations are subject to the Federal Single Audit standards if they receive $750K or more in Federal funds in a fiscal year, either directly or indirectly. The funding could be cash or noncash awards. OMB A-133 Compliance Supplement is an extensive United States Federal government guide created by the Office of Management and Budget (OMB) and was originally created in 1996.  It is used in auditing federal assistance and federal grant programs, as well as their respective recipients. It is considered to be the most important tool of an auditor for a Single Audit. It serves to identify existing important compliance requirements that the Federal Government expects to be considered as part of a Single Audit.

For December 31, 2015, year-ends and beyond

    • All single audits performed under Subpart F of the Uniform Guidance
    • Auditees comply with the new administrative requirements and cost principles for federal awards made on or after December 26, 2014, and to incremental funding made on or after that date
    • Auditees comply with the “old” OMB administrative requirements and cost principles for awards made prior to December 26, 2014, until those funds run out
    • With regard to subawards, the effective date of the Uniform Guidance is the same as the effective date of the federal award from which the subaward is made
    • Auditor compliance testing will test against both the old criteria and the new criteria depending on federal award dates

New procurement standards go into effect for those agencies with a year end of 12/31/17 on 1/1/18, and for 6/30 year end, on 7/1/18. It is the auditees’ responsibility to prepare a complete Schedule of Expenditures of Federal Awards (SEFA) and to comply with all OMB A-133 standards, regulations, and audit report requirements, and to have a strong system of Internal Controls.  As much as possible, try to segregate Federal funding from other sources of funds.  If you are a contractor/vendor that receives Federal funds, then you do not have to comply.  If your organization is a sub-recipient, then you have to comply.  Generally, it you should comply with the standards even if you receive less than $750K in Federal funds, but you are not subject to the more expensive and extensive audit.

There are usually some changes to the regulations annually, which are listed in the Compliance Supplement. Part 3 lists Compliance Requirements, and Part 4 lists Agency Program Requirements (specific to the Federal program).  Internal controls are included in Part 3.  For effective internal controls, there are five major components:  1) Control of the environment 2) Risk Assessment 3) Contract Activities 4) Information and Communication, and 5) Monitoring.  Part 3 also identifies and describes the 12 types of compliance requirements where noncompliance may have a direct and material effect on a Federal program and provides audit objectives and suggested audit procedures. The 12 types of compliance requirements are: A. Activities Allowed or Unallowed B. Allowable Costs/Cost Principles C. Cash Management D. (Reserved) (Note: Some agencies have made Davis-Bacon Act (Wage Rate Requirements) a Special Test and Provision; see 20.001 in Part 4 for a cross-cutting section addressing Wage Rate Requirements.) E. Eligibility F. Equipment and Real Property Management G. Matching, Level of Effort, Earmarking H. Period of Performance I. Procurement and Suspension and Debarment J. Program Income K. (Reserved) L. Reporting M. Subrecipient Monitoring N. Special Tests and Provisions.

At the end of the process, the auditors will issue a set of Financial Statements in Accordance with Government Auditing Standards and Uniform Compliance. You will have to file a Data Collection Form also. If your auditors have detected any material weaknesses or issues a material finding in the course of their A-133 audit, then your organization will be required to file and implement a Corrective action Plan.