Financial Management Workshop for CILs…Regulations and Beyond
IL-NET presentation on May 25-27, 2016
Module 1: Framework for Accountability

PAULA McELWEE: Changes that all of us are facing are Uniform Guidance is in place, wasn't before.

Before we had the OMB circulars, there are some changes from one to the next, and also we changed departments, so we're no longer under Edgar and the Department of Education, but moved over to HHS, so we need to do things according to HHS as opposed to Department of Education, so that's changed.

And we're going to juggle all of that as we go through these two and a half days and see how much of that information we can share with you.

We're curious about this, though, regarding indirect cost rates, which is on everybody's mind, it would be helpful for us to know kind of where you are in that process.

So how many of you have not yet submitted for indirect cost rate?
Several of you, half a dozen centers, maybe ten centers represented there.

How many of you have submitted it and received it back?
So got your cost rate back.

It was approved first time, right?
Yay.

Always good to hear.

That was probably four or five of the centers here.

And then everybody else, I assume, has submitted, but not yet heard back.

Who falls into that category?
So most of the room falls into that category.

So still waiting to hear back, and you want to know how to apply it -- that's what I'm hearing.

All right.

Good to know.

Let's take a look at what our objectives, or program overview was for this training.

These are the things that we came up with, and I think you'll see that they represent much of what you've just said.

How to survive audits is on our list.

Of course, with changing rules, you need to make sure that you are meeting those new rules whether that audit comes from within the independent living administration or is your own independent audit, you want to make sure that you're doing things properly and survive those funder audits and reduce the likelihood of the need for those funder audits.

How Uniform Guidance rules will affect your funding and reporting.

How transition from Department of Education to HHS impacts your center or your CIL.

How you allocate your payroll or other costs, sometimes called time and effort reporting.

What policies and procedures you need to develop, what training should be provided around the implementation of those policies, and how an effective board can support your organization.

So the board also has a role in the financial, and we didn't ask, are there any board members here?
Members of the board?
So we have a few board members.

But how to strengthen and engage the board because the board certainly has a role here and how the board should interact with committees and with your staff in order to make that happen.

Also, how to prepare an Indirect Cost Rate Proposal and simplify the process of working with it.

Regarding the deadline that David mentioned in the back, for indirect cost proposals, the deadline was imposed based on our conversations with how long it took to have it approved, because you have to use it when you apply for your next round of money.

So you don't -- you have to have it when you do your next grant budget.

That was the urgency around the date.

We put forward the date, nobody else required it.

You're the ones who are not going to get your funding until you have one operating.

If that adds a little urgency.

There's that situation.

So how to develop and update the fiscal policies and procedures manual to comply with the new regulations and requirements.

How to protect your assets and your confidential information.

What lobbying is permitted and prohibited -- a constant question for all of us, right?
So those are some things we're going to cover as we go through.

And I'm going to let John take the lead on this next part.

JOHN HEVERON: Thanks very much, Paula.

Let me add on to your survey with a couple more questions.

Anybody going to just use the 10% de minimis rate?
A few of those?
Allocate all costs, everything, rather than use a rate?
Oh, good.

And does anybody think that they don't have more than one program, therefore don't need an indirect cost rate?
One hand up.

Two.

So we'll -- when we get in the Indirect Cost Rate Proposal process, and want to talk about the follow-up process as well, we will address those issues.

But now I wanted to mention, a few years ago, we had an unusual opportunity to review funder audits of agencies like yours.

A good number of them, in depth audits and we got some key insights into what the auditors were looking for.

Basically they were finding inadequate internal controls.

We'll be discussing them.

Missing timesheets and payroll allocations that weren't complete.

Some other specific items they found were that personnel activity reports were missing or nonexistent or weren't in a proper format and weren't compliant.

Charges to a program didn't agree with what the accounting system showed, so reports, the voucher and requests for reimbursement didn't agree with the accounting system information.

Charges to programs were inconsistent with the budget.

Don't charge based on budget but the budget does identify the process.

Inadequate expense documentation, co-mingling of funds, all turned up in these audits.

Another thing they found is that senior management expenses were not properly approved.

They might be approved by subordinates or by senior management themselves, and the expectation is that they will be reviewed by someone other than the individual, so usually if it's senior management, then a board member would look at those expense reimbursements.

Allocation of salary for staff working on multiple programs wasn't documented.

Billing policies were inadequate or they weren't being followed properly.

And there were an inadequate number of board meetings.

Now that's actually based on the organization's policy.

Are there rules about how many board meetings you have to have?
Let me just ask.

How many of your boards meet every month?
Once every month, or every month outside of summer?
And how many do quarterly board meetings?
How many fewer than quarterly board meetings?
So everyone is doing at least quarterly.

And that's sort of a best practice, a guideline, at least quarterly meetings, so it looks like most of you fall into that category.

But what the problem was here, you're going to see this in a few cases, is that the organization have policy about board meetings, so while four is a sufficient number, their policy said every month, they didn't follow their policy so that was a finding -- they didn't violate a federal rule.

They violated their own policy.

That's why it's so important when you develop policies to make sure that you will be able to stick with them.

You can create violations that don't exist by having policies that you don't follow.

So don't hold yourself to a higher standard than you can meet.

Policies were not reviewed or updated in some cases.

In some cases, duplicate services, timesheets indicated two people performed services for the same consumer at the same time, presumably consumer self-directed services.

Payroll allocations weren't based on payroll.

Now, as we look at some of the Indirect Cost Rate Proposals, most of you based payroll overhead on payroll.

Some did specific identification.

This comment sort of implies it's better to have payroll overhead based on payroll.

But it isn't an absolute requirement, if anybody has a question about that we can address that when we're in that segment.

Unallowable costs were charged to programs.

Some agencies were not complying and not familiar with the Federal Guidance.

And salary allocation wasn't documented.

There was no support for services performed.

The next finding was some personal use items were purchased.

Now, as auditors, we have a threshold for errors, but we have a very different threshold for wrongdoing.

Basically any wrongdoing is wrongdoing.

There are dollar amounts where we have to report in our compliance reports, errors, but something that is apparently deliberate really doesn't have a dollar threshold.

Purchase requests were nonexistent or incomplete.

Unreasonable or incorrectly allocated costs.

Unallowable lobbying was observed.

A fixed monthly amount was charged for certain costs with no documentation.

So for example, a set amount of payroll was charged month after month to this program.

There may have been personnel activity reports or other documentation for time actually worked, but that's not how it was charged in a general ledger.

So again, there is the opportunity to do some things on an interim basis, and then true things up but in this particular case, there was apparently no truing up.

Timesheet errors, just mathematical errors and funding from other sources wasn't identified.

No approval for pay rate changes.

Pay rate changes didn't agree with documentation.

Units of service are not the same as the amounts on the timesheets.

Timesheets weren't signed.

No support for allocation of indirect salaries.

No accounting procedures manual or guidance from a predecessor CFO to their successor.

The new CFO couldn't explain what their predecessor had done.

Seeing a couple comments like that really tells you that you need to have procedure manuals and you need to follow those procedures, that makes it way easier when you have a change in a key position.

In auditing business, we have a technical standard that we must follow, that somebody with auditing skill but with no knowledge of our client or their programs should be able to look at our work papers and determine what we did and how we reached our conclusions.

So that's a standard we have.

That's actually a pretty good standard, because these two problems wouldn't have been identified if the documentation was good enough, that the successor could look back and know exactly what his predecessor or her predecessor had done.

Personnel files were missing.

Some new-hire information was missing.

Again, the agency had a policy for background checks but they didn't follow that policy.

That policy might have been at a higher standard that what was required, but it was their policy, and they didn't comply with that.

So didn't violate federal rules, they violated their own policies.

There was a lack of documentation of costs from the general ledger.

Background checks weren't documented.

Timesheet in and out times didn't equal the time worked.

So you can see that there were some recurring themes, some things that kept coming up time after time as we reviewed these funder audit reports, and these are valuable.

I'm a motorcyclist and I've taken class -- I was from the time I bolted a chainsaw engine on to my bicycle as a kid.

It's not like I don't have a lot of experience but they say, perfect practice makes perfect, practice doesn't make perfect.

Perfect practice makes perfect and I like to occasionally take the Motorcycle Safety Foundation course, which reminds me, the course is based on thousands of motorcycle accidents that occur, and the course says, what didn't this person know or what did they know and not do?
I think that makes me safer.

Similarly, looking at those audits, seeing the problems that occurred, allows you to be better prepared for these audits, so I would take some time, flip through these one more time, maybe consider this as you do your training.

These are failures.

These are your motorcycle accidents.

These are the things that went wrong.

Avoid these because like falling down on your motorcycle, comes with some pain, come up short here.

So recurring items included missing or inadequate personnel activity reports, federal rules require that these reports reflect after-the-fact determination of actual activity, not budget.

Now there's new flexibility with the new rules.

There is some ability to have documentation other than personnel activity reports.

But you do need to have documentation.

It does need to be based on what was actually done, not based on your budget or your initial plan.

They must account for all activity, and be signed by an employee or a supervisor stating that the distribution of activity is a reasonable estimate.

Many agencies and consultants think that signatures by both is a good idea, help comply with wage and hour rules as well.

And they must be prepared at least monthly and tie into payroll reports.

So again, we're going to talk more about documenting payroll, so we'll talk about personnel activity reports and the other procedures that you might use.

I think we're still going to hear strong bias for maintaining personnel activity reports, but we'll wait.

Some other deficiencies that were found in several of the audits.

Timesheets missing or inadequate.

Cost allocation procedures not followed or understood.

Some mathematical errors and other mistakes, some errors and inconsistencies were noted with payroll hours and payroll rates, even with some of the policies -- simple mistakes, but there wasn't a process to minimize them.

Your organizations are probably too small to have an internal audit function, with probably very limited exceptions.

At least not an internal audit position but there should be some checking, some verification done, possibly done by a staff member, possibly done by a board member, but there should be some process of checking back so that when the funder shows up, that isn't the first time checking has been done.

If a mistake still gets through, but you have process to minimize errors, that's way different than not having a process to minimize errors.

Many of the audits resulted in a requirement to repay funding, some substantial amounts.

Post-audit monitoring, also required for some auditees.

So the bad news is that audit reports showed little tolerance for missing documentation.

Even if things were done properly, even if they could be explained orally, if the documentation wasn't there, we saw no tolerance for that.

Post-audit monitoring is a lot more painful than pre-audit preparation.

PAULA McELWEE: I might just describe that post-audit monitoring a little bit if you've never had this happen.

If any of this is making you kind of nervous as we went through, we'll get more detail in a minute, so if you had questions that occurred to you as we went through, be sure to write down those questions.

The postaudit monitoring is often getting prior approval from your funder for all of your expenses.

That means there's no regular flow of your funding.

You have to spend your money first and approve it and have all the documentation in place, and put in personnel activity reports, including all of your bills and proper approvals for it so the Executive Director can't approve their own credit card.

Somebody above them on the board has to do that.

You've got those kinds of things that we just went through that list, monitoring results in those same things.

Did I see some stirring when I said the Executive Director can't approve their own credit card?
I will repeat, the Executive Director cannot approve their own credit card.

Have them call us, we'll be glad to say that.

The board member, not someone that reports to them, should be reviewing any expense and the Executive Director should never sign their own approval of their own checks.

Somebody else should be doing that.

As you heard all these little things, those are monitored after the fact, if you are found lacking, so if your center is found not doing what you're supposed to be doing, then you can have this kind of thing.

Didn't want to get into questions yet.

AUDIENCE MEMBER: I'm sorry.

PAULA McELWEE: If you have one, please write it down and we'll make sure that we catch it when we go through that section.

So does that all make sense?
Is anybody nervous?
I'm not seeing a show of hands.

A little bit.

When you look at the finances, a couple of things to just kind of keep in mind, and the first broad theme is, you need to know why you did everything, you need to document that.

And you need to keep it in the records, so one of the things John mentioned is the predecessor didn't keep good records and I don't have the institutional memory.

So I came in after my predecessor is gone, and maybe there was a good reason why they did things a certain way but nobody bothered to tell me, so I don't know what that is.

Well, you need to know what that is or change the method, write a new policy, clarify in policy, call up retired person and ask them and get your documentation in order, because it has to be documented.

Whatever you're doing, document, document, document.

If you have a reason for doing something that might otherwise be questioned and you feel like your reason is a good one, write it down and keep it with that bill, because if it's reviewed and your reason is a good one but no one is there to tell the later auditors about it, that's going to be problematic, right?
So that's first theme you heard here.

Make sure your documentation is there, make sure you thought it through, because policy drives a lot of this.

So your policies and procedures are going to be important.

We're going to give you some samples, we'll talk about that in some detail as we go along.

But you need to know what you're doing and why and whatever you report in policies and procedures needs to be public information and not hidden in a notebook on a back shelf someplace, but it needs to be stuff everybody understands.

We have a joke, we think what happens is the policy manual falls behind the refrigerator, because when a new person comes on, they can never find the policy manual and you can't tell me there wasn't one.

I'm sorry, I believe there really must have been a policy manual at some point.

But often, new person coming in cannot locate that policy.

Now, why is that?
Probably because the policy was written and not used on a day-to-day basis.

You want working policies, policies that describe what you do on a day-to-day basis, and anybody can come and review and say, oh, okay, that's what they're doing.

And understand it.

So those two things, document well what you're doing but also have policies and procedures to support that so that you know what you're doing, when you go into it, you know it's all balanced and all making sense.

Maybe we should let them ask questions.

Should we give them a couple minutes?
All right.

I'm going to take a microphone here.

Do you still have your question?
Tim is coming over there.

AUDIENCE MEMBER: Kathy from West Virginia SILC.

The question on the credit card.

Is that approval to apply for a new credit card?
Approval for charges being made?
PAULA McELWEE: For paying the bill.

AUDIENCE MEMBER: Before you made the charge, or when the bill comes in.

PAULA McELWEE: When the bill comes in, if I've made all the charges on that credit card, my board member ought to see what charges those were.

I should not be the only keeper of that information.

Or somebody who reports to me that I can control.

So you want a board member to be --  AUDIENCE MEMBER: In terms of best practice, how often should we review our personnel policies and procedures and also operational manuals as well?
PAULA McELWEE: I like to see an organization have annual calendar that you lay out things that you regularly review, and John may have something to add to this.

If you review your bylaws once a year and review your personnel policies once a year and you review financial policies once a year, you know, if you just kind of have a schedule, and you know that every January you review financial policies, then that's going to be your practice.

And then you review them internally, the board affirms them or can make changes with the board or let them know about the changes.

But I like to see it once a year, because things change fast sometimes.

Until you go back and look at them, don't realize how quickly they went.

Financial policies and procedures, you'll notice it's not a huge oppressive document.

It is practical and we feel like really covers things you need to cover.

Not onerous thing to review it at least once a year.

I don't know, John, do you want to add to that?
JOHN HEVERON: I'd agree with that.

And also add that at that point in time, you should consider whether you want to do some additional training.

A few things, if you had any change in personnel, so you've got some new people on board, since you've done your last training or doing updates to your manual, or if you just get a sense that the people aren't wholly familiar with the policies and procedures, so as you do your review, consider whether you want to do a general training or training on some specific elements, either because they're key critical or because they're new.

PAULA McELWEE: You had one here?
AUDIENCE MEMBER: Build on the credit card question.

If we have a policy in place that says Executive Director is able to spend up to, or Executive Director can sign mileage reimbursement up to, and anything beyond that requires board approval, would that be sufficient for an audit?
PAULA McELWEE: Regarding their own expenses, what they themselves have expended?
JOHN HEVERON: I'm sorry, I need to hear that again.

AUDIENCE MEMBER: There is a policy in place that says our Executive Director can spend up to, sign checks up to, regarding their own expenses, and anything beyond that requires board approval, would that be sufficient for an audit?
JOHN HEVERON: Signing checks is one thing.

Signing checks for the agency wouldn't require anything special.

If they are incurring expenses for travel, there should be independent review of that really at any level.

PAULA McELWEE: Executive Director is doing that for everybody else, but who is doing that for Executive Director?
Should be someone who does not report to Executive Director, so that involves the board.

Both John and I can tell you, when something goes wrong and spending is happening where spending should not happen, this is the first place you see it.

AUDIENCE MEMBER: Continued follow-up regarding the signing approvals versus signing checks, in our organization in our main account, a board member executive co-signs every check, so is an after-the-fact review of the charges that are held by the credit card sufficient?
And for instance, like this trip, I had communications with the board president, saying, okay, this is something good for us to represent, and there's an informal approval, but there's not a signing of form for that, and afterwards one of the other executives co-sign the check.

PAULA McELWEE: Have a policy that says that when they're signing the check, they are seeing the backup documentation.

They aren't just signing the checks.

AUDIENCE MEMBER: The other question related to personnel activity reports, timesheets, when you have various programs and you're allocating your time in the administration role, is it sufficient to do it that way or do you have to specifically note, I was talking with this employee, specifically the tasks that you were doing or is it sufficient to have amount of time for different categories?
JOHN HEVERON: I don't think anybody is asking us to go down to that level of exactly what you were doing.

You were working on general agency administration, or this specific program.

Not specifics beyond that.

And that's why they do require a certification.

PARs will generally have certification that says this is a reasonable representation of the time actually spent but no, we don't need -- even in all these audits, I never -- PAULA McELWEE: One state, where the state designated entity recommended that PAR include a breakdown of the actual activity, but that was not -- it's not required, and probably take them to task for that and find ways to get them to modify that, because that really is excessive, and not at all the intent of the personnel activity report, so if your state is doing that, it's one of the few that is promoting, adding on a layer of additional record-keeping.

Glad to help with a conversation about that.

Typically you're keeping records about what's happening in a consumers' service record.

A lot of activity that probably is in your database, regarding the activities of your staff, and you need to keep track for the purpose of consumer records, not for the purpose of the PAR, time and effort reporting.

Okay, let's take -- that's great.

Keep writing down questions too, and we'll go on to the next section.

JOHN HEVERON: This isn't part of the program but there were some recent regulations that were passed that may have effect on organizations and might be a little bit of confusion.

The federal overtime regulations and they were passed recently.

Become effective December 1 and they apply to nonprofits but they apply differently to nonprofits.

And so I think there might be a bit of confusion about these, and I wanted to help clarify.

Basically, the regulations are about when you must pay an employee overtime.

And what changed here, what the big deal is, is if an employee met certain other criteria, and they were paid at least $23,660, that's the federal rule, each state might be different.

New York is -- but if they were paid at least that amount, and they met other criteria, you weren't required to pay them overtime.

The new rule raises threshold to $47,476 per year.

Now, this automatically applies to some nonprofits, including schools, preschools.

You're safe there.

Government agencies, I don't know CILs, whether you fall into that category of governmental agency.

It may apply specifically to you.

And then some other organizations.

For other nonprofits, they really only apply if you have over $500,000 of business-type revenue.

In fact, I've seen some of the reports that say that you have to have $500,000 of unrelated activities.

These are sales or fee for service type of arrangements that are really unrelated to your activity.

You wouldn't include any federal funding.

You wouldn't include any gifts, grants or contributions in that $500,000.

So if you're not automatically covered, I think this won't apply to you.

But the new rules, there's a nice little fact sheet on this from the Department of Labor called overtime final rule in nonprofit sector and says, in several circumstances, you're automatically exempt.

One of those circumstances is you've got hourly workers.

Because hourly workers always have to get time and a half.

Make sure we comply with that.

Workers with regular workweeks of 40 hours or less, of course, are exempt because don't have overtime.

But there's also a duties test.

If your employees are performing manual labor, and that doesn't mean just chopping wood.

There are a lot of things that fall into the category of manual labor, then they need to be covered by the time and a half rules here, pay overtime.

So just be aware of those things.

Finally, there's one other category, and I don't know how applicable this is going to be, but they say, any employee, so your agency might be exempt, but any employee who is involved in interstate commerce would be covered.

Now, sounds like that's something that would never happen, but they give an example of an individual who makes or receives interstate telephone calls, ships materials to another state or transports persons or property to another state, the coverage would apply to them.

PAULA McELWEE: John, there are a few centers that cross state lines, so that they live in a major city that has services on both sides of that state line.

And so I would guess those would apply there, right?
JOHN HEVERON: Very possible.

They even give an example of employee who regularly calls out of state store and uses a credit card to purchase, for example, food for nonprofit that provides meals for the homeless, but you see how easily you might get into something like that.

These are the overtime pay regulations.

If you're concerned about these or think they may apply to you, there are some good resources available.

Right from the U.S.

Department of Labor, the overtime final rule in the nonprofit sector, or go to independentsector.org.

That's a wonderful website, if you haven't been to that one.

Independentsector.org.

And they have some information on these new rules as well.

PAULA McELWEE: I don't know, Tim, maybe that's a webinar topic, that one specifically.

Because I can see, once we kind of organize our thoughts around it -- this is unfolding as we speak.

Once we kind of organize our thoughts around it, it might make sense to do a section on that, on just webinar, just on the overtime stuff.

We're going to do a few minutes of this first part about boards.

It will be interrupted by a break.

We promise we'll break on time.

The board roles and responsibilities are a key matter, not just around funding but certainly the board has a role, duty of care for the organization.

So volunteers who come together are operating your center.

They hire and fire the Executive Director and they are people in charge -- therefore, they need to know that things are happening according to the way that they ought to happen.

So it becomes really important to look for skills and experiences of board members that make it possible for them to do this.

You may also need to help them if you're on staff, maybe provide some documentation, training, and other kinds of things for them to do this, but it's important that skills and experiences, board members, at least someone on your board, include some financial management expertise.

It doesn't mean that every person on the board has to have that expertise, but at least want to make sure that somebody on the board understands financial matters at a little deeper level than just looking at a financial report every month or quarter, whatever your board meeting schedule is.

And everybody needs to have some basic idea how to read that financial statement.

So another question is, does your board have active committees and what are those committees and how should they be operating?
When you look committees related to finance, often you have a Finance Committee.

And the people on that Finance Committee might meet more frequently than your board or more thorough review than your board does, so some centers only have board meetings quarterly.

The Finance Committee still meets monthly and reviews report month by month, so they're reviewing the financial reports, sitting around the table talking to the Executive Director and finance person -- it's a small group, it's easy to ask questions, and so that committee takes on a role often with how to look at those financial reports, how to look at it in more detail.

That committee is also a great place to have people learn more about how to read that financial statement, because that training almost happens meeting by meeting by meeting, because questions come up and hopefully always have somebody that has expertise on that committee, then you have a really great process, so if you have committee structure,  you can delve into this a little better.

If you are not using active committee structure, maybe your board is too small, you need to make sure that you're allowing enough time for review of those financial statements by that board, so usually should get them in advance, right?
Because if they get them in advance, have a chance to jot down questions before they come to the meeting, prepared them to have conversation around financial statements.

Too often, what happens around the financial statements is nobody is engaged in them really.

They just make a motion, second and pass it and nobody is really paying attention to it and that is not a duty of care.

Duty of care for the organization, or the due diligence the board member ought to be doing related to your organization, includes looking at those more carefully, so make sure you give them what they need in order to make that happen on the board.

So sometimes you'll have a separate Audit Committee.

This has become very common -- we'll get into when you have to have an audit, what kinds of audits you might have and all of that a little later on.

But if you have an Audit Committee that is separate from the Finance Committee, has become the best practice, so that you know that your Audit Committee is seeing the full financial statements in addition to what your Finance Committee sees, and of course, if you have an external auditor, of course, that auditor needs to report to the board, not to the Executive Director.

I know of a situation where nonprofit Executive Director works directly with the auditor, and didn't take the reports or took the reports and said, oh, there's nothing really here, but I had to give you a copy, here you are.

What you really want is for your auditor to come to the board meeting, for the board itself to be aware of any findings that are there, and for the board itself to know what was the response of management to those findings, so it's real important that you are involved in that process, usually through committees -- a lot of times, the relationship between the board and the committees is the committee does the detail and brings a motion to the board meeting for approval or for change of policy or for whatever is coming out of these committee meetings and the full board is still aware but doesn't have the to take that extra time to drill down to that detail.

And so you need to think about, have you developed board members who have a good complement of skills around financial statements?
Typically that's done through some kind of board training, some kind of board opportunity to learn about that, whether that happens while they're doing work on a committee or it happens in a training session or it happens in a part of a board meeting where you spend time to train, somehow you want to make sure that you have developed those skills.

Because the board is responsible for eventually evaluating and approving any policies and verifying the procedures are in place to follow those policies and anything else related to the compliance, and most boards never even look at any of that.

Now, if you're an Executive Director, you know, sometimes easier if your board doesn't look at that because it's especially difficult if you have a board doesn't get it and takes a lot of extra training or a lot of extra time and I know that can be frustrating.

Still you want the board to be involved.

You want the board to have ownership in the financial status of your organization.

You don't want that to be something that they pay no attention to, because the boards that pay no attention to it sometimes later find themselves in trouble.

You as Executive Director who has high values and high ethical concerns, you're going to lay the groundwork so your successors are going to be held to that same ethical conduct so you can do that through the policies, procedures, training, other preparation that you do.

Somehow the board needs to regularly be involved in this process.

They're also responsible to the community, so the board needs to understand, how are we responsible to our donors?
What do we do related to giving good information to the public about what we do financially?
Do we do an annual report?
Do we put in our newsletter?
How do we let our stakeholders know what it is that we are doing financially, and good, bad, or ugly, whatever that information is, how do we make sure that that information is available to the community, because the board is responsible for that relationship to the community.

And board members must understand all kinds of things about the community.

We're talking mostly about finances today, but in the big picture, they need to understand the need for advocacy and services, right?
They need to understand at least the basics of what the core services are that you provide, because they need to be involved in that.

Because we have consumer control boards, this is even more urgent because those consumer control boards do have an interest directly in what services that you provide, and what you're required to do and so it's very helpful that they know and understand this.

And of course, they need to be aware of any policies related to the payment for services through your grants and your contracts.

If you have a service you bill for, then you might have to have a collection process to collect money that's supposed to be coming to you for that service, and the board has to have some awareness of that process of what to expect of that, how you actually are providing that information to the board and on to the community, and sometimes this will affect your board -- your financial reports that the board requests of you.

So if you've got something that you're billing for and you're not getting paid on a regular basis, then suddenly the board might need to see an agent report on your payables.

Because they need to know are you receiving your funds the way you ought to receive your funds.

Anyway, so I didn't say that right.

I think you understood me anyway.

They need to know the status of it.

If you're $20,000 in the hole for something you billed for and you're not getting paid on a timely basis, the board needs to know that a cash flow problem is building.

How do you communicate that to them?
In your financial reports on a monthly basis or quarterly basis, you need to make sure that they're informed about the things that affect you or impact you financially.

So the board has responsibilities also for the compensation and supervision of the Executive Director, the CEO in the organization.

So if you look at the board's role, the board needs to act and be supervising the Executive Director.

Some of you that are Executive Directors know, it is like pulling teeth sometimes to get your board to do this.

It isn't that you don't want them to.

You want their feedback.

They're not skilled at giving it.

You need to figure out and help build for them ways to do that.

Mentioned a calendar earlier, one thing in January, one thing in March.

One of those months ought to be evaluation performance of Executive Director.

Ought to be on board calendar.

If you have to do a self- evaluation, give it to them to agree or disagree with, whatever you have to do.

They ought to evaluate your performance annually.

Sample documents they could use.

Help them to understand, it is their role to evaluate Executive Director's performance.

And sometimes other senior staff may want to have input into your financial person's evaluation.

The Executive Director does that as direct supervisor, input from the board might be important at that level as well.

And then also the board is responsible for financial direction including assessing budgets and financial statements, budget revisions, if you do them.

Typically your board should approve those.

That's a place where a lot of centers drop the ball.

The board approved the original budget and as you go through the year and do budget revisions, nobody brings it to the agenda for the board and that's a mistake.

The board needs to know your current operating budget.

Somehow you need to communicate that, either by presenting the revised budget or by pointing out in the financial statements that the budget has been revised.

So those are some key things.