Book used for this course: Coe, Charles K. Nonprofit Financial Management: A Practical Guide. Wiley, 2011. ISBN: 978-1-118-01132-4
Please write a constructive response to the discussion post titled (6B) The post titled (6B) is based on the questions in (6C) a-f.
6B
A. An audit was conducted two years ago, but not last year because of reduced funding.
As CEO firs thing I would do is ask questions as to why an audit was not conducted last year to learn any insight that could provide help to me so that I am making the best plan of action decisions moving forward. I would direct my questions to the audit coordinator, CFO, as well as the financial committee. There is little to no excuse as to why an audit is not conducted each year other than a breech in organization on the nonprofits part. By missing a year, you are unable as an organization to forecast future budgets. As CEO I would work with my team to ensure an audit can take place each year by assigning roles and responsibilities.
B. The audit received an unqualified opinion; but the Communication of Significant Deficiencies or Material Weaknesses Letter noted that payroll and nonpayroll disbursement duties were not separated.
Payroll and nonpayroll disbursement duties should be separated in order to prevent fraud (Coe, 2011), but in this case it was not, meaning that it could have been the same person performing accounting duties which is very risky. As CEO I would need to run as assessment to determine if this was the case. If this is a small nonprofit, there might not be enough people in order to keep these duties separate (Coe, 2011) but it is important for the CEO to be involved in some way by performing one of the duties. Aside from assessing, as a new CEO I would also plan to become more involved.
C. The bookkeeper has worked for over 15 years with the organization. She is a much-loved employee. Due to cutbacks, she lost her account clerk two years ago and had to assume all accounting duties with no extra compensation. She has learned on the job, having no background in accounting.
This is a tough situation that I see a lot as a professional working in nonprofits. As a new CEO I would work internally to determine if there was anything I could do compensation or training wise for this employee. Most employees working in a nonprofit want to help keep the organization alive so they will take on tasks that they have no previous experience in, just so the tasks can be completed. I would speak with the CFO about allocating funds to either compensate this employee or hiring a new employee to take over these added tasks. It can be beneficial for her to get trained by me nevertheless, as I believe cross training is important.
D. The nonprofit installed new accounting software last year.
I would review this new software system and ensure that my team likes it too. Reviewing includes analyzing the safety and risk to this new software system. I would check to see if everyone on the team felt well versed in the system and host a training if they did not.
E. Because of new IRS Form 990 requirements, the Board is thinking of adopting a Code of Ethics.
A code of ethics is a great resource to have in any organization as a set of standards to reference. This code should incorporate conflicts of interest and expected ethical behavior (Coe, 2011). I would work with a review committee so ensure I was not just making up the rules myself, as I would want to ensure our diversity and inclusion was up to par.
F. The bookkeeper reputedly inherited a considerable sum of money last year, allowing her to buy a new Lexus
If there is a concern for fraud than immediate action must be taken. Before pointing fingers I would investigate the facts. By talking with the CFO I would review financial records to see if any suspicious activity. If there was any suspicion I would have the NPO and CFO review everything with me. I would also turn to my auditing committee to look over the records. I would give the employee a chance to state her case but would turn to authorities if it was determined there was a true case. I would use this as an example as to why we audit every year!
References
Coe, C. K. (2011). Nonprofit Financial Management. Wiley.
6C
You are the new CEO of a nonprofit organization. Doing your due diligence, you conduct a study of financial operations and find the following:
A. An audit was conducted two years ago, but not last year because of reduced funding.
B. The audit received an unqualified opinion; but the Communication of Significant Deficiencies or Material Weaknesses Letter noted that payroll and nonpayroll disbursement duties were not separated.
C. The bookkeeper has worked for over 15 years with the organization. She is a much-loved employee. Due to cutbacks, she lost her account clerk two years ago and had to assume all accounting duties with no extra compensation. She has learned on the job, having no background in accounting.
D. The nonprofit installed new accounting software last year.
E. Because of new IRS Form 990 requirements, the Board is thinking of adopting a Code of Ethics.
F. The bookkeeper reputedly inherited a considerable sum of money last year, allowing her to buy a new Lexis
Using the COSO framework, what are the warning signs? What changes would you make to the system?
Sample Solution