Arizona Chamber Executives Conference 2017 Rob Leslie, CPA, CGMA rleslie@eidebailly.com 602.339.2805

Financial Key Elements any Chamber Should Have in Their Optics Discussion points Financial Reporting Internal – What do we need to know? External – What is the story that our financials tell? Regulatory Reporting Issues – staying out of harms way! General Best Practices Internal Controls External Influences

Internal Financial Reporting

Internal Financial Reporting Where does this begin? Understanding the business model that your chamber works under: Revenues sources Membership trends? Expense parameters Staffing Hired Volunteer/members Attrition Budgets Where do we start from? Zero based or not?

Internal Financial Reporting What do we use to track and understand our fiscal performance? Budget to Actual comparisons Cash basis versus Accrual basis How do we handle known changes to budgeted amounts? Dash Board – who are the users? Development Critical indicators Use – Management vs: Board

Internal Financial Reporting Internal financial statement – What do they look like? Who are the Users? – start here! Management Board /committees Outside stakeholder Level of detail One report for all users? Multiple reports with different levels of detail? Summary reporting

External Financial Reporting

External Financial Reporting Who Are The Users? Board Vendors Financial institutions What is the basis used? Cash Accrual Other What is the Story that is told? Types of CPA Prepared Financial Statements – what is the difference in types? Compilation Reviewed Audited Other types of reporting

External Financial Reporting Footnotes – What is required and what is optional? Does your Chamber have affiliate entities? Foundation Publications Building LLC New Reporting Standards – only for GAAP basis F/S! Two classes of net assets instead of three Net Assets with Donor Restrictions Net Assets without Donor Restrictions Disclosure of future cash-flows – significant change and requirement!

Regulatory Reporting Issues

Regulatory Reporting Issues Internal Revenue Service 990 filings – timely and complete? Open for public viewing through GuideStar Related entities? Unrelated Business Income (UBI) Lobbying and Political Activities Income tax related to UBI Payroll Filings and Taxes In-house prepared Payroll service company NEVER borrow from withheld taxes to patch cash flow needs

Regulatory Reporting Issues State Filings Corporation commission Department of Revenue Sales and use tax Multistate or other Jurisdiction filings

General Best Practices

General Best Practices Internal controls – What are these? Policies and procedures to protect the assets of the entity What are the assets? Accounting and reporting controls General controls COSO internal control framework – industry best practice! Their website is full of documents to assist in developing and/or enhancing internal controls First element of sound internal controls starts with “control environment” – aka “Tone at the Top” How does your chamber communicate its “tone at the top”?

General Best Practices What do sound controls help to prevent? – FRAUD Are Chambers susceptible to fraud? – YES Example – Utah Chamber Two types of fraud Misappropriation of assets – theft of assets Financial Statement Fraud – most significant in effect in dollars – falsifying overall financial outcome to achieve an end result Bank requirements to be met Bonus calculations for executives

General Best Practices Report to the Nations – fraud report published bi-annually by the Association of Certified Fraud Examiners – Free on their website Actual cases used Stratified by: Types of fraud Industries (non-profits) Who are the perpetrators Average life cycle of a fraud scheme is 18 months You can’t fully eliminate the risk of fraud but you can mitigate it Does your Chamber have a Whistle Blower Hotline? Or policy?

General Best Practices There are many more best practices to discuss, all of these are predicated on: The size of your Chamber Staffing Revenues and types of events and activities

Questions?

Thank You! Rob Leslie, CPA CGMA 602.339.2805