Fiscal & Programmatic Accountability for CIL Boards & SILC Councils

Fiscal & Programmatic Accountability forCIL Boards & SILC Councils Presented at the 2016 APRIL Conference in Reno, Nevada, By Dawn Francis, Executive Director, Iowa Statewide Independent Living Council Don Dew, Executive Director, Disability Resource Center of Siouxland Liz Sherwin, Executive Director, Illinois/Iowa Center for Independent Living

Overview • Chain of Command • Oversight of the Executive Director • Board Fiscal and Programmatic Oversight A. Oversight of Policies B. Fiscal Oversight C. Programmatic Oversight D. Board Committees E. Board Meetings F. Conflicts of Interest G. Other Board Oversight Responsibilities

Overview This workshop is meant to give CIL Board Members and SILC Council Members a brief, readily useable, hands-on training of what is expected of Board/Council Members. For simplicity, we are going to use the term “Board” in this presentation to refer to both CIL Boards and SILC Councils. This presentation is not intended to be all-inclusive, but rather to touch on some of the critical responsibilities that Board Members need to be aware of, and provide real life accounts of what has happened at some SILCs and CILs when these responsibilities were not handled properly.

Overview CIL Board and SILC Council Members, although volunteers, ARE charged with ensuring the fiscal and programmatic soundness of the organization, and need to be aware of the critical duties they must perform in order to ensure the fiscal and programmatic soundness of the organization.

Overview There is a lot more detail involved than just what is in this overview. Specifically, the ByLaws and other policies that are put in place by the Board have a lot of details involved. Ensuring that these documents are developed and annually reviewed in a very thoughtful and careful manner will help to ensure the fiscal and programmatic soundness of the organization, along with the Board carrying out the other duties listed in this document.

I. Chain of Command

I. Chain of Command Scenarios Example #1: One organization had their ED resign, and made the determination that they did not have enough funds to hire a new ED. The Board allowed the Board Chair to remain as Board Chair and also volunteer as the ED. Evaluate the above scenario in terms of appropriate behavior for Boards/Councils/ Executive Directors.

I. Chain of Command Scenarios Example #1 - CONSEQUENCES: This created a situation where there was no chain of command, and no checks and balances. This individual ended up stealing about $30,000 from the organization, and was found guilty and put in prison. The rest of the Board was put at risk for facing charges and being financially liable for the loss. The organization faced the possible loss of some of their federal funding, and did lose their Part B funding. They also lost credibility in the community and with other potential funders.

I. Chain of Command Scenarios Example #2: One organization hired a new ED whose daughter was the Chair of the organization’s Board. The new ED told her daughter to step down from the Board as this was a conflict of interest. Another Board Member said not to worry as they would just change their ByLaws to make this arrangement ok to do. Evaluate the above scenario in terms of appropriate behavior for Boards/Councils/ Executive Directors.

I. Chain of Command Scenarios Example #2 - CONSEQUENCES: This was not appropriate, and is not sound fiscal management. The Chair of the Board, along with the rest of the Executive Committee Officers, are generally considered the direct supervisor of the ED. A family member cannot be expected to be objective in the event there is a problem with the ED.

I. Chain of Command Scenarios Example #3: One Board Chair insisted upon weekly meetings with the ED, and continually told the ED what they were to do. Two different ED’s resigned from the organization within the same year. This Board Chair then reviewed the resumes of new ED applicants, and told the Board that none of the applicants were appropriate so she was going to go off the Board and have the Board hire her as the ED. Evaluate the above scenario in terms of appropriate behavior for Boards/Councils/ Executive Directors.

I. Chain of Command Scenarios Example #3 – CONSEQUENCES: This organization lost two competent ED’s within a year due to the micromanaging behavior of this Board Member. These two EDs were NOT empowered to handle the day to day operations of the organization, when they should have been. It was also a conflict of interest for any Board Member to review ED applicants and then also apply themselves for the ED position.

II. Oversight of the Executive Director • The Executive Committee (President, Vice President, Treasurer, Secretary) is the entity directly responsible for providing oversight to the Executive Director. • The full Board must approve a detailed job description, plus an annual work plan for what they expect of the ED each year IF there are specific activities they want the ED to perform in addition to the job description duties.

II. Oversight of the Executive Director • Individual Board Members may NOT contact the ED to request that the ED perform additional duties. The duties of the ED are outlined by full Board approval. If a Board Member would like to see additional duties performed by the ED, they are to bring that to the full Board for consideration and approval.

II. Oversight of the Executive Director • The Board has a duty to REQUIRE the ED to present them with a detailed itemized budget ANNUALLY. • The ED compiles the annual detailed itemized budget and presents it to the Executive Committee to review, and changes may be made based upon what the Executive Committee decides. • Once the Executive Committee has approved the annual budget, it is brought to the full Board to review, discuss, and approve. • The budget must list all sources of funding and the amount of each source, and list each major category and line item for the budget. • The Board has the duty to review this budget, make any needed changes, and approve the annual budget PRIOR TO THE START of the federal fiscal year. • If the organization has unrestricted donation funds, the Board may require a separate budget for those funds if there are activities approved by the Board that will be paid for by those unrestricted funds.

II. Oversight of the Executive Director • Please note that the CIL’s detailed itemized budget is NOT the same as the budget the CIL submits to the federal funder (called a federal 424), nor is it the same budget as the CIL submits to the DSE for their Part B and State Funds. The CIL’s detailed itemized budget has to be done first, including all funding sources, and then the totals for the federal Part C funds for each major category (i.e., Salaries, Benefits, Rent, etc.) are then put into the federal 424 budget. The budget for the CIL’s Part B funds and State Funds are generally two separate itemized budgets for the DSE, but these amounts must be included in the full CIL itemized budget which includes the federal Part C funds, federal Part B funds, State Funds, and any other funds the CIL receives for programming, such as grants.

II. Oversight of the Executive Director • DUTY: The Board has the duty to REQUIRE the ED to submit budget revisions to them for approval throughout the year as changes are needed. The Board must approve any changes to the budget. It is not enough to discuss and approve changes to the budget at a Board Meeting without having a revised itemized budget to review. The ED needs to submit an actual itemized budget revision for the Board to consider and approve. • DUTY: The Board has the duty to REQUIRE the ED to submit written detailed financial reports at each Board Meeting for Board approval. It is CRITICAL that CILs and SILCs track ALL funding sources SEPARATELY, and that each expense is clearly charged to the appropriate funding source. It must be clearly documented in the financial accounting system as to which funding source each expense is being charged to. The financial report, at a minimum, needs to display the current approved budget, the amount expended to date out of each category/line item, and the amount remaining to be expended by the end of the year. CILs/SILCs have multiple funding sources, so the report must contain the amount of each source, the amount expended to date for each source, and the amount remaining to expend for each source. This includes the federal Part C funds, federal Part B funds, State Funds, and any other funds, such as grants, that are received. The financial reports must also account for the amount of unrestricted donation funds, and what expenditures were made with those funds.

II. Oversight of the Executive Director • DUTY: The Board has a duty to REQUIRE the ED to present an Executive Director Report at each Board Meeting outlining the activities the ED and staff have engaged in and, for CILs, what services they have provided to Consumers (numbers of Consumers served to date, number of goals set in what areas, number of goals achieved, number of goals in progress, number of information and referrals, etc.). The ED may choose to have other staff assist them with portions of the reporting as appropriate. • DUTY:The CIL Board has a duty to REQUIRE the ED to inform them when the CIL federal 424 budget form has been submitted. This form is generally due to the federal funder by mid July to allow the federal funder time to review and approve the budget for the start of the October 1st federal fiscal year. • DUTY: The Board has a duty to REQUIRE the ED to inform them when the 990 IRS Form has been submitted, and to provide a copy of the 990 to Board Members who request it. THE BOARD CHAIR MUST SIGN THE 990!The 990 IRS form is due February 15th or May 15th, depending on how their reporting is set up with the IRS. This is the annual federal report required of all non-profits.

II. Oversight of the Executive Director • DUTY: The Board has a duty to REQUIRE the ED to inform them when the federal 704 Report has been submitted, and to REQUIRE the ED to provide a copy of the 704 Report to all Board/Council Members, the SILC, other CILs (for the SILC/DSE 704 Report), and the Designated State Entity. The 704 Report is submitted online annually by December 31st. This is the annual report to the federal funder on the use of federal funds for CIL/SILC/DSE/DSU operations, the services provided to Consumers, and other activity reporting. • DUTY: The Executive Committee of the Board has a duty to conduct an annual written evaluation of the ED. They must ensure there is an up to date detailed job description, an annual work plan if there are additional duties they want the ED to perform in addition to what is in the job description, and an up to date ED evaluation document so they have written documents to conduct the evaluation. The evaluation needs to evaluate the ED’s performance of their job description, and work plan, for the previous year. Evaluation of the ED also entails the Executive Committee making a recommendation to the full Board as to whether the ED is to receive a raise, the amount of the raise, and if there is enough funding in the budget available to give a raise. Boards/Councils may choose to give the ED a one time cost of living adjustment each year if there are remaining funds at the end of the year but not sufficient funds for an ongoing raise.

II. Executive Director Oversight Scenarios Example #1: An ED refused to give the Board financial reports at each meeting for their review and approval, telling the Board that they were micromanaging him and did not need to know that. Evaluate the above scenario in terms of appropriate behavior for Boards/Councils/ Executive Directors.

II. Executive Director Oversight Scenarios Example #1 - CONSEQUENCES: As a result, the Board was unaware of the financial mismanagement of the organization for years. This resulted in a loss of services for the Consumers the CIL was to be serving. The ED was eventually fired, but many years of damage to the reputation of the organization had already occurred.

II. Executive Director Oversight Scenarios Example #2: An ED did not submit his federal 990 reports for two years, and his Board was not aware he had not submitted them. Evaluate the above scenario in terms of appropriate behavior for Boards/Councils/ Executive Directors.

II. Executive Director Oversight Scenarios Example #2 - CONSEQUENCES: As a result, the IRS put a lien on the bank accounts for the CIL, including the Part C funding which meant the CIL was unable to draw down their Part C funding from the federal system. It took the new ED 6 months to get this situation resolved with the assistance of a federal legislator. Had the Board Chair been signing the 990s, this would not have happened.

II. Executive Director Oversight Scenarios Example #3: A CIL ED was having difficulties compiling his budget and contract for Part B and State funding with the VR agency. He requested assistance from the SILC ED and another CIL Director. When the SIL ED and CIL Director met with the ED, he had no itemized budget for his Center. He refused to follow through with their recommendations for the CIL budget as well as his Part B and State budgets. The ED decided to refuse to take the Part B and State funds. Evaluate the above scenario in terms of appropriate behavior for Boards/Councils/ Executive Directors.

II. Executive Director Oversight Scenarios Example #3 - CONSEQUENCES: Five years later, after that ED resigned, the new ED informed the Board that the former ED had refused these funds, resulting in a $130,000 loss in funding to the CIL over the previous 5 years. The former ED had not informed the Board that he had refused the funding because he did not want to do the required documentation for the funding. This resulted in a great loss of services for CIL Consumers.

III. Fiscal & Programmatic Oversight Responsibilities A. Oversight of Policies Ensure the organization has up to date ByLaws, Fiscal Policies, Board Member Policies, Personnel Policies, Operations Policies, and any other policies the Board determines are needed. The ED annually reviews the ByLaws and other policies, makes recommendations for any changes, and presents this to the Operations Committee. That committee then reviews the policies and recommendations, makes any additional changes, and the finalized revision is brought to the full Board to review, discuss, make any additional changes, and then approve. These policies all need to be reviewed annually.

III. Fiscal & Programmatic Oversight Responsibilities A. Oversight of Policies TIP: Ensure you have Conflict of Interest, Code of Ethical Conduct, and Grievance Procedures policies in place for both staff and Board Members. TIP: Ensure you have a process in place for checks and balances in terms of fiscal accountability. Here are some examples: • Two people must open the mail together, and document any checks received. • Two signatures are required on checks over $1,000, and on all checks made out to the ED. • The checking account debit card may not be used to withdraw cash from an ATM.

III. Fiscal & Programmatic Oversight Responsibilities A. Oversight of Policies All of these ByLaws and policies need to be in place to ensure the fiscal and programmatic soundness of the organization. The Board and ED work together to develop these policies initially. The ED reviews the policies annually and makes recommendations for any changes to the Operations Committee. The committee works with the ED to review the changes, make other changes as needed, and approve the recommended changes. The revisions are then presented to the full Board, and the full Board approves these policy revisions, and the ED is responsible for implementing the approved policies.

III. Fiscal & Programmatic Oversight Responsibilities B. Fiscal Oversight • Review and approval of the annual itemized budget PRIOR TO the start of the federal fiscal year on October 1st. The Board must also approve the use of any unrestricted donation funds. The ED prepares the annual itemized budget, and the unrestricted donations funds budget if needed, presents them to the Executive Committee to review, make additional changes, and approve. The budget(s) then go to the full Board/ Council to review, make any needed changes, and approve.

III. Fiscal & Programmatic Oversight Responsibilities B. Fiscal Oversight • What To Look For: In reviewing the itemized budget and the unrestricted donation funds budget, Board Members need to ask themselves if the amounts appear reasonable and appropriate. If not, you need to question it to the full Board and the Executive Director. Don’t be afraid to ask questions! Remember, YOU as a Board Member, are responsible for ensuring the organization is fiscally sound and using the federal and state funds, and any other funds, appropriately.

III. Fiscal & Programmatic Oversight Responsibilities B. Fiscal Oversight • Review and approval of any budget revisions needed throughout the year. The same process applies to revisions as to developing the original budget. The ED makes revisions, presents it to the Executive Committee for review, discussion, additional changes, and approval. Then it goes to the full Board to review, discuss, make any needed changes, and approve. • Review and approval of the detailed financial report at least every other month or at each Board meeting. The ED works with the accountant to prepare the financial report, then presents the report to the Board Treasurer to review and approve. The report is then presented to the full Board for approval.

III. Fiscal & Programmatic Oversight Responsibilities B. Fiscal Oversight • What To Look For: In reviewing the financial report at each meeting, Board Members need to ask themselves if the amounts expended appear reasonable and appropriate, and if they are proportionate given the amount of time since the start of the fiscal year, and the amount of time remaining in the fiscal year. Does it look like the organization has spent too much or too little to date? If you have questions, don’t be afraid to ask! Again, remember YOU, as a Board Member, are responsible for ensuring the organization is fiscally sound and using the federal and state funds, and any other funds, appropriately.

III. Fiscal & Programmatic Oversight Responsibilities • Fiscal Oversight • What To Look For: It is important to make sure that the organization has accounting tools in place that are tracking each and every funding source SEPARATELY, and that each expense has is clearly documented as to which funding source is paying for that expense.

III. Fiscal & Programmatic Oversight Responsibilities B. Fiscal Oversight • For CIL’s, Ensure the ED has submitted the federal 424 budget form on time, generally by mid July. • Ensure the ED has submitted the federal 990 IRS form on time by February 15th or May 15th, depending on your IRS reporting schedule. THE BOARD CHAIR is the person who MUST sign the 990! • Ensure the ED has submitted the federal 704 Report on time, by December 31st. This report has to be submitted online to the federal funder. Copies of this report need to be provided to the Board, the SILC, and the Designated State Entity.

III. Fiscal & Programmatic Oversight Responsibilities B. Fiscal Oversight • Ensure the Treasurer is reviewing the reconciled checking account statements on a regular basis, and signing off that they have reviewed them. • Ensure that federal and state payroll taxes are paid on time, as well as both Directors and Officers Insurance and Property and Liability Insurance policies are in place, and that the annual premiums are being paid each year to keep them in force.

III. Fiscal & Programmatic Oversight Responsibilities C. Programmatic Oversight of the CIL • Ensure that the ED provides a report to the Board at each meeting on the activities of the ED and staff of the CIL, and the services that have been provided to Consumers (numbers of Consumers served to date, number of goals set in what areas, number of goals achieved, number of goals in progress, number of information and referrals, etc.). • The Board and ED need to develop a 3-5 year strategic plan for the organization. This outlines the activities the staff and Board Members will be conducting to support and improve the independent living services provided by the CIL (for CILs), and to promote home and community based services that allow individuals with disabilities to remain independent (for CILs and SILCs), and other important activities that these organizations wish to accomplish.

III. Fiscal & Programmatic Oversight Responsibilities • Board Committees • The Board needs to have an Operations Committee that annually reviews the ByLaws, Fiscal Policies, Board Policies, Personnel Policies, and Operations Policies, and makes recommendations for any changes needed to the full Board. The ED reviews the ByLaws and policies annually and submits recommended changes to the committee. The committee reviews those recommendations, and may make their own recommendations. The full Board must approve any recommended changes. • The Board needs to have a Strategic Planning Committee that works with the ED and staff to develop the organization’s 3-5 year Strategic Plan, review the plan at least annually, and report to the Board on the progress, barriers, and any recommended changes needed.

III. Fiscal & Programmatic Oversight Responsibilities D. Board Committees • The Board needs to have a Resource Development Committee that works with the ED and staff to look at ways for the organization to obtain additional funding and other resources needed. This can be advocacy for more state and/or federal funding, grant seeking, activities to raise unrestricted donation funds, or other types of resource development activities. The federal Rehab Act mandates that CILs are to do Resource Development, and that SILCs MAY do Resource Development. The Board can also include recruitment of new Board Members as part of this committee, or create a separate Board Recruitment Committee. Board Member recruitment can be considered a part of Resource Development, as the volunteer Board Members ARE a resource for the organization. • The Board may create other committees as they determine are necessary for organizational operations.

III. Fiscal & Programmatic Oversight Responsibilities E. Board Meetings • Board Meetings must be held on a regular basis. Most CILs hold Board Meetings monthly, and SILCs quarterly. • Notice of Board Meetings need to be posted at least 10 days prior to the meeting. This can be done by posting a notice in the office and on the website. • Board Meetings must be open to the general public, and held in an accessible location. The Board may go into closed session when discussing personnel issues, legal issues, or other sensitive issues at the Board’s discretion. Make sure your ByLaws indicate that you are able to go into a closed session for these kinds of reasons.

III. Fiscal & Programmatic Oversight Responsibilities E. Board Meetings • Documents for the meeting, such as Agenda, Minutes from the previous meeting, financial report, and other documents need to be sent to the Board Members prior to the meeting and enough in advance so they have time to review them. All documents sent to Board Members MUST be available in an accessible format as requested by any Board Member who needs an accessible format.

III. Fiscal & Programmatic Oversight Responsibilities E. Board Meetings Board Meeting Agendas need to include, at a minimum, all of the following: I. Establishment of a Quorum II. Review and Approval of the Agenda III. Review and Approval of the Minutes from the Previous Meeting IV. ED and Staff Reports V. Review and Approval of the Financial Report VI. Action Items – This includes any and all items that the Board needs to review and vote on, not including the Financial Report which has its own line item above. VII. Committee Reports VIII. Other Business IX. Public Comment

III. Fiscal & Programmatic Oversight Responsibilities F. Board and Staff Conflicts of Interest To Avoid – Get Policies In Place To Address These Issues (Conflict of Interest and Code of Conduct Policies for Staff and Board) • It is a conflict of interest, and therefore not acceptable, for any Board Member to act as the Interim Director, Director, or staff of the organization while still being on the Board. • It is a conflict of interest, and therefore not acceptable, for any Board Member to also be a paid consultant or a paid employee of the organization while they are on the Board.

III. Fiscal & Programmatic Oversight Responsibilities F. Board and Staff Conflicts of Interest To Avoid – Get Policies In Place To Address These Issues (Conflict of Interest and Code of Conduct Policies for Staff and Board) • It is a conflict of interest, and therefore not acceptable, for a Staff Member or Board Member to allow an unrelated person who is a Consumer of the CIL to live with them. This opens up the staff and Board Member, as well as the CIL and other Board Members, to liability. There needs to be professional relationships maintained between staff and Consumers, and Board and Consumers. • It is a conflict of interest, and therefore not acceptable, for a Staff Member or Board Member to become a legal guardian, payee, or any similar type of arrangement for an unrelated person who is a Consumer of the CIL. This opens up the staff and Board Member, as well as the CIL and other Board Members, to liability issues. There needs to be professional relationships established between staff and Consumers, and Board and Consumers.

III. Fiscal & Programmatic Oversight Responsibilities G. Other Board Oversight Responsibilities Boards Need To Ensure the ED Submits All Required Documents on Time: • Federal 990 Form to the IRS, due either February 15th or May 15th, depending on the reporting schedule your organization has set up with the IRS. Some may have an accountant complete this form. BOARD CHAIRS MUST SIGN THIS FORM!!! • Federal 424 budget (for CILs only), usually submitted by mid July. • Federal 704 Report to the federal funders, due by December 31st. • Many States required filing every two years with the Secretary of State for the non-profit status. • Payment of the Directors and Officers Insurance and Property and Liability Insurance. • Payment of the employees federal taxes and FICA, if the organization has staff that does this and does not have a payroll company that does this function.

CONSEQUENCES - Real Life Stories • One ED did not submit his federal 990 Report to the IRS for several years. When he quit, the Board discovered he had not been filing this report, and that they were faced with a number of significant penalty fines for this document not being filed for several years. • Another ED did not fill out a required state form for their non-profit status. The Board found this out after the ED left, and had to pay fees to get re-instated. • One ED did not renew the Directors and Officers Insurance. He left the organization 6 months later, and the Board eventually discovered the insurance had been cancelled. They had to go through the process of re-applying for the insurance, and were at risk of possible lawsuits due to the actions of the previous ED.

Fiscal & Programmatic Accountability for CIL Boards & SILC Councils