The Role of a Volunteer Board of Directors in Enterprise Risk Management of a Not-for-Profit

1. The Role of a Volunteer Board of Directors in Enterprise Risk Management of a Not-for-Profit Presented by Jenene Schaffer, CPA and Paul Kelsey, CPA Hartman Leito & Bolt, LLP

2. Introducing HLB � the Numbers Founded 1986 Number of Offices 2 Size of Firm in Tarrant County* 6th Size of Firm in Metroplex** 13th * Source: Fort Worth Star Telegram ** Source: Dallas Business Journal

3. Introducing HLB � Services Provided Auditing and Accounting Payroll Tax Due Diligence Sales Tax Corporate Finance Consulting Federal Tax Litigation Consulting State and Local Tax Business Valuations International Tax

4. Introducing Jenene Schaffer, CPA Position in the Firm �Partner Areas of Expertise and Experience Not-For-Profit, Employee Benefits, Manufacturing, Wholesale, and Travel industries. More than 19 years in the accounting industry, including overseeing participation in Government Audit Quality Control Center for HLB Education Bachelor of Business Administration from Southern Methodist University in 1991 Professional Affiliations Texas Society of Certified Public Accountants American Institute of Certified Public Accountants United Way of Tarrant County � Former Audit Panel Chairman Junior League of Arlington

5. Introducing Paul A. Kelsey, CPA Position in the Firm � Audit Manager Areas of Expertise and Experience Not-For-Profit, Single Audit, and Wholesale industries. More than 10 years in the accounting industry, including managing, consulting and auditing Not-For-Profit organizations. Education 2001-2003 University of Texas at Arlington Masters of Professional Accounting Masters of Business Administration 1993-1997 Abilene Christian University Professional Affiliations Texas Society of Certified Public Accountants American Institute of Certified Public Accountants Association of Certified Fraud Examiners

6. Why Are We Here? Serving the community at large Demonstrating a commitment to financial literacy and strong internal controls

7. Today�s Topic �The Role of a Volunteer Board of Directors in Enterprise Risk Management of a Not-for-Profit�

8. Today�s Agenda Overview of the roles of the Board of Directors (BOD) Defining enterprise risk management Key components of enterprise risk management Specific risk management recommendations for the Board of Directors

9. The Role of the BOD Source: Richard T. Ingram, Ten Basic Responsibilities of Nonprofit Boards, Second Edition (BoardSource 2009). Determine mission and purpose Select, support and evaluate the chief executive Ensure effective planning Monitor, and strengthen programs and services

10. The Role of the BOD Source: Richard T. Ingram, Ten Basic Responsibilities of Nonprofit Boards, Second Edition (BoardSource 2009). Ensure adequate financial resources and provide proper financial oversight Build a competent board Ensure legal and ethical integrity Enhance the organization's public standing

11. Fundamental Needs of the BOD Independence Involvement Diversity Continuity / Succession

12. Defining Enterprise Risk Management (ERM) COSO Framework (www.coso.org) The Committee of Sponsoring Organizations (COSO) American Institute of CPAs Institute of Management Accountants Institute of Internal Auditors Financial Executives International American Accounting Association.

13. Defining ERM COSO defines ERM as �a process, effected by an entity�s board of directors, management and other personnel, applied in a strategic setting across the enterprise, designed to identify potential events that may affect the entity, and manage risk to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives.�

14. Defining ERM Categories of entity objectives: Strategic (achieving mission) Operational (effective use of resources) Reporting (reliability, usefulness) Compliance (laws, regulations)

15. ERM Components

16. ERM Components Internal Environment Tone at the top Risk appetite Entity and management values

17. ERM Components Objective Setting Supportive of primary mission Consistent with risk appetite

18. ERM Components Event Identification Internal and external Potential impact on objectives Risk or opportunity?

19. ERM Components Risk Assessment Identify Consider likelihood Consider potential impact

20. ERM Components Risk Response Avoid Accept Reduce Share

21. ERM Components Control Activities Policies Procedures Carry out risk response

22. ERM Components Information / Communication Identify relevant information Capture Communicate Formalize

23. ERM Components Monitoring

24. ERM Additional Examples

25. ERM Specific Recommendations Establish annual strategy / risk assessment evaluation process Specifically assess fraud risks Fraud Risk Assessment Tool available upon request

26. ERM Specific Recommendations Specifically assess segregation of duties Internal control checklists available upon request Specifically assess conflicts of interest Related policy and disclosure statements available upon request

27. ERM Specific Recommendations Review Form 990 for indications of what the IRS believes are minimal standards for effective governance See related article in HLB�s Nonprofit Insight, July 2010 issue, available upon request

28. Recap Overview of the roles of the Board of Directors (BOD) Defining enterprise risk management Key components of enterprise risk management Specific risk management recommendations for the Board of Directors

29. Questions? Contact information for any future questions: Paul Kelsey, CPA Hartman Leito & Bolt, LLP 6050 Southwest Blvd, Ste 300 Fort Worth, TX 76109 817-738-2400 (phone) 817-738-1995 (fax) 817-680-2964 (cell) pkelsey@hlbllp.com