April 2010 Audit Committee Report

  • : preg_replace(): The /e modifier is deprecated, use preg_replace_callback instead in /home/pacifican/pacificana.org/drupal/includes/unicode.inc on line 311.
  • : preg_replace(): The /e modifier is deprecated, use preg_replace_callback instead in /home/pacifican/pacificana.org/drupal/includes/unicode.inc on line 311.
  • : preg_replace(): The /e modifier is deprecated, use preg_replace_callback instead in /home/pacifican/pacificana.org/drupal/includes/unicode.inc on line 311.
  • : preg_replace(): The /e modifier is deprecated, use preg_replace_callback instead in /home/pacifican/pacificana.org/drupal/includes/unicode.inc on line 311.
  • : preg_replace(): The /e modifier is deprecated, use preg_replace_callback instead in /home/pacifican/pacificana.org/drupal/includes/unicode.inc on line 311.
  • : preg_replace(): The /e modifier is deprecated, use preg_replace_callback instead in /home/pacifican/pacificana.org/drupal/includes/unicode.inc on line 311.
  • : preg_replace(): The /e modifier is deprecated, use preg_replace_callback instead in /home/pacifican/pacificana.org/drupal/includes/unicode.inc on line 311.

Pacifica National Board Audit Committee Report

April 23 - 25, 2010

Before I get into the meat of the report, I’d like to acknowledge the other 14 members of the Audit Committee:

KPFA – Matthew Hallinan, Chandra Hauptman and Joe Wanzala WBAI – Lisa Davis and Seth Goldberg

KPFK – Dutch Merrick, Leslie Radford and Donna Warren

KPFT – Wesley Bethune, Bill Crosier and Melinda Iley-Dohn

WPFW – Jane Gatewood, Campbell Johnson and Nia Turner.

At our last meeting, I was elected chair and Campbell Johnson was elected secretary, both unanimously.

According to California's Nonprofit Integrity Act of 2004, there are five duties of the audit committee: “Audit committees: (1) shall recommend to the board of directors the retention and termination of the independent auditor, (2) may negotiate the compensation of the auditor on behalf of the board, (3) shall confer with the auditor to satisfy the committee members that the financial affairs of the charitable organization are in order, (4) shall review and determine whether to accept the audit, and (5) shall approve performance of any non-audit services to be provided by the auditing firm.” (Gov. Code §12586(e)(2), as cited in Thomas Silk and Rosemary Fei, “California’s Nonprofit Integrity Act of 2004,” The International Journal of Not-for-Profit Law, Volume 7, Issue 2, February 2005; available at http://www.icnl.org/KNOWLEDGE/ijnl/vol7iss2/art_3.htm#_ednref6 .)

As you recall, at our last in-person meeting (January in DC), I ended the committee report by saying, “Finally, the Audit Committee functions best when it has productive relationships with management. Now that we have permanent leadership, I have all confidence that the ‘tone at the top’ will be conducive to establishing and adhering to policies resulting in accountability all around.”

After our first two meetings of 2010, I’m pleased to report that I have confidence that we are on our way under our ED’s leadership. At our first meeting with our auditor present, committee members -- understanding their responsibility of ensuring that the Foundation never ever gets another terrible report that says we are literally out of control -- crafted a motion that passed unanimously:

    Motion:

    1. The Audit Committee will immediately review the Auditor's 2009 Management Letter in relation to the Pacifica Financial Policies and Procedures Manual adopted in 2007, and then develop recommendations for remedial action.

    2. The Audit Committee recommends that the PNB adopt the following motion:

    The PNB directs the Executive Director and CFO to immediately begin working in conjunction with the Audit Committee on a plan, based on the 2007 Financial Policies and Procedures Manual, that will:

    a) address the deficiencies identified in the management letter, and

    b) establish adequate internal controls for accurate financial reporting.

    The PNB further directs the Executive Director and CFO to provide written and oral progress reports for each PNB teleconference and each in-person PNB meeting until all these issues have been addressed.

But to our chagrin, some directors voted to postpone the motion to this in-person meeting on the grounds that it is “overreaching.” This claim is absolutely not true based on the California Nonprofit Integrity Act of 2004 (audit committee comment # 3 cited above). The line between the responsibilities of the Finance Committee and the Audit Committee are clearly outlined in the table on the next page, which was prepared by the NonProfit Risk Management Center.

At our second meeting, our ED and CFO, Arlene Engelhardt and LaVarn Williams respectively, were present and gave a very good report on how they are going to solve the problems cited in the ’09 Management Letter. Again, I commend them both and appreciate the sense of urgency they expressed.

That said, the Audit Committee members and I urge you to vote for the motion above. It is not “overreaching” but holds us as directors accountable for ensuring that management establishes effective processes for maintaining adequate internal controls and procedures for accurate financial reporting.

Nia Bediako

Audit Committee Chair

 

 

Appendix:

What's The Difference?

Audit Committee vs. Finance Committee

AUDIT COMMITTEE SHARED

RESPONSIBILITIES

FINANCE COMMITTEE

The audit committee is authorized to consider matters related to
(a) the financial statements of the organization and other official financial information provided to the public;

(b) the systems of internal controls, including overseeing compliance by management with applicable policies and procedures and risk management (e.g., for organizations that are part of a national network, annually reviewing whether the organization meets the rechartering requirements of its national organization);

and (c) the annual independent audit process, including the recommended engagement of and receiving of all reports from the independent certified public accountants. The audit committee shall have such other authority and perform such other duties as may be delegated to it by the board.

The finance committee ensures that budgets and financial statements are prepared; the audit committee has oversight for ensuring that reports are received, monitored, and disseminated appropriately.

The finance committee monitors financial transactions; the audit committee makes sure things are done according to policy and with adequate controls.  The finance committee provides guidance about what can be done; the audit committee ensures that independent oversight occurs.

The finance committee shall oversee the preparation of the annual budget and financial statements.

The finance committee shall oversee the administration, collection, and disbursement of the financial resources of the organization.

The finance committee shall advise the board with respect to making significant financial decisions.

 

Source: NonProfit Risk Management Center Website

For more information on any risk management topic, contact the

Nonprofit Risk Management Center at www.nonprofitrisk.org or (202) 785-3891.