Leadership_fiduciary _DALLAS_2010

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International Reading Association : 

International Reading Association Fiduciary Responsibility

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What is a fiduciary? What are the responsibilities and expectations? What are the legal requirements of a fiduciary? Fiduciary Responsibility

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Fiduciary Responsibility Webster defines “Fiduciary” as, “Founded in confidence or Trust.” Fiduciary Duties include: Duty of Care Duty of Loyalty Duty of Obedience

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The board as the fiduciary of an association: Holds assets for the members Has legal authority and duty to make decisions regarding financial matters on their behalf Must act in the best interests of the members Fiduciary Responsibility

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To uphold their individual responsibility nonprofit board members must: Recognize their fiduciary status Understand their fiduciary duties and responsibilities Understand the legal and regulatory environment impacting the fiduciary Individual Responsibility

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Individuals that act as fiduciaries face an enormous responsibility to properly manage the assets entrusted to them on behalf of the members they represent. Individual Responsibility

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Responsibilities That Uphold Fiduciary Trust Ensure organizational planning Evaluate board performance and effectiveness Determine, monitor, and strengthen programs and services Manage resources effectively Audit finances through outside professionals Avoid or disclose all conflicts of interest Fiduciary Responsibility

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The Nature of Conflict of Interest Board members must be committed to prioritizing the mission of the organization over personal agendas. Conflict of interest occurs when personal or professional concerns affect the ability to put the welfare of the organization before personal benefit. Conflict of Interest

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Examples of potential conflicts of interest include: A board member’s relative manages the facility you want to rent A board member’s spouse is an accountant who offers services for a reduced rate A vendor provides an expensive dinner to the Board A board member receives a royalty on a product the board recommends Conflict of Interest

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To avoid problems boards should: Have a conflict of interest policy Disclose any conflicts Avoid conflicts whenever possible Recuse yourselves from discussions and votes where a conflict exists and reflect this in the minutes Follow clear purchasing and travel policies Have financial transactions signed by 2 other Board members Conflict of Interest

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An Audit is the board’s responsibility Provides assurance to the board that they are operating in good faith Establishes a foundation of trust between members and the board Promotes accountability and ensures a responsible transfer of treasurer duties Audit

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The expense of an audit: It is a necessity and not a luxury Seek a volunteer For paid service negotiate fees Do the minimum if funds are tight Audit

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The MUSTS of Managing Resources Individuals must read and understand the financial reports (regular financial reports must be distributed) The board must engage in developing and implementing the budget All board members must follow and support financial policies Managing Resources

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Liability Directors and officers (D&O) claims may result if: Board members fail to perform their duties in good faith Make decisions that are not in the best interest of the organization Fiduciary Responsibility

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Insurance D&O liability insurance policies typically cover directors and officers for liabilities related to their positions if good business judgment is demonstrated. Fiduciary Responsibility

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Business Judgment Rule Limits the liability of D&O who act in good faith. Courts are reluctant to re-examine the merits of judgment so long as: Good faith and due care have been shown Informed decisions were made Sufficient time was given for consideration of options Accurate written records exist Fiduciary Responsibility

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Good Faith Good faith means the responsibilities discussed in this presentation have been performed. The law (and most members) will not include good intentions when evaluating board performance. Fiduciary Responsibility

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FINANCIALMANAGEMENT Greg Rumsey Director of Finance grumsey@reading.org

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