MKP USA Financial Update: Financial Integrity

February 10, 2012

in From the Finance Director

A Message from MKP USA Finance – Controls, Oversight, Responsibilities and Integrity
We are the wise and transparent fathers we have been waiting for

Is MKP USA operating in financial integrity?

Yes and increasingly every day. MKP USA controls and oversight standards include:

  • Multiple signatures and disbursement controls via bill.com to ensure that dollars are spent for approved purposes only
  • Oversight by a regional accounting firm in California and audited by a second firm in Illinois
  • Finance Director responds to regular questions and reviews by the MKP USA Finance Committee, comprised of experienced businessmen
  • Accounting Clerk sends weekly reports to the MKP USA Finance Committee for review
  • Finance Director delivers frequent reports to the MKP USA board and council and responds to active questions and inquiries
  • Finance Director responds promptly to Center, Center Director, Member and individual questions.
  • Careful and thorough documentation trails of all financial activity are maintained
  • Reserve requirements and budgeting for unexpected events in 2012 to account for the unpredictability of revenue in our organization.
  • Current with vendors or has made responsible arrangements to pay those vendors promptly and will continue to do so
  • Separate bank account and chart of account entries for restricted funds (more details in a future communication about restricted and board designated funds)

Was this always the case and if no, how were we out of integrity? What have we done or are we doing about it?

No it was not.

During and prior to the transition from MKP to the establishment of MKPI and MKP USA in 2010, a number of tasks were not completed or accounted for. It took the greater part of 2011 to fully understand and rectify those tasks that were not completed. The most significant of these incomplete tasks was the failure to file and pay certain state payroll taxes from 2007 to 2010. The penalties and interest from these late filed payroll taxes will have ultimately cost MKP USA approximately $25,000 in penalties and interest as well as the costs of paying our accounting firm incremental fees to rectify the unfiled returns. At the time, our internal controls were not strong enough to detect the incomplete tasks. Today, our controls are sophisticated, thorough, frequent and in accordance with Generally Accepted Audit Standards (GAAS). Further, MKP USA now uses a professional payroll service since last year to ensure that payroll tax filings are timely and complete.

In early 2011, MKP USA hired James Dougherty, an initiated man and partner of Larsen & Rosenberger, a regional accounting firm in California, to do the work of establishing strong and lasting internal controls and procedures for MKP USA and to register with the various states and file those returns that had remained unfiled in the past. Thanks to Larsen & Rosenberger, substantial work has been done to “clean up” MKP USA’s legacy responsibilities in this area. Work is scheduled to continue throughout 2012 until every single unpaid tax dollar has been paid. This work was budgeted and forecast in 2012 and continues to progress in a timely fashion.

How do MKP USA controls and oversight work?

Disbursements

Requests for disbursement are entered into bill.com upon the receipt of an invoice or bill by the MKP USA Bookkeeper.

  • All disbursements must receive dual approval by the MKP USA Accounting Firm and the MKP USA Executive Director AND be supported by documentation
  •  No disbursements can be approved by the party the disbursement is written to:
    • If the disbursement is to the MKP USA Accounting Firm
  • Approval by the MKP USA Vice Chair and the MKP USA Executive Director
    • If the disbursement is to the MKP USA Executive Director
  • Approval by the MKP USA Accounting Firm and the MKP USA Vice Chair
  • After dual approval is completed, payment is made by the MKP USA Finance Director

Reporting/Review

  • Weekly unaudited Balance Sheet, Profit and Loss Statement and Account Review from the MKP USA Bookkeeper to the MKP USA Finance Committee (which includes the MKP USA Finance Director, Executive Director and Vice Chair)
  • 2011 Financials to be widely published after Adjusting Journal Entries are received from accounting firm

Audit

  • MKP USA is audited by Warady and Davis, a regional accounting firm located in Illinois
  • MKP USA receives additional audit support and oversight from Larsen & Rosenberger, a regional accounting firm in Glendale, CA

Accounting

  • Entries made by the MKP USA Bookkeeper are reviewed both by the MKP USA Finance Director and when requested, Larsen & Rosenberger. Entries made are intended to comply with GAAP (Generally Accepted Accounting Practices) for non-profit organizations.

Board of Directors Oversight

  • The Board of Directors will name a Treasurer in 2012 to perform board level review of reporting, budgeting and similar finance functions

Who works on MKP USA finances and what are their responsibilities? How much work is there?

Michael Bailey – W-2 employee – Accounting Clerk/Bookkeeper

  • Processing of all entries for all accounts into Quick Books
  • Center Receipts and Disbursements for 32 Centers and Developing Centers
  • Invoicing and Accounts Receivable Reports
  • Entry of disbursements into Bill.com with attached supporting documentation
  • Membership contribution reconciliation
  • Maintenance of Restricted Funds, Designated Funds Accounts
  • Ad hoc reporting and projects as they occur
  • Monthly bank reconciliations of five bank accounts
  • Reconciliation and maintenance of membership and other pledges and populating ledgers
  • Weekly report preparation to Finance Committee

Jon Levitt – Contracted – (JSA Business Development) – Interim Finance Director

  • Oversight of Accounting Clerk activities with support from advisory accounting firm
  • Weekly reporting to Finance Committee / Bi-weekly reporting to MKP USA Board and Council
  • Bi-Weekly Communication to membership/constituencies/initiated men about MKP USA Finance
  • Forward cash flow and strategic analysis
  • Budget analysis and preparation
  • Payment issuer on bills.com
  • Regular review of Quick Books
  • Payroll confirmation
  • Review of contracts, initiatives and projects from a finance perspective
  • Response to approximately 50 daily e-mails to finance@mkpusa.org and related e-mail accounts
  • Donor / Member support regarding finance questions and status of Donor / Member programs
  • Participation in committees in which finance and strategic finance are necessary for planning / decision making
  • Organize efforts to retain consistent records across Centers for audit and tax preparation
  • Monitor and interface with accounting / finance vendors

James Dougherty – Contracted – (Larsen & Rosenberger) – Accounting Advisory / Assistant Treasurer

  • Provides advisory services to resolve bookkeeping / accounting questions
  • Filing, negotiation and resolution of past payroll tax delinquencies
  • Audit process support oversight and advisory
  • Tax filing process oversight and advisory
  • Completion of 1099/1096 filings for MKP USA
  • Official mailing address of MKP-USA; Deposits and remittance
  • Signatory on disbursements/approvals
  • Release payroll instructions to payroll vendor

MKPUSA Finance Committee – Volunteer and Staff – Currently Jeff Leyser (chair), David Lang, Martin Marks, Bob Oser, George Faison, Russell Kramp, John Groll, Jon Levitt

  • Meets bi-weekly to review/oversee the books, accounting, practices and procedures of MKP USA finance employees and advisors
  • Conducts annual budgetary process and monitors compliance with budget
  • Considers strategic developments as they arise
  • Requires bi-weekly report of Finance Director

Susan Greggo – Contracted (Warady & Davis) – MKP USA Annual Audit

Coming soon…

  • Is MKP USA operating in financial integrity?
  • How do MKP USA controls and oversight work?
  • Who works on MKP USA finances and what are their responsibilities? How much work is there?
  • What is the status of Fund the Plan? Is MKP USA in integrity with that set of financial agreements? What Fund the Plan dollars are being invested in 2012 and how?
  • Why does MKP USA seek contributions and what percentage of operations are funded by contributions, membership and similar efforts?
  • Is MKP USA in integrity with our agreements with MKPI?
  • Is MKP USA in integrity with our agreements with the Centers?
  • What is the status of the Diversity Scholarship Funds held by MKPUSA?
  • What is the status of the Multicultural Committee and Elder Funds held by MKPUSA?
  • Does MKP USA have enough money to operate?
  • Is MKP USA wasting money? What do we pay for and why? What is the 2012 budget and why?
  • What are MKP USA’s financial results and 2011 yearend balance sheet?
  • What is the status of legacy payroll taxes from 2007 to 2010?

 

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