Fiduciary Responsibilities

1. Fiduciary Responsibilities Presented to the Supreme Council, Southern Jurisdiction, A.&A.S.R. August 20, 2011 By: Ill. James D. Cole, 33˚ Fiduciary Reports

2. What Fiduciary Responsibilities? • Trust of members/donors • Significant Financial Activity in Orients: • $425 M in facilities • $409 M in financial investments • $64 M in annual receipts • Protect tax status Fiduciary Reports

3. Fulfilling Duties Fiduciary Reports • Put capable people in place • Ensure good policies • Stay informed • Fiduciary reports and monthly/quarterly reports

4. Put Capable People in Place Fiduciary Reports • Seek business/finance experience • Above all, someone who communicates • Avoid “good old boy who has always……..” • Monitor burnout

5. Policies for Active/Deputy Use Fiduciary Reports See website: scottishrite.org/sp2011 Valley Financial Management Suggestions Valley example -Conflict of Interest Policy Valley example – Whistle Blower Policy Valley example- Document Retention Policy Council’s Per Diem Policy Council’s Fraternal Support Allowance Policy

6. How to Manage Fiduciary Reports • Ensure timely and accurate completion • Communicate reminder before January 1 • Set deadline of May 15 to Active/Deputy • Submit to Council before July 1 • Compare to prior years • Closely monitor key data Fiduciary Reports

7. SIX Key Items to WATCH • Sustained losses • No audit • Almoner's funds • Foundations • IRS Form 990 • Noncompliance with Articles/Bylaws Fiduciary Reports

8. Sustained Losses Loss = annual disbursements > receipts • Is it sustained or isolated? • Valley – may need dues increase, or alternative revenues • Foundation – need to increase gifts or reduce expenses • Title Holding – increase rents or reduce expenses Fiduciary Reports

9. Summary Information • SJ Valleys: • Receipts $52.1 M; Disbursed $51.7 M • SJ Orient Entities: • Receipts $12.3 M; Disbursed $13.7 M • SJ Valley Foundations: • Receipts $13.1 M; Disbursed $11.3 M Fiduciary Reports

10. The Problem of No Audit • Exposes assets to loss • Could impact future gifts • Could impact public image • Observed problems: • Significant assets/activity – no audit • Significant assets – attempt to use an internal audit Fiduciary Reports

11. Problems Noted - Almoner's Funds • No separate fund reported (Statutes XV-9) • Little or no activity • Excess cash/savings • Receipts significantly and continuously exceeding disbursements Fiduciary Reports

12. Problems Noted - Foundations • No audit when -- significant assets/activity • Little or no activity • Could lose tax status Fiduciary Reports

13. Problems Noted - IRS Form 990 • Not filed timely • Not sent to Active/Deputy • Not sent to Supreme Council • Endanger tax status – group exemption • 990 is public document • Available online • Could hurt public image Fiduciary Reports

14. Noncompliance with Articles/Bylaws Fiduciary Reports For foundations, title holding entities, etc. Required annual meetings Number of directors Name of entity?

15. Questions or Need Help? CONTACT: Jorge Franchi, CFO Or Jim Cole, Grand Treasurer General Fiduciary Reports