New address: 24 Farnsworth Street, Boston, MA 02210-1409.
Picket & Eliot House – Rice Room
Members Present: Larry Ladd, chair, Ed Merck, Chris Reece, Will Saunders,
Also Present: Glenn Charbonneau, Florence Einhorn, Lucia Santini-Field,
Nancy Gladyszak, Richard Crowell, and Jerry Gabert, Liaison plus Jim Winning
and Kathy Davis of Deloitte and Touche.
The meeting convened at 9:06 a.m.
Merck recommended meeting notes meetings be sent out earlier.
MSP: August meeting Minutes approved.
Ladd introduced a conversation regarding conflict of interest policy. Ladd
handed out a document detailing the three Unitarian Universalist Association (UUA) conflict of interest policies
and a further document of a draft a conflict of interest policy dealing with
BOT members applying for or being appointed to staff positions. In the past
few years two board members joined the staff. Montgomery joined the meeting
to present the administration’s view. Montgomery added that there has
been in the past board members who apply for jobs and do not get the position.
Montgomery’s goal is to get the most skilled people on the staff. Often
time board members represent the skills needed for staff, especially for senior
staff. Montgomery asked for the committee members’ view on the topic.
Smith has said that other not-for-profit have similar policies. He questioned
why there wasn’t symmetry with the policy banning staff members from joining
the board during their employment and for a period afterwards. Merck clarified
the draft document to mean that a board member would have to resign in order
to apply for a position. Ladd’s asking for guidance about if he’s
“overreacting”. Saunders pointed out that this is a narrow issue
but the broader issue is all the extended issues surrounding conflict of interest.
Ladd said that disclosure is the first part of a conflict of interest policy.
Saunders feels that while the interplay between staff and board is important
it is too narrow. Ladd asked if we should defer until a more global statement
is drafted. Merck asked Montgomery to clarify her views. Montgomery said that
she feared the situation of asking a board member to resign in order to apply
for a position and then not be awarded the position. Merck said that he was
comfortable with the allowing a board member under rare circumstances to apply
for a position under the understanding that the board member would resign upon
accepting the position. Smith suggested that board members take a leave of absence
upon applying for a position. Ladd said that this was a good idea although often
a position can be posted and filled well within the time frame between board
meetings. Saunders recommends that in point two, “ordinarily” be
dropped, “should” be changed to “may”, and “further”
be also dropped. Saunders feels that this would make it clear that a board member
applying for a position must be initiated by the Administration. Santini-Field
said that this would give the impression of currying favor.
Santini-Field was pleased with the GIF audit. Santini-Field handed out a sample
engagement letter with Boston Trust’s auditors. Santini-Field feels the
need for a free standing financial audit of the GIF. We need to make available
to congregations the kind of materials that investors want. Santini-Field said
that she has received many requests for information from congregations but also
significant numbers of requests from individual donors who previously could
not make sense of the GIF from the UUA audited financial statements. Santini-Field
and Saunders feels that the need is growing for a separate GIF audit. Smith
raised the questions of should the UUA be handling other people funds and also
should the UUA be the administrator of Donor Advised Funds. These are business
issues. Santini-Field said that the GIF is given an allocation for administrative
costs. Gabert said that the Investment Committee needs to assume some ownership
of the separate statement. Without action the separate GIF statement will not
be included in the UUA’s financial statement. Gabert said that one alternative
would be to have the GIF section as the final portion of main UUA audited financial
Jim Winning and Kathy Davis from Deloitte & Touche joined the meeting to
discuss the audit and the UUA’s financial statements. Davis provided a
briefing for the committee and noted that the audit was complete. It was conducted
in compliance with Generally Accepted Auditing Standards (GAAS) and the financial
statements, with an unqualified opinion, will be issued shortly. There were
no adjustments. Saunders wanted it to be clear that in some areas the Deloitte
materials use the word “management” which is a reference to committees
or commissions making the ultimate decision. Some questions were raised about
the post-retirement benefits calculations. Ladd clarified that while we use
Deloitte for actuarial services this is not a legal conflict of interest because
of the nature of the UUA. Winning also highlighted the significant increases
both in investments and investment return. Gabert handed out a document that
consisted of Deloitte & Touche’s comments and management’s response.
Merck said the management response to the Health Insurance Plans comment should
be more direct. In their management letter Deloitte recommended the UUA implement
a formal fixed asset tracking and accounting software package, which has also
been recommended previously. Merck asked if there were other areas that Deloitte
& Touche wanted to get into but there wasn’t enough time. Winning
said there were no outstanding areas that he felt needed more attention. Conversation
took place around the Prudent-Man rule. Merck said we need to pay close attention
to the difference between real dollar figures versus projected values. Gabert
requested consideration of reformatting the business segments to be more descriptive
by replacing the Endowment, Trust and Agency segment in favor of the General
Investment Fund. Winning asked if this was a question about adding the GIF as
supplementary schedules. Following discussion it was agreed that supplemental
schedules for the General Investment Fund could be prepared to present to the
Board meeting during the Audit Committee presentation with, at a minimum, the
equivalent information that has been presented in the past. Winning stated that
it would not be possible to issue the GIF segment as supplementary schedules
in a standalone document. Saunders questioned whether or not it was useful to
present the audit to the full board rather than to simply present to the finance
committee. Ladd said that in terms of governance, it is necessary for the board
to review the final audit results and that interest seems to have increased
in recent years partially as a result of Sarbanes-Oxley.
UUA staff members left the meeting so a private discussion could take place
between the Board appointed Audit Committee members and Deloitte & Touche.
Following a lunch break, committee members toured the Financial Services staff
group area at the UUA’s 25 Beacon Street office.
Ladd moved the group to discussing the RFP. Gabert presented a list of potential
firms to send the RFP to: KPMG, McGladrey & Pullen, Tonneson, PWCoopers,
Tofias, and Deloitte & Touche. Saunders asked for progress made in looking
at regional as opposed to national firms. Saunders asked if Ladd, Einhorn, and
Gabert could filter the list down to the top three for interviewing. Reece noted
that a decision had been made that we couldn’t filter down. How much time
do we need to interview? Ladd said that 30 minutes would do. Merck said that
the last clause on the first page expressed a concern for selecting a firm that
can provide advice to improve our financial systems and financial management
capacity and to broaden the scope of the audit. We may want to broaden the language
as well. Ladd suggested best practices and other business practices. Saunders
said that was covered in point three. Merck said he would also broaden the language
to be consistent. Reece noted that in the interest of simplifying the language,
the opening paragraph wasn’t as clean as the committee had discussed and
he felt it was confusing about what we are asking for. We should consider simply
saying: financial statements for the year ending June 30, 2005 and consider
clarifying the 2nd paragraph from “also included” to “also
consolidated”. Ladd said there needed to be language to express that we’re
small yet complex and suggested we bid this out as a consolidated financial
statement audit. Then, during our presentation meeting dialogues, we can discuss
the potential of having separate reports for Beacon Press and possibly GIF.
The committee is committed to making a selection in January. Reece asked that
we request written responses by some date in December so they can be distributed
to the committee members for review.
Merck left the meeting.
Ladd moved on to the draft charter, which is based on the current charter of
the UUA’s Investment Committee. Reece asked for clarification on the language
surrounding investigation of perceived or alleged impropriety. Ladd clarified
that the role of the Audit Committee would be to hire investigators or forensic
accountants. Saunders pointed out the missing year on the first page.
MSP: Present the proposed charter to the Board of Trustees at a future meeting.
Ladd asked that we have copies available for distribution to the Finance Committee.
For more information contact web @ uua.org.
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Last updated on Friday, July 22, 2011.
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