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Continuous learning in action

NATIONAL INDIAN GAMING ASSOCIATION

BOARD GOVERNANCE TRAINING

John T. Fisher, CPA, CGFM, Principal

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Learning Objectives

• Defining Accountability and Fiduciary Responsibility– The purpose of this session is to understand the legal and ethical

requirements of serving as a council member or commissioner • Governance vs. Management

– The purpose of this session is to understand the difference between governance and management

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Part One

Accountability and Fiduciary Responsibility

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Defining Accountability

Council members and commissioners are required to:

• Operate with clarity of purpose• Maintain legal knowledge• Maintain ethical behavior that extends beyond the

requirement of the law• Conduct regular self-evaluation of the tribes mission,

programs, and operating policies• Maintain responsibility for fiscal oversight

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Purpose of the Governing Council

• Purposes for the Council/Commission– Provide organizational oversight– Maintain accountability to the tribal members and the law

• A governing board must ensure that– The organization provides a product or service that reflects

the needs of the tribe– The organization is financially, managerially, and

programmatically healthy

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Governance Responsibilities

• Establish mission and philosophy• Planning• Selection and supervision of top management• Ensuring adequate resources and managing them effectively• Setting policies to effectively guide operations and programs• Reviewing financial and programmatic performance as

compared to objectives• Organization of the council/commission to work effectively• Ensuring legal and ethical integrity

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What Does the Law Require?

• Duty of Care– Diligence and attentiveness to council/commission

responsibilities. Act as an “ordinary prudent person” would in a “like position under similar circumstances”

• Duty of Loyalty– Faithful pursuit of the interest of the tribe rather than

personal interest or the interest of another person or organization

• Duty of Obedience– Act with fidelity, within the bounds of the law and to the

tribe’s mission

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Duty of Care

• Attend council/commission meetings and actively participate in the work of the council/commission

• Scrutinize the work of committees that have authorization of the council/commission

• Participate in council/commission actions. If you are there, you are responsible

• Know the books and records of the tribe• Protect the tribe’s assets consistent with the legal

requirements

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Duty of Care (cont’d)

• Assist the tribe in obtaining adequate resources• Honor your duty to investigate and report potential

theft or mismanagement• Document decision-making in the minutes• Ensure financial accountability

– Oversee the Chief Financial Officer– Check that resources are used prudently– Implement procedures to ensure accurate records– Maintain internal controls

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Duty of Loyalty

• Avoid conflicts of interest or the appearance of such conflicts. If questions arise, the burden of proof that no conflict exists lies with the council member/commissioner

• Establish a written policy on avoiding conflicts of interest

• Do not divert a tribal business opportunity for your own personal gain

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Duty of Obedience

• Ensure the tribe remains obedient to its central purpose– Be familiar with tribal, gaming, state, and federal statutes

and laws related to the tribe– Comply with every deadline for all tribal, state, and federal

fillings– Be familiar with the tribe’s governing documents and

follow the provisions of those documents– Where appropriate, obtain the opinion of legal counsel or

accountants

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Fiduciary Responsibility• Financial oversight is a core responsibility of the

council/commission. This means that all council members/commissioners:− Have equal and shared fiduciary responsibilities for the tribe− Understand the content and significance of financial statements

and audit− Ensure the protection and appropriate use of the tribes assets− Establish program revenue and expense objectives which are

consistent with the mission of the tribe− Thoroughly discuss and adopt an annual budget that reflects the

financial objectives and strategies of the tribe before the beginning of its fiscal year

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Fiduciary Responsibility (cont’d)− Review financial statements regularity and compare them to

the budget. Ensure that you account for significant variances and require timely course adjustments as needed

− Ensure that strong and appropriate internal financial controls, processes, and practices are in place

− Establish appropriate financial polices to guide tribal operations− Where possible, establish operating reserves to finance cash

shortfalls and program growth

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Finance Committee Responsibilities

• Oversee financial operations:– Budgeting– Policy development– General financial planning- current and long-term

• Be alert to signs of financial problems• Risk assessment• Investments

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Audit Committee Responsibilities

• Select audit firm and define service expectations• Discuss scope and timing of work with the auditor• Respond to audit findings and recommendations• Present the annual financial statements• Review conflicts between auditors and management• Review audit letters that are received in addition to

the audit report

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Management

• Carry out council policy and directives• Administer internal controls• Monitor financial goals and objectives• Process financial information• Prepare budgets and financial information• Provide accurate, timely, and meaningful information• Keep council/commissioners appropriately informed

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Part Two

Management vs. GovernanceModes of Governance

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Governance

In the government setting, the purpose of governance is to “ensure, usually on behalf of others, that an

organization achieves what it should achieve, while avoiding those behaviors and situations that should be

avoided.”

- John CarverBoards That Make A Difference, 2006

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Governing Functions

• Strategic Direction – setting a direction for the tribe that reflects its members needs

• Resource Development – developing financial resources that support program activities

• Financial Accountability – managing financial resources that ensure honesty and cost-effectiveness

• Leadership Development – developing the human resources that lead the tribe today and in the future

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Management Functions

• Program Planning and Implementation – taking the strategic directions to the next level of detail and putting it into action

• Administration – ensuring the effective management of the details behind the program

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Determining Different Roles

• Governance is the ultimate responsibility of the council/commission, while the responsibility of the staff is management

• Rather than seeing the council’s/commission’s job as a function of management, it is first and fundamentally a responsibility for ownership

• Council/commission should ask, in regards to programs and initiatives, “Why are we doing this?” rather than “how can we do this?”

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Governance Triangle

Three modes of governance based on best practices of organizations and behavioral theory

Type I: Fiduciary Type II: Strategic

Type III: Generative

GOVERNANCE AS

LEADERSHIP

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Type I: Fiduciary Mode

• Fiduciary accountability, integrity, and oversight

“Essential but if that is all a board does, its focus is to prevent trouble rather than

promote success” - Richard Chiat, William Ryan and Barbara Taylor

Governance as leadership: reframing the work of nonprofit boards (2006)

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Type II: Strategic

• Beyond annual strategic planning, is to have continuous strategic thinking

“Until a board learns to use ideas rather than plans to drive strategy, the full range of the board members talents will be

vastly underutilized.”

“Boards are better suited to think together than to plan together, to expand the essence of a great idea, rather than elaborate

the details of a plan”- Richard Chiat, William Ryan and Barbara Taylor

Governance as leadership: reframing the work of nonprofit boards (2006)

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Type III: Generative

• Drivers for continually moving the organization forward. Knowledge of the broader landscape

• REAL WORLD EXAMPLE– Problem - voluntary turnover of staff– Technical solution - increase compensation– Strategic solution - create a great place to work for

professional staff where quality work, not money, is the deciding factor.

– Generative solution - create an environment where employees learn the skills needed to build a career in the tribal industry – whether at your tribe or another.

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Oversight(Fiduciary)

Foresight(Strategic)

Insight(Generative)

Unleashing Your Potential

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Emphasize Modes, Not Tasks, of Governance

Fiduciary Strategic Generative

Council’sCommission's purpose

Stewardship of tangible assets

Strategic partnership with

management

Source of leadership for the

organization

Chief role Steward Strategist Sense Maker

Core work Set mission, oversee operations,

deploy resources,ensure compliance

Scan environment, shape strategy,

create comparative advantage

Find and frame challenges,

reconcile values and choices

Conducive process Standing committees

Task forces, ad hoc work groups

Inclusive conversations

Power base Legal authority Technical expertise Ideas, insights

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Discussion/Questions

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twitter.com/CLAconnect

facebook.com/cliftonlarsonallen

linkedin.com/company/cliftonlarsonallen

John T. FisherPrincipaljohn.fisher@CLAconnect.com425-250-6024

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