FINANCE COMMITTEE

PURPOSE

The Finance Committee is a committee of the Apereo Foundation’s (AF) Board of Directors that oversees the AF’s financial strategy and performance.

MEMBERSHIP

The AF Treasurer shall serve as the Finance Committee Chair. The Treasurer is selected by the Board of Directors. The Finance Committee Secretary is a member of the Finance Committee elected by a majority of the Finance Committee members.  In addition to the Finance Committee Chair (Treasurer), the Finance Committee is composed of two additional members who are AF Board of Directors. Ex officio, non-voting members of the AF Finance Committee include the AF Executive Director and Controller.

If the Finance Committee wishes to change its size, the Finance Committee shall submit a request to the AF Board for approval; the Finance Committee shall maintain an odd number of members if the size is changed.  Finance Committee membership is voluntary and must be from current members of the duly-elected AF Board of Directors.  The membership will be reviewed each year by the Board.  

The Board will use its best efforts to maintain a Financial Expert on the Finance Committee. 

The Board shall consider whether a person has, through education and experience as an accountant, auditor, or from a position involving the performance of similar functions, the following:

• an understanding of generally accepted accounting principles (GAAP) and financial statements.
• the ability to assess the general application of such principles in connection with the accounting for estimates, accruals, and reserves.
• experience preparing, auditing, analyzing, or evaluating financial statements that present a breadth and level of complexity of accounting issues that can reasonably be expected to be raised by the AF’s financial statements.
• an understanding of internal controls and procedures for financial reporting.
• an understanding of Audit Committee functions.
• an understanding of Investment Committee functions.

Finance Committee members serve one-year terms following the election timetable established by the Board or until the new Committee is elected by the Board.

The Finance Committee may hire or accept volunteer services from outside experts or consultants.
The Board may establish an advisory committee, which may include non-directors, to provide accounting, finance, tax, and/or audit advice to the Finance Committee.  Advisory committees have no authority to act for the Board, but may monitor compliance with the Finance Committee Charter, recommend changes, and assist the Finance Committee in selecting and retaining consultants to execute the Finance Policy.

AUTHORITY AND RESPONSIBILITIES

The Finance Committee will:

1. Operate under the Finance Committee Charter.  The Finance Committee shall review the Finance Committee Charter annually; suggested changes shall be recommended to and approved by the Board.
2. Oversee the AF’s financial policies, including risk management, and recommend appropriate revisions to the Board.  The Finance Committee will review the AF’s compliance with such policies annually and report results to the Board.
3. Review the AF’s financial statements on a minimum of a quarterly basis with Management.  Financial statements shall include comparisons to prior month or year and comparisons to the budget where applicable.
4. Review the annual budget and submit the budget to the Board for approval along with recommendations.
5. Manage the Audit Policy.
6. Review the annual tax return(s) including Internal Revenue Service Form 990 prepared by Management.  Review includes discussing mission review, significant assumptions, changes from prior years, and concerns.  The Finance Committee will include a report to the Board regarding tax return review.  The Board will approve the annual tax return(s) in writing.
7. Manage the Investment Policy.
8. Issue regular reports to the Board.
9. Review other appropriate financial information concerning the AF and accomplish additional tasks as charged by the Board’s Executive Committee.

MEETINGS

The Finance Committee will meet at least quarterly; the Finance Committee may schedule additional meetings as often as its Chair or a majority of its members deems necessary or appropriate, either in person, telephonically, or electronically, and at such times, places and manner as its Chair or Co-Chair may determine.

Deliverables, budget, and alternative meeting methods should be included in the decision-making process. The Chair or Co-Chair will develop an agenda in advance of each meeting and communicate meeting details to Finance Committee members in a timely fashion.

As necessary, the Finance Committee will meet in a joint session with other committees regarding items of concern to both committees.

REPORTS

The Finance Committee will produce a written report at the conclusion of each meeting, which will include an attendance record, a copy of the agenda, and a report of meeting discussions,  recommendations, and decisions.

Finance Committee reports will be completed at least one week prior to the next meeting and forwarded to the Finance Committee membership for review.  Finance Committee reports, to the extent not confidential, will be posted on the AF Finance Committee minutes page open only to Board members and staff.

The Finance Committee will issue a quarterly report to the Board, including a summary of financial activity, findings, and recommendations.  The Finance Committee will also provide reports on policies, annual tax return(s), and the budget annually.

EVALUATION

The Executive Committee will conduct periodic performance evaluations to review the performance of the Finance Committee in relation to the requirements of the Finance Committee Charter and such other matters as the Board deems appropriate.

INVESTMENT POLICY

PURPOSE AND SCOPE

The purpose of the Investment Policy is to define the AF’s investment objective(s), to define the responsibilities of the Investment Committee, Management, and Investment Manager(s), and to provide investment guidelines including target asset allocations, permissible investments, diversification, and monitoring requirements.

INVESTMENT OBJECTIVE

The overall investment objective of the AF is to maximize the return on invested assets while minimizing risk and investment expenses.  

All transactions shall be for the sole benefit of the AF, including fiscal sponsorees, and to support the AF’s tax-exempt mission.  The AF’s goal is a prudently-invested, diversified portfolio that reflects short-term and long-term AF cash requirements.

The Board will endeavor to comply with all applicable local, state, and federal laws and regulations concerning investment asset management.  Any investment that is not expressly permitted under this Policy must be formally reviewed and approved by the Board.

DEFINITION OF DUTIES

The Board has ultimate responsibility for the investment and management of the AF’s investment assets.  The Board delegates authority over the AF’s investments to an Investment Committee comprised of all Finance Committee members.

The Investment Committee shall provide direction to AF Management, which shall be responsible for the day-to-day administration and implementation of policies established by the Investment Committee.  

The Investment Manager(s) shall manage investments in accordance with the Investment Committee’s direction and shall communicate with the AF Management.

RESPONSIBILITIES OF THE INVESTMENT COMMITTEE

The Investment Committee’s specific responsibilities include:

1. Establishing reasonable and consistent investment objectives and policy guidelines and allocations, including:
   1. Determining the AF’s risk tolerance and investment horizon
   2. Verify the existence and marketability of the underlying assets
   3. Review the investment portfolio’s rate of return against investment goals to determine whether the targets or investment allocations should be adjusted given changing market conditions, goals, risk tolerance, etc.
   4. Establish guidelines for AF Management regarding when the Investment Committee should approve transactions above a certain threshold.
   5. Provide an annual review of investment activity and plans to the AF Board
2. Select and manage external Investment Manager(s), including:
   1. Prudently and diligently selecting one or more qualified Investment Managers, including investment managers(s), investment consultant(s), and custodian(s).
   2. Regularly evaluating the performance of Investment Manager(s) to assure adherence to policy guidelines and to monitor investment objective progress.
3. Developing and enacting proper control procedures; e.g., replacing Investment Manager(s) due to a fundamental change in the investment management process, investment objectives, or for failure to comply with established guidelines.
4. The Investment Committee will meet at least once per calendar year to review the Investment Manager and Investments; the Investment Committee will provide a report to the Board summarizing activity, findings, and recommendations.

The Investment Committee may hire outside experts as investment consultants or investment managers.

The Investment Committee may establish an advisory committee, which may include non-directors, to provide investment advice to the Investment Committee.  Advisory committees have no authority to act for the Investment Committee, but may monitor compliance with the Investment Policy, recommend changes, and assist the Investment Committee in selecting and retaining Investment Managers to execute the Investment Policy.

RESPONSIBILITIES OF MANAGEMENT

AF Management, including the Executive Director, Controller, and other delegated staff, shall be responsible for the day-to-day administration and implementation of policies established by the Investment Committee.  Specifically, Management shall:

1. Oversee day-to-day investment activities of AF funds subject to policies established by the Investment Committee.  At least two members of AF Management shall be signatories on the Investment Account(s).
2. Contract with any Investment Manager(s) after approval by the Investment Committee.
3. Ensure that the Investment Manager(s) adhere to the terms and conditions of their contracts.
   1. Communicating the AF’s financial needs to the Investment Manager(s) on a timely basis.
4. Establish performance monitoring systems to provide the Investment Committee timely, accurate, and useful information.  
5. Comply with official accounting and auditing guidelines regarding due diligence and ongoing monitoring of investments.  
6. Prepare and issue periodic status reports to the Investment Committee.

RESPONSIBILITIES OF INVESTMENT MANAGERS

Each Investment Manager will invest assets placed in their care in accordance with the AF Investment Policy.  Specific responsibilities include:

1. Each Investment Manager must acknowledge in writing acceptance of responsibility as a fiduciary.
2. Discretionary investment management, including decisions to buy, sell, or hold individual securities, and to alter allocation within the guidelines established by the Investment Committee.
3. Reporting monthly or quarterly investment performance results on a timely basis.
4. Communicating any major changes in the economic outlook, investment strategy, or any other factors that affect implementation of the investment process.
5. Voting proxies, such as annual shareholder meetings or stock reorganizations, on behalf of the AF, if requested by the Investment Committee.
6. Administering the AF’s investments at reasonable cost, balanced with avoiding a compromise of quality.  These costs include, but are not limited to, management and custodial fees, consulting fees, transaction costs and other administrative costs chargeable to the AF.

INVESTMENT GUIDELINES

The AF is a tax-exempt organization as described in section 501(c)(3) of the Internal Revenue Code; the tax-exempt status should be taken into consideration when making investments.

• One or more cash accounts shall be maintained with a zero to very low risk tolerance to keep cash available for short-term including compensation, events within one year or less, grant distributions, tax obligations, fiscal sponsoree support, and other anticipated expenses.
• Transactions shall be executed at reasonable cost, taking into consideration prevailing market conditions and services and research provided by the Investment Manager.

INVESTMENT TYPES

Investments include:

• Cash and cash equivalents
• Debit cards prefunded for AF use
• Credit cards for AF use
• Marketable securities including equities and fixed income securities

DONATED INVESTMENTS

All investments acquired by donation to the AF shall be sold upon receipt and recorded at their net market value as of the date of sale. Donated investments shall be transferred to an AF cash or cash equivalents account on or after the date of sale.

In all instances, donor intent shall be respected when decisions are rendered concerning the investment or expenditure of donor-restricted funds.  If the AF deems that the donor restrictions are impracticable, the AF may reject or return a donated investment.

INVESTMENT QUALITY

Securities shall have investment grade at the time of purchase defined as:

• BBB by Standard & Poors or Baa3 by Moody’s Investor Service for straight bonds and convertibles
• A1 by Standard & Poors or P1 by Moody’s Investor Service for short term securities
• AAA for money market accounts

The following transactions are prohibited: Purchase of non-negotiable securities, cryptocurrency, derivatives, high risk or junk bonds, private placements, precious metals, commodities, short sales, any margin transactions, straddles, warrants, options, life insurance contracts, leverage or letter stock, or real estate.

DIVERSIFICATION

The AF will maintain a reasonable diversification of investment assets between asset classes and investment categories at all times.
Investments in the equity securities of any one company shall not exceed 5% of the portfolio nor shall the total securities position (debt and equity) in any one company exceed 10% of the portfolio.
Reasonable sector allocations and diversification shall be maintained. No more than 25% of the entire portfolio may be invested in the securities of any one sector.
Investments within the investment portfolio should be readily marketable.
The investment portfolio should not be a blind pool; each investment must be available for review.

RESERVE RATIO

The AF shall endeavor to invest 12 months of expected cash requirements. 

ASSET ALLOCATION

The asset allocation policy shall be predicated on historical performance of capital markets adjusted for the perception of the future short- and long-term capital market performance and economic conditions, including inflation and interest rate assumptions. Asset allocations will also take into account liquidity requirements for the AF.

Rebalancing the asset allocation targets shall be reviewed on an annual basis, but may be conducted more frequently if deemed necessary by the Investment Committee.

PERFORMANCE

Performance objectives are to be met on a net of fees basis.  The investment performance of each asset allocation class will be measured on two levels: against inflation objectives for the total AF and against index objectives for individual portfolio components.

Investment performance shall be measured no less than quarterly on a net of fees basis. 

AUDIT POLICY

PURPOSE AND SCOPE

The purpose of the Audit Policy is to define the Finance Committee’s oversight responsibilities for the monitoring of the AF’s accounting, financial reporting, internal control policies and procedures, risk management identification and management, and annual audits.

AUDIT OBJECTIVE

The overall objective of the AF’s Audit Policy is to establish guidelines regarding an annual external audit, including discussion with AF Management of significant issues regarding accounting principles, practices and judgments, and selecting Independent Public Accountant(s) under applicable professional standards.  The Audit Policy also provides a monitoring framework.

The Board, Finance Committee, Audit Committee, and Management will endeavor to comply with all applicable accounting pronouncements.  Any changes to the Audit Policy must be formally reviewed and approved by the Board.

DEFINITION OF DUTIES

The Board has ultimate responsibility for the oversight of the AF’s accounting, finance, internal control, and audit activities.  The Board delegates authority over the AF’s Audit Policy to the Audit Committee comprised of all Finance Committee members.

The Audit Committee shall provide direction to AF Management, which shall be responsible for the day-to-day administration and implementation of policies established by the Audit Committee.  

The Independent Public Accountant(s) shall manage investments in accordance with the Investment Committee’s direction and shall communicate with the AF Management.

RESPONSIBILITIES OF THE AUDIT COMMITTEE

The Audit Committee’s specific responsibilities include:

1. Operate under the Finance Committee Charter’s Audit Policy.
2. Review the AF’s Audit Policy annually and recommend new policies and/or revisions to current policies to the Board.  Review Management’s compliance with such policies and report results to the Board.
3. Recommend appointment, retention, and termination of the Independent Public Accountant(s) to the Board. Oversee the Independent Public Accountant(s) including the terms of engagement and the resolution of any disagreements between Management and the Independent Public Accountant(s) regarding financial reporting, any restrictions on the scope of the auditor’s activities, or access to requested information. The Independent Public Accountant(s) shall report directly to the Audit Committee.
4. Review and discuss with the Independent Public Accountant(s) any material risks and weaknesses in internal controls identified by the auditor and the adequacy of the AF’s accounting and financial reporting processes. Solicit recommendations from the Independent Public Accountant(s) for the improvement of the AF’s internal control procedures.
5. Review the AF’s external audit reports, and legal and regulatory compliance and monitor compliance with all required tax and information return filings with federal, state and local government agencies. Review should include discussion with Management and the independent auditor of significant issues regarding accounting principles, practices and judgments, including certain matters required to be communicated to the Committee in accordance with AICPA professional standards.
6. Establish and monitor procedures for the receipt, retention and treatment of complaints received regarding accounting, internal controls or audit matters; and the confidential anonymous submission by Board, staff, officers, and volunteers of concerns regarding questionable activity related to financial internal controls, audit, illegal activity, accounting issues, and related matters.
7. Report activities, findings, and recommendations to the Board annually.  
8. Institute and oversee any special investigatory work as needed, and assure responses to investigations.  Accomplish additional tasks as charged by the Finance Chair or the Board.

The Audit Committee may hire outside experts as consultants.

The Audit Committee may establish an advisory committee, which may include non-directors, to provide advice to the Audit Committee.  Advisory committees have no authority to act for the Board, but may monitor compliance with the Audit Policy, recommend Independent Public Accountant(s) to execute the Audit Policy.

RESPONSIBILITIES OF MANAGEMENT

AF Management shall be responsible for the day-to-day administration and implementation of policies established by the Audit Committee.  Specifically, Management shall:

Maintain a system of internal controls and document processes and procedures for accounting, finance, tax, and audit matters.
Prepare financial statements, processes and procedures, and supporting documents in response to requests from the Independent Public Accountant(s) and Audit Committee.
Provide regular updates to the Audit Committee regarding audit progress. Ensure that the Investment Manager(s) adhere to the terms and conditions of their contracts.

RESPONSIBILITIES OF INDEPENDENT PUBLIC ACCOUNTANT(S)

Each Independent Public Accountant must maintain independence delineating all its relationships and professional services with the AF in writing.

Specific responsibilities include:

• Issuing an audit report opinion, audited financial statements, and associated documents.
• Communicating material risks and weaknesses in internal controls and recommendations to improve the internal control structure to the Audit Committee.

REMUNERATION POLICY

PURPOSE AND SCOPE

Guide the annual Executive Director and other appropriate Foundation employees' assessment and evaluation process.

DEFINITION OF DUTIES

Assess comparability of salaries and other regular payments to individuals conducting work on behalf of the Foundation under Section 4958 of the Internal Revenue Code,
Based on the annual evaluation and the assessment of salaries, recommend to the Board appropriate salary increases and merit and other bonuses.

RESPONSIBILITIES OF THE REMUNERATION COMMITTEE

This Committee must be composed of persons with no financial or personal interest in any agreement or arrangement with the Foundation.