Report from the Board: Annual Audit
Sharon Matuszek and Donna Cookson Martin
LLLI Board of Directors
From: LEAVEN, Vol. 38 No. 6, December 2002 - January 2003, p. 122.
At the end of each fiscal year, the LLLI Board of Directors orders an independent audit of the financial operations directed from the LLLI office in Schaumburg, Illinois, USA. Thomas Havey, LLP Certified Public Accountants, completed the audit for the fiscal year ending March 31, 2002. Their report was presented to the LLLI Board of Directors at the October 2002 meeting.
Because of the publicity regarding audits in 2002 or perhaps because of LLLI’s current financial situation, you may be wondering about and trying to understand the audit process. What is the role of the Audit Committee? How is the auditing firm selected? What did the 2001-2002 audit tell us?
The Audit Committee is a standing committee, mandated by the LLLI Bylaws to report to the LLLI Board of Directors. The majority of the committee members must be members of the LLLI Board of Directors. This year the committee, co-chaired by Sharon Matuszek and Donna Cookson Martin, also includes Board member Sharon Vines, LLLI Founder, Mary Ann Kerwin, and former EUS Division Finance Administrator, Linda Parry.
According to the LLLI Policies and Standing Rules, the Audit Committee of the Board of Directors has two main functions:
To present the auditor’s report to the Board and respond to questions regarding its contents and the auditing procedures used so that all the functions of the organization may be effectively and efficiently carried out in conformity with established policies and procedures of LLLI; and
To present to the Board of Directors at the session prior to the Annual Board session the Committee’s recommendations of independent public accountants to be employed to prepare the audit the following year.
Put simply, the audit Committee recommends a competent and trustworthy auditor, reviews the auditor’s findings and shares these findings with the Board.
The Board, on the recommendation of the Audit Committee, has used the services of Thomas Havey, LLP, for several years. The firm, which has offices in several major US cities, was chosen because it has a solid reputation and is respected for its work with nonprofit organizations. The accountants have an understanding and appreciation of our history as an organization and a wide experience of the issues facing not-for-profit organizations. Thomas Havey, LLP, offers reasonable and competitive rates and their employees work well with our office staff. Barry Omahen, Senior Partner at Thomas Havey, has worked on the LLLI audit for many years. He helped LLLI obtain an exemption from paying property taxes of approximately $45,000 a year and helped us receive a refund of the taxes that had been previously paid by LLLI.
To determine the financial status of LLLI, two auditors from Thomas Havey, LLP, conducted an on-site inspection at the LLLI office in Schaumburg. They checked the accuracy of the physical inventory and examined the financial records and the procedures and policies used by the office staff. After this three-week process, reports and management letters were prepared and distributed to the Finance Director and the Audit Committee.
The report stated in part:
In our opinion, the financial statements present fairly, in all material respects, the financial position of La Leche League International, Inc. as of March 31, 2002 and 2001; and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
LLLI experienced a deficit of $426,418 in 2001-2002. Our total revenue in 2001-2002 was $4,355,916 and our expenses $4,782,334. The costs we incurred in operating the LLLI office and providing the services exceeded the amount of money received from memberships, donations, and sales, etc. This is not the first time we have incurred a deficit. We avoided a deficit in 2000-2001 only because of a refund of $265,257 in real estate taxes that had been paid in previous years.
Several factors have contributed to the deficit. One is the weakening United States economy. The largest proportion of LLLI income is derived from US sources. LLLI has seen a decrease in the number of memberships, the volume of sales, and the amount of philanthropic giving. La Leche League depends on donations as a way of meeting our operating expenses. Sales of materials from the LLLI Catalogue were down in 2001-2002. The value of merchandise held for resale at the time of the audit in 2002 was $440,609 compared to $317,669 in 2001. Although inventory is an asset, the amount shows us that we did not meet anticipated sales during the 2001-2002 fiscal year. At the close of the fiscal year, LLLI owed vendors $380,000. Those who make purchases from LLLI owed $361,000. About half of the money owed to LLLI comes from within LLL (Groups, Areas, Affiliates), and the remaining from book distributors, hospitals, and other larger customers outside of LLL.
Executive Director Anne Gaskell, Finance Director Mike Giuntoli, Operations Director Tamara Harris, and the Board of Directors Finance Committee are working to develop ways to improve this situation. They are examining the work done in the office and continue to implement ideas for generating revenue and for improving efficiency. Input and suggestions from Leaders are always welcome.
Sharon Bell-Wilson, Funding Director, is working toward developing new funding sources for our mission. She is striving to improve relations with our current donors and develop relationships with new ones.
Areas, Groups, and Leaders can help to ensure that LLLI has the financial resources needed to carry out our mission all over the world. We can sell more memberships and seek support from those who contact us for mother-to-mother support. We can purchase publications and other materials from LLLI and work to make sure that we pay our account balances quickly. We can remember La Leche League when making charitable donations and ask others to do the same. We can look for fundraising opportunities, we can participate in the World Walk for Breastfeeding, and we can attend the LLLI Conference.
We encourage all to become engaged in promoting the financial health of La Leche League. If you have questions about the Auditor’s Report or the work of the Audit Committee, please write to: Sharon Matuszek, 241 Scannell Road, Chatham, New York 12037 USA, matuszek at taconic.net (email); or Donna Cookson Martin, Box 236 Sedgewick, Alberta, Canada T0B 4C0, cookson at telus planet.net (email).