Accounting 340-01 System Flowcharting Project Background: The Neil Peart Foundation is a private charitable organization classified as a 501(c)(3).

Accounting 340-01

System Flowcharting Project

Background:

The Neil Peart Foundation is a private charitable organization classified as a 501(c)(3). The foundation was created in 1956 when billionaire insurance mogul, Neil Peart, passed away. His will required the formation of the foundation and a substantial portion of his net wealth created the foundation’s endowment fund. The foundation’s purpose is to make grants to qualified community non-profit organizations so they may carry out programs in four main areas: public health, education, arts and culture, and environmental. The foundation is funded mainly by investment earnings from the endowment fund; however they also receive donations from businesses and individuals. 

The foundation has a Board of Trustees (much like a board of directors in a corporation), an Executive Director (much like a CEO in a corporation), along with management and staff in four departments: Finance/Accounting, Grants, Information Systems, and Fund Raising/Public Relations.

In November of each year, the Board of Trustees reviews financial information of the endowment fund. They look at investment portfolio allocations, investment earnings/losses, fund raising activities, expenses, and assess the overall health of the fund. Based on this information, they budget how much they will grant out in the next year for all four of the main areas.  Each program will have its own budget. They also set criteria for who is an eligible grantee (organization that receives the grant). The budget and the eligibility criteria are given to the executive director in late November. After the Trustees give all pertinent information to the Executive Director, a meeting is held and this information is disseminated to management and staff of all four departments. In December, applications are taken, reviewed, selections are made, and then grants are awarded and funded by January of the next year.

Grant Making Process:

Start of process: The IS department loads pertinent criteria such as eligibility requirements and maximum grant amount on their secure web server. All applications are taken in on the foundations webpage in an online form. If the application does not meet all criteria, the application is rejected and the applicant is sent an automated email that states the reason for rejection. If the application meets all of the criteria, the application is accepted; the web server forwards the data to the Grants department and is loaded into a database within their department.

After the application deadline, the grants database will contain all accepted applications for grants in all four of the foundations main program areas. Next, all applications are printed and given to a grant selection committee, a group of Grants department staff that fulfill the initial selection process. The committee holds a daylong meeting to discuss each application. By the end of the day, all applications have been ranked (the foundation does not have enough money to fund all eligible applicants, so they rank the organizations that will provide the greatest impact from highest to lowest).  These ranked applications are forwarded to a technical advisory group. 

The technical advisory group is also Grants department staff that assesses each proposal made by the applicants, and the group makes a determination as to the impact each prospective grantee would have in their respective communities. Next, the technical advisory group selects only the top 30% of applications. For the applicants that do not make it, the technical advisory group drafts a hardcopy letter explaining that times are tough and they didn’t make the cut. The letters are mailed via US Postal to the rejected applicants. The information from applications that made it are placed in an Excel file that contains the organization name, key contact person(s), contact information, the grant program area, summary of what they plan to do with the money, their overall ranking, and the proposed grant amount. This file is sent via email to the board of trustees for their last board meeting of the year which is held in December. 

The Board of Trustees reviews the information in the Excel file and holds a vote for each one. Usually, the Board votes for all of the proposals; however sometimes a majority vote against funding will occur. If this happens, the Board of Trustees drafts a letter of explanation and sends it to the applicant and the applicant is deleted from the Excel file. After the board meeting, the Excel file is sent to the Executive Director, Finance/Accounting and the Grant departments via email.

The Grant department loads the grantee list into their database. The database automatically drafts a grant contract and an award letter for each grantee. The contract and letter are sent to each grantee via Fed Ex for signing. End of process.

Task:

The Board of Trustees has asked the Executive Director to perform a comprehensive risk assessment for the foundation. The Executive Director is overwhelmed and does not know where to start. He figures that the granting process is one of the most material business processes within the organization, so he wants to gain a better understanding of this process so he can incorporate it into his risk assessment. He contacts you, the foundation’s internal auditor, to draft a flowchart of the grant process described above.

·       Key items to remember when you design the flowchart:

o  Set the boundary: put a box around the process described above

o  Determine the critical swim lanes (column headings)

o  Look at the swim lanes and jot down actions performed under each

o  Create the menu of flowchart symbols you are going to most likely use

o  Prepare the rough draft by hand

o  On your own, using software (Excel, Word, PowerPoint, Vision, or get a trail version of Smartdraw http://www.smartdraw.com/downloads/ )finalize your flowchart in electronic form. (The trail version of Smart Draw is good for only 10 days).