Governance

Q. How do Rotary International and The Rotary Foundation manage financial risks?

A. All organizations face financial risks. Some forms of risk are internal to the organization (such as spending decisions, revenue growth, and so forth), and some are external (economic conditions). Nevertheless, Rotary International and The Rotary Foundation rely on effective prevention to minimize financial risks as follows:

1. The governance and organization structure address financial challenges.

• Both RI and the Foundation have strong financial governance. For RI, this includes the Board of Directors  represented by the RI treasurer, the standing RI Finance Committee, the standing Audit Committee, and the Operations Review Committee. For the Foundation, the governance structure includes the Board's Finance Committee, the Standing Investment Advisory Committee, and the Stewardship Committee.
• The RI Council on Legislation , the RI Board of Directors, and the Foundation's Board of Trustees  have established strong, effective policies for mitigating financial risk. These policies are documented in the bylaws and the codes of policies for both RI and the Foundation.
• Additionally, RI has liaison representatives on the Investment Advisory Committee; the Foundation has a liaison trustee on both the RI Finance Committee and the RI Audit Committee; and there is a Joint RI/Foundation Cost Allocation Review Committee to ensure collaboration on matters affecting both organizations.

2. The Secretariat has strategies, financial processes, and internal controls for mitigating risk. These include annual budgets, financial reserve requirements, and periodic review and oversight by Rotary committees.

3. The Secretariat has a strong financial services organization that provides quality financial services and controls to all of Rotary's constituents.

4. RI and the Foundation are audited annually by independent certified public accountants to ensure the fair presentation of financial results and compliance with professional and government rules and requirements.

5. All elements of the organization are responsive to financial challenges that may arise. A good example of this is the organization's contingency planning that began in the very early stages of the current economic downturn. This planning enables the Board to respond quickly and effectively when financial problems arise.

Q.  Who oversees the Foundation's investments and financial matters?

A.  The Rotary Foundation's financial governance structure consists of the Board of Trustees, TRF Finance Committee, the Investment Advisory Committee, the Stewardship Committee, and the staff.

The Trustees are ultimately responsible for monitoring Rotary's investments and making policy or manager changes. They have responsibility for formulating investment policy; developing investment objectives; retaining, monitoring, and terminating investment managers; and allocating assets among the managers. The investment managers appointed to execute the policy will invest the fund in accordance with the fund's investment guidelines and the managers' judgments concerning relative investment values.

The TRF Finance Committee consists of at least four trustees who make recommendations to the Trustees on all matters related to finance, including the annual budget of The Rotary Foundation and the funds necessary to support the Foundation programs. In addition, it serves as the audit committee of the Foundation, annually receiving the report of the external auditors and receiving copies of all internal audit reports on matters that would have a material effect on the Foundation's resources or operations.

The Investment Advisory Committee advises the Trustees on all investment matters. The committee has nine members — three trustees, including the chair and vice chair of the Finance Committee and another trustee with investment or financial experience, and six Rotarians with investment expertise. This committee typically meets twice each year to review and discuss investment matters. Because The Rotary Foundation uses the same investment managers as Rotary International in the U.S. equity, non-U.S. equity, and fixed income partnerships, decisions to hire or terminate managers in these partnerships are made jointly with Rotary International.

The Stewardship Committee consists of four trustees whose responsibilities include (but are not limited to) making recommendations to the Trustees on all matters related to stewardship, compliance, oversight, and fiduciary responsibility and the scheduling of regional/zonal stewardship seminars.

Staff is responsible for implementing the policies and investment-related decisions taken by the Trustees.