Kevin P. Martin & Associates, P.C. ASSURANCE | TAX | RISK MANAGEMENT | IT ADVISORY V Kevin P. Martin & Associates, P.C. ASSURANCE | TAX | RISK MANAGEMENT

Kevin P. Martin & Associates, P.C.

ASSURANCE | TAX | RISK MANAGEMENT | IT ADVISORY

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Time for the Treasurer’s Report: What are Financials Trying to Tell Me?

Presented by Karen Kent, CPANovember 19, 2014



IT’S ALL ABOUT THE STORY

FINANCIAL STATEMENTS TELL A STORY.

YOU'RE NOT JUST SHOWING A COLLECTION OF PROFIT-AND-LOSSSTATEMENTS AND BALANCE SHEETS — YOU'RE TELLING A STORY THAT YOUR AUDIENCE NEEDS TO HEAR.

IT MAY BE A STORY OF A NEW AGENCY WITH PROMISING GROWTH OR, MAYBE IT'S A STORY ABOUT MEETING MISSION CHALLENGES.

WHATEVER YOUR STORY IS, STICK TO IT: TOSS EVERYTHING THAT DOESN'T HELP YOU TELL IT IN A COMPELLING, EASY-TO-FOLLOW WAY.

TELL YOUR STORY WITH SIMPLICITY AND CLARITY.



TRUSTEE’S FIDUCIARY ROLE

AS A TRUSTEE, YOUR FUNDAMENTAL ROLE IS TO OVERSEE THE IMPLEMENTATION OF THE NOT-FOR-PROFIT ORGANIZATION’S MISSION.

THIS INCLUDES EXERCISING YOUR FIDUCIARY DUTY TO ENSURE THAT THE ORGANIZATION’S FINANCIAL RESOURCES ARE EFFECTIVELY MANAGED AND SUFFICIENT TO ASSURE THE ORGANIZATION’S LONG-TERM FINANCIAL VIABILITY.



• REALISTIC BUDGET

• ADEQUATE ACCOUNTING SYSTEMS AND CONTROLS

• PERIODIC CONFIRMATION FROM MANAGEMENT THAT ALL REQUIRED FILINGS ARE UP-TO-DATE

• REVIEW FINANCIAL INFORMATION IN ADVANCE

• ASK THE TOUGH QUESTIONS

• CONSIDER VALUE OF HAVING INDEPENDENT AUDITS AND MAINTAINING STANDARD AUDIT/FINANCE COMMITTEE(S)

• FUNDRAISING IS DONE HONESTLY

• RESTRICTED GIFTS ARE ACCOUNTED FOR SEPARATELY AND FUNDS ARE BEING USED IN ACCORDANCE WITH THE TERMS OF THE

RESTRICTION

HOW DOES A TRUSTEE FULFILL THEIR FIDICUARY OBLIGATIONS?



FINANCIAL STATEMENTS

STATEMENT OF FINANCIAL POSITION

STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS

STATEMENT OF CASH FLOWS

TOGETHER THESE TELL YOUR STORY!!!

STATEMENT OF FINANCIAL POSITION

STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS

STATEMENT OF CASH FLOWS

TOGETHER THESE TELL YOUR STORY!!!

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FINANCIAL STATEMENTS SEEK TO ANSWER THREE QUESTIONS

How did the Organization generate its

current financial resources?

How did the Organization generate its

current financial resources?

Where did those financial

resources go?

Where did those financial

resources go?

What amount of financial resources is presently held?

What amount of financial resources is presently held?

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Report assets, liabilities, and

net assets.

Report assets, liabilities, and

net assets.

The Statement of Financial Position tells us:

What an Organization owns and the claims

against its assets.

The Statement of Financial Position tells us:

What an Organization owns and the claims

against its assets.

At a particular point in time.

At a particular point in time.

STATEMENT OF FINANCIAL POSITION (BALANCE SHEET)

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Measures revenue, expenses and profit over a

period of time

Measures revenue, expenses and profit over a

period of time

Change in net assets is reported instead of net

income.

Change in net assets is reported instead of net

income.

Focuses on revenues and costs

associated with revenue

Focuses on revenues and costs

associated with revenue

STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS (INCOME STATEMENT)

Change in net assets = difference between

revenues and expenses

Change in net assets = difference between

revenues and expenses

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STATEMENT OF CASH FLOWS18-9

Cash is King!!!

An agency’s cash receipts and cash payments that presents information on its sources and uses of cash

Reported by: Operating, Investing and Financing Activities



REVIEW YOUR STATEMENTSSAMPLE QUESTIONS TO CONSIDER

1. How much cash is on hand, and how many days’ worth of expenses would it cover?

2. Are we generating cash from operations or using it?

3. How quickly is accounts receivable being collected? Is it all collectible?

4. How much debt do you have?5. How much income, and what kinds of expenses?6. Are non-cash items recorded (i.e. donated goods

and services)



REVIEW YOUR STATEMENTSSAMPLE RATIOS TO CONSIDER

Current ratio: measures an organization’s ability to pay its current liabilities with its current assets. The higher the ratio the better. A good benchmark is 1.2 or higher = every $1.00 of current debt you have a $1.20 in current assets to cover.

Debt to Equity: a measure of an organization’s leverage. Debt to equity ratio compares an organization’s total debt to total equity. The lower the better. A good benchmark is less than 1. It is important to realize that if the ratio is greater than 1, the majority of assets are financed through debt. If it is smaller than 1, assets are primarily financed through equity.




Administrative (overhead) percentage: Percent of total expenses spent on administration. Lower is better.

Program Percentage: Percent of total expenses spent on program. Higher is better.

Fundraising Percentage: Percent of total expenses spent on fundraising. Lower is better.

Understand your cost allocation plan – how costs are allocated is critical to these ratios.




Fundraising Efficiency: Amount spent to raise a dollar. Lower is better.



WHAT ARE THE NUMBERS SAYING?

1. If your organization is growing or contracting?

2. What kinds of things have you accomplished?

3. How many people were impacted by these accomplishments?

4. Did you get a lot done with limited funds?



WHAT IS YOUR STORY?

After review of the numbers and thinking over these type of questions, you can begin to compare:• What people will see looking at your

numbers, versus what you want them to see.



WHAT IS YOUR STORY?

• In doing this type of analysis keep in mind who is seeing your financial statements:

Internal ( board/management)External (funders/supporters)

• This will determine the type of story you’re trying to communicate and why.

• Once you’ve considered the numbers, audience and what you want your numbers to say, you’ll be able to start framing your finances into a story.



WAYS TO TELL YOUR STORY

• CEO/President talking points

• Dashboard

• Elevator Speech – everyone on the same page with the same story



Contact Information


ASSURANCE | TAX | RISK MANAGEMENT | IT ADVISORY19

THANK YOU

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Kevin P. Martin & Associates, P.C. ASSURANCE | TAX | RISK MANAGEMENT | IT ADVISORY V Kevin P. Martin & Associates, P.C. ASSURANCE | TAX | RISK MANAGEMENT