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1/18/2017
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CMAA World Conference 2017: Orlando
EXECUTIVE ACCOUNTING
Robert J. Crifasi, CCM, CCE, CPA
General Manager
New Orleans Country Club
Philip Newman, CPA, CIA, CGMA
Partner
RSM US LLP
Talking points for today
■ Understanding the numbers
■ Controlling the numbers
■ Presenting the numbers
Why your job depends on this…
Financial acumen and the ability to convey it!
Lots of people want the title and all that comes with it, but from our vantage point, you've also got to be
able to live up to the expectations that come with it. As an example, many of the most successful
managers we see give the financial report in their board and finance committee meetings.
If you want to be in charge, you need to be able to convey how the business is functioning and share
the trends that it is following. The problem for many is that they've been conditioned to think that that
isn't their role, or they simply don't have the confidence to do so!
So if this is an area that you know you need to develop further, getting more knowledgeable and
articulate is increasingly more important in order to establish and maintain credibility in the
boardroom.
Kurt D. Kuebler
Partner, Kopplin & Kuebler, LLC
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BIGGEST CHALLENGES – YOU ARE NOT ALONE
Biggest Challenges
■ Inadequate systems and processes to properly manage
performance progress and criteria.
■ Distracted and unfocused management attention for
exceeding performance objectives.
■ Overloaded information summaries. Track the key influencers
on primary metrics.
■ Missing basic financial blocking and tackling.
Biggest Challenges
■ De-humanizing your board/committee members.
■ Lack of accountability for department heads.
■ Insufficient financial acumen at senior management levels.
■ Placing personal financial incentives ahead of the best interests of
the Club‟s interests.
■ Too much “trust”…not enough “verify”.
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Biggest Challenges
■ Managing to metrics and not with metrics.
■ Going cheap with your internal financial advisors and decreasing
your knowledge growth.
■ Talking with your auditor once a year versus regular check-ins and
updates.
■ Use incremental budgeting, which compounds past mistakes,
instead of zero-based budgeting.
UNDERSTANDING THE NUMBERS
General financial presentation issues
Presentation CIRA Private Club
1) Financial Position Balance Sheet Statement of Financial Position
2) Results of Operations Statement of Revenues and Statement of Activities
Expenses
3) Cash Flows Statement of Cash Flows Statement of Cash Flows
4) Fund Balances or Statement of Changes in Fund Generally included in the above
Members' Equity Balances or Members' Equity Statement of Activities
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Balance sheet components
■ Assets (other than cash!) generally represent:
– Revenue already recorded but cash not received yet
– Expenses that have yet to be recorded
■ Liabilities generally represent:
– Expenses already recorded but yet to be paid
– Revenue not yet recorded but cash already received
■ Equity = Assets – Liabilities and generally represents:
– Net worth of the club on a historical cost basis
Reading your balance sheet
Assets 2013 2012 CASH IMPACT
Current Assets
Cash 5,000,000 $ 4,500,000 $ 500,000
Less board designated funds 4,000,000 2,500,000 1,500,000
1,000,000 2,000,000 (1,000,000)
Accounts receivable 200,000 145,000 55,000
Inventories 160,000 130,000 30,000
Prepaid expenses 150,000 201,000 (51,000)
Total current assets 1,510,000 2,476,000 (966,000)
Board Designated Funds 4,000,000 2,500,000 1,500,000
Property and Equipment, less accumulated depreciation (Notes 2 and 4) 19,000,000 19,500,000 (500,000)
Deposits 20,000 20,000 - 24,530,000 $ 24,496,000 $ 34,000
Liabilities and Net Assets
Current Liabilities
Accounts payable 169,000 559,000 390,000
Accrued expenses 421,000 421,000 -
Unearned revenue 1,400,000 1,370,000 (30,000)
Total current liabilities 1,990,000 2,350,000 360,000 -
Deferred Compensation (Note 9) 140,000 130,000 (10,000) -
Mortgage 400,000 416,000 16,000
Total liabilities 2,530,000 2,896,000 366,000 -
Commitment and Contingency (Notes 2 and 5) - -
Unrestricted Net Assets (Notes 7 and 8) 22,000,000 21,600,000 (400,000) 24,530,000 $ 24,496,000 $ (34,000)
See Notes to Financial Statements.
Questions you need to ask…First…
■ Where is the trial balance?
■ Why did cash go down?
■ Are the bank accounts reconciled?
■ Why did A/R go up?
■ Why did inventory go up?
■ What‟s in prepaid expenses?
■ What‟s our working capital position?
■ What is our capitalization policy?
■ Did we capitalize interest?
■ What new accounting standards will impact us?
■ Do we have all (or not enough!) accruals and
payables recorded?
■ Where is the liability for the deferred compensation agreements we have?
■ Are we on target to meet our loan covenants?
■ What‟s buried in our byelaws:
– Check signers?
– Bonding requirements
– Contract signers
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CONTROLLING THE NUMBERS
Budgeting Questions You Should Ask…and Answer
■ What are the key goals and
objectives?
■ What do we know about our
business?
■ Is the business plan budget fully
integrated within our business
plan?
■ How do we use benchmarking?
■ Do we have the history to stress-test
our budget?
■ Do the linkages make sense?
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Budget Assumption Components
Benchmarks
1. Source multiple
trustworthy
benchmark data-
points.
2. Develop your own
captive set of
benchmarks.
Budget Drivers
1. Dues revenue
trends and
elasticity.
2. Full-time
equivalent labor
impacts and
changes.
Historic Results
1. The past is
prologue.
2. Build a data
library for your
club.
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How do you validate variances?
Do you know?
■ When?
■ How?
■ How much?
■ Repercussions?
Reasons or Excuses
■ Changes in conditions?
■ Quality of Management
■ Lousy Budgeting
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Reading your balance sheet
“Read the footnotes… that’s where
accountants hide stuff…”
Nathan Lane – The Good Wife
“ ”
It is Bobby Crifasi‟s favorite “F” word and one he never tires of using.
PHILIP NEWMAN, CO-PRESENTER
FRAUD!
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How BIG is the problem?
Question ■ What is the total dollar percentage (of
revenue) that organizations lose to fraud annually according to the Association of Certified Fraud Examiners‟ 2016 Report to the Nations?
A. 1.0% B. 2.0%
C. 5.0% D. 7.0%
Answer ■ Answer: C. 5%.
■ This amount may actually be understated as many organizations are reluctant to report losses attributable to fraud…..WHY???
At a $10 million club…..that‟s $500,000
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Fraud prevention
training: Know why it can happen
1. Opportunity
2. Non-shareable financial
pressure
3. Rationalization
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“ ”
Are you budgeting to fight fraud or accept it?
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How to Approve an Invoice
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Examining Your Fraud Conscience
Q. How many people have intentionally gone
faster than the speed limit?
Q. How many people think taking $1,000 is as
bad as embezzling $1 million?
Q. How many people think pocketing $100
(from petty cash) is as bad as taking $1,000?
Q. How many people think pocketing $100 of
time is as bad as taking $1,000?
1 – No fraud (You consider yourself
(peers) incapable of fraud.)
10 – Clearly fraud (e.g. $1 million
embezzlement)
Even something that is not „technically‟
fraud, could be unethical, or at a
minimum potentially against club policy.
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PRESENTING THE NUMBERS
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Information You Need To Receive… And Communicate…Timely
■ Board Report
■ Budget & Finance Report
■ Cash Forecast Summary
■ Weekly Cash Report
■ Food & Beverage Results
■ Key Metrics
Not all treasurers are the same…
How soon do you have your auditors meet the new
treasurer/committee?
Managing expectations
■ Doesn't it start with "getting the right treasurer" - their financial knowledge/background?
■ Size of the finance committee.
■ Term limitations.
■ Too many CPA's spoil the broth?
■ Job and committee descriptions?
■ Who presents the numbers?
■ Audit committee role?
■ Importance of financial orientation.
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Financial orientations
“People who are in financial capacities at
nonprofit organizations have to understand
that we budget for the mission. We don’t
change the mission to suit the budget.”
-- Stanley Corman, former CFO, YWCA
How not to report…
How to report…
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How to report…
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How to report…
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How to report…
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How to report…
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Reporting expecations: ratios
Question Ratio Type
Are financial resources sufficient to support the mission of
the club? Liquidity
What financial resources are available to support the mission
of the club? Solvency
How are the existing financial resources being used to
support the mission of the club? Activity
Are financial resources being applied efficiently and
effectively to support the mission of the club? Profitability
Sample ratios
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Reporting expections: Common Treasurer questions
1. How do we compare to other clubs?
2. Do we have too much debt?
3. Can we fund depreciation?
4. How can we fund capital improvements?
5. How can we drive revenue?
6. What do we do about our resigned member “liability”?
7. How are our internal controls?
8. What are we doing to prevent fraud?
9. How do you rate our financial staff?
10. Why can‟t we make money in F&B?
TOP TAKEAWAYS
Top Ten Takeaways
1. Revise/develop financial orientation for MY board/committee members
2. Train MY staff to review an invoice
3. Understand MY credit card/purchase card exposure
4. Review MY trial balance/balance sheet with controller
5. Talk to MY staff about fraud
6. Ensure MY budget properly reflects the business plan
7. Dust off my copy of the USFRC
8. Read the footnotes to MY audited financial statements
9. Take a refresher accounting class
10.Make Bobby Crifasi buy you a drink if he says his favorite “F” Word…
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Philip Newman, CPA, CIA, CGMA
www.rsmus.com
DISCUSSION Q&A
Robert J. Crifasi, CCM, CCE, CPA
www.neworleanscountryclub.com
