MONEY, MONEY, MONEY PRESENTED BY: MADALINE (MADDI) NOLEEN, MSW JOHN J TROY, CPA, MM

Transcription

1 MONEY, MONEY, MONEY PRESENTED BY: MADALINE (MADDI) NOLEEN, MSW JOHN J TROY, CPA, MM

2 MONEY, MONEY, MONEY TABLE OF CONTENTS STATEMENT OF FINANCIAL POSITION 1 STATEMENT OF FINANCIAL POSITION NOTES 2 STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS 3 STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS EXPENSES 4 STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS NOTES 5-6 STATEMENT OF CASH FLOWS 7 STATEMENT OF FUNCTIONAL EXPENSES 8 STATEMENT OF FUNCTIONAL EXPENSES NOTES 9 UNIT COST CALCULATIONS 10 INDIRECT COST ALLOCATION METHODS 11 2

3 COA STATEMENT OF FINANCIAL POSITION AS OF DECEMBER 31, 2015 ASSETS Cash 90, ,000 Accounts Receivable 550, ,000 Prepaid Expenses 40,000 22,000 Security Deposit 25,000 15,000 Investments 450, ,000 Fixed Assets Furniture, Fixtures and Equipment 260, ,000 Vehicles Accumulated Depreciation (160,000) (137,000) Total Fixed Assets 100,750 74,750 TOTAL ASSETS 1,255,750 1,181,750 LIABILITIES Accounts Payable 55,250 72,000 Loans Payable 70,000 70,000 Security Deposit Payable 6,250 6,250 Accrued Wages 115, ,000 Accrued Payroll Taxes 4,000 3,500 Deferred Revenue 150, ,000 TOTAL LIABILITIES 400, ,750 NET ASSETS Prior Year End Balance 780, ,000 Current Year Surplus (Deficit) 75, ,000 TOTAL NET ASSETS 855, ,000 TOTAL LIABILITIES AND NET ASSETS 1,255,750 1,181,750 1

4 STATEMENT OF FINANCIAL POSITION NOTES These notes are to highlight some areas to question when they are on your statements. Also some things to look for that could affect monthly statement results. Accounts Receivable Is there a significant change in value from the prior period? Is it due to a change in revenue volume or a change in payment methods from the funders? Are open balances reconciled and followed up with funders? Investments Are the valuations current or only done periodically? Are nonliquid donations sold as soon as possible? Fixed Assets Is depreciation calculated monthly or periodically? Loans Payable Is this a loan or a line of credit? What is the collateral for the amount due? What is the interest rate? If it is a line of credit, is it being used as a real line or as a loan? Deferred Revenue Is this a timing difference or a true overpayment? Is the funder aware of the overpayment amount at year end? What are the plans for repayment? Where are the excess funds held? SUMMARY While the Balance Sheet is not as likely to be monitored as the Income Statement, there are many elements that allow management to identify trends and issues before they get out of control and grow into significant issues. 2

5 COA STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS FISCAL YEAR ENDED DECEMBER 31, 2015 ACTUAL BUDGET VARIANCE PRIOR 6/30/2015 TO DATE (UNDER) YEAR REVENUE GOVERNMENT FUNDING Dept OF Human Services 1,600,000 1,800,000 (200,000) 1,500,000 Youth Counseling Contract 100, , ,000 Dept of Mental Health 400, ,000 25, ,000 HUD 300, ,000 (50,000) 350,000 Medicaid Billing 300, ,000 60, ,000 State Grants 500, , ,000 TOTAL GOVERNMENT FUNDING 3,200,000 3,365,000 (165,000) 3,000,000 CONTRIBUTIONS AND DONATIONS Corporate Contributions 800, ,000 50, ,000 Individual Donantions 30,000 45,000 (15,000) 30,000 United Way 45,000 50,000 (5,000) 60,000 Other 25,000 10,000 15,000 12,000 TOTAL CONTRIBUTIONS/DONATIONS 900, ,000 45, ,000 SPECIAL EVENTS/FUND RAISERS Annual Gala 350, ,000 (50,000) 400,000 Walk/Run 40,000 50,000 (10,000) 50,000 Golf Tournament 60,000 75,000 (15,000) 75,000 TOTAL SPEC EV/FUND RAISERS 450, ,000 (75,000) 525,000 OTHER INCOME Rental Income 30,000 30, ,000 Miscellaneous Income 10, ,000 0 TOTAL OTHER INCOME 40,000 30,000 10,000 24,000 TOTAL REVENUE 4,590,000 4,775,000 (185,000) 4,251,000 TOTAL EXPENSES 4,514,750 4,548,000 33,750 4,126,000 CURR YR SURPLUS (DEFICIT) 75, ,000 (151,250) 125,000 3

6 COA EXPENSES December 31, ACTUAL BUDGET VARIANCE PRIOR 6/30/2015 TO DATE (UNDER) YEAR Personnel Costs 3,100,000 3,000,000 (100,000) 2,567,000 Professional Services 68, ,000 31, ,000 Rent 300, , ,000 Occupancy 300, ,000 60, ,000 Supplies 75,000 60,000 (15,000) 60,000 Travel 60,000 50,000 (10,000) 48,000 Depreciation 23,000 25,000 2,000 21,000 Legal and Accounting/Audit 30,000 36,000 6,000 30,000 Insurance 50,000 60,000 10,000 48,000 Communications 40,000 36,000 (4,000) 36,000 Fundraising 300, ,000 50, ,000 Equipment Rental 24,000 30,000 6,000 30,000 Conferences and Meetings 50,000 48,000 (2,000) 42,000 Dues and Membership Fees 25,000 18,000 (7,000) 18,000 Credit Card Processing Fees 18,000 15,000 (3,000) 12,000 Postage and Printing 15,000 12,000 (3,000) 12,000 Interest 12,000 12, ,000 Miscellaneous Expense 24,000 36,000 12,000 30,000 Total Expenses 4,514,250 4,548,000 33,750 4,126,000 4

7 STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS NOTES As stated in the previous set of comments, these notes are to highlight some areas to question when they are on your statements. Also some things to look for that could affect monthly statement results. Some points are obvious but worth remembering. Government Funding Compare actual to budget and last year for current month and year to date. What do the variances tell you? What are reasons for the variances? Staff shortfalls, reduction in eligible clients or services? Who is following up with funders to increase service units? What niche services are funders willing to pay for and that we could add with minor changes? Who is our government liaison? Special Events/Fundraisers Why is every event lower than the previous year? Are we tapping the same individuals for every event? Do we need to create new events that will attract different groups of donors? Do we gather contact information for everyone who attends each event? Do we coordinate this list with the donor file for the annual appeal? Other Income Is any of this non business related income that may result in special tax return disclosure? Personnel/Professional Services Should be approximately 75% of total costs, depending on your mix of services. Why did Government Funding increase 6.67% but these costs increased 17.91%? Grants vs Fee For Service mix change, salary increases, additional staff? Occupancy Why the big drop from budget and prior year? Weather changes, timing of general repairs? Current Year Surplus There are different goals for For Profit and Not For Profit organizations. 5

8 For Profit entities want to make a significantly higher profit to show a return for the shareholders. There is no fundraising and therefore no outside entities are a consideration when calculating the bottom line. Not For Profit entities have a much more difficult line to walk. The goal is to show a result that is a moderate surplus and that is not a deficit. Corporations and foundations are often concerned about very high surpluses that would indicate that there is not a great need for their grant and that there are other entities that could use the donations to a greater extent. A deficit, particularly multiple year deficits, raise the issue of an ongoing concern and will their contribution merely defer a closure. SUMMARY It is very important in the current environment to have a CFO that not only processes the paperwork precisely, but also knows what it means. The CFO needs to be able to explain variances in the financial results. The CFO needs to visit the program sites on a regular basis to be able to relate existing conditions to financial results. The CFO needs to be highly creative and be able to see the entire picture. While the CFO is rarely a clinical person, he/she needs to be able to know the workings of each program and be able to relate the facts to all outside entities, especially financial institutions, government agencies, foundations, etc.- 6

9 COA STATEMENT OF CASH FLOWS AS OF DECEMBER 31, 2015 INCREASE (DECREASE) IN CASH: CASH FLOWS FROM OPERTATING ACTIVITIES Change in Net Assets 75,250 Adjustments to reconcile change in net assets to net cash provided (used) by operating activities: Depreciation 23,000 Change in accounts receivable (125,000) Change in prepaid assets (18,000) Change in security deposits (10,000) Change in accounts payable (16,750) Change in accrued liabilities (34,500) Change in deferred revenue 50,000 Net Cash Provided (used) by Operating Activities: (56,000) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of fixed assets (49,000) Sale of investments 50,000 Net Cash Provided by (Used by) Financing Activities: 1,000 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from loans 0 Payments on loans 0 Net Cash Provided (used) by Financing Activities: 0 NET INCREASE (DECREASE)) IN CASH (55,000) CASH - Beginning of Year 145,000 CASH - End of Year 90,000 7

10 COA FUNCTIONAL EXPENSES AS OF DECEMBER 31, 2015 Total Management Programs and General Development Total Payroll Costs 2,550, , ,000 3,100,000 Professional Services 54,000 14,250 68,250 Rent 210,000 60,000 30, ,000 Occupancy 210,000 60,000 30, ,000 Supplies 51,000 18,000 6,000 75,000 Travel 42,000 12,000 6,000 60,000 Depreciation 14,000 6,000 3,000 23,000 Legal and Accounting/Audit 18,000 9,000 3,000 30,000 Insurance 36,000 12,000 2,000 50,000 Communications 27,000 9,000 4,000 40,000 Fundraising 300, ,000 Equipment Rental 15,600 6,000 2,400 24,000 Conferences and Meetings 36,000 12,000 2,000 50,000 Dues and Membership Fees 12,000 9,000 4,000 25,000 Credit Card Processing Fees 9,000 6,000 3,000 18,000 Postage and Printing 6,000 4,500 4,500 15,000 Interest 6,000 6,000 12,000 Miscellaneous Expense 12,000 9,000 3,000 24,000 TOTAL 3,308, , ,900 4,514, % 14.46% 12.25% % 8

11 STATEMENT OF FUNCTIONAL EXPENSES NOTES The Statement of Functional Expenses is an important schedule that serves many purposes. For Funders This report allows them to quickly determine how much of every dollar spent goes to providing services. In this example, the amount is 73.29%. This is high and needs to be lower to attract new funders. The rate should ideally be under 20% and closer to 15%. For Management This report gives management the opportunity to review the indirect cost allocations and determine if they can be adjusted for the current conditions. Are the billing staff able to be allocated by program? Can the building services staff be allocated by building and by the programs within specific building? Merely allocating costs properly can result in better presentations and improve the ability to obtain foundation grants and corporate donations Unfortunately, this report is often overlooked by management and can result in issues and concerns in the future. SUMMARY Do not allow this report to be prepared by the auditors. Have your finance staff learn how to complete the report and how to interpret the results. Again, this is a report that can have a large impact on an organization. 9

12 UNIT COST CALCULATIONS In simplest terms unit cost is the result of dividing total program costs by the number of service units. Unit costs can be difficult to calculate depending on the number of components in the computation. There are fixed, variable and semi variable costs. Each category will react differently to the change in the number of service units. Based on the contract fee for service rates, you are able to estimate the provided number of units of service necessary to cover your program costs. The problems may be that the number of clients necessary to provide the service may not be available or your capacity to deliver the services may not be sufficient. Program staff shortages and no show rates can also be significant factors. Other issues include the overhead rate (20% vs. 5%) that the contracting funder will allow and what direct costs are allowed (psychiatry vs. security). Here is another example of where creativity in allocating indirect costs is critical. The importance of knowing your unit cost and resulting breakeven point is the ability to determine the bottom line effect of increasing or decreasing productivity. It is also important to remember that as volume increases, not all costs will rise proportionately. Direct, or variable costs will (program personnel). There will be a smaller increase, if any, for indirect costs (finance, human resources). Fixed costs will always remain the same. 10

13 INDIRECT COST ALLOCATION METHODS Indirect costs are expenses that are not directly associated with single organization entities. These may include occupancy costs, supplies, interest, accounting costs, etc. There are several methods that can be used to allocate these costs across the program and administrative functions. The most common methods include direct salary dollars, headcount and square footage. There are others. It is acceptable to use different methods for different expense lines. Creativity is important to achieve the maximum benefit for the organization. The key is having the independent auditing firm agree with your practices. The allocation method can be changed each year, but will require a restatement of the prior year audit report. It is only recommended to do so when the allocation changes are significant. Entities that have contracts with federal agencies will often have an approved indirect cost rate. Some states abide by that rate while others may have their own. The desirable results of the Statement of Functional Expenses is dependent upon the ability to allocate all costs to the maximum advantage of the organization. 11

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