PART I. Financial Statement Basics

Transcription

1

2 PART I Financial Statement Basics

3 Financial Statement Basics Accounting Processes Importance of Budgeting Statement of Operations Statement of Financial Position

4 Accounting Processes Why are accounting processes so important? GAAP Generally Accepted Accounting Principles FASB Financial Accounting Standards Board Council Fiscal Management Procedures for Stewardship Checks and balances for the Council

5 Accounting Processes Vendor Purchases /Payables Revenue /Receivables Payroll / Benefits Inventory Month End Reconciliations

6 Accounts Payable Accounts Payable is the amount due and payable to all suppliers and vendors. Incoming invoices are matched to Purchase Orders, amounts and account numbers are verified, and sent to staff for approval. Invoices are entered into PeopleSoft (PS) with vendor specific payment criteria.

7 Accounts Payable Invoices entered in PS will be represented as an expense on the Statement of Operations Other Options Can Apply Weekly Accounts Payable Aging Report Selection of invoices to be paid by payment terms and cash available Checks are issued weekly

8 Accounts Receivable Receivables are payments for pledges, special events, income from product sales and investments recorded but not yet received. (Other items may also apply) Example: Pledges and popcorn / wreath sales are recorded as income on the Statement of Operations. If the pledge or sale is not accompanied by a check, credit card or cash it becomes a receivable.

9 Accounts Receivable Invoices are mailed and phone calls are made to open receivables If, after many attempted efforts to collect, the receivable is written off as a Bad Debt. Bad Debt is an additional expense to the Council

10 Payroll & Benefits Payroll is processed twice a month with appropriate deductions made for Federal, State, Social Security and Medicare taxes. National handles our benefits and informs our third party payroll provider, IOI, of the amounts due by staff and Council. Wages, taxes and benefits are represented as Employee Compensation, an expense, on the Statement of Operations.

11 Month End Each month accounting performs a month end close process. Final vendor and customer invoices are entered Receipts for both offices are reviewed and posted Bank statements and other accounts are reconciled Inventory adjustments are made Expenses are accrued as needed *****

12 Then What????? Where does all of this information go and how do we know if it s accurate??? All of the monthly work resides in the Statement of Operations and Statement of Financial Position Robin reviews the Monthly Statements and poses questions to Marianne and Suzy for clarification. When all questions are answered we close the month and issue Financial Statements.

13 BUDGETING The budget is the Council s roadmap for the financial year! Allows the Council to ensure adequate revenue sources to support Program and operating expenses A monthly snapshot of performance Importance of timely Expense Reports & Vendor Invoices Promotes accountability by all departments and staff Allows the Council to proactively react to shortages in revenue sources before it s too late

14 Three Fund Accounting The BSA and other not for profit organizations use what is called Three Fund Accounting Each fund is a separate accounting entity with its share of Assets, Liabilities and Net Assets Fund #1 - Operating Account Fund #2 - Capital Account Fund #3 - Endowment Account

15 Statement of Operations The Statement of Operations represents current month and year to date financial activity of the Council and also compares to our Budget Roadmap! It is a calculation of our bottom line or Income less Expenses In the for-profit world this report is call an Income Statement Question What should be higher income or expenses?

16 Support & Revenue Support is contributions made from outside the organization Revenue is income generated by the Council through program delivery or council operations.

17 Support - Direct Direct Support Contributions coming directly to the Council Friends of Scouting Project Sales Special Events (Net) Legacies & Bequests Foundations & Trusts Other Direct Support

18 Support - Indirect Indirect Support Contributions coming through another entity acting as an agent, such as United Way Other Indirect Support Other unrestricted contributions received in the calendar / budget year that do not fit in another category

19 Revenue Revenue is an income source that is generated by the council through program delivery or council operations. Sales of Supplies- Council Scout Shop (Net) Products Sales (Net) Investment Income Camping Revenue Activity Revenue Other Revenue

20 Expenses Employee Compensation The total of salaries through employee-related expenses. Salaries Employee Benefits (Employer share) Payroll Taxes (Employer share of FICA and Worker s Compensation) Employee Related Expenses (example moving expenses)

21 Other Expenses Total of other expenses, not included in Employee Compensation. Professional Fees (Audit, legal and data processing fees) Supplies (Office, program, fundraising and camp supplies, including camp food) Telephone Postage and Shipping Occupancy (Rent, janitorial, repairs, utilities and property maintenance

22 Other Expenses Rent & Equipment Maintenance (Equipment rental expenses and service contacts on office and computer equipment) Printing & Publications (Subscriptions to periodicals and outside printing) Travel (Leased and owned auto expense, meals, travel, rentals and fares) Conferences & Meetings Specific Assistance to Individuals (Camperships and other assistance) Recognition Awards Interest Expense (Line of Credit)

23 Other Expenses Other Expenses (Advertising, bank fees, uncollectible debt, miscellaneous expenses and expenses associated with District activities. Charter & National Service Fees (Fees for Annual Council Charter Renewal and annual fee paid for regional and national programs and services) The National Service Fee is based on a percentage of salaries

24 Total Expenses The total of employee compensation and all other expenses.

25 Net Income / Expense Increase or decrease of income over expenses There may be months during the year where expense exceeds revenue BUT..year end revenue less expense should always be a positive number!!!!

26

27 PART II Statement of Financial Position The second part of the story!

28 What is the Statement of Financial Position? A snapshot in time reporting the financial condition of the council as of a certain date. It is the aggregate, or total, history from its inception to a particular date in time. The statement lists the assets and liabilities of the council, by each of the three funds. In the for profit world the Statement of Financial Position is called the Balance Sheet Fund #1 Operating Fund Fund #2 Capital Fund Fund #3 Endowment Fund

29 Three Fund Accounting The BSA and other not for profit organizations use what is called Thee Fund Accounting The assets and liabilities for the three funds are recorded separately in the Statement of Financial Position, just as income and expense are recorded separately in the Statement of Operations.

30 What are Assets? Current Assets Council assets considered to be accessible during the fiscal year Cash Short Term Investments (Money Markets, CD s) Accounts / Pledges Receivable Inventories Deferred activity, camp and special event expense Prepaid Expenses

31 What are Assets? Non-Current Assets are assets that have an extended life. Land, Buildings and Equipment Long-Term Investments Total Assets include Current and Noncurrent Assets

32 What are Liabilities? Current Liabilities - Short-term claims on the council resulting from annual operations. Accounts Payable Accrued Expense Payroll Taxes Withheld Custodial Accounts Notes Payable

33 More Current Liabilities Deferred Income Deferred Activity, Camp & Special Events Income Includes participation fees for activities, camps or special events that will be held at some future time. The fees are considered a liability, because it is refundable, until the activity is held. Once the activity, camp or event is held the balances are moved to the appropriate lines on the Statement of Operations

34 Non-Current Liabilities Non-current liabilities are liabilities that extend beyond the current fiscal year Long term notes payable or mortgages, such as a capital lease, which extend beyond the current fiscal year. These items are most often accounted for in Fund #2

35 Total Net Assets Total of unrestricted, temporarily restricted and permanently restricted net assets. Represents the total net worth or value of the Council Total Assets <Less Total Liabilities > Equals Total Net Assets

36 Statement of Financial Position Rule The Statement of Financial Position is also referred to as the Balance Sheet because of this calculation Total Assets MUST EQUAL Total Liabilities & Net Assets These two lines must equal each other or the statement is out of balance!

37 Part III Financial Projections

38 Quarterly Projections Each quarter we project where we think we will be at year end for both revenue and expenses During the last quarter of the year we project at the end of each month We compare our projections to the budget, our annual financial roadmap, to see where we are exceeding expectations and where we are falling short.

39 Quarterly Projections The projections give us time to react if there is an area of concern. If revenue is short, we find ways to cut expenses or raise additional funds We share these projections with the Key 4 and the Executive Committee

40 Quarterly Projections & Annual Budget Quarterly projections provide the path to the coming year s budget If we are projecting a shortfall in revenue we need to look at why, look at different opportunities to raise money and adjust our budget for the next year accordingly. We look at three years of history and must be realistic in our goals for the coming year

41 Quarterly Projections & Annual Budget We carefully look at expenses and compare to budget to anticipate changes for the upcoming year. Some expenses, such as insurance and rent, we have a firm number for the next year. Other expenses, such as utilities, maintenance and travel we have to anticipate the change.

42 Projections & Annual Budget In summary we use our quarterly projections for two purposes. The first is to allow us to be proactive in the current year if we find we are falling short in revenue or our expenses are over budget. The second is to guide us through the coming year budget. If we have fallen short in revenue, without a specific explanation, we must revisit our goals for the following year to be realistic. This also holds true for expenses.

43 Resources BSA Local Council Accounting Manual BSA Interpreting Council Financial Statements Accounting Coach