ACCOUNTING MEASUREMENTS AND METRICS FOR NPO S

Transcription

1 ACCOUNTING MEASUREMENTS AND METRICS FOR NPO S Presented by: David J Piscorik, CPA Stancil & Company, CPAs 4909 Windy Hill Drive Raleigh, NC / dpiscorik@stancilcpa.com

2 ABOUT THE SPEAKER Director of Auditing Services Stancil & Company, CPA s. Concentrate my efforts in serving not-for-profit organizations and closely-held family-owned businesses, overseeing 60+ attestation engagements a year. Active member in the Association Executives of North Carolina (AENC). Serve on the board of directors of my local home owners association and as the finance chair at my church. Graduate of the University of Scranton Member of both the AICPA and the NCACPA. Three young children, Aniela, Thomas & Samuel Stancil & Company Certified Public Accountants.

3 WHY USE ACCOUNTING MEASUREMENTS AND METRICS? Accounting measurements and metrics use financial data to summarize organizational performance Accounting measurements and metrics are tools used to improve financial decision making Provides a quick snapshot approach that is easy to understand. Helpful in identifying trends within the Organization Stancil & Company Certified Public Accountants.

4 TYPICAL ACCOUNTING MEASUREMENTS & METRICS Overview of Operational Results Budget comparisons for key income and expense line items Departmental reports. Cash on Hand / Investment balances, Etc. But financial analysis applicable to for profit entities is only partially useful for nonprofits. Profit margins mostly do not apply. Revenue streams are different. Equity is much different. A/R and inventory turns not typical for a NPO Stancil & Company Certified Public Accountants.

5 ACCOUNTING MEASUREMENTS & METRICS -ADEQUACY OF RESOURCES Operating Cash (Annual Expenses - Depreciation / 365) This reflects how many days the organization could operate if no additional funds were received before investment accounts would need to be liquidated. Typically organizations like to maintain days of operating cash. Cash + Investments (Annual Expenses - Depreciation / 365) This reflects how many days the organization could operate if no additional funds were received before requiring borrowed funds Stancil & Company Certified Public Accountants.

6 ACCOUNTING MEASUREMENTS & METRICS -INVESTMENTS Portfolio s Rate of Return ((S&P500 Rate of Return x (equity portfolio invest. %)) + (Bond Rate of Return x (bond portfolio invest.%))) Measures your portfolio return to the broader overall market s performance. A portfolio with an annual return of 10% can actually be underperforming if the broader markets annual return was 15% ( equates to a 50% underperformance +fees incurred) SPY, AGG or BND are good general comparisons to benchmark against. "I'm not so much concerned about the return on my money as the return of my money" - Will Roger Stancil & Company Certified Public Accountants.

7 ACCOUNTING MEASUREMENTS & METRICS WORKING CAPITAL Current Assets Current Liabilities Measures the financial health of an organization. A Ratio > 1 represents an organization that is able to meet its short term obligations and satisfy both maturing short-term debt and upcoming operational expenses Stancil & Company Certified Public Accountants.

8 ACCOUNTING MEASUREMENTS & METRICS DEBT RATIO Total Debt Total Assets Measures the proportion of assets provided by debt. High values indicate future liquidity problems. High values indicate a organization to be highly leveraged and could have reduced capacity for future borrowings. Typically, a ratio < 0.5 is generally considered a healthy ratio Stancil & Company Certified Public Accountants.

9 ACCOUNTING MEASUREMENTS & METRICS NET ASSETS Temporarily Restricted Net Assets (Cash + Investments + Pledge Receivables) This metric is useful in determining if an organization may be spending restricted cash for purposes other than those which the funder intended, or using monies designated for future purposes to meet current expenses. This ratio should be less than 1. (lower is better) Stancil & Company Certified Public Accountants.

10 ACCOUNTING MEASUREMENTS & METRICS INCOME RELIANCE RATIO Income Source Total Income Analyze the proportion each of the income streams contributes to the organization s total income. 1. Contributions 2. Grants 3. Program service revenues 4. Dividends and interest 5. Membership Dues 6. Special events Determine trends in line with strategic funding goals Stancil & Company Certified Public Accountants.

11 ACCOUNTING MEASUREMENTS & METRICS PROGRAM SERVICE EXP. Program Service Expense Total Expense Measures the relationship of funds spent for program purposes compared to all expenses. The Wise Giving Alliance of the Better Business Bureau has provided a standard of sixty five percent, with a minimum ratio of fifty percent. Note, this ratio can vary widely from industry to industry and by the size of the organization Stancil & Company Certified Public Accountants.

12 ACCOUNTING MEASUREMENTS & METRICS FUNDRAISING EFFICIENCY Fundraising Expense Contributions Calculates an organizations fundraising efficiency by determining how much it spends to generate $1 in charitable contributions For example, Charity Z, with fundraising expenses of $500,000 and total contributions of $3.4 million, has a fundraising efficiency of $0.147, which means it spends 14.7 to raise $1. Charity Navigator s study notes an average fundraising efficiency of $ Stancil & Company Certified Public Accountants.

13 ACCOUNTING MEASUREMENTS & METRICS SAVINGS INDICATOR Income - Expense Total Expense The savings indicator measures the ability of an organization to add to its net assets. The savings indicator is a simple way to determine if an organization is adding to or using up its net asset base Stancil & Company Certified Public Accountants.

14 ACCOUNTING MEASUREMENTS & METRICS OTHER RATIOS CEO wages as percent of total expenses Cost Per Unit of Service (program cost / unit of service) Benefit Cost Ratio (payroll taxes, insurance / Wages) A/R DSO Ratio (AR / (annual sales / 365) Effective Tax Rate (income tax expense / pretax income) Stancil & Company Certified Public Accountants.

15 BOARD MEETING PRESENTATIONS Financial presentations at board meetings should provide a quick snapshot of the current financial status of the organization. Detailed financial statements and comparisons to budget line item details should be discussed through the finance committee. The Board should receive a summary report of key issues related to the finances of the organization. A Financial Dashboard can provide your accounting measurements and metrics in a efficient and effective manner Stancil & Company Certified Public Accountants.

16 Pledges 79,003 96,210 (17,207) -18% 69,062 9,941 14% 79, ,266 (217,263) -73% 215,147 (136,144) -63% Non Pledge 17,618 13,469 4,149 31% 19,344 (1,726) -9% 17,618 41,477 (23,859) -58% 70,601 (52,983) -75% Loose Plate 1,445 2,886 (1,441) -50% 2,074 (629) -30% 1,445 8,888 (7,443) -84% 6,203 (4,758) -77% Interest Income (399) -44% 838 (337) -40% 501 2,700 (2,199) -81% 4,452 (3,951) -89% Endowment % - - 0% - 5,500 (5,500) -100% 6,172 (6,172) -100% Rent Income Preschool Income 47,097 42,224 4,873 12% 42,696 4,401 10% 47, ,783 (100,686) -68% 163,935 (116,838) -71% Pledge Shortfall - (3,250) 3, % - - 0% - (9,750) 9, % - - 0% Other Income - 1,500 (1,500) -100% - - 0% - 4,500 (4,500) -100% 4,000 (4,000) -100% Total Income 145, ,940 (8,276) -5% 134,014 11,650 9% 145, ,363 (351,699) -71% 470,510 (324,846) -69% Annual Conference Expense % - - 0% % % Payroll Fees % 377 (60) -16% 437 1,754 1,317 75% 1,707 1,270 74% Bank Fees % - (2) #DIV/0! % % Office Supplies % % 345 1,350 1,005 74% 1,423 1,078 76% Misc Admin Exp./Telephone S Postage % 139 (134) -96% % % Total Administrative 1,057 1, % 1, % 1,057 4,566 3,509 77% 4,789 3,732 78% Spiritual Freedom Family Ministries % % 160 1,275 1,115 87% 1, % Flowers % - - 0% % - - 0% Congregational Care Supplies % 70 (39) -56% 109 1,875 1,766 94% 1,561 1,452 93% Children's Choir % % % % Bell Choir % - (31) #DIV/0! % - (31) #DIV/0! Guest Musicians % % 155 1,313 1,158 88% 1, % Instrument Maintenance (35) -14% 220 (65) -30% % % Misc Music Supplies (214) -100% 409 (18) -4% % % Total Music 1,609 1,327 (282) -21% 1,373 (236) -17% 1,609 3,977 2,368 60% 3,773 2,164 57% Sunday School Supplies\Retr 1,391 1,063 (328) -31% 1,080 (311) -29% 1,391 3,188 1,797 56% 3,359 1,968 59% Worship Supplies % 399 (217) -54% 616 2,625 2,009 77% 2,595 1,979 76% Youth Ministries 551 1, % 114 (437) -383% 551 2,000 1,449 72% 162 (389) -240% Misc. Nurture Total Nurture 4,436 5, % 3,404 (1,032) -30% 4,436 15,014 10,578 70% 12,540 8,104 65% Advertising Cleaning Service Preschool Director Salary 7,684 7,682 (2) 0% 7,460 (224) -3% 7,684 24,325 16,641 68% 23,613 15,929 67% Preschool Teachers Salary 19,840 14,451 (5,389) -37% 18,997 (843) -4% 19, ,159 81,319 80% 102,430 82,590 81% Preschool Supplies 1, (247) -28% 925 (197) -21% 1,122 2,625 1,503 57% 2,847 1,725 61% Preschool Scholarships Preschool Misc % - - 0% - 1,125 1, % - - 0% Preschool Other (159) #DIV/0! % (159) #DIV/0! 1,388 1,229 89% Preschool Equipment (177) -71% 57 (370) -649% % 388 (39) -10% Total Preschool 29,232 23,633 (5,599) -24% 28,351 (881) -3% 29, , ,752 78% 130, ,434 78% WSW Conference 12,289 12, % 11,618 (671) -6% 12,289 36,869 24,580 67% 36,294 24,005 66% Episcopal Fund % 411 (5) -1% 416 1, % 1, % Interdenominational Fund (1) -3% % % % African University (1) -2% % % % District Work Fund (842) #DIV/0! % (842) #DIV/0! 2,621 1,779 68% Black College Fund % % % % Raleigh Board of Missions Past Service Liabilities 2,527 2,527-0% 2, % 2,527 7,581 5,054 67% 7,674 5,147 67% Missions (82) -33% - (332) #DIV/0! % - (332) #DIV/0! Greatminds % % - 1,628 1, % 1,300 1, % Total Outreach 16,699 16,317 (382) -2% 15,921 (778) -5% 16,699 48,954 32,255 66% 50,012 33,313 67% Administrative Assistant 12,790 18,804 6,014 32% 18,255 5,465 30% 12,790 59,545 46,755 79% 57,766 44,976 78% Employer FICA 1,669 1, % 2, % 1,669 5,396 3,727 69% 5,677 4,008 71% Program Director 6,014 10,385 4,371 42% - (6,014) #DIV/0! 6,014 32,885 26,871 82% - (6,014) #DIV/0! Staff Recognition % - - 0% % - - 0% Salary - Choir Director Salary - Minister 16,155 20,308 4,153 20% 15,286 (869) -6% 16,155 64,310 48,155 75% 49,131 32,976 67% Continuing Education % - - 0% % - - 0% Travel - Minister % % - 2,777 2, % % Insurance - Minister - Health 3,225 2,875 (350) -12% 3,129 (96) -3% 3,225 8,625 5,400 63% 8,608 5,383 63% M Pension 2,931 3, % 2,823 (108) -4% 2,931 10,108 7,177 71% 8,469 5,538 65% C Pension % 782 (24) -3% 806 2,916 2,110 72% 2,046 1,240 61% Nursery Attendants 2,881 3, % 3, % 2,881 11,271 8,390 74% 10,298 7,417 72% Staff Pension (37) -6% 659 (17) -3% 676 2,023 1,347 67% 1,926 1,250 65% Total PPR 47,147 63,760 16,613 26% 46,250 (897) -2% 47, , ,631 77% 144,033 96,886 67% Cleaning Service 5,207 4,750 (457) -10% 2,745 (2,462) -90% 5,207 14,250 9,043 63% 8,175 2,968 36% Copier Contract 1,623 1, % 1, % 1,623 5,250 3,627 69% 5,280 3,657 69% Education Building Furnishing % (149) (198) 133% % - (49) #DIV/0! Education Building Maintenan 1, (838) -223% 472 (741) -157% 1,213 1,125 (88) -8% 2,684 1,471 55% HVAC Maintenance (500) -400% - (625) #DIV/0! (250) -67% 385 (240) -62% Insurance 2,354 2,063 (291) -14% 2,318 (36) -2% 2,354 6,188 3,834 62% 6,297 3,943 63% Kitchen Equipment Maintenan % % % % Kitchen Furnishings Maintenance Service % 399 (441) -111% 840 2,850 2,010 71% 2,106 1,266 60% Misc Building & Janitorial Sup % % 603 2,250 1,647 73% 2,688 2,085 78% Mortgage Payments - Ed Bld 16,500 13,500 (3,000) -22% 16, % 16,500 40,500 24,000 59% 43,345 26,845 62% Parsonage Furnishings % % % % Parsonage Maintenance 95 - (95) #DIV/0! 85 (10) -12% 95 - (95) #DIV/0! % Parsonage Mortgage % - - 0% % 3,765 3, % Sanctuary Building Furnishing % - - 0% A) % - - 0% Sanctuary Building Maintenan % 160 (325) -203% A) 485 2,999 2,514 84% 3,023 2,538 84% Utilities 9,979 7,500 (2,479) -33% 7,721 (2,258) -29% 9,979 22,500 12,521 56% 24,012 14,033 58% Van Repairs and Maintenance 75 1,075 1,000 93% 53 (22) -42% 75 3,225 3,150 98% 4,095 4,020 98% Grounds Keeping 1,702 1,425 (277) -19% 1, % 1,702 4,275 2,573 60% 3,842 2,140 56% Parking Lot Maintenance Information Technology % % % % Budgeted Projects - 1,375 1, % - - 0% - 4,125 4, % - - 0% Non Budgeted Projects Mattie Bell Bldg Maintenance 1, (1,664) -666% - (1,914) #DIV/0! 1, (1,164) -155% 175 (1,739) -994% Total Trustees 43,407 37,487 (5,920) -16% 35,484 (7,923) -22% 43, ,462 69,055 61% 112,263 68,856 61% Communications % - - 0% % % Total Witness % - - 0% % % Fundraiser Expense Total Expenses 141, ,980 6,002 4% 130,491 (11,487) -9% 141, , ,939 72% 454, ,475 69% Net Income 3,686 5,960 (2,274) -38% 3, % 3,686 (14,553) 18, % 16,057 (12,371) -77% BOARD MEETING PRESENTATIONS Creating a color coded financial dashboard provides a quick and easy reference to relevant information MONTH September Actual Budget B/(W) % Prior Year B/(W) % Year to Date YEAR TO DATE Budget Prior YTD B/(W) % Year YTD B/(W) % INCOME: Expenses: Administrative: Nurture: Music: Chancel Choir Music (331) -88% 301 (405) -135% 706 1, % 1, % Preschool: Outreach: Pastor-Parish Relations: Trustees: Witness: Stancil & Company Certified Public Accountants.

17 BOARD MEETING PRESENTATIONS Blue = Exceeds Targets, Green = Meeting Targets, Yellow = Slightly Below Targets, Red = Below Targets Adequacy of Resources Days Cash adequacy of resources Target WorkingCaptial working capital Temporary Restricted Net Assets Ratio Net Assets Target 83% 83% 82% Program Service Expense Program % Target % % 81% % % 79% % Stancil & Company Certified Public Accountants.

18 CONTACT INFORMATION David J Piscorik, CPA Stancil & Company, CPAs 4909 Windy Hill Drive Raleigh, NC / dpiscorik@stancilcpa.com Stancil & Company Certified Public Accountants.

19 PRESENTATION DISCLAIMER Presentations are intended for educational purposes only and do not replace independent professional judgment. Stancil & Company does not endorse or approve, and assumes no responsibility for, the content, accuracy or completeness of the information presented Stancil & Company Certified Public Accountants.