nonprofit finance and reporting: what every board member should know molly lovelock...
Post on 15-Dec-2015
224 Views
Preview:
TRANSCRIPT
Nonprofit Finance and Reporting: What every board member should know
Molly Lovelock
lovelock3@gmail.com
815-520-0811
Introductions…
Your organization(s) Your name, role in organization How much do you like financial statements?
– Love them and/or work with them all the time in your job
– Never look at them if you can avoid it– In between and/or….
Board finance responsibilities
Annual budget Review financial
statements Audit IRS form 990 Setting financial
policies, including internal controls
Opening bank accounts
Determine who signs checks
Borrowing Approve capital
projects Compensation ED
Board protections
Your nonprofit is incorporated Directors and Officers insurance Delegation and oversight
The Annual Budget Key strategic document for the year ahead
The Board approves the budget each year Understand the revenue & expense items Compare proposed budget with previous
year’s budget and actual results Ask questions Board may approve a revised budget mid-
year, if needed (but not necessary)
Financial Reports
Board oversight Community oversight Funder requirements (grants, government
contracts, restricted donations) Legal requirements (e.g. IRS form 990) Management tool for operations
All those numbers every month…
Last monthBudget for
month Variance YTD BUDGET VarianceBudget this
year Last year percentINCOMEGrant XYE 118,208 172,875 (54,667) 4,240.72 8,500.00 (4,259) 75.50 5,600.00 76%Grant ABC 61,587 200,375 (138,788) 13,892.39 12,150.00 1,742 1,685.23 12,750.00 109%Special memorial X z 298,205 280,000 18,205 21,925.00 21,925.00 - 1,825.00 21,925.00 100%Government 3 37,275 18,000 19,275 47,919.73 61,000.00 (13,080) 0.00 52,788.00 91%Memorial Revenue 67,115 86,300 (19,185) 0.00 0.00 - 0.00 0.00 0%Fees from people 770 72,625 (71,855) 1,505.66 375.00 1,131 69.78 1,800.00 84%Feess fromother people 1,427 2,500 (1,073) 234,688.00 205,875.00 28,813 47,057.37 234,688.00 100%Donations 331.83 106,312.04 (105,980) 0.00 3,981.96 (3,982) 0.00 0.00 0%Special events 6,174.62 42,000.00 (35,825) 97,783.57 106,312.04 (8,528) 7,522.56 106,310.00 92%Conference 1,806.16 1,200.00 606 37,370.65 42,000.00 (4,629) 1,623.03 42,000.00 89%Programs 400.00 23.97 376 106.40 1,200.00 (1,094) 106.40 500.00 21%Misc. 53.00 55.36 (2) 245.75 246 245.75 4,000.00 6%Total income 593,352.33 982,266.37 (388,914.04) 0.00 463,319.00 (3,641.13) 60,210.62 459,677.87 0%EXPENSESOffice Occupancy Expenses 34,052 37,500 (3,448) 311,965.00 311,965.00 330,059.00 30,720.00 305,146.53 102%Other Office Expense 14,252 22,500 (8,248) 65,367.00 65,367.00 69,896.00 10,411.29 68,221.35 96%Employee Expense 214,422 330,915 (116,493) 5,000.00 5,000.00 5,000.00 4,514.00 4,514.00 111%Professional Services 22,727 46,250 (23,523) 11,350.00 11,350.00 11,680.00 4,500.00 7,280.00 156%Travel & Related 14,555 36,275 (21,720) 5,600.00 5,600.00 6,000.00 532.95 5,899.25 95%Conference 4,587 31,250 (26,663) 5,300.00 5,300.00 5,500.00 1,070.54 3,121.96 170%Meetings & Conferences 11,723 21,125 (9,402) 6,500.00 6,500.00 6,500.00 462.00 5,437.27 120%Program Expense 23,800 104,602 (80,802) 5,000.00 5,000.00 5,000.00 653.68 4,490.55 111%Professional Services 22,727 46,250 (23,523) 11,350.00 11,350.00 11,680.00 4,500.00 7,280.00 156%Travel & Related 14,555 36,275 (21,720) 5,600.00 5,600.00 6,000.00 532.95 5,899.25 95%Conference 4,587 31,250 (26,663) 5,300.00 5,300.00 5,500.00 1,070.54 3,121.96 170%Meetings & Conferences 11,723 21,125 (9,402) 6,500.00 6,500.00 6,500.00 462.00 5,437.27 120%Program Expense 23,800 104,602 (80,802) 5,000.00 5,000.00 5,000.00 653.68 4,490.55 111%Insurance 4,041 6,500 (2,459) 1,000.00 1,000.00 1,000.00 150.00 1,479.85 68%Computer & Equipment Expense 2,163 6,250 (4,087) 7,510.00 7,510.00 7,510.00 757.60 8,005.04 94%Bank & Merchant Account Fees 2,343 4,537 (2,194) 32,000.00 32,000.00 33,000.00 1,704.09 33,458.20 96%Depreciation Expense 2,822 2,750 72 5,000.00 5,000.00 5,550.00 1,070.72 19,104.50 26%Misc Expenses 6,784 5,500 1,284 525.00 525.00 525.00 0.00 0.00Total expenses 435,662.27 435,662.27 88% 495,867.00 495,867.00 521,900.00 63,766.04 466,158.50 106%difference 157,690.06 546,604.10 (495,867.00) (32,548.00) (525,541.13) (3,555.42) (6,480.63)
Focus in on what is important
Income and expense vs. budget Balance sheet, knowing the key items
Standard accounting is important– There is a reason for the rules and practices– Consistency allows better, broader understanding
Be sure that someone points out what’s important in words!
Budget vs. Actual
Board should have actual vs. budget at every meeting
Reporting is most useful if clear, uncluttered, and following standard accounting procedures
Management will review in more detail than the board. (Sometime Board Finance Committee may also review more detail.)
Example of simple presentation
EXPENSES July-Sept Actual Annual Budget Percent
Payroll - Salary 26,550 106,200 25.0%
Travel, Program 1,129 2,605 43.4%
Office Supplies 418 4,000 10.5%
Accounting 1,061 4,420 24.0%
Advertising 161 3,000 5.4%
Staff Development 525 2625 20.0%
etc….TOTAL EXPENSE $ 49,173 $ 190,625 25.8%
Graphics can illustrate key issues
Budget Revenue this year$1,757,180
Membership Dues,
$300,000
Policy Grants,
$300,000
Programs $891,180
ConferenceWorkshops
etc., $266,000
Actual Revenue last year$1,381,302
Membership Dues,
$228,599
Programs $659,135
Policyl Grants,
$255,000
Conference, Workshops,
etc., $239,068
What is crucial to know?
Every board member needs to know what income or expense items make the difference for that organization.
May want to highlight those items in a “dashboard”
Talk about these: what is behind the figures? What may need to change?
Balance Sheets are also crucial
The statement of “Financial position” Cash Fixed assets Money owed the organization? Debt or bills owed? Net assets
The board and balance sheets
Board should always have a balance sheet in reporting at each meeting
Report should be clean, uncluttered (e.g. combine like categories)
Comparison with prior year or prior period may be useful
Make sure board members know what the items mean and why they are important.
Basic Statement of Financial Position (Balance Sheet)
September 30, 2015ASSETS
Cash/bank 24,621
Accounts Receivable 4,876
Fixed Assets, net of depreciation 14,157
TOTAL ASSETS 43,654
LIABILITIES AND NET ASSETS
Liabilities:
Accounts Payable 7,553
Net Assets:
Temp Restricted 3,821
Unrestricted 36,888
Net Revenue (4,608)
Total Net Assets 36,101
TOTAL LIABILITIES AND NET ASSETS 43,654
Focus on balance sheet items
Cash: If problems, why? Accounts receivable: Who owes you what? What other assets do you have? Liabilities: Who will you need to pay and
when? Net Assets. This is KEY for nonprofits. How
much unrestricted? Temporary restrictions? Permanently restricted funds?
Restricted Funds
Tracking programs separately Keeping tabs on “temporarily restricted” on
the balance sheet—each purpose, and when “released from restrictions”
Permanently restricted (endowments) Distinguishing restricted from “designated”
funds Decisions on using unrestricted funds
Practice Reading Financial Statements
What is the most positive thing you see on these statements?
What is the thing that worries you the most? What question, as a board member, would
you most like to ask?
The Independent Audit
Required in Illinois if revenue over $300,000 (or may be required by funder etc.)
Role of audit committee of the board Board hires qualified CPA to do audit Good practice to go out to bid on the audit
every 3-5 years Auditor reports back to the board with final
financial report and other insights
The IRS 990
Required of 501(c)3 nonprofits Usually prepared by the auditor or a CPA Short form for smaller organizations The 990 asks questions about governance
and oversight, as well as finance Board must approve before submission Publicly available on Guidestar or if asked Illinois also requires its own form and 990.
Setting financial policies
Financial policies should be in writing Board approves (like personnel policies) Policies should reflect:
– Reality, nature of the work– Best practices– Size of the organization
Review/revise every few years
Include in financial policies
Purchasing and expense process
Incoming funds Bank account and
check signing Gift acceptance Credit cards
Payroll process Mileage
reimbursement Capitalization policy Budgeting Reporting Record retention
Other board functions
Open bank accounts and decide on signers Borrow money Embark on capital projects, including budget Approve certain grant applications Compensation/review of Exec. Director Ensure that legal obligations are met
(employment taxes, insurance, etc.)
Mission, mission, mission
Is the money there to do the important work of your organization?
Is it being used for your mission and according to policy/budget set by board?
Are funders requirements being met? (and does funding mesh with your mission?)
Is the organization sustainable? Is action or change needed?
Board Finance Checklist
Budget Financial
statements Audit IRS form 990 Financial policies Legal obligations
Bank accounts Check signers Borrowing Capital projects Compensation ED Mission!
Nonprofit Finance and Reporting: What every board member should know
Molly Lovelock
lovelock3@gmail.com
815-520-0811
top related