V Time for the Treasurers Report What are

V Time for the Treasurer’s Report: What are Financials Trying to Tell Me? Presented by Karen Kent, CPA November 19, 2014 Kevin P. Martin & Associates, P. C. ASSURANCE | TAX | RISK MANAGEMENT | IT ADVISORY | IT |ADVISORY Kevin P. Martin & Associates, P. C. ASSURANCE | TAX | RISK MANAGEMENT ASSURANCE | TAX RISK MANAGEMENT | IT ADVISORY

IT’S ALL ABOUT THE STORY FINANCIAL STATEMENTS TELL A STORY. YOU'RE NOT JUST SHOWING A COLLECTION OF PROFIT-AND-LOSS STATEMENTS AND BALANCE SHEETS — YOU'RE TELLING A STORY THAT YOUR AUDIENCE NEEDS TO HEAR. IT MAY BE A STORY OF A NEW AGENCY WITH PROMISING GROWTH OR, MAYBE IT'S A STORY ABOUT MEETING MISSION CHALLENGES. WHATEVER YOUR STORY IS, STICK TO IT: TOSS EVERYTHING THAT DOESN'T HELP YOU TELL IT IN A COMPELLING, EASY-TO-FOLLOW WAY. TELL YOUR STORY WITH SIMPLICITY AND CLARITY. Kevin P. Martin & Associates, P. C. ASSURANCE | TAX | RISK MANAGEMENT | IT ADVISORY

TRUSTEE’S FIDUCIARY ROLE AS A TRUSTEE, YOUR FUNDAMENTAL ROLE IS TO OVERSEE THE IMPLEMENTATION OF THE NOT-FORPROFIT ORGANIZATION’S MISSION. THIS INCLUDES EXERCISING YOUR FIDUCIARY DUTY TO ENSURE THAT THE ORGANIZATION’S FINANCIAL RESOURCES ARE EFFECTIVELY MANAGED AND SUFFICIENT TO ASSURE THE ORGANIZATION’S LONGTERM FINANCIAL VIABILITY. Kevin P. Martin & Associates, P. C. ASSURANCE | TAX | RISK MANAGEMENT | IT ADVISORY

HOW DOES A TRUSTEE FULFILL THEIR FIDICUARY OBLIGATIONS? • REALISTIC BUDGET • ADEQUATE ACCOUNTING SYSTEMS AND CONTROLS • PERIODIC CONFIRMATION FROM MANAGEMENT THAT ALL REQUIRED FILINGS ARE UP-TO-DATE • REVIEW FINANCIAL INFORMATION IN ADVANCE • ASK THE TOUGH QUESTIONS • CONSIDER VALUE OF HAVING INDEPENDENT AUDITS AND MAINTAINING STANDARD AUDIT/FINANCE COMMITTEE(S) • FUNDRAISING IS DONE HONESTLY • RESTRICTED GIFTS ARE ACCOUNTED FOR SEPARATELY AND FUNDS ARE BEING USED IN ACCORDANCE WITH THE TERMS OF THE RESTRICTION Kevin P. Martin & Associates, P. C. ASSURANCE | TAX | RISK MANAGEMENT | IT ADVISORY

18 -5 FINANCIAL STATEMENTS STATEMENT OF FINANCIAL POSITION STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS STATEMENT OF CASH FLOWS TOGETHER THESE TELL YOUR STORY!!! Kevin P. Martin & Associates, P. C. ASSURANCE | TAX | RISK MANAGEMENT | IT ADVISORY

16 -6 FINANCIAL STATEMENTS SEEK TO ANSWER THREE QUESTIONS How did the Organization generate its current financial resources? Where did those financial resources go? Kevin P. Martin & Associates, P. C. What amount of financial resources is presently held? ASSURANCE | TAX | RISK MANAGEMENT | IT ADVISORY

18 -7 STATEMENT OF FINANCIAL POSITION (BALANCE SHEET) Report assets, liabilities, and net assets. The Statement of Financial Position tells us: At a particular point in time. ? Kevin P. Martin & Associates, P. C. What an Organization owns and the claims against its assets. ASSURANCE | TAX | RISK MANAGEMENT | IT ADVISORY

18 -8 STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS (INCOME STATEMENT) Change in net assets = difference between revenues and expenses Measures revenue, expenses and profit over a period of time Kevin P. Martin & Associates, P. C. Change in net assets is reported instead of net income. Focuses on revenues and costs associated with revenue ASSURANCE | TAX | RISK MANAGEMENT | IT ADVISORY

18 -9 STATEMENT OF CASH FLOWS Cash is King!!! An agency’s cash receipts and cash payments that presents information on its sources and uses of cash Reported by: Operating, Investing and Financing Activities Kevin P. Martin & Associates, P. C. ASSURANCE | TAX | RISK MANAGEMENT | IT ADVISORY

REVIEW YOUR STATEMENTS SAMPLE QUESTIONS TO CONSIDER 1. How much cash is on hand, and how many days’ worth of expenses would it cover? 2. Are we generating cash from operations or using it? 3. How quickly is accounts receivable being collected? Is it all collectible? 4. How much debt do you have? 5. How much income, and what kinds of expenses? 6. Are non-cash items recorded (i. e. donated goods and services) Kevin P. Martin & Associates, P. C. ASSURANCE | TAX | RISK MANAGEMENT | IT ADVISORY

REVIEW YOUR STATEMENTS SAMPLE RATIOS TO CONSIDER Current ratio: measures an organization’s ability to pay its current liabilities with its current assets. The higher the ratio the better. A good benchmark is 1. 2 or higher = every $1. 00 of current debt you have a $1. 20 in current assets to cover. Debt to Equity: a measure of an organization’s leverage. Debt to equity ratio compares an organization’s total debt to total equity. The lower the better. A good benchmark is less than 1. It is important to realize that if the ratio is greater than 1, the majority of assets are financed through debt. If it is smaller than 1, assets are primarily financed through equity. Kevin P. Martin & Associates, P. C. ASSURANCE | TAX | RISK MANAGEMENT | IT ADVISORY

REVIEW YOUR STATEMENTS SAMPLE RATIOS TO CONSIDER Administrative (overhead) percentage: Percent of total expenses spent on administration. Lower is better. Program Percentage: Percent of total expenses spent on program. Higher is better. Fundraising Percentage: Percent of total expenses spent on fundraising. Lower is better. Understand your cost allocation plan – how costs are allocated is critical to these ratios. Kevin P. Martin & Associates, P. C. ASSURANCE | TAX | RISK MANAGEMENT | IT ADVISORY

REVIEW YOUR STATEMENTS SAMPLE RATIOS TO CONSIDER Fundraising Efficiency: Amount spent to raise a dollar. Lower is better. Kevin P. Martin & Associates, P. C. ASSURANCE | TAX | RISK MANAGEMENT | IT ADVISORY

WHAT ARE THE NUMBERS SAYING? 1. If your organization is growing or contracting? 2. What kinds of things have you accomplished? 3. How many people were impacted by these accomplishments? 4. Did you get a lot done with limited funds? Kevin P. Martin & Associates, P. C. ASSURANCE | TAX | RISK MANAGEMENT | IT ADVISORY

WHAT IS YOUR STORY? After review of the numbers and thinking over these type of questions, you can begin to compare: What people will see looking at your numbers, versus what you want them to see. Kevin P. Martin & Associates, P. C. ASSURANCE | TAX | RISK MANAGEMENT | IT ADVISORY

WHAT IS YOUR STORY? • In doing this type of analysis keep in mind who is seeing your financial statements: Internal ( board/management) External (funders/supporters) • This will determine the type of story you’re trying to communicate and why. • Once you’ve considered the numbers, audience and what you want your numbers to say, you’ll be able to start framing your finances into a story. Kevin P. Martin & Associates, P. C. ASSURANCE | TAX | RISK MANAGEMENT | IT ADVISORY

WAYS TO TELL YOUR STORY • CEO/President talking points • Dashboard • Elevator Speech – everyone on the same page with the same story Kevin P. Martin & Associates, P. C. ASSURANCE | TAX | RISK MANAGEMENT | IT ADVISORY

Contact Information Karen Kent, CPA Principal Direct Line: 781 -849 -5305 Email: kkent@kpm-us. com Kevin P. Martin & Associates, P. C. ASSURANCE | TAX | RISK MANAGEMENT | IT ADVISORY

THANK YOU Kevin P. Martin & Associates, P. C. 19 ASSURANCE | TAX | RISK MANAGEMENT | IT ADVISORY