The Forbes Funds Finance Matters-October 6, 2011
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The Forbes Funds Finance Matters-October 6, 2011
- 1. Financial Management Series Organizational Systems and Controls October 6, 2011
- 12. Financial Infrastructure Sample Chart of Accounts Standard Chart of Accounts First Classification Second Classification Third Classification 1000-1999 Assets 2000-2999 Liabilities 3000-3999 Net Equity/Assets 4000-6999 Revenues Location G&A Program Funding Source 7000-9999 Expenses Location G&A Program Funding Source
- 18. Cash Flow Projections Sample Six-Month Cash Flow Calculation
- 19. Program Tracking Sample Program/Activity Statement
- 21. Financial Roles at a Glance
Notas do Editor
- Accuracy – ensure that data is entered into the system correctly and there are multiple checks and balances to eliminate possibility of error Reliability - ensures you can rely on reports generated by the financial system to make decisions with Security – ensure that adequate controls are in place to reduce the risk of fraud, theft
- Most important preliminary safeguard to ensuring accuracy, reliability, security General policies and procedures – from 990 accounting department structure Conflict of interest Whistleblower Revenue and cash processing How cash, checks, credit cards are processed Contributions processed Billing/invoices In kind donations – recognition Purchasing and cash disbursements Purchases/purchase orders Accounts payable Employee expenses Travel, meals and entertainment Check preparation/signing Payroll Asset and liability account management Cash accounts: operational cash, reserves, etc and procedure for utilizing these funds Banking and bank reconciliation Investment policies Property, Equipment and depreciation Leases Notes payable Audit and tax reporting Filing of tax returns Unrelated business activities Auditor selection Budgeting and financial management Budget process Insurance requirements Government grants and contracts Board committee responsibilities Finance committee role Audit committee responsibilities Record retention and destruction Hard copies Software, backups etc Resource list – table of contents for P&P, McMillan internal controls checklist
- Now – take 10 min and fill out the first section of the handout. Discuss with your group where you are strong and where you need improvement. Ask yourself the following questions:
- Most important functions of chart of accounts – to track revenue and expenses by activity To differentiate between direct and indirect expenses Multi-dimensional classification – what does that mean? When entering a revenue or expense item, you use multiple fields to categorize an item
- Most accounting programs allow for you to filter out revenue and expenses by class, job or other category if you utilize multiple fields
- This is a potential model for an organization that has multiple locations, programs, and funding sources that require tracking. Once the standard chart of accounts is established using your major expense types (salaries, supplies, rent, etc.) There should be little reason to add any additional line items. Your organization may not be this complex – or could require additional fields See Unified Chart of Accounts – posted resource for more detail
- Note: this method of coding: Requires you to add line items for each type of expense each time you add a new program Also does not allow for easy report generation without exporting into excel and doing quite a bit of cutting and pasting (leads to error!!!)
- You may need more classifications depending on the complexity of your operations; or you may just want to classify by programs if your operations are relatively simple. This method of classification will also allow for easier allocation of overhead across programs by making journal entry adjustments (rather than having to make calculations outside of your accounting program.)
- Accuracy – ensure that data is entered into the system correctly and there are multiple checks and balances to eliminate possibility of error Reliability - ensures you can rely on reports generated by the financial system to make decisions with Security – ensure that adequate controls are in place to reduce the risk of fraud, theft
- If you have the right chart of accounts in place, this section will be a breeze.
- Balance sheet – show your current financial position (assets and liabilities)’; a “snapshot” in time Budget vs. actual. Compares your profit and loss statement (also known as statement of activity) to your budget. A P&L by itself is not adequate to gauge progress. NOTE: make sure you compare your activity YTD to your budget YTD. It’s hard to look at an annual budget and do the math in your head to determine whether the org is on track. 1 Year Rolling Cash Flow: CRUCIAL. Projections can be done in a simple excel spreadsheet (will be posted online with resources) Cash flow statement (past activity – key distinction between statement and projection) Program/activity budgets and statements – it is crucial to know which of your programs/services/activities are sustained and which are not. OK to have a program with a deficit as long as its understood that the difference will have to be made up somewhere else or covered by unrestricted funds. Resource list: Sample board package – Fiscal Management Associates Cash flow projection/Contingency budget template – Nonprofit Assistance Fund – may be a bit complex
- Fill out last section on questionnaire… discuss questions. Provide your questions for us to your consultant.