Financial Management & Fiscal

ProceduresAustin Michel

Clarifying Terms

•Bookkeeping: How you record your financial data

•Accounting: The rules for classifying and reporting data

• Financial vs. Managerial

• Cash vs. Accrual

• Financial management: Analyzing data and making predictions

Unified Theory of Nonprofit Finance

• The financial sources available to a nonprofit reflect the services and programs it provides

• Therapeutic riding vs. Ronald McDonald House

•Diversify financial sources

• Minimize risk and maximize autonomy

Operating Funds

•Unrestricted, temporarily restricted, restricted

• Endowments - funds never meant to be spent• Board-designated vs. Pure

• Physical assets

Financial Statements

•Financial Accounting Standards Board

•Fiscal year vs. Calendar year

•The main four: Balance sheet, income statement, cash flow, and functional expenses

Balance Sheet & Income Statement

•Balance Sheet – A “snapshot” of the organization

• Summarizes assets and liabilities

• SFAS 116 – The requirement to show future pledges

• Income Statement – A “video” of the organization

• The flow of revenue and expenses in a period of time

• AKA the Statement of Activities

Cash Flow & Functional Expenses

•Cash Flow: Shows the intake and spending of cash

• Gives a better picture of how cash was used vs. Statement of Activities

• Functional Expenses: Categorizes each expense

• Depreciation and Efficiency

Financial Ratios

•Used by watchdogs to measure efficiency (vs effectiveness)

•Main four: Profitability, liquidity, asset management, and long-term solvency.

Endowments

•Held mainly by large organizations

• Key concepts of endowment management

• Total return: Invest in a diverse portfolio, focused on the long-term

• Spending limit: Established by the board, dictates what percentage of the endowment is withdrawn each year

• UPIMFA (Uniform Prudent Management of Institutional Funds Act)

Budgeting

• 3 types of budgets

•Operating budget (revenue and expenditures), Capital budget (long-term assets), Cash budget

• Incremental, redistribution, and zero-based approaches

•Having a strategic plan

Risk Management, Financial Policies, and Controls

•Risk management: Identifying potential hazards to the organization (people, property, income, goodwill), and devising ways to prevent them

• Accountability and regulatory compliance policies-990 form

• Financial and financial management policies-range on ratios

• Data integrity-privacy and confidentiality of people’s info

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