Transcript Talking Numbers: What Non-Finance People Need to Know

2011 Fiscal and Compliance
Monitoring Training
February 1, 2011
Marissa M. Tirona
Project Director
Agenda
8:30 a.m. to 9:15 a.m.
Introductions and Agenda Review
9:15 a.m. to 10:30 a.m.
Overview of the Standard Monitoring Form - Fiscal
10:30 a.m. to 10:45 a.m.
BREAK
10:45 a.m. to 11:15 a.m.
Continue Overview of the Standard Monitoring Form –
Fiscal
11:15 a.m. to 11:45 a.m.
Overview of the Standard Monitoring Form Compliance
11:45 a.m. to 12:00 p.m.
Wrap Up
CompassPoint Nonprofit Services
CompassPoint
intensifies the impact of
fellow nonprofit
leaders, organizations,
and networks as we
achieve social equity
together
Our integrated practice
offers the strongest
teaching, coaching,
consulting, and peer
learning – all grounded in
deep nonprofit leadership
experience
Learning Objectives

Understand context for fiscal and compliance monitoring
program

Review the fiscal and compliance standard monitoring
form

Learn more about what City monitors will be looking for
during site visits
Context

Organizations that invest in increasing their management
capacities are poised to achieve greater mission impact.

Leaders need to consider the mission impact and financial
impact of all decisions.

The City’s monitoring process is about supporting your
organization’s ability to implement sustainable financial
practices.
Overview: Site Visit and SelfAssessment Processes
Site Visit

Receive cover letter from City Monitoring Team

Receive confirmation of site visit logistics, including date, time, location and Monitoring
Team information

Receive Monitoring Report approximately 6 weeks after site visit

Submit response (if requested) to Monitoring Report 1 month after receiving report
Self-Assessment

Submit self-assessment to City 6 weeks after receiving notice

Receive Monitoring Report approximately 6 weeks after assessment submission

Submit response (if requested) to Monitoring Report 1 month after receiving report
Section 1
Agency-wide Budget, Cost
Allocation Procedures and Invoices
Related Compliance Form Boxes
1A. Agency-wide Budget
1B. Cost Allocation Procedures
a. Current (fiscal or calendar year)
b. Shows income and expense by funding source or
program
a. Process for cost allocation procedures and plan for
shared costs is documented in a written narrative or in
the footnotes of the current approved agency-wide
budget
c. Shows allocation of shared and indirect costs by funding
source or program
b. Process for allocating shared program costs is consistent
and reasonable
d. Shows fundraising separate from program expense
c. Process for cost allocation procedures and plan for
indirect costs is documented in a written narrative or in
the footnotes of the current approved agency-wide
budget
e. Clearly identifies all funding sources
f. 15% of funding from non-City sources, (pilot element)
d. Process for allocating indirect costs is consistent and
reasonable
Related Compliance Form Boxes
1G. Invoices
Expenses:
a. Expenses tested on invoices have supporting documentation: credit card charges and/or petty cash
expenditures are all documented with an original receipt and reasonably tie to the cost allocation plan.
b. Contractor follows its policies for writing checks, credit card use, petty cash use, and/or reimbursement for
expenses tested on invoices
c. Tested expenses on invoices appear to be reasonably associated with the program budget
If Units of service contract (usually DPH contracts only):
d. Units of service provided are documented and agree with invoices
If payments to subcontractors are included on invoices:
e. Subcontractor authorized by contract
f. Contractor paid its subcontractors’ invoices per the schedule established in the subcontracting agreement
and/or prior to receiving City reimbursement for the services delivered
g. Subcontractor invoices show basis for work billed as performed (units of service, hours, reimbursable costs)
The Organizational Budget:
Key Performance Points






Current budget?
Budgeted by cost centers?
Includes projections and variances?
Funding sources included?
Appropriate cost allocations?
15% of funding from non-City sources?
Sample Unrestricted Budget with
Shared Costs Allocated


This budget format is akin to a high-level
“working” budget
Often not the format presented to an
organization’s board for final approval
(generally, the board does not get
involved in the details of an
organization’s cost allocation
methodology)
SAMPLE UNRESTRICTED BUDGET WITH SHARED COSTS ALLOCATED
2008-09 Budget: First Draft (summarized)
As for May 29, 2008
Program Activities
Contributions
Fundraising events - net
Foundation grants
Total support
Supporting Activities
Shelter
Services
Support
Groups
Administration
Fundraising
-
-
-
-
10,000
10,000
Shared
Costs
80,000
135,000
125,000
340,000
Total
2007-08
-
80,000
135,000
125,000
340,000
58,000
125,000
115,000
298,000
-
815,009
10,000
825,009
-
450,000
1,615,009
770,467
5,750
776,217
453,000
1,527,217
Government contracts
Interest and dividends
Unrealized gain (loss) on investments
Total revenue
815,009
815,009
Net assets released from restriction
Total income
815,009
445,000
445,000
10,000
5,000
345,000
Personnel expenses
Non-personnel expenses
329,852
416,750
214,881
129,300
117,365
28,100
127,339
44,750
179,161
224,113
968,598
843,013
973,204
505,507
Total specific costs
746,602
344,181
145,465
172,089
403,274
1,811,611
1,478,711
See 1 Note Below
Allocation of shared costs
181,473
125,015
44,360
52,426
(403,274)
-
-
Expenses before overhead/indirect
928,075
469,196
189,825
224,514
-
(113,066)
(24,196)
(179,825)
120,486
-
57%
108,200
29%
55,049
-100%
(189,825)
Change before overhead/indirect
% of direct costs See Note 2 Below
Allocation of indirect costs
Total expenses
Change in net assets
1,036,275
(221,266)
524,245
(79,245)
-
Total
2008-09
14%
26,576
0%
-
-
251,090
-
10,000
93,910
-
1,811,611
(196,602)
1,478,711
48,507
(0)
(0)
-
1,811,610
(196,601)
1,478,710
48,507
Sample Program by Source Budget



Excellent supporting documentation for
overall budget
Helps in conversations you have with
City staff regarding how the
organizational budget was developed
It’s another way to check invoicing –
does the invoice accurately reflect the
organizational budget and the program
budget?
SAMPLE PROGRAM BY SOURCE BUDGET SHOWING WHO IS FUNDING BUDGET
Shelter Program
Program
Total
DCYF
First 5
Funder C Funder D
Salaries
Payroll Taxes
Training
Personnel expense
295,920
30,332
3,600
329,852
65,000
6,500
1,800
73,300
105,000
10,500
1,800
117,300
-
Clients, direct assistance
Conferences & Meetings (see note)
Dues and Subscriptions
Other Professional Fees
Printing & Copying
Supplies
Travel
Non-personnel expense
375,000
1,000
1,000
20,000
1,000
15,000
3,750
416,750
15,000
250
250
5,000
1,250
21,750
25,000
1,000
250
15,000
250
8,000
1,250
50,750
180,259
-
Liability Insurance
Occupancy
Utilities
Depreciation
Other shared costs
Shared Costs
12,000
88,000
22,000
10,000
49,473
181,473
3,000
20,000
5,000
2,500
10,000
40,500
Overhead/aka Indirect Costs
108,200
1,036,275
Total expenses
207,500
20,750
3,600
231,850
88,420
9,582
98,002
180,259
500
2,000
1,250
73,500
285,259
5,250
1,000
15,000
1,000
15,000
3,750
326,259
89,741
(4,250)
5,000
90,491
3,000
20,000
5,000
2,500
10,000
40,500
3,000
25,000
5,000
2,500
10,000
45,500
3,000
23,000
5,000
2,500
10,000
43,500
12,000
88,000
20,000
10,000
40,000
170,000
2,000
9,473
11,473
14,950
21,950
25,000
25,000
86,900
21,300
150,500
230,500
250,759
183,250
815,009
221,266
-
37,500
3,750
Funding
Total
(Over)
Under
Funded
41,250
65,000
4,250
500
Possible Allocation Methodologies




A percentage determined by dividing the number of FTEs of
each activity by the total number of FTEs from all the
activities (excluding any whose salaries are treated as
common costs).
A percentage determined by dividing the amount of the
payroll expenses of each activity by the payroll expenses of
all the activities (excluding common).
A percentage determined by dividing the square footage
used by each activity by the total agency square footage.
A percentage determined by dividing the amount of the
specific expenses of each activity by the total specific
expenses of the organization.
Common Allocation Mistakes



Failure to categorize
Failure to document
Failure to apply
consistently
Section 2
Financial Reports, Audited Financial
Statements and Tax Forms
Related Compliance Form Boxes
1C. Audited Financial Statements
For All Organizations:
a. Complete: all sections and statements included; opinion and other audit letters are signed
b. Unqualified opinion
For Organizations which received a Management Letter:
c. Management letter has been signed by the audit firm
d. For any prior year findings, the Contractor has provided you with a reasonable explanation of how the
Contractor has corrected all the findings
For Organizations which had A-133 Audit:
e. No material weaknesses mentioned
f. No current findings and/or questioned costs
g. For any prior year findings, the Contractor has provided you with a reasonable explanation of how the
Contractor has corrected all the findings
1D. Tax Form
a. Federal 990 return filed or extended and submitted on time
Related Compliance Form Boxes
1F. Financial Reports
Balance Sheet (a.k.a. Statement of Financial Position):
a. Current (as of the last four months, at least)
b. Overall cash balance is positive
c. Current assets exceed current liabilities by 2 to 1 (pilot element)
d. Current bank reconciliation (as of the last four months, at least)
Profit and Loss Statement (a.k.a. Statement of Activity):
e. Current (as of the last four months, at least)
f. Shows year-to-date (YTD) income and expense by program/ contract/ funding source, including
indirect costs
g. Year-to-date net income is either a positive number or the Contractor provides a sound explanation of
how it will be positive by the end of the fiscal year
Statement of Financial Position







Commonly called “balance sheet”
A snapshot as of date on top of report
Never gets zeroed out: no “starting over”
Assets = own/have title to
Liabilities = owe
Net Assets = the difference between the
two
Remember what “current” means: within a
year
Statement of Financial Position
As of March 31, 2008
Current
YTD
Previous
Year End
Assets
Cash and equivalents
Investments
Contracts receivable
Grants receivable
Prepaid expenses
Total current assets
161,270
106,361
144,567
315,000
11,942
739,140
551,584
100,000
177,674
124,000
15,065
968,323
180,000
32,750
48,955
19,771
281,476
(102,419)
179,057
180,000
32,750
48,955
14,725
276,430
(73,325)
203,105
3,589
3,589
3,589
3,589
921,786
1,175,017
12,514
9,897
14,259
36,670
48,990
6,941
13,457
69,388
Note payable (leasehold improvements)
Less current portion of long-term debt
99,398
(14,259)
109,392
(13,457)
Total liabilities
121,809
165,323
Unrestricted net assets
Temporarily restricted net assets
Permanently restricted net assets
Total net assets
275,308
419,669
105,000
799,977
283,690
326,004
100,000
709,694
Total liabilities and net assets
921,786
875,017
Buildings and improvements
Vehicles
Furniture and fixtures
Equipment
Total property and equipment
Less accumulated depreciation
Net property and equipment
Long-term deposits
Total non-current assets
Total assets
Liabilities and Net Assets
Accounts payable
Accrued vacation
Current portion of long-term debt
Total current liabilities
Financial Ratios

Current ratio – your ability to meet current obligations, like paying bills and making
payroll
–

Quick ratio: your ability to meet your obligations with your most liquid of assets –
generally, cash and short-term investments
–

Healthy ratio for most organization is 2.0 to 4.0 – essentially means that for every
dollar you owe you have double to quadruple the financial means to pay off your
short-term debts
Note that if you wanted to be really conservative, use cash and equivalents line
only
Reserve – unrestricted money that your org has accumulated over time beyond what it
needs to pay your bills and other commitments – your rainy day fund
– Generally – nonprofits should strive for 3 – 6 months reserve
– In calculating your reserve, we use only the unrestricted net assets and
exclude those net assets you have committed to spend
– Can determine typical month’s expenses from your annual budget or
from your statement of activities
Financial Ratios
Current Ratio:
Total Current Assets
Total Current Liabilities
Quick Ratio :
Total Cash and Investments
Total Current Liabilities
Liquid Reserve Ratio:
Unrestricted Net Assets - Total Fixed Assets
Typical Monthly Expenses
Statement of Activities




Commonly called “income statement” or
“P&L”
Reports on the fiscal year
Does get zeroed out each new year
Shows flows of restricted contributions in
aggregate, not by funder
SAMPLE BUDGET TO ACTUAL INCOME STATEMENT (Statement of Financial Activity)
Budgeted Statement of Activity - Unrestricted
For the Nine Months Ending March 31, 2008
YTD
Actual
YTD
Budget
Variance
B/(W)
Annual
Budget
$
Remaining
%
Remaining
Contributions
Fundraising events - net
Foundation grants
Total support
23,200
92,430
92,000
207,630
43,500
93,750
86,250
223,500
(20,300)
(1,320)
5,750
(15,870)
58,000
125,000
115,000
298,000
Government contracts
Interest and dividends
Unrealized gain (loss) on investments
Total revenue
574,382
3,761
(2,400)
575,743
577,850
4,313
582,163
(3,468)
(552)
(2,400)
(6,420)
770,467
5,750
776,217
196,085
1,989
2,400 n/a
200,474
25%
35%
Net assets released from restriction
322,335
339,750
(17,415)
453,000
130,665
29%
Total income
1,105,708
1,145,413
(39,705)
1,527,217
421,509
28%
Shelter Services
Support Groups
Administration
Fundraising
Total expenses
505,866
277,286
167,168
163,769
1,114,090
502,478
288,695
156,025
161,834
1,109,032
(3,388)
11,408
(11,144)
(1,935)
(5,058)
669,971
384,926
208,033
215,779
1,478,709
164,105
107,640
40,865
52,010
364,619
24%
28%
20%
24%
25%
36,381
(44,763)
48,508
56,890
117%
Change in net assets
(8,382)
Beginning net assets
283,690
283,690
-
283,690
Ending net assets
275,308
320,071
(44,763)
332,198
B = Better than budgeted
(W) = Worse than budgeted
34,800
32,570
23,000
90,370
60%
26%
20%
30%
26%
Section 3
Payroll and Timesheets
Related Compliance Form Boxes
1H. Payroll
a. State (DE6) and federal (941) payroll tax returns were filed by the end of the month following the end of
the quarter for monitoring months under review
b. Employees paid with City funds listed on invoices checked in Section 1G above are listed on the DE6 for
the quarter(s) that includes the monitoring months under review
c. Payroll taxes due were actually paid
Timesheets:
d. If employee time is paid by more than one source, it is recorded by funding source or program on
timesheets
e. Employee & supervisor signatures on timesheets in ink
f. All changes to timesheet are initialed by supervisor in ink
g. Employees and hours charged to City contracts agree to timesheets and to payroll journals
(Request and review the Contractor’s DE6 and 941 returns, payroll tax verification, bank statements, select
employee timesheets, and payroll register/ journal for the months under review.)
Timesheets: What to Look Out For





Time spent on activity is accurately
reflected, including breaks
Activity is clearly defined
Time is recorded by program or funding
source
Employee’s and supervisor’s signatures
Any changes are initialed by supervisor
Different ways to track time



Daily timesheets
Weekly timesheets
Time studies
Section 4
Fiscal Policies and Procedures
Related Compliance Form Boxes
1E. Fiscal Policies & Procedures
a. Current (updated to reflect prior site visit or audit recommendations)
In writing, contains at a minimum:
b. Internal controls (safeguarding of assets, authorization of transactions, reconciliation of accounting
records)
c. Financial reporting
d. Accounts payable
e. Accounts receivable
f. Petty cash
g. Payroll
Key Elements of a Fiscal Policies
and Procedures Manual

Internal Controls (safeguarding of assets, authorization of
transactions, reconciliation of accounting records)

Financial Reporting (which reports are required, to whom, and
when)

Accounts Payable (processing of bills to the organization
including credit cards)

Accounts Receivable (process of money coming into the
organization)

Petty cash procedures

Payroll (timesheets, time-studies, payroll process, paying and
filing payroll taxes)

Conflict of Interest Policies (if not included in the
organization’s Personnel Manual)
Section 5
Board Minutes, Board Meetings, Public
Access to Records and Community
Representation on the Board
Related Compliance Form Boxes
2A. Board Minutes
a. Minutes show that if a paid City employee or City commission member is on the Board, he or she did
not vote on items related to City contracts with their affiliated City department (excluding vote on
Agency-Wide Budget)
b. Minutes show that if the Executive Director is a member of the Board, he or she is a non-voting member
c. Minutes show current agency-wide budget approved
d. Minutes show that financial reports are shared with the Board on a regular basis
2B. Board Meetings
a. At least two meetings with quorum status are open to the public each year
b. These two meetings are announced to the general public at least 30 days in advance through the SF
Public Library and the Clerk of the Board
Related Compliance Form Boxes
2C. Public Access to Records
a. Procedures for responding to Sunshine Requests from the public within 10 days of request
b. Policies for requests beyond what is “Sunshineable,” including disputes about access to information
2D. Community Representation on Board
a. By-laws include requirements for community representation on Board, or, Contractor makes other
efforts to ensure community representation
Section 6
Personnel Policies
Related Compliance Form Boxes
2G. Personnel Policies
a. Written and current personnel/employee manual
b. Evidence that staff were trained regarding personnel policies
c. Documentation of the following is maintained on file:
- Job description
- Employment application or résumé
- Employment confirmation or letter of hire
- Salary information including adjustments
- Verification of employee orientation
- Annual TB clearance (required for DPH contracts, meal, aging and dependent adult, and children’s
services)
- Fingerprinting (required for children’s services)
Evidence of Adequate Training on
Personnel Policies



Signed
acknowledgment
of receipt form
Training calendar
Memorandum
documenting
training
Section 7
Subcontracts and Licenses
Related Compliance Form Boxes
2E. Subcontracts
a. Procurement procedures in the Contractor’s fiscal policies and procedures were followed by
Contractor to select subcontractors
b. Legally binding agreements between Contractor and subcontractors are valid and current
c. Contractor regularly monitors fiscal and programmatic performance of subcontractor
2F. Licenses
a. Site licenses required by City contracts are available, verified and current
b. Staff licenses required by City contracts are available, verified and current
Section 8
Emergency Operations Plan and
Americans with Disabilities Act
Related Compliance Form Boxes
2H. Emergency Operations Plan
a. Written emergency operations plan
b. Plan contains contingency planning, including an alternate site, if needed
c. Plan contains business continuity arrangement (pilot)
d. Staff and volunteers were trained within the last year on the emergency plan
e. At least one fire drill and one earthquake drill have been conducted in last year
f. Elevator permit is current (if building owned by the Contractor)
g. All sites have received fire inspections (if required)
2I. Americans with Disabilities Act (ADA)
a. Written policies and procedures to allow people with disabilities to benefit from services and
containing an agency-wide ADA grievance procedure
b. Staff is trained regarding Contractor’s ADA policies and procedures
Next Steps . . .

What next steps will you take as a result of what
you learned today?

What resources do you need to support you in
the monitoring process?
Upcoming Trainings

February 22, 2011
City Staff Mock Monitoring Workshop – 8:30 – 12:00, City Hall, 421

February 24, 2011
City Staff Mock Monitoring Workshop – 12:30 – 4:30, City Hall, 421

March 16, 2011
City Contractors Workshop – 9:00 – 3:00, CompassPoint
Agency Wide Budget, Financial Statements, Fiscal Policies and
Procedures

March 23, 2011
City Contractors Workshop – 9:00 – 3:00, CompassPoint
Cost Allocation, Invoices and Personnel (Payroll and Timesheets)

March 30, 2011
City Contractor Workshop – 9:00 – 3:00, CompassPoint
Board Development and Governance and Fundraising
Contact Information
Greg Asay
Office of the Controller
[email protected]
415.554.7595
Marissa M. Tirona
415.541.9000
[email protected]
www.compasspoint.org