Kevin P. Martin & Associates, P.C. ASSURANCE | TAX | RISK MANAGEMENT | IT ADVISORY V Kevin P. Martin & Associates, P.C. ASSURANCE | TAX | RISK MANAGEMENT | IT ADVISORY 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’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-FOR- PROFIT 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 LONG- TERM FINANCIAL VIABILITY.

Kevin P. Martin & Associates, P.C. ASSURANCE | TAX | RISK MANAGEMENT | IT ADVISORY 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 HOW DOES A TRUSTEE FULFILL THEIR FIDICUARY OBLIGATIONS?

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

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

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

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

Kevin P. Martin & Associates, P.C. ASSURANCE | TAX | RISK MANAGEMENT | IT ADVISORY STATEMENT OF CASH FLOWS 18-9 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?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?Are we generating cash from operations or using it? 3.How quickly is accounts receivable being collected? Is it all collectible?How quickly is accounts receivable being collected? Is it all collectible? 4.How much debt do you have?How much debt do you have? 5.How much income, and what kinds of expenses?How much income, and what kinds of expenses? 6.Are non-cash items recorded (i.e. donated goods and services)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?If your organization is growing or contracting? 2.What kinds of things have you accomplished?What kinds of things have you accomplished? 3.How many people were impacted by these accomplishments?How many people were impacted by these accomplishments? 4.Did you get a lot done with limited funds?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. 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: 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. 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. 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 Elevator Speech – everyone on the same page with the same story

Kevin P. Martin & Associates, P.C. ASSURANCE | TAX | RISK MANAGEMENT | IT ADVISORY Karen Kent, CPA Principal Direct Line: Contact Information

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