1. National Association of Social Workers Financial Management for Chapters Developed by the Administrative Division, Adapted by Chapter Services August 2002 NATIONAL ASSOCIATION OF SOCIAL WORKERS 1

2. NATIONAL ASSOCIATION OF SOCIAL WORKERS 2 Responsibilities of a Chapter Treasurer n Key volunteer financial manager n Reports on financial activity of chapter n Presents budget to the Board n Keeps full and accurate accounts of financial records n Source: Lang, Andrew, “Financial Responsibilities of Nonprofit Boards”

3. NATIONAL ASSOCIATION OF SOCIAL WORKERS 3 Responsibilities of a Chapter Treasurer (cont’d) n Serves as a member of the Board of Directors. n Has signature registered with bank servicing chapter. n In collaboration with the chapter executive director and president, prepares the annual budget for presentation to the board.

4. NATIONAL ASSOCIATION OF SOCIAL WORKERS 4 Responsibilities of a Chapter Treasurer (cont’d) n Provide information to the board regarding budgetary restrictions and budgetary restriction and alert the board when projects or programs are in danger of going over budget. n Propose cost cutting measures and budget increases based on knowledge of financial matters.

5. NATIONAL ASSOCIATION OF SOCIAL WORKERS 5 Definitions of Key Terms The following key terms are defined: n Accounting n Asset and Liability n Budget Process n Credit and Debit n Revenue and Expense n Fiduciary

6. NATIONAL ASSOCIATION OF SOCIAL WORKERS 6 Accounting n The art of recording, classifying, and summarizing in a significant manner, transactions and events of a financial character, and interpreting the results thereof.

7. NATIONAL ASSOCIATION OF SOCIAL WORKERS 7 Asset n Anything of value that is owned. It may be physical in character, such as land, machinery, equipment, and cash. Assets may also be intangible, such as a legal claim or right against contributors or funders, generally called accounts receivable.

8. NATIONAL ASSOCIATION OF SOCIAL WORKERS 8 Liability n A debt or an obligation owed by the chapter to its creditors. Examples include wages owed to employees, related withholding owed to tax agencies, and amounts owed to creditors, generally called accounts payable.

9. NATIONAL ASSOCIATION OF SOCIAL WORKERS 9 Budget Process n A plan for what the chapter is hoping to achieve during a future predesignated period and how the dollar amounts will be distributed to achieve those goals and objectives. n A tool for monitoring financial activities during the budget period and help in managing the affairs of the chapter.

10. NATIONAL ASSOCIATION OF SOCIAL WORKERS 10 Credit and Debit n Credit - one of the amounts in a double-entry accounting system. At least one component of every accounting transaction (journal entry) is a credit amount. Credits increase liabilities and equity and decrease assets. Credits are entered on the right-hand side of a two-column journal or ledger. n Debit - one of the amounts in a double-entry accounting system. At least one component of every accounting transaction (journal entry) is a debit amount. Debits increase assets and decrease liabilities and equity. Debits are entered on the left-hand side of a two-column journal or ledger.

11. NATIONAL ASSOCIATION OF SOCIAL WORKERS 11 Revenue and Expense n Revenue - income for the chapter, such as membership dues, advertisements, fees, and interest earned. n Expense - represents an outflow of a chapter’s resources (not always cash) for operational costs for goods or services.

12. NATIONAL ASSOCIATION OF SOCIAL WORKERS 12 Fiduciary n A person who serves or has the characteristics of a trustee with respect to the trust and confidence required for the position, institution, or fund. This person must also possess scrupulous good faith and candor.

13. NATIONAL ASSOCIATION OF SOCIAL WORKERS 13 Fiscal Integrity n Taking those necessary steps to ensure that the chapter is financially sound in the short-term and plan wisely for the long-term n Some of those steps would include: –auditing financial management operations –establishing financial parameters –determining the soundness of insurance coverage.

14. NATIONAL ASSOCIATION OF SOCIAL WORKERS 14 Double-Entry Basis of Accounting n When a debit is recorded, it must be offset by a credit because fundamental accounting principles require that debits (left) should equal credits (right) and that assets should equal liabilities plus fund balance.

15. NATIONAL ASSOCIATION OF SOCIAL WORKERS 15 Double-Entry Accounting n DEBIT –Increases Assets –Decreases Liabilities & Deferred Income –Increases Expenses –Decreases Revenue n CREDIT –Decreases Assets –Increases Liabilities & Deferred Income –Increases Net Assets (fund balance) –Decreases Expenses –Increases Revenues (earned income)

16. NATIONAL ASSOCIATION OF SOCIAL WORKERS 16 What is a Budget? n A plan of action for future financial activity usually expressed in dollars. n A tool to measure the financial commitments needed to support the activities necessary in reaching the chapter’s goals. n An important internal control mechanism that can alert management to changes in operating effectiveness.

17. NATIONAL ASSOCIATION OF SOCIAL WORKERS 17 The Budgeting Process n Budgets are based on educated guesses; therefore the better your cost history and accounting system, the better your guesses about the future. n It is better to prepare a budget on limited cost data than not to budget at all. Working with limited data will allow you to adjust your projections.

18. NATIONAL ASSOCIATION OF SOCIAL WORKERS 18 Steps in Preparing a Budget n Clarify the overall goals and objectives for the year. n Review the current year’s budget. n Identify expenditures that are not recurring every year. n Gain specific input from chapter board/committee chairs and staff. n Estimate expenses.

19. NATIONAL ASSOCIATION OF SOCIAL WORKERS 19 Steps in Preparing a Budget (cont’d) n Estimate income and expenses. n Review and approve the proposed budget with the chapter board. n Monitor and make adjustments to the budget as necessary. n Use the budget as the basis for year-end reports.

20. NATIONAL ASSOCIATION OF SOCIAL WORKERS 20 A Budget Should Be n based on the chapter’s plan for future activities. n broken down into periods corresponding to those of the financial statements n based on historical information n a realistic assessment of the future revenues and expenses n actively reviewed as the budget period progresses n capable of being modified

21. NATIONAL ASSOCIATION OF SOCIAL WORKERS 21 A Budget Should Not Be n inflexible n a guideline as to the amount of money that must be spent by a certain year n several pieces of paper developed each year to be filed until next year n a statement of the hopes and aspirations of the chapter n the sole criterion for accepting or rejecting an activity or expense item

22. NATIONAL ASSOCIATION OF SOCIAL WORKERS 22 Benefits of a Budget n Coordination: improves coordination among board and committees in a chapter n Communication: allows interchange of ideas and information to achieve mutual understanding

23. NATIONAL ASSOCIATION OF SOCIAL WORKERS 23 Benefits of a Budget (cont’d) n Control: the difference or variances between actual results and budgeted amounts serve as feedback that enables management to improve performance through corrective action

24. NATIONAL ASSOCIATION OF SOCIAL WORKERS 24 Statement of Financial Position n Assets –Cash in Bank $130,000 –Investments 50,000 –Accounts Receivable 25,000 n Other Assets –Prepaid expenses 1,000 –Investments 5,000 Total Assets $211,000

25. NATIONAL ASSOCIATION OF SOCIAL WORKERS 25 Liabilities, Deferred Revenue,and Net Assets n Liabilities –Accounts payable $30,000 –Payroll taxes 5,000 Current Liabilities –Other accrued expenses 1,000 –Total Current Liabilities$36,000 n Deferred revenue 150,000 –Membership dues 5,000 Long-term Liabilities –Subscriptions 2,500 –Credit Card program 2,500 n Total deferred revenue 160,000 n Total liabilities and deferred revenue 196,000 n Net Assets n Unrestricted 15,000 n Total liabilities, deferred revenue n and net assets $211,000

26. NATIONAL ASSOCIATION OF SOCIAL WORKERS 26 n Allows chapters to identify and monitor resources available, resources needed to meet obligations as they become due, and excess cash that can be invested for short and/or long periods of time. Cash Flow Analysis

27. NATIONAL ASSOCIATION OF SOCIAL WORKERS 27 Cash Flow Formula The formula for a cash flow budget is simple: n Cash balance, beginning $_________ n Plus cash received during month +_________ n = Cash available for the month = n Less cash disbursed during month - ________ n = Cash available, end of month =________

28. NATIONAL ASSOCIATION OF SOCIAL WORKERS 28 Regular Board Financial Review

29. NATIONAL ASSOCIATION OF SOCIAL WORKERS 29 n Is the Chapter operating according to plan? –Is the strategic plan being followed? –Are the goals of the budget being met? n Are there a variety of income sources? –An entity with substantial income from a variety of sources is less likely to have trouble than one that gets the majority of its income from one source. –Has the cash flow from the sources of income been steady and dependable over a given period of time? n Are income and expenses exhibiting appropriate trends? –Are critical income sources growing or declining? –Are major expenses maintaining steady relationships to income? –Are dues and/or fees income increasing or decreasing? Why? Factors to Consider When Reviewing Financial Information

30. NATIONAL ASSOCIATION OF SOCIAL WORKERS 30 Comparative Analysis n Most commonly used method of financial review n Figures must be provided for two different time periods for the same type of financial statement n Compare information for similar time periods n Be certain that information for all line items have been calculated the same way n Observe trends and determine : –Is this a positive or negative trend? –Are there related items whose trends should be considered? –Is some action warranted?

31. NATIONAL ASSOCIATION OF SOCIAL WORKERS 31 Comparative Statement of Activities As of March 31, 2001 and March 31, 2002 Dues Revenue Non-Dues Revenue Total Revenue Total Expenses Excess/(Deficit)

32. NATIONAL ASSOCIATION OF SOCIAL WORKERS 32 Earned/Deferred Revenue for NASW Chapters

33. NATIONAL ASSOCIATION OF SOCIAL WORKERS 33 The Accounting of Membership Dues Accounting for a Membership Dues Payment During the First Month of a Membership Cycle

34. NATIONAL ASSOCIATION OF SOCIAL WORKERS 34 The Accounting of Membership Dues Accounting for a Membership Dues Payment During the First Month of a Membership Cycle

35. NATIONAL ASSOCIATION OF SOCIAL WORKERS 35 The Accounting of Membership Dues Accounting for a Membership Dues Payment During the First Month of a Membership Cycle

36. NATIONAL ASSOCIATION OF SOCIAL WORKERS 36 The Accounting of Membership Dues Accounting for a Membership Dues Payment During the First Month of a Membership Cycle

37. NATIONAL ASSOCIATION OF SOCIAL WORKERS 37 The Accounting of Membership Dues Accounting for a Membership Dues Payment During the First Month of a Membership Cycle

38. Accounting for Earned and Deferred Income J F M A M J J A S O N D 1/12 of cash payment $6.71 Deferred income $73.80$67.09$60.38$53.67$46.96$40.25$33.54$26.83$20.12$13.41$6.71$0.00 Earned income $6.71$13.42$20.13$26.84$33.55$40.26$46.97$53.68$60.39$67.10$73.81$80.51 Deferred income Earned income Earned/Deferred balances at beginning of accounting period Earned/Deferred balances at end of accounting period

39. NATIONAL ASSOCIATION OF SOCIAL WORKERS 39 Quiz - A Hypothetical Chapter n the chapter has three members n the dues are $120 annually n the chapter earns dues at the rate of 1/12 per month or $10 per month for each member n member A pays his dues in April member B pays her dues in May member C pays her dues in June n the fiscal year ends in June

40. NATIONAL ASSOCIATION OF SOCIAL WORKERS 40 Quiz - How much cash did the chapter receive during the year? n A - $360 n B - $240 n C - $ 60

41. NATIONAL ASSOCIATION OF SOCIAL WORKERS 41 Quiz - How much did the chapter earn during the year? n A - $120 n B - $ 60 n C - $360

42. NATIONAL ASSOCIATION OF SOCIAL WORKERS 42 Quiz Answers

43. NATIONAL ASSOCIATION OF SOCIAL WORKERS 43 Chapter Rebates n The amount of a chapter’s rebate is not determined based solely on the number of members. The amount of a chapter’s rebate is determined based on the net effect of the following factors : Number of Members

44. NATIONAL ASSOCIATION OF SOCIAL WORKERS 44 Chapter Rebates n The amount of a chapter’s rebate is not determined based solely on the number of members. The amount of a chapter’s rebate is determined based on the net effect of the following factors: Number of Members Mix of Member Categories

45. NATIONAL ASSOCIATION OF SOCIAL WORKERS 45 Chapter Rebates n The number of members in the various categories is an important determinant in the amount of chapter dues revenue chapters actually will receive.

46. NATIONAL ASSOCIATION OF SOCIAL WORKERS 46 Chapter Rebates n The amount of a chapter’s rebate is not determined based solely on the number of members. The amount of a chapter’s rebate is determined based on the net effect of the following factors: Number of Members Mix of Member Categories Member Payment Patterns

47. NATIONAL ASSOCIATION OF SOCIAL WORKERS 47 Chapter Rebates n Chapters actual revenue is a function of the number of members who actually pay, not the number of members.

48. NATIONAL ASSOCIATION OF SOCIAL WORKERS 48 Chapter Rebates n Chapters actual revenue is a function of the number of members who actually pay, not the number of members.

49. NATIONAL ASSOCIATION OF SOCIAL WORKERS 49 Chapter Rebates n The amount of a chapter’s rebate is not determined based solely on the number of members. The amount of a chapter’s rebate is determined based on the net effect of the following factors: Number of Members Mix of Member Categories Member Payment Patterns Member Payment Cycle

50. NATIONAL ASSOCIATION OF SOCIAL WORKERS 50 Chapter Rebates n When members’ renewal date occurs impacts the flow of revenue to chapters.

51. NATIONAL ASSOCIATION OF SOCIAL WORKERS 51 Chapter Rebates n The amount of a chapter’s rebate is not determined based solely on the number of members. The amount of a chapter’s rebate is determined based on the net effect of the following factors: Number of Members Mix of Member Categories Member Payment Patterns Member Payment Cycle Number of Inactive Members

52. NATIONAL ASSOCIATION OF SOCIAL WORKERS 52 Chapter Rebates n Chapters’ anticipated revenue is reduced in direct relation to the number of inactive members

53. NATIONAL ASSOCIATION OF SOCIAL WORKERS 53 A Year in Review: Quarterly Fiduciary Responsibilities

54. NATIONAL ASSOCIATION OF SOCIAL WORKERS 54 Fiduciary Responsibilities: First Quarter n Orient new board members to role in fiscal operating procedures. n Review chapter financial policies with new board n Board receives unaudited year end financial report n Board adopts charge to finance committee.

55. NATIONAL ASSOCIATION OF SOCIAL WORKERS 55 Second Quarter n Audit and management letter presented by auditor or treasurer. n Board takes action to address concerns identified in management letter. n Has 990 tax form been filed? n Review quarterly report presented by Treasurer. Note any significant deviations from projections.

56. NATIONAL ASSOCIATION OF SOCIAL WORKERS 56 Third Quarter n Review quarterly financial report by treasurer and note any significant deviation from projections. n What trends, if any, have developed during past six months? n Treasurer needs to review chapter’s budget development process and timetable.

57. NATIONAL ASSOCIATION OF SOCIAL WORKERS 57 Fourth Quarter n Board reviews quarterly financial report presented by treasurer and note any significant deviations from projections. n Treasurer and finance committee should work with the executive director on cash flow and trends. n Treasurer presents the finance committee proposed budget. n Board reviews and adopts the budget.

58. NATIONAL ASSOCIATION OF SOCIAL WORKERS 58 Questions and Answers