Why is financial management important?
For Non-Profit Organizations
Good management of resources help those resources stretch farther. Keeps the organization in a position to attract funding. Necessary to attract future volunteer officers.
Why is financial management difficult for some volunteer organizations?
Time commitment. Volunteers may not have the skills. Too T many people involved. l i l d Very limited resources. Thought someone else was doing it. Programs are the priority. Some people think accounting is boring!
How do successful organizations maintain good financial management?
Have well-developed procedures and responsibilities in place. Keep their record-keeping simple. record keeping simple Do not let the record-keeping and reporting fall behind. Ask for help when they need it.
Budget Development Recording of Actual Transactions Monitoring Results Financial Statements Internal Controls Audits and Reviews Revenue Sources Potential Resources
Budget should be developed each year and approved by the Board. Should reflect prior year’s results as well as new year s developments. Consider all changes such as new sources of funding, price increases, new programs, etc. Budget must be working document. Don’t just approve it and forget it.
Be Thorough! Be Realistic! Be Ready to Adjust!
Record them as they occur. Use a simple account code structure that meets the organization’s requirements.
Where possible, use cheques. Record all details of the disbursement (date, payee, amount and complete description of the nature of the payment). Keep supporting documentation such as invoices and receipts well organized.
List of Payments. Cash Disbursements Journal. Computer Programs such as Simply Accounting, Quickbooks, Microsoft Accounting for Small Business, etc. Key: Categorize nature of payment and record appropriately.
Sample Cash Disbursement Journal
Always provide a written, signed receipt for all cash received.
Credit Date Cheque No. Payee Cash 100 $ 150.00 46.39 15.00 9.50 Salaries 410 $ 150.00 $ 46.39 Utilities 420
Debit Supplies 430 Ice Time 440 Other Description
Record all Cash Receipts, including receipt number. p , g p Make deposits to bank as soon as reasonably practical. Check receipts and deposits against bank statements.
15-Jan-06 21-Jan-06 31-Jan-06 31-Jan-06
105 106 107 n/a
Sue Smith SaskPower Gales Florist Credit Union
$ 15.00 $
Lesson Instruction January Power Bill Craft Materials 9.50 Bank Service Charges
Recording of Receipts
Similar to Payments. Record all details, including the individual or organization the money was received from, date, amount and receipt y , , p number. Record the reason for the receipt. Can use a simple or sophisticated system, depending on the organization’s needs.
System of checks and balances. Procedures in place to safeguard the p g organization’s resources. Must be a cost/benefit consideration. Do not make it easy or tempting for someone to mishandle the organization’s resources.
Most Critical Internal Controls
Regular Monitoring of Results with Comparison to Budget Signatures on Disbursements Pre numbered Pre-numbered Receipts Regular Bank Reconciliations Review of Bank Reconciliations Segregation of Duties
Monitoring of Results
Treasurer should provide a report to the Board comparing actuals to budget at a minimum quarterly. All Board Members should thoroughly review the results and consider reasonability. Monthly or quarterly reports can be simple, cash basis items, but full annual statements should be prepared, including accruals.
Not-for-profit Accounting Requirements Income Statement
Revenues - expenses p
Monitoring of Results
Based on results, adjustments may have to be made: changes in programs, reductions in spending, etc. Problems result when an organization reacts too slowly to changes in financial circumstances. Treasurer should bring significant changes in the financial results to the Board’s attention as soon as possible.
Assets Liabilities Equity
Statement of Cash Flows
Cash used in/from operations, investing and financing
Signatures on Disbursements
Make disbursements by cheque wherever practical. Ensure bank requires two signatures (can use two of three or more) more). Ensure two significant sign each cheque. Do not sign blank cheques!
Signatures on Disbursements
Ensure receipt or support is provided for each disbursement. Ensure disbursement is within approved budget and in line with the intent of the program. Ensure disbursement is within other guidelines the Board may set.
Often required on a practical basis. All disbursements should be supported by receipts. Periodic verification should be performed by a second person.
Allows for the control of individual receipts. Allows for the verification of all deposits to the bank.
Regular Bank Reconciliations
Cheque each receipt and each disbursement to the bank statement on a regular basis. This helps to ensure that all receipts were deposited, and that all cheques are recorded. Also necessary to detect errors in recording.
Review of Bank Reconciliations
A second person should thoroughly review the bank reconciliations. Provides a good, second person review of all transactions, as well as reduce the chance of fraud or significant error. Look for items remaining on the reconciliation month after month.
Sample Bank Reconciliation
Bank Reconciliation, October 31, 2005
Segregation of Duties
General practices to ensure no one person has full control of a transaction from the beginning to end. Sometimes difficult to achieve in a volunteer organization with few people. Need to develop other compensating controls.
Balance as per bank statement, October 31, 2005 Add: Deposit recorded in accounting records, not yet recorded by bank (October 30) Cheques not yet cleared through bank Bob Smith Valley Cycle Sask Power
$ 31,273.59 314.29
35.00 267.44 36.79 $ 31,248.65
Balance Per Accounting Records, October 31, 2005
Is an Audit Necessary?
Depends upon the nature of the organization. Some granting organizations require an g g g q audit. Purpose of an audit is to ensure that the financial statements present fairly the financial position of the organization. Is not designed to detect fraud, or to ensure statements are 100% correct.
A review engagement may be sufficient. An auditor must be independent from the organization. i ti Anyone can do an “audit” in Saskatchewan; but professional accountants such as CA’s, CMA’s and CGA’s must uphold strict professional standards and carry professional liability insurance.
Key to keeping an organization healthy. Critical for attracting funding and volunteers. g g Good organization can reduce the effort involved significantly. Where possible, make use of individuals with accounting backgrounds in your organizations.
Getting Money for Your Organization
Grants – one-time and ongoing
Government of Canada, Sask, City, RM, Lotteries, etc. Eligibility look for Eli ibilit – l k f a partner t
Donations – living legacies, memorials, life insurance Sponsorships Interest revenue Good financial practices help with all of these
Where can I get assistance?
Members may have experience. Local Accounting Firms. Saskatchewan Parks and Recreation Association – extensive library. y City of Regina Leisure Services and Finance Staff. Internet and Library Resources i.e. Charitable donation information: http://www.sasksport.sk.ca/pdf/NSTF-SK-manualrevised-Feb07.pdf Sask Sport Online Volunteer Training Centre: http://ovtc.sk.ca/PreRegister.php