Chapter Board Treasurers

National Association of Social Workers

Financial Management for Chapters

Developed by the Administrative Division, Adapted by

Chapter ServicesAugust 2002

NATIONAL ASSOCIATION OF SOCIAL WORKERS 1


Responsibilities of a Chapter Treasurer

Key volunteer financial manager Reports on financial activity of

chapter Presents budget to the Board Keeps full and accurate accounts

of financial records

Source: Lang, Andrew, “Financial Responsibilities of Nonprofit Boards”


Responsibilities of a Chapter Treasurer (cont’d)

Serves as a member of the Board of Directors.

Has signature registered with bank servicing chapter.

In collaboration with the chapter executive director and president, prepares the annual budget for presentation to the board.


Responsibilities of a Chapter Treasurer (cont’d)

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.

Propose cost cutting measures and budget increases based on knowledge of financial matters.


Definitions of Key Terms

The following key terms aredefined: Accounting Asset and Liability Budget Process Credit and Debit Revenue and Expense Fiduciary


Accounting

The art of recording, classifying, and summarizing in a significant manner, transactions and events of a financial character, and interpreting the results thereof.


Asset

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.


Liability

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.


Budget Process 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.

A tool for monitoring financial activities during the budget period and help in managing the affairs of the chapter.


Credit and Debit 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.

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.


Revenue and Expense

Revenue - income for the chapter, such as membership dues, advertisements, fees, and interest earned.

Expense - represents an outflow of a chapter’s resources (not always cash) for operational costs for goods or services.


Fiduciary 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.


Fiscal Integrity Taking those necessary steps to

ensure that the chapter is financially sound in the short-term and plan wisely for the long-term

Some of those steps would include:– auditing financial management

operations– establishing financial parameters– determining the soundness of

insurance coverage.


Double-Entry Basis of Accounting

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.


Double-Entry Accounting

DEBIT– Increases Assets– Decreases Liabilities

& Deferred Income– Increases Expenses– Decreases Revenue

CREDIT– Decreases Assets– Increases Liabilities

& Deferred Income– Increases Net

Assets (fund balance)

– Decreases Expenses

– Increases Revenues (earned income)


What is a Budget?

A plan of action for future financial activity usually expressed in dollars.

A tool to measure the financial commitments needed to support the activities necessary in reaching the chapter’s goals.

An important internal control mechanism that can alert management to changes in operating effectiveness.


The Budgeting Process

Budgets are based on educated guesses; therefore the better your cost history and accounting system, the better your guesses about the future.

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.


Steps in Preparing a Budget

Clarify the overall goals and objectives for the year.

Review the current year’s budget.

Identify expenditures that are not recurring every year.

Gain specific input from chapter board/committee chairs and staff.

Estimate expenses.


Steps in Preparing a Budget (cont’d)

Estimate income and expenses. Review and approve the

proposed budget with the chapter board.

Monitor and make adjustments to the budget as necessary.

Use the budget as the basis for year-end reports.


A Budget Should Be

based on the chapter’s plan for future activities.

broken down into periods corresponding to those of the financial statements

based on historical information

a realistic assessment of the future revenues and expenses

actively reviewed as the budget period progresses

capable of being modified


A Budget Should Not Be

inflexible a guideline as to the

amount of money that must be spent by a certain year

several pieces of paper developed each year to be filed until next year

a statement of the hopes and aspirations of the chapter

the sole criterion for accepting or rejecting an activity or expense item


Benefits of a Budget

Coordination: improves coordination among board and committees in a chapter

Communication: allows interchange of ideas and information to achieve mutual understanding


Benefits of a Budget (cont’d)

Control: the difference or variances between actual results and budgeted amounts serve as feedback that enables management to improve performance through corrective action


Statement of Financial Position

Assets– Cash in Bank $130,000– Investments 50,000– Accounts Receivable 25,000

Other Assets– Prepaid expenses 1,000– Investments 5,000

Total Assets $211,000


Liabilities, Deferred Revenue,and Net Assets

Liabilities– Accounts payable $30,000– Payroll taxes 5,000 Current Liabilities– Other accrued expenses 1,000– Total Current Liabilities $36,000

Deferred revenue 150,000– Membership dues 5,000 Long-term Liabilities– Subscriptions 2,500– Credit Card program 2,500

Total deferred revenue 160,000

Total liabilities and deferred revenue 196,000 Net Assets Unrestricted 15,000

Total liabilities, deferred revenue and net assets $211,000


-

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


Cash Flow FormulaThe formula for a cash flow budget is simple:

Cash balance, beginning $_________

Plus cash received during month +_________

= Cash available for the month =

Less cash disbursed during month - ________

= Cash available, end of month =________


Regular Board Financial Review


Is the Chapter operating according to plan?– Is the strategic plan being followed?– Are the goals of the budget being met?

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?

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


Comparative Analysis

Most commonly used method of financial review

Figures must be provided for two different time periods for the same type of financial statement

Compare information for similar time periods Be certain that information for all line items

have been calculated the same way Observe trends and determine:

– Is this a positive or negative trend?– Are there related items whose trends should be considered?– Is some action warranted?


Comparative Statement of ActivitiesAs of March 31, 2001 and March 31, 2002

Dues Revenue

Non-Dues Revenue

Total Revenue

Total Expenses

Excess/(Deficit)

YTDMarch2001

YTDMarch2002

ActualMar ’02Over/Under

Mar ‘01Budget Actual Budget Actual$ 90,218

$ 80,985

$ 88,900

$ 82,904

$94,204

$93,483

$ 92,372

$ 91,082

$171,176 $171,804 $187,687 $183,454

$169,185 $170,104 $186,612 $182,636

$ 1,991 $ 1,700 $ 1,075 $ 818

$3,427

$8,178

$11,650

$12,532

$(882)


Earned/Deferred Revenue for NASW

Chapters


The Accounting of Membership DuesAccounting for a Membership Dues Payment During the First Month of a Membership Cycle

$166.00



3%

$4.98 to Chapter Development Fund

$166.00



3%


$161.02

$166.00



3% 50%

50%


$161.02

$80.51 to Chapter

$80.51 to National

Office

$166.00



3% 50%

50%

1/12

1/12

11/12

11/12


$161.02

$80.51 to Chapter

$80.51 to National

Office

$6.71 to Chapter Earned Income

$73.80 to Chapter Deferred Income

$6.71 to National Office Earned Income

$73.80 to National Office Deferred Income

$166.00

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 $ 6.71 $6.71 $6.71 $6.71 $6.71 $6.71 $6.71 $6.71 $6.71 $6.71 $6.71Deferred income $73.80 $67.09 $60.38 $53.67 $46.96 $40.25 $33.54 $26.83 $20.12 $13.41 $6.71 $0.00Earned 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


Quiz - A Hypothetical Chapter

the chapter has three members the dues are $120 annually the chapter earns dues at the rate of

1/12 per month or $10 per month for each member

member A pays his dues in April member B pays her dues in May member C pays her dues in June

the fiscal year ends in June


Quiz - How much cash did the chapter receive

during the year? A - $360 B - $240 C - $ 60


Quiz - How much did the chapter earn during the

year? A - $120 B - $ 60 C - $360


Cash ReceivedApril May June Total

Member A $120 $120Member B $120 $120Member C $120 $120

$120 $120 $120 $360

EarningsApril May June Total

Member A $10 $10 $10 $30Member B $0 $10 $10 $20Member C $0 $0 $10 $10

$10 $20 $30 $60

Quiz Answers


Chapter Rebates 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


Chapter Rebates 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


Chapter Rebates The number of members in the various categories is

an important determinant in the amount of chapter dues revenue chapters actually will receive.

Chapter Chapter Chapter A B C

Category Rate Share # Members $ # Members $ # Members $Full Regular $160 $77.60 75 $5,820 50 $3,880 25 $1,940Transitional $80 $38.80 10 $388 25 $970 75 $2,910Student $40 $19.40 15 $291 25 $485 25 $485

Total Members 100 100 125Total Dollars $6,499 $5,335 $5,335


Chapter Rebates 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


Member Payment Patterns


Chapter Rebates Chapters actual revenue is a function of the number of

members who actually pay, not the number of members.

Chapter A

Category Rate Share # Members Anticipated $ # Paying Members Actual $Full Regular $160 $77.60 75 $5,820 60 $4,656Transitional $80 $38.80 10 $388 9 $349Student $40 $19.40 15 $291 12 $233

Total Members 100 81Total Dollars $6,499 $5,238


Chapter Rebates Chapters actual revenue is a function of the number of

members who actually pay, not the number of members.

Chapter B




Chapter Rebates 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



Member Payment Cycle


Chapter Rebates When members’ renewal date occurs impacts the

flow of revenue to chapters.

Jul Aug Sep Oct Nov Dec TotalChapter A 6 10 13 8 7 5 49

$466 $776 $1,009 $621 $543 $388 $3,802Chapter B 5 12 8 13 5 6 49

$388 $931 $621 $1,009 $388 $466 $3,802


Chapter Rebates 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



Member Payment Cycle

Number of Inactive Members


Chapter Rebates Chapters’ anticipated revenue is reduced in direct relation to

the number of inactive members

Chapter B




A Year in Review: Quarterly Fiduciary

Responsibilities


Fiduciary Responsibilities: First Quarter

Orient new board members to role in fiscal operating procedures.

Review chapter financial policies with new board

Board receives unaudited year end financial report

Board adopts charge to finance committee.


Second Quarter

Audit and management letter presented by auditor or treasurer.

Board takes action to address concerns identified in management letter.

Has 990 tax form been filed? Review quarterly report presented by

Treasurer. Note any significant deviations from projections.


Third Quarter

Review quarterly financial report by treasurer and note any significant deviation from projections.

What trends, if any, have developed during past six months?

Treasurer needs to review chapter’s budget development process and timetable.


Fourth Quarter

Board reviews quarterly financial report presented by treasurer and note any significant deviations from projections.

Treasurer and finance committee should work with the executive director on cash flow and trends.

Treasurer presents the finance committee proposed budget.

Board reviews and adopts the budget.


Questionsand

Answers

Chapter Board Treasurers

Technology

Transcript of Chapter Board Treasurers