CCF Request For Proposal for San Antonio

1. Non-profit Financial
Fundamentals
Essentials to a Healthy Non-profit

2. Welcome
• Introductions
• Your take-a-ways…
–
For your organization
–
For you personally

3. Financial Management’s
Primary Role:
To control and direct the
resources of an organization in
support of the mission and
goals.

4. Our Objectives ……
• Provide an overview of the elements for sound
financial management.
• Understand the fundamentals of financial
management, why they are important, and how to
implement them.
• Understand the tools necessary to manage grants
and financial resources.
• Complete a self evaluation action plan that will
improve your organizations grant readiness and
improve your financial management capacity.

5. Financial Management
Elements
• Strong Budget Process
• Timely Management Reports
• Strong Internal Controls
• Consistent Documentation
• Self Assessment & Capacity Development
Plan.

6. Financial Management Benefits
• Provides a financial plan to support
achievement of goals.
• Promotes proactive decisions, not reactive
ones.
• Establishes trust and confidence in donors
and grantors.
• Provides a means to access more resources.
• Ensures integrity in the stewardship of the
resources you have.

7. Illustrations & Examples
• Structural steel in a building…
• Engineering on Star Trek…
•
•
•
•

8. What characteristics are
critical to making a successful …
• Farmer ……
• Coach ……
• Parent ……
• Teacher ……
• Grocer ……

9. The Faithful Fruitful Farmer

10. Let’s start with a story….
Food & Warmth Inc.

11. Food & Warmth Inc.
• Read the Case:
–
What are the issues / problems
you observe ?
–
What are the requirements to
earn the grant ?

12. Element #1: Strong Budget
Process
A budget is the foundation for all
financial management.

13. Budget Process
• Step 1: Build a statement of financial
position for the past year.
• Step 2: Develop a one year budget for the
upcoming year.
• Step 3: Project cash flows by month
for the time period in the budget.

14. Budget Process Building Blocks
• Chart of Accounts & Accounting System
• Track Revenue by Source of Income
• Track Expenses by Administration, Fund Raising
and Program.
• Track Revenue and Expenses by Grant & In-Kind
Giving
• Project Cash Flow

15. Chart of Accounts
Simply stated the chart of accounts
allows you to categorize all financial
transactions. It is the foundational
building block for financial information
and reports.

16. Example Chart of Accounts
• What are the elements / categories you see
in this example chart of accounts?
• What is missing from this chart of
accounts? What accounts do you use in
your own organization?
• How would this chart of accounts be useful
in your role as the Food & Warmth Financial
Manager?

17. Review Food & Warmth Inc.
• Review the Budget Table. Does it provide
for everything you need to satisfy the grant
requirements?
• What is still missing?
• How does it compare to your own
organizations budget?

18. Anticipate Your Cash Needs
Project cash flows by month for the time
period reflected in the budget.

19. Budget Process Skills
• You can categorize and track different sources of revenue by
program/department.
• You can separate out your administrative costs, fund raising
costs, and program costs.
• You can report at least one past year of historical revenue and
expenses.
• You can track grant specific revenue and expenses for the
portion funded by the grantor and the part funded by your
organization.
• You can forecast net cash flow by month.

20. Self Evaluation Check List:
#1: Strong Budget Process
• Review #s 1-17

21. Element # 2 Timely Management
Reports:
Reports provide the opportunity to focus
• on the right things,
• demonstrate faithful stewardship,
• provide valuable information that guides
and supports decision making in achieving
the mission of your organization.

22. Management Reports Building
Blocks
• Timely: Ensure all deadlines are met.
• Accurate: Use accounting data that has been
reviewed.
• Complete: Contain all pertinent information relating
to the reporting period.
• Identify costs by year and budget category.
• Account for each grant separately.
• Distinguish administrative, fund raising,
and program costs.
• Track program outcomes and indicators.

23. Suggested Monthly Reports
• Monthly and year-to-date budget to actual
reports.
• Monthly cash on hand.
• Track & monitor restricted fund balance.
• In-Kind giving by area.
• Develop program outcomes and indicators
to go along with financial reports.

24. Develop Reporting Skills
• Understand the difference between direct and
indirect costs.
• Develop methods to allocate full costs to programs.
• Able to track restricted fund balance.
• Develop methods to capture in-kind contributions.
• Identify program metrics and indicators as well as
financial reports.

25. Indirect Cost Exercise
Fundraisi Food Clothing
Category Admin ng Bank Bank Total
Actual Annual
Cost $40,000 $40,000 $260,000 $160,000 $500,000
Number Staff 1 1 2 2 6
Number
Volunteers 8 6 14
Space Used 500 500 4,000 5,000 10,000
(Square Feet)

26. Food & Clothing Inc. Example
• Direct Costs? ___________
• Indirect Costs? _________
• Percent Breakdown:
–
Admin : _ _ _ _ _ _ _ %,
–
Fundraising _______%
–
Program _______%
• Full Program Cost:
–
Food Bank $ ____________
–
Clothing Bank $ _ _ _ _ _ _ _ _ _ _ _ _

27. Self Evaluation Check List:
#2: Timely Management Reports
• Review #s 18-22

28. Element #3: Strong Internal
Controls
The purpose of internal controls is to:
• Ensure expenditures are spent only upon
proper authorization of management, for
valid business purposes
• Ensure all disbursements are properly
recorded.

29. “Opportunity facilitates Temptation”
• Appropriate internal controls will protect
your organization and your people.
• Given opportunity:
–
even an honest individual will be tempted .
–
an honest individual in great need is at great risk of
compromising their values .
–
a dishonest individual will award you with responsibility
for their fraudulent behavior.

30. Internal Control Building Blocks
1. Board Approved Budget
2. Establish authority and process limits.
3. Cash management.
4. Segregation of duties.
5. Restricted fund management.
6. Establish performance standards.
7. Three bid requirement.

31. 1. Budget ; 2. Authority
• Board Approved Budget: The Board reviews and
approves the annual budget .
2. Established authority limits: Identify who is
authorized to spend money and at what limit . Areas to
set limits include the following:
–
Determine who is a signer on each bank account .
–
Set signature authority limits :
• For example: Checks over $5,000 require two signatures.
• Program Director can authorize spending up to $500 without
Executive Director approval.

32. 3. Cash Management
• Two count cash at all times
• Petty Cash account documentation
and reconciliation.
• Target the number of days cash to
have on hand.

33. Target Days Cash on Hand
Target / Goal Average Monthly Expenses
Days Cash on Hand $10,000 $15,000 $20,000
30 $10,000 $15,000 $20,000
60 $20,000 $30,000 $40,000
90 $30,000 $45,000 $60,000

34. 4. Segregation of Duties
Segregation of duties means that no financial
transaction is handled by only one person
from beginning to end.
What are the dangers if the same person ….
Opens Mail
Counts Cash
Deposits Cash
Posts Deposit

35. Design Segregation of Duties
• For your own organization fill out the Actual
segregation of duties worksheet.
• Exchange your sheet with someone else and
talk through how you could increase
segregation of duties.
• Use the “Revised Segregation of Duties” to
make any recommended changes. Think
about non financial donated items as well.

36. 5. Restricted Fund Management
Money which has been restricted by the donor
for a specific use.
For example: Buying a new building or starting
a new program, should only be used for the
purpose for which it has been given.

37. Restricted Funds
• Receipt of grant funds usually is
accompanied by a contract which spells out
how the funds can be used.
• Develop a method to review the status of
restricted funds on a monthly basis.

38. Restricted Funds Example
Example 1 Example 2
Funds Acct. Bal. Acct. Bal.
Total Cash All Accounts $ 120,000 $ 120,000
Restricted Funds
Building $ 60,000 $ 80,000
Federal Grant $ 15,000 $ 25,000
Intern Support $ 5,000 $ 20,000
Total Restricted Funds $ 80,000 $ 125,000
Unrestricted Funds $ 40,000 $ (5,000)
Total Restricted & Unrestricted $ 120,000 $ 120,000

39. 1. Establish Performance
Standards
Establish goals for timeliness and accuracy.
• Bill and reimbursement payment.
• Deposits: Daily, no cash overnight.
• Receipts.
• Filing.
• Account reconciliation monthly.
• Treasurer review monthly;
–
Cash on hand
–
Restricted fund balances
–
Bank account reconciliations

40. 7. Three Bid Requirement
Some grants require you to get three bids on
purchases over a certain threshold. $500 is a
common threshold. For example, purchase
of a computer or lap top with software would
require you to solicit three bids before
purchase. Documentation of the bids would
need to be saved.
See example “Procurement Form”

41. Building Your Capacity
• Take the time to formalize your internal
controls in the form of board approved
policies and procedures.
• Plan to review your policies and revise them
as needed at least annually.
• If you don’t start…it won’t get done.

42. Self Evaluation Check List:
#3: Strong Internal Controls
• Review #s 23-35

43. Element #4: Consistent Documentation:
Financial & Program Activity
Documentation demonstrates stewardship and
accountability in your organization relative
the financial transactions.
It is being faithful in the daily “little” things that
will prepare you for the trust donors and
grantors will give you for greater resources.

44. Documentation Building Blocks:
• Donations:
• Expenses:
• Bank Reconciliation
• In-kind contributions.
• Time sheets
• Sign-In sheets

45. Principles of Documentation
• Date
• Signature
• Sign in Sheet
• Purpose
• Originals filed
• Use a three ring binder

46. Review of Example Forms
• Request for Reimbursement
• Request for Expenditure
• Debit Card Expenditure
• Electronic Funds Expenditure
• Bank Transfer Authorization
• Time Sheet
• Volunteer Time Sheet

47. Building Your Capacity
Develop the forms and process that will
provide an efficient and accurate audit trail.

48. Self Evaluation Check List:
#4: Consistent Accurate Documentation
• Review #s 36-42

49. Element #5: Self Assessment
& Capacity Development Plan.
• The key improving is to determine
what you need to work on, and get
busy.
• Set your goals to incrementally
improve.

50. Self Assessment & Capacity
Building Blocks
• Complete a self evaluation & take action.
• Develop the areas that will make you ready
for grants.
• Complete an outside audit.

51. Key Elements for Grant
Readiness
• Chart of accounts and accounting software that
supports segmentation and reporting of revenue
and expenses by grant.
• Internal controls that ensure grant funds are
expended according to the grant.
• Capacity to add the additional work not only for
grant program implementation, but in the
accounting and administrative areas.
• Develop a clear idea of what you need resources
for.

52. Fundamental Financial Elements
• Strong Budget Process
• Timely Management Reports
• Strong Internal Controls
• Consistent Documentation
• Self Assessment & Capacity Development
Plan.

53. “Daily” “Faithful” & “Fruitful”