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Discussion: Finances

in: iansmith; iansmith > 2016-12-12

Dec 14, 2016 4:05 PM # 
JimBaker:
The financial report makes it quite hard to see what's coming from unrestricted funds and what's coming from restricted funds. All line item expenses are shown under Operations, and then two lines show bulk transfers from restricted to unrestricted, without itemising what. Could the report instead show each line item categorised under Operations, Restricted or so forth? I realise that the day to day operations might involve paying everything out of unrestricted funds, and then making transfers, but in terms of clarity and understanding, it would be clearer to show where each line item is eventually coming from.
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Dec 14, 2016 11:26 PM # 
iansmith:
Hi, Jim; thanks for the comment. Let me restate your question, and correct me if I'm misunderstanding: you're asking for clarification of the sources of expenses (operating, board designated, restricted) for the statement of activities on page 4 of the Financial Report, right? (Also the financial statements on the website.)

And your question gets to one of the conclusions about our current accounting: that OUSA's current accounting practices do not provide a transparent, complete picture about the respective spending of the three classes of unrestricted, board designated, and restricted money. I have made a few efforts to decompose this spending, and Barb has comprehensively gone back to first principles with transaction records and R scripts to get a sense of this. The budget proposal strictly addresses new unrestricted revenue, as the restricted donations are outside of control of the Board by virtue of restriction.

I think this lack of transparency was a contributing factor to our current fiscal crisis, though the rapid deficit spending is also superficially apparent to anyone who examines even briefly the financial statements over the past several years.
Dec 15, 2016 2:25 AM # 
JimBaker:
Yes, that's the question. It's difficult matching the line items to the amounts of the transfers from restricted to unrestricted. The budget proposal is much clearer.
Dec 16, 2016 7:52 PM # 
barb:
Hello! A few comments. Yes, it would be nice to know more about how expenses are matched to sources of income (funds). I, also, would like to have a report that shows at a more granular level which expenses were matched to which restricted funds, and that is something that can be generated, once we tweak our accounting practices a little. I will say that from what I've learned so far, the statement of activities as shown is the proper way to report out, because in fact you often have a choice of different expenses that could be matched to a restricted source of income, and so your assignments can be a bit arbitrary. For the teams, that would not be an issue for us because of the fairly close alignment between funds (restricted sources of income) and programs (teams). However, if we start to match other expenses (say, website development or ED time spent talking to land managers) to other restricted sources of income (say, the 50th anniversary fund), there are more choices there about which expenses you match. It doesn't make a lot of sense to get knotted up about exactly which expenses match a source of income, as long as whichever you choose is allowable. Thus for the final reporting to the organization, it is best to use standard practice, showing all expenses as unrestricted, followed by a transfer of money between net asset accounts ('funds') based on matching of expenses to fund purposes.

At any rate, it should be possible in the future to create a report of which expenses were actually matched to which funds, and when we view that report we should keep in mind that other expense-fund matching choices could have been made.

I can summarize by saying that most of the items released from restriction have been team expenses. There is a little traffic for Iain Wilson Award, and in 2017 we'll start to see a lot for the 50th anniversary fund.

If you go into the current accounting, you can see the process our accountant, Robin, goes through for expense-fund matching each month. She records the total amount of matching for each team and other fund separately, but does not separate out which specific items she selected. Often you will see that *all* of a team's expenses for that month match their restricted fund, which makes it easy. But if there isnt enough restricted fund left to match that team's expenses (so that we are going now into board-designated funds), then the matched amount will be less than the team's expenses. One of the things we need to change about our accounting is to have separate net asset accounts (funds) for donations to individual teams. Then some of the reports we want will be come WAY easier.

Another thing I want to emphasize is that "fund" is a different notion than "program". A program (ski-O team) may draw from multiple funds (ski-O fund, overall teams fund, uniforms fund, board-designated money for ski-O team, unrestricted). A fund is money restricted by a donor for a particular purpose, or designated by the board for a particular purpose. A fund may support multiple programs. We need to figure out the right granularity for our programs, which is decided by how they are best managed, and where it makes sense to make and manage budgets. Some funds may be tightly linked to a particular program, and others may not. As long as we are tracking each fund and each program appropriately, we will be fine.

In day-to-day accounting, each expense must be associated with a program (like junior team), as well as with the category of expense (like, team travel). But the matching to source of income may happen later, at regular intervals of reconciliation. That is partly because that matching requires calculating how much of a fund is left, and possibly deciding amongst different funds for a given expense; maybe based on what other expenses have come in, and what funds they can match. We *could* do that matching in real time if we had a system that made finding out the relevant information easy - but doing it monthly is a good compromise given our current system, and given the advantage you can get if you are juggling multiple funds.

There has been some talk about how we should not accept donations unless they fit one of a set of predefined purposes, like a team. I disagree with that. I think we should take money from anyone for any purpose that is aligned with our mission. We should not let our accounting system constrain what we are able to do - that is the tail wagging the dog. Of course it is fine to have a dialog with a donor to influence how they constraint (or whether they constrain) their donation.

Another thing we have not been doing right is documenting restricted donations. We have been treating some restricted donations as unrestricted, probably because with our current system they are a little complicated to track. We need to fix that.

The accounting systems we have looked at (Aplos, Xero) do not make it super easy to do both good program and fund accounting. It is important that the person interacting with the system the most (the accountant) be enabled to easily do what we need to do.

Yup.
Dec 23, 2016 5:03 PM # 
jtorranc:
Questions for my audience: we have a marketing plan (put together by Greg Lennon and Bob Forgrave) using a marketing firm to do SEO that will be actionable for ~$10k. Given that we're broke for the near term, what junior development programs can we implement for at most a few thousand dollars?

If I were quite diligent, I might be able to figure it out by reading here and elsewhere but I'm lazy enough to ask - is this ~$10K marketing plan funded or not in the universe we now live in?

Also, a hypothetical question - how much do you think OUSA could usefully spend on marketing in 2017?
Dec 23, 2016 8:02 PM # 
JimBaker:
Barb wrote:

Thus for the final reporting to the organization, it is best to use standard practice, showing all expenses as unrestricted, followed by a transfer of money between net asset accounts ('funds') based on matching of expenses to fund purposes.

Currently OUSA is faced with a shortfall of unrestricted funds (though not currently of restricted funds). Thus, in order for the organisation to understand what's going on, it's important to see how the unrestricted funds are being spent, and how the restricted funds are being spent, in order to understand the situation and the choices. (Not just overall totals for unrestricted and restricted.). The Board will need this info to make decisions, and since it highlights major decisions, it's best to make it available to the organisation as a whole as well. There is certainly a practical limit to the detail, but the current info is extremely limited. If someone said "we're overspending our unrestricted income by this much", the natural next question would be "what are we spending it on...How much for each line item"? To which the statements you suggest give no answer.
Dec 23, 2016 8:10 PM # 
JimBaker:
Regarding search engine optimization and junior development, both are important. The latter will take decades to bear full fruit, and so should be started early, but the former maybe gets us (or the clubs) additional members sooner. So spending ten grand on see next year, and a few thousand on junior development, may be sensible for next year, as (hopefully) a transition year.

I've had a teacher ask me about starting an ongoing orienteering program at his nearby school, eventually joining the Colorado interscholastic league. Some may not know who to ask. Setting up an easily findable section on the OUSA website, and helping people interested in starting programs find local and national resources (those that exist already) could help.
Dec 24, 2016 1:04 AM # 
iansmith:
Hi, Jon - the fiftieth anniversary fund drive this year received about thirty thousand dollars in donations (thanks, everyone!) to be used for marketing and publicity, club websites, and land access. We haven't explicitly partitioned that sum amount the three projects, but funding ten thousand dollars for marketing seems eminently reasonable.
Dec 24, 2016 3:48 AM # 
jtorranc:
Glad to hear the 50th anniversary fund has that covered (BTW, should I infer that mapper training isn't near and dear to at least one board member's heart, for it to be that easily left out of a description of the project triad?). I'd still be interested in an estimate of how much money could be well spent on marketing/publicity/club web sites/the OUSA web site too, I suppose,. If a deep-pocketed donor were to materialize out of thin air and tell you they wanted to fund that for 2017, generously, and would decide based on the results whether to provide similar funding or not in 2018, how much would you ask them for?

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