using financial reporting - microsoft azure · moving the needle on donor analysis •management...

©20

14 C

lifto

nLar

sonA

llen

LLP

©20

14 C

lifto

nLar

sonA

llen

LLP

CLAconnect.com

Deconstructing the Overhead Myth: Using Financial Reporting September 9, 2014

@CLA_Nonprofit #OverheadMythNPO

©20

14 C

lifto

nLar

sonA

llen

LLP

Housekeeping

• If you are experiencing technical difficulties, please dial: 800-422-3623.

• Q&A session will be held at the end of the presentation. – Your questions can be submitted via the Questions

Function at any time during the presentation. • The PowerPoint presentation, as well as the webinar

recording, will be sent to you within the next 10 business days.

• Please complete our online survey at the conclusion of today’s presentation.

2 #OverheadMythNPO @CLA_Nonprofit

©20

14 C

lifto

nLar

sonA

llen

LLP

CPE Requirements

• Answer the polling questions • If you are participating in a group, complete the CPE sign-in

sheet and return within two business days – Contact [email protected]

• Allow four weeks for receipt of your certificate; it will be sent to you via email

* This webinar, once recorded, has not been developed into a self study course. Therefore, watching the recording will not qualify for CPE credit.


©20

14 C

lifto

nLar

sonA

llen

LLP

About CliftonLarsonAllen

• A professional services firm with three distinct business lines – Accounting and Consulting – Outsourcing – Wealth Advisory

• 3,600 employees • Offices coast to coast • Nonprofit group serves 6,000 clients across the

country


©20

14 C

lifto

nLar

sonA

llen

LLP

Speaker Introductions

• Marie Caputo, Principal – 23 years of experience, specializing in providing auditing, accounting and

consulting services for nonprofit organizations – Public Sector Group’s Northeast regional lead – Experience includes providing services to a variety of tax-exempt

organizations, including social welfare organizations, associations, foundations, and others

• Adam Pyzdrowski, Senior Associate – Four years of experience in public accounting with CLA – Works exclusively in the nonprofit and government area serving religious

organizations, colleges and universities, social service organizations, membership based organizations, cities, schools, and foundations.

– Has extensive experience with A-133 Single Audits of federal grant programs and preparation of Form 990 tax-exempt return.


©20

14 C

lifto

nLar

sonA

llen

LLP

Learning Objectives

• At the end of this session, you will be able to: – Explain the overhead myth and misinformed nonprofit

analysis – Identify opportunities to improve nonprofit financial

reporting to more clearly present your organization’s program successes

– Recognize current best practices and tips to assist with improving financial reporting


©20

14 C

lifto

nLar

sonA

llen

LLP

7

The Overhead Myth

How did we get here?

#OverheadMythNPO @CLA_Nonprofit

©20

14 C

lifto

nLar

sonA

llen

LLP

Financial Metric Focus: Tide of Change

• Significant advocacy and support from evaluating entities: – TED Talk by Dan Pallotta – OH Myth Letter – Overheadmyth.com – Stanford Social Innovation

Review – Guide Star – Donor’s Forum


©20

14 C

lifto

nLar

sonA

llen

LLP

Side Effects of Financial Metrics

• Starvation Cycle (Stanford Social Innovation Review) – Focus on financial metrics results in funding that causes:

◊ Lack of infrastructure & monitoring ◊ Inability to compensate competitively

and retain talent ◊ Inability to plan strategically


Presenter

Presentation Notes

Overhead ratio: - Can’t spend funds on: 1. Competent IT and accounting personnel – individuals who enable adequate monitoring and data collection which leads to decision-making tools 2. Competent fundraising personnel – individuals who allow the organization to increase it’s ability to raise funds and increase impact (whole pie picture) 3. IT software & hardware – technology that necessitates efficient data tracking and capture in order to generate sufficient decision-making data 4. Advertising – inability to adequately market fundraising events, successes and failures Executive comp and personnel costs ratios: 1. Can’t compensate talent leaders and retain talent. Can’t steal talent from the for-profit sector Accumulating funds measure: 1. Prohibitive against projects that may take several years to take off and start incurring costs

©20

14 C

lifto

nLar

sonA

llen

LLP

Tell us about your problems

1. Do you experience issues explaining financial metrics to donors?

2. How is your organization evaluated by contributors?


Presenter

Presentation Notes

Look for a survey or news reference for nonprofits

©20

14 C

lifto

nLar

sonA

llen

LLP

Where do we go from here?

Change the focus of the conversation from overhead limits to long term, flexible funding for measureable results.

#OverheadMythNPO @CLA_Nonprofit 11

Presenter

Presentation Notes

Insert picture of someone in a hole

©20

14 C

lifto

nLar

sonA

llen

LLP

12

How do we get out of here?


©20

14 C

lifto

nLar

sonA

llen

LLP


Presenter

Presentation Notes

Photo of getting out of a maze or hole

©20

14 C

lifto

nLar

sonA

llen

LLP

14


Management Discussion and Analysis Example


©20

14 C

lifto

nLar

sonA

llen

LLP

Other Comm. Best Practices – FASB Review

• Meaningful information (strongly encouraged): – Programmatic outcomes/ outputs – Results of operations – Economic, industry or other risk factors – Liquidity measures and information

• Other potential disclosures: – Segment information – Financial strength/ health – Mission – Forward-looking (financial & programmatic) – Key performance indicators (financial & non-financial)


©20

14 C

lifto

nLar

sonA

llen

LLP

Moving the Needle on Donor Analysis

• Management Discussion and Analysis (MD&A) section – supplementary information – not audited

• Revising Footnote One of financial statements – part of audit opinion – audited

• Attach a Cover letter to the financial statements – Not part of audit report


©20

14 C

lifto

nLar

sonA

llen

LLP

Global Example – MD&A

• Water For People

• Challenges identified:

– Questions about overhead and program expense ratios

– Unasked questions about financial analysis concerns of potential donors

– Donors only fund strictly “programmatic” activity

• Wanted to change the conversation


©20

14 C

lifto

nLar

sonA

llen

LLP

18

Global Example – MD&A (continued)

Water For People MD&A Information Communicated

"Who we are""Who we are"

"Momentum building"

"Demand outpacing supply"

"The (near-term) future"

Mission & program goals

Progress toward goals

Current year results

Forward-looking information

• Developed a MD&A to include at the front of the financial statements (www.waterforpeople.org)


http://www.waterforpeople.org/

©20

14 C

lifto

nLar

sonA

llen

LLP

Global Example – MD&A (continued)


©20

14 C

lifto

nLar

sonA

llen

LLP

20


Financial Statement Presentation Examples


©20

14 C

lifto

nLar

sonA

llen

LLP

Global Example – Cost of Programs Report

• Water For People

• Challenges identified: – Questions about overhead and program expense ratios – Donors only fund strictly “programmatic” activity

• Wanted to show all expenses supporting programs

• Developed a cost of programs report – Showed cost of program by programmatic cost category – Considered to be unaudited supplementary information


©20

14 C

lifto

nLar

sonA

llen

LLP

Example – Presentation Options

• Consider changing the presentation of your financial statements

• Common challenges identified: – Availability and use of assets

◊ Misconceptions about available resources ◊ Change presentation to show restrictions

– Operating versus non-operating activity ◊ Misconceptions about operating activity versus non-

operating activity ◊ Change presentation to show activity separately


©20

14 C

lifto

nLar

sonA

llen

LLP

Example – Availability and Use of Assets

24

• Statement of Financial Position Presentation – Traditional (below) – Non-traditional

Total


©20

14 C

lifto

nLar

sonA

llen

LLP

Example – Availability and Use of assets (cont’d)


Presenter

Presentation Notes

Insert example of balance sheet that shows restricts and funds

©20

14 C

lifto

nLar

sonA

llen

LLP

28

The Way Forward


Presenter

Presentation Notes

Take a survey about whether or not participants have identified areas where they could improve their financial reporting

©20

14 C

lifto

nLar

sonA

llen

LLP

• Be proactive and address challenges head on

• Use your financial statements

• Talk to your funders about challenges

• Change conversation

29

Be Proactive


©20

14 C

lifto

nLar

sonA

llen

LLP

31

©20

14 C

lifto

nLar

sonA

llen

LLP

CLAconnect.com

twitter.com/ CLA_Nonprofit

facebook.com/ cliftonlarsonallen

linkedin.com/company/ cliftonlarsonallen

Marie Caputo, CPA Principal, Nonprofit [email protected] 301.902.8518 Adam Pyzdrowski, CPA Senior Associate, Nonprofit [email protected] 303.439.6079

31


http://www.twitter.com/CLA_CPAs

http://www.facebook.com/CliftonLarsonAllen

http://www.linkedin.com/company/cliftonlarsonallen

using financial reporting - microsoft azure · moving the needle on donor analysis •management...

Documents