Download The amount of a chapter`s rebate is not

National Association
of Social Workers
Financial Management
for Chapters
Developed by the Administrative
Division, Adapted by
Chapter Services
August 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”
NATIONAL ASSOCIATION OF SOCIAL WORKERS
2
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.
NATIONAL ASSOCIATION OF SOCIAL WORKERS
3
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.
NATIONAL ASSOCIATION OF SOCIAL WORKERS
4
Definitions of Key Terms
The following key terms are
defined:
 Accounting
 Asset and Liability
 Budget Process
 Credit and Debit
 Revenue and Expense
 Fiduciary
NATIONAL ASSOCIATION OF SOCIAL WORKERS
5
Accounting

The art of recording, classifying,
and summarizing in a significant
manner, transactions and events
of a financial character, and
interpreting the results thereof.
NATIONAL ASSOCIATION OF SOCIAL WORKERS
6
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.
NATIONAL ASSOCIATION OF SOCIAL WORKERS
7
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.
NATIONAL ASSOCIATION OF SOCIAL WORKERS
8
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.
NATIONAL ASSOCIATION OF SOCIAL WORKERS
9
Credit and Debit

Credit -

Debit -one of the amounts in a double-entry
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.
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.
NATIONAL ASSOCIATION OF SOCIAL WORKERS
10
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.
NATIONAL ASSOCIATION OF SOCIAL WORKERS
11
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.
NATIONAL ASSOCIATION OF SOCIAL WORKERS
12
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.
NATIONAL ASSOCIATION OF SOCIAL WORKERS
13
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.
NATIONAL ASSOCIATION OF SOCIAL WORKERS
14
Double-Entry Accounting

DEBIT
– Increases Assets
– Decreases Liabilities
& Deferred Income
– Increases Expenses
– Decreases Revenue
NATIONAL ASSOCIATION OF SOCIAL WORKERS

CREDIT
– Decreases Assets
– Increases
Liabilities &
Deferred Income
– Increases Net
Assets (fund
balance)
– Decreases
Expenses
– Increases
Revenues (earned
income)
15
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.
NATIONAL ASSOCIATION OF SOCIAL WORKERS
16
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.
NATIONAL ASSOCIATION OF SOCIAL WORKERS

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.
17
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.
NATIONAL ASSOCIATION OF SOCIAL WORKERS
18
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.
NATIONAL ASSOCIATION OF SOCIAL WORKERS
19
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
NATIONAL ASSOCIATION OF SOCIAL WORKERS



a realistic
assessment of
the future
revenues and
expenses
actively
reviewed as the
budget period
progresses
capable of being
modified
20
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
NATIONAL ASSOCIATION OF SOCIAL WORKERS


a statement of
the hopes and
aspirations of
the chapter
the sole criterion
for accepting or
rejecting an
activity or
expense item
21
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
NATIONAL ASSOCIATION OF SOCIAL WORKERS
22
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
NATIONAL ASSOCIATION OF SOCIAL WORKERS
23
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
NATIONAL ASSOCIATION OF SOCIAL WORKERS
$211,000
24
Liabilities, Deferred
Revenue,and Net Assets








Liabilities
– Accounts payable
– Payroll taxes
– Other accrued expenses
– Total Current Liabilities
$30,000
5,000
1,000
$36,000
Deferred revenue
– Membership dues
– Subscriptions
– Credit Card program
Total deferred revenue
150,000
5,000
2,500
2,500
160,000
Total liabilities and deferred revenue
Net Assets
Unrestricted
196,000
Total liabilities, deferred revenue
and net assets
NATIONAL ASSOCIATION OF SOCIAL WORKERS
Current Liabilities
Long-term Liabilities
15,000
$211,000
25
Cash Flow Analysis
-

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.
NATIONAL ASSOCIATION OF SOCIAL WORKERS
26
Cash Flow Formula
The 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
=________
NATIONAL ASSOCIATION OF SOCIAL WORKERS
27
Regular Board
Financial Review
NATIONAL ASSOCIATION OF SOCIAL WORKERS
28
Factors to Consider When
Reviewing Financial Information



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?
NATIONAL ASSOCIATION OF SOCIAL WORKERS
29
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?
NATIONAL ASSOCIATION OF SOCIAL WORKERS
30
Comparative Statement of Activities
As of March 31, 2001 and March 31, 2002
YTD
March
2001
Actual
Mar ’02
Over/
Under
Mar ‘01
YTD
March
2002
Budget
$ 90,218
Actual
$ 88,900
Budget
$94,204
Actual
$ 92,372
$3,427
$ 80,985
$ 82,904
$93,483
$ 91,082
$8,178
Total Revenue
$171,176
$171,804
$187,687 $183,454
$11,650
Total Expenses
$169,185
$170,104
$186,612 $182,636
$12,532
Excess/(Deficit)
$ 1,991
$ 1,700
$ 1,075 $
Dues Revenue
Non-Dues Revenue
NATIONAL ASSOCIATION OF SOCIAL WORKERS
818
$(882)
31
Earned/Deferred
Revenue for NASW
Chapters
NATIONAL ASSOCIATION OF SOCIAL WORKERS
32
The Accounting of Membership Dues
Accounting for a Membership Dues Payment During the First
Month of a Membership Cycle
$166.00
MSW $190.00
BSW $125.00
NATIONAL ASSOCIATION OF SOCIAL WORKERS
33
The Accounting of Membership Dues
Accounting for a Membership Dues Payment During the First
Month of a Membership Cycle
3%
$4.98 to
Chapter
Development
Fund
$166.00
NATIONAL ASSOCIATION OF SOCIAL WORKERS
34
The Accounting of Membership Dues
Accounting for a Membership Dues Payment During the First
Month of a Membership Cycle
3%
$4.98 to
Chapter
Development
Fund
$161.02
$166.00
NATIONAL ASSOCIATION OF SOCIAL WORKERS
35
The Accounting of Membership Dues
Accounting for a Membership Dues Payment During the First
Month of a Membership Cycle
$80.51 to
Chapter
3%
$4.98 to
Chapter
Development
Fund
$166.00
NATIONAL ASSOCIATION OF SOCIAL WORKERS
50%
$161.02
50%
$80.51 to
National
Office
36
The Accounting of Membership Dues
Accounting for a Membership Dues Payment During the First
Month of a Membership Cycle
1/12
$6.71 to
Chapter
Earned
Income
$80.51 to
Chapter
$4.98 to
Chapter
Development
Fund
$73.80 to
Chapter
Deferred
Income
50%
3%
$161.02
$166.00
50%
11/12
1/12
$80.51 to
National
Office
$6.71 to
National
Office
Earned
Income
11/12
$73.80 to
National
Office
Deferred
Income
NATIONAL ASSOCIATION OF SOCIAL WORKERS
37
Accounting for Earned and Deferred Income
Deferred income
1/12 of cash payment
Deferred income
Earned income
J
F
$6.71
$ 6.71
$73.80
M
Earned income
A
M
$6.71
$6.71
$6.71
$6.71
$67.09
$60.38
$53.67
$46.96
$6.71 $13.42
$20.13
$26.84
$33.55
Earned/Deferred
balances at beginning of
accounting period
J
J
A
S
O
$6.71
$6.71
$6.71
$6.71
$40.25
$33.54
$26.83
$20.12
$13.41 $6.71
$0.00
$40.26
$46.97
$53.68
$60.39
$67.10 $73.81
$80.51
Earned/Deferred
balances at end of
accounting period
N
$6.71
D
$6.71
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
NATIONAL ASSOCIATION OF SOCIAL WORKERS
39
Quiz - How much cash did
the chapter receive
during the year?



A - $360
B - $240
C - $ 60
NATIONAL ASSOCIATION OF SOCIAL WORKERS
40
Quiz - How much did the
chapter earn during the
year?



A - $120
B - $ 60
C - $360
NATIONAL ASSOCIATION OF SOCIAL WORKERS
41
Quiz Answers
Cash Received
April
May
June
Total
Member A
$120
$120
Member B
$120
$120
Member C
$120
$120
$120
$120
$120
$360
Earnings
April
Member A
Member B
Member C
May
$10
$0
$0
$10
NATIONAL ASSOCIATION OF SOCIAL WORKERS
June
$10
$10
$0
$20
Total
$10
$10
$10
$30
$30
$20
$10
$60
42
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
NATIONAL ASSOCIATION OF SOCIAL WORKERS
43
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
NATIONAL ASSOCIATION OF SOCIAL WORKERS
44
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.
Category
Full Regular
Transitional
Student
Total Members
Total Dollars
Rate
$160
$80
$40
Share
$77.60
$38.80
$19.40
Chapter
Chapter
Chapter
A
B
C
# Members
$
# Members
$
# Members
$
75 $5,820
50 $3,880
25 $1,940
10
$388
25
$970
75 $2,910
15
$291
25
$485
25
$485
100
NATIONAL ASSOCIATION OF SOCIAL WORKERS
100
$6,499
125
$5,335
$5,335
45
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
Member Payment
Patterns
NATIONAL ASSOCIATION OF SOCIAL WORKERS
46
Chapter Rebates

Chapters actual revenue is a function of the number of
members who actually pay, not the number of
members.
Category
Full Regular
Transitional
Student
Total Members
Total Dollars
Rate
$160
$80
$40
Share # Members
$77.60
75
$38.80
10
$19.40
15
Chapter
A
Anticipated $ # Paying Members
$5,820
60
$388
9
$291
12
100
81
NATIONAL ASSOCIATION OF SOCIAL WORKERS
$6,499
Actual $
$4,656
$349
$233
$5,238
47
Chapter Rebates

Chapters actual revenue is a function of the number of
members who actually pay, not the number of
members.
Category
Full Regular
Transitional
Student
Total Members
Total Dollars
Rate
$160
$80
$40
Share # Members
$77.60
75
$38.80
10
$19.40
15
Chapter
B
Anticipated $ # Paying Members
$5,820
50
$388
2
$291
15
100
67
NATIONAL ASSOCIATION OF SOCIAL WORKERS
$6,499
Actual $
$3,880
$78
$291
$4,249
48
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
Mix of Member
Categories
Member Payment
Patterns
NATIONAL ASSOCIATION OF SOCIAL WORKERS
49
Chapter Rebates

When members’ renewal date occurs impacts the
flow of revenue to chapters.
Jul
Chapter A
Chapter B
Aug
6
$466
5
$388
Sep
10
$776
12
$931
NATIONAL ASSOCIATION OF SOCIAL WORKERS
13
$1,009
8
$621
Oct
8
$621
13
$1,009
Nov
Dec
7
$543
5
$388
Total
5
$388
6
$466
50
49
$3,802
49
$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 Inactive
Members
Member
Payment Cycle
Number of
Members
Mix of Member
Categories
Member Payment
Patterns
NATIONAL ASSOCIATION OF SOCIAL WORKERS
51
Chapter Rebates

Chapters’ anticipated revenue is reduced in direct
relation to the number of inactive members
Category
Full Regular
Transitional
Student
Total Members
Total Dollars
Rate
$160
$80
$40
Share # Members
$77.60
75
$38.80
10
$19.40
15
Chapter
B
Anticipated $ # Paying Members
$5,820
50
$388
2
$291
15
100
67
NATIONAL ASSOCIATION OF SOCIAL WORKERS
$6,499
Actual $
$3,880
$78
$291
$4,249
52
A Year in Review:
Quarterly Fiduciary
Responsibilities
NATIONAL ASSOCIATION OF SOCIAL WORKERS
53
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.
NATIONAL ASSOCIATION OF SOCIAL WORKERS
54
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.
NATIONAL ASSOCIATION OF SOCIAL WORKERS
55
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.
NATIONAL ASSOCIATION OF SOCIAL WORKERS
56
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.
NATIONAL ASSOCIATION OF SOCIAL WORKERS
57
Questions
and
Answers
NATIONAL ASSOCIATION OF SOCIAL WORKERS
58