CGU Drucker School & Arts and Humanities CGU Arts Management Finance & Accounting for Non-profit Arts Organizations Course #328 Spring, 2013 Contact Information Course Instructor: Faith Raiguel Office: none at CGU Phone: cell: 323-717-7497 home: 323-662-5722 E-mail: fairai@yahoo.com In-person Office Hours: by appointment set up through e-mail Teaching Assistant: none Course Schedule Semester start/end dates: 1/22/13 – 5/18/13 Meeting day, time: Wednesday, 7:00 p.m. Course Location: Burkle 26 Course Description Objectives of the Course: • • • • • Expand awareness of the similarities and differences between financial management of profit-seeking firms and not-for profit firms. Understand the scope and importance of financial management responsibilities within an arts organization. Understand the techniques of day-to-day financial management, with particular emphasis on budgeting, financial statements, internal controls and decision making. Develop a thorough understanding of funds accounting and of financial analysis. Provide a useful set of tools for an emerging arts manager, regardless of art form or professional specialty. Background Preparations (Prerequisites) - none 1 v.8/1/2012 Course #328 Student Learning Outcomes: By the end of this course, students will be able to: 1. Understand and communicate fundamental financial and accounting issues for non-profit arts organizations. 2. Appropriately utilize professional vocabulary in the non-profit field. 3. Interview and oversee finance and accounting staff. 4. Acquire tools for financial planning, budgeting and evaluation. 5. Prepare analysis (numerical) and briefing memos (written summary information) to other staff and to a board of directors. 6. Appreciate the different organizational roles as they relate to financial decision making, including involvement of all departments, organizational leadership, board members and auditors. 7. Assess fiscal health of an organization. Texts and Other Resources Required: Texts: • • • “Not-for-Profit Accounting Made Easy,” Ruppel, John Riley & Sons (Abbreviation “NFP”) “Good to Great and the Social Sectors,” Collins, Jim Collins (Abbreviation “Good to Great”), monograph “Sarbanes-Oxley for Nonprofits,” Jackson and Fogarty, John Riley & Sons (Abbreviation “SOX”) Additional materials/activities: 2 • Case Studies in arts or arts related fields, distributed in class.. • Guest speakers in budgeting, planning, artistic decision making, endowment, audit function, governance, among others. • Internet research in arts and government websites. • ArtsOrg Project • Additional readings and assignments TBD v.8/1/2012 Course #328 Course Requirements & Assignments: ArtsOrg Project The culminating project for the semester is the “ArtsOrg.” You will be asked to select an arts organization, anywhere in the country that is of interest to you. Pick a back-up organization. Throughout the course, you will be asked to analyze, discuss or otherwise use materials provided by your organization as they relate to other class materials and exercises. 1. Visit their website. Find their mission statement on the website. Establish contact with their CFO or Business Manager a. Conduct an interview to collect and discuss items below 2. Obtain - Materials a. Most recent audited statement, last three years b. Monthly Financial Statement – any one will do, even without numbers i. Refer to it for its structure (sometimes they will not share) c. Current Annual Budget (usually they will provide) d. Most recent 990 (available on Guidestar) e. Current promotional material f. Organization chart (if possible) g. Other material TBD – if possible i. Articles of incorporation ii. Bylaws iii. Tax exemption letter 3. Articulate a. Mission Statement b. Product array i. Be able to articulate what they sell ii. Detailed list of “other earned revenue sources” c. External Environment, their stakeholders d. Internal Environment, organization structure e. SWOT Analysis, 1-2 items in each category f. Comparative financial statements, 3 years i. Income statements ii. Balance sheets g. Ratio analysis and discussion of key ratios. h. Largest Challenge they face in the next five years i. What steps are they taking to address it? ii. Are they using a Strategic (Long Range) Planning process? iii. Is there a Strategic Plan in place? i. Your assessment of fiscal health and two or three key aspects of the organization that resonate with you on a fiscal basis. 4. Organize, to turn, in all your material in a 3 ring binder. Include all the material in 3. above, plus an Executive Summary. 5. Prepare a 5-6 page Highlights of your investigation in a Power point presentation to present in class, plus 1 hard copy of the presentation. 3 v.8/1/2012 Course #328 14-session course outline Session & Date 1 Jan. 23 SESSION THEME, CONTENT AND PREPARATION Introductions and Orientation to the Field PREPARATION Read: “Good to Great” Prepare for class: Articulate for discussion in class three points of particular interest in “Good to Great”, agree or disagree with the thesis. Elements of Financial Management system • Organization’s Annual “Life Cycle” • Principles, Systems, People • Complete Books and Records Role of the Finance Office Discuss ArtsOrg Project 2 Jan. 30 Complete Books And Records #1 Key Concepts: COURSE OVERVIEW, Elements of “THE BOOKS” • Journals, record of transactions • General Ledger, closing “the books” • Financial Statements, month-end reporting ANNUAL OPERATING BUDGET PREPARATION. Read: “NFP” Ch 2 portion on Statement of Activities pp 46-56 “SOX” Appendix A “Governance & Artistic Product” Opera America Article, Winter 2008 Prepare: Select Arts Org Project, Prepare to hand in: • Name of Arts Org Project • Primary non-profit purpose • Mission Statement • Contact info, name and title of person whom you will connect with Prepare brief answers to the following 6 questions on The Operating Budget: 1. What is a budget? 2. Why budget? 3. Who is involved? 4. Who cares? 6. When do you do it? 6. How do you use it? In Class Exercise: Budget Poker Key Concepts: BUDGET TOOLS 4 v.8/1/2012 Course #328 3 Feb 6 Budgeting and Introduction to Cash Flow GUEST SPEAKER – The role of financial management in artistic decisions PREPARATION Prepare: CASE #1 Circle Theater The role of financial planning in artistic decision making. Using the Operating Budget as keystone for other tools: • Planning for Cash Flow • Planning for the Future Key concepts: BUDGETING, FIXED AND VARIABLE COSTS, P’s & Q’s 4 Feb 13 CASH FLOW FUNDS ACCOUNTING & FINANCIAL STATEMENTS #1 GUEST SPEAKER – cash flow and budgeting PREPARATION Read: NFP Chapters, 1,2 Prepare: CASE #2 Shoreline Symphony Part 1 Key Concepts – It’s ACCRUAL World. Accrual Accounting • “Cash Basis Bookkeeping” • “Simplified Accrual Basis Bookkeeping” • “Full Accrual-Basis Bookkeeping” Basic Financial Statements • STATEMENT OF FINANCIAL POSITION: Balance Sheet • STATEMENT OF ACTIVITIES: Income Statement • STATEMENT OF CHANGES IN NET ASSETS: Statement of Changes of Financial Position • STATEMENT OF CASH FLOWS • NOTES TO FINANCIAL STATEMENTS 5 Feb.20 FUNDS ACCOUNTING & FINANCIAL STATEMENTS #2 BUDGETS AND CASH FLOWS PREPARATION Read: NFP Chapters 3,5,7 Prepare: CASE #2 Shoreline Symphony Part 2 EFFECTIVE COMMUNICATION: Board Brief, Executive Summary UNDERSTANDING THE BALANCE SHEET Key Concepts: LIQUIDITY, SHORT & LONG TERM 5 v.8/1/2012 Course #328 6 Feb 27 FINANCING A NON-PROFIT: STRATEGIC PLANNING AND FINANCIAL MODELING GUEST SPEAKER – Long Range Planning PREPARATION • Read Northfield Academy Case Read NFP Chapters 4, 6, 8, 9, 10, enough to provide “write-up” below" Write-up FOR EACH CHAPTER ABOVE IN NFP: • Define the concept in each chapter • Is it an asset or liability • Does it generate income or expense • Comment on why it is important. Key Concepts: LEVERAGING RESOURCES: 1.Operations: Creating Revenue Opportunities • Earned, programmatic, pricing issues • Earned, ancillary, Role of UBI • Contributed, realistic goals and strategies 7 Mar 6 EVALUATION TOOLS + EFFECTIVE COMMUNICATION LEVERAGING RESOURCES Role of the Endowment GUEST SPEAKER – Endowment Funds PREPARATION Read: NFP Chapter 11; SOX Chapter 3 Prepare (one copy to turn in): Set up 3 years of Balance Sheets & Income Statements of your ArtsOrg UNRESTRICTED FUND ONLY SWOT Analysis for Circle Theater REVIEW OF THE BALANCE SHEET…again Ratio analysis, introduction and overview INTRODUCTION TO BOOKKEEPING Key Concepts: LEVERAGING RESOURCES: 2,Endowments 3.Debt 8 Mar 13 THE BASICS, BOOKKEEPING – putting it all together, keeping it in balance! Prepare: DEBIT AND CREDIT EXERCISE CASE #2 Shoreline Symphony Part 3 – bookkeeping IN CLASS McLEAN GALLERY DEBIT AND CREDIT EXERCISE Writing up journal entries Writing up working trial balance Key concept: Respect for Bookkeeping, DEBITS AND CREDITS 6 v.8/1/2012 Course #328 Mar 20 SPRING BREAK 9 Mar 27 ANALYSIS PREPARATION Calculate 3 years of ratios for your ArtsOrg, state what is revealed by each Turn in with 3-years of comparative B/S; I/E statements Work will be evaluated on completeness and clarity of presentation Read: SOX Chapter 1 Key Concept: RATIO ANALYSIS, ASSESSMENTS OF HEALTH 10 Apr 3 AUDIT ENVIRONMENT AND GOVERNMENT REPORTING GUEST SPEAKER PREPARATION Read: NFP 12; SOX 2, 4, 5 Download: California Nonprofit Integrity Act not just the legislation but a discussion Download: New Form 990 Bring Form 990 from your ArtsOrg Prepare: Inquiry of ArtsOrg on Compliance with SOX & Cal Integrity Act The increasing demand for accountability. The changing oversight landscape. 11 Apr 10 Key Concept: ORGANIZAITONAL INTEGRITY; THE AUDIT FUNCTION INTERNAL CONTROLS + INTRODUCTION TO GOVERNANCE GUEST SPEAKER PREPARATION Read: SOX Chapter 6,7, 8 Read: LATimes “Bigger, Bolder + Poorer” E-mail to me three questions for a Board Treasurer by Saturday night, April 6 Assess your Debit and Credit ratio homework, add your evaluation of each ratio to your work and resubmit. Complete Books and Records, again • What to keep and what to throw away. Internal Controls • People • Systems & Reports • Physical tools Key concepts: ORGANIZATIONAL STEWARDSHIP: Roles, Challenges and Rewards. EFFECTIVE COMMUNICATION 7 v.8/1/2012 Course #328 12 Ap. 17 GOVERNANCE & INTERNAL CONTROLS CONTINUED REVIEW – Semester recap 13 Ap. 24 PREPARATION Read: SOX 9,10 Appendices: E, F, G FINAL MEETING Presentation of Class Projects 14 Ap. 25 8 FINAL EXAM v.8/1/2012 Course #328 Grading rubrick • HOMEWORK 40% Grading will be weighted for o EFFORT o CLARITY o IMAGINATION o COMPLETENESS o TIMELINESS • CLASS PARTICIPATION 30% o Including preparation and involvement • ARTSORG PROJECT 15% o This will be the foundation for homework as well. • FINAL EXAM 15% While each segment does not carry equal weight, it is expected that each student will complete each segment satisfactorily for full credit in the course. Grading Your grade will be calculated using the following scale. Grades with plus or minus designations are at the professor’s discretion. Letter Grade Description Learning Outcome Grade Point A 4.0 Complete mastery of course material and additional Insightful insight beyond course material B 3.0 Complete mastery of course material Proficient C 2.0 Gaps in mastery of course material; not at level Developing expected by the program U 0 Unsatisfactory Ineffective Continual matriculation at CGU requires a minimum grade point average (GPA) of 3.0 in all coursework taken at CGU. Students may not have more than two incompletes. Details of the policy are found on the Student Services webpage (http://www.cgu.edu/pages/5081.asp). 9 v.8/1/2012 Course #328 Course Policies: Attendance Students are expected to attend all classes. Students who are unable to attend class must seek permission for an excused absence from the course director or teaching assistant. Unapproved absences or late attendance for three or more classes may result in a lower grade or an “incomplete” for the course. If a student has to miss a class, he or she should arrange to get notes from a fellow student and is strongly encouraged to meet with the teaching assistant to obtain the missed material. Missed extra-credit quizzes and papers will not be available for retaking. Homework Homework is expected to be completed and turned in on time. I would rather see attempted and incomplete work than no work turned in. Homework is reviewed in class prior to turning it in. Students may write corrections on their papers during that review. Any homework assignment may be re-done completely after the first due date. Scientific and Professional Ethics The work you do in this course must be your own. Feel free to build on, react to, criticize, and analyze the ideas of others but, when you do, make it known whose ideas you are working with. You must explicitly acknowledge when your work builds on someone else's ideas, including ideas of classmates, professors, and authors you read. If you ever have questions about drawing the line between others' work and your own, ask the course professor who will give you guidance. Exams must be completed independently. Any collaboration on answers to exams, unless expressly permitted, may result in an automatic failing grade and possible expulsion from the Program. Additional information on CGU academic honesty is available on the Student Services webpage (http://www.cgu.edu/pages/1132.asp). Instructor Feedback and Communication The best way to get in touch with me is by e-mail. I will respond to email or voice messages within two business days. Expectations and Logistics It is expected that preparation be made prior to class, homework assignments completed in hard copy to be turned in when due. Class materials other than the texts will be e-mailed and posted in Sakai. Accommodations for Students with Disabilities CGU is committed to offering auxiliary aids and services to students with verifiable disabilities, in compliance with Section 504 of the Rehabilitation Act of 1973 and Title II of the Americans with Disabilities Act of 1990. To ensure that their individual needs are addressed, students with special needs are encouraged to contact the Dean of Students Office as early as possible. Additional resources can be found on the linked page (http://www.cgu.edu/pages/1154.asp). 10 v.8/1/2012 Course #328