Theresa Coble, Ph.D.
Associate Professor
Arthur Temple College of Forestry & Agriculture and the Forest Resources Institute
Stephen F. Austin State University
NAI Treasurer’s Report
April 2013
Dear colleagues,
In my role as NAI Treasurer, I have reviewed NAI financial statements (i.e., budgets, balance
sheets, profit/loss statements, accounts receivable, credit card statements, checks written
statements, mortgage statements, line of credit statements, class account statements, previous and
proposed NAI business plans, and executive staff reports and board communications). In
February 2013 I spoke with Paul Caputo and Beth Bartholomew regarding NAI 2012 end-of-theyear financial reports. I presented the results of this conversation to the NAI Executive
Committee in February 2013. On March 28, 2013, I convened a meeting of the NAI Finance
Committee (meeting minutes accompany this report). During 2012, thanks to NAI staff, we
strengthened the archiving of NAI’s financial records and reports through the creation of the
“NAI Financial Information Dropbox.”
With regards to NAI’s financial performance in 2012, I would like to call your attention to some
notable items. As of December 31, 2012, NAI had:
1. A checking/savings balance (combined totals across five accounts) of $154,382.
2. Fixed assets for iMIS totaling approximately $46,000.
3. An accounts receivable balance of approximately $55,000 (down from $114,000 at the
end of 2011 due to factors such as the outflow of certification materials, deferred billing,
and an increasing number of life memberships being paid off).
4. A line of credit (LOC) balance of $205,000. (NAI pays approximately $8000 in LOC
interest annually.)
5. Annual certification income of approximately $335,000 (not including $40,000 for a twoyear period for certification training paid for via a NOAA grant).
6. Membership dues revenue of approximately $281,000.
7. Legal fees totaling approximately $15,000.
8. Contract services totaling approximately $44,000.
9. Salaries and wages totaling approximately $402,000.
10. Annual revenues and expenses totaling $1,412,573 (non-audited).
For new board members (and as a helpful review for all of us!), I have attached Appendix A. The
appendix reproduces a blog posting by Elizabeth Hamilton Foley (2008) entitled “Statement of
Financial Position” (available online at: http://www.nonprofitaccountingbasics.org/reportingoperations/statement-financial-position). The Appendix clarifies terminology and provides
assistance with reading and understanding financial reports.
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As before, I recommend that NAI conduct an assessment of its financial sustainability and
mission impact. Specifically, I encourage NAI to base their programmatic and financial decision
making on a full-cost accounting approach (such as the one outlined in Bell, Masaoka &
Zimmerman, 2010, Nonprofit Sustainability: Making Strategic Decisions for Financial
Viability).
I recommend that NAI conduct a cost-benefit analysis of NAI’s programs before the board
engages in (or, at a minimum, concurrent to engaging in) strategic planning efforts.
In 2011 (the most recent year for which NAI has audited financial information), NAI had total
expenses equaling $1,364,637. Assuming 2,080 work hours per year, NAI spends $656.08 per
hour of operation. In 2011, given seven employees, the average per staff hour cost of NAI
programs and services was $93.73. NAI provides a host of mission-based activities that support
members and contribute to the development of the interpretive profession. As members of the
board, it is our collective responsibility to consider (re-consider) the question: “Are we spending
our daily, weekly, yearly program service budget efficiently and with the greatest amount of
long-term impact?”
As NAI Treasurer, I recommend that the board support NAI staff in their efforts to establish
adequate financial reserves so that we can position ourselves to borrow from ourselves (instead
of from an interest-accruing line of credit) when we face cash-flow challenges. I also encourage
the board to support NAI staff in their efforts to generate increased revenue through fundraising
and other mechanisms.
I would like to commend all NAI staff for their professional and highly admirable efforts to
maintain NAI’s high quality programs and services during the time of transition between
outgoing and incoming executive staff.
In sum, I would like to work with NAI’s board, staff and committee members, as appropriate, on
the following financial tasks: strengthen cash flow management, expand revenue generation
activities/capacity, pay off NAI’s line of credit, re-subscribe region and section account balances,
increase NAI’s reserves of unrestricted funds, develop financial benchmarks, accurately assess
the cost-benefit of NAI programs, formulate economic objectives that are specific, measurable
and targeted to ongoing financial needs, leverage resources through effective partnerships,
further develop NAI’s volunteer resources, and update NAI financial policies on an as needed
basis.
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- Appendix A -
Statement of Financial Position
http://www.nonprofitaccountingbasics.org/reporting-operations/statement-financial-position
Elizabeth Hamilton Foley
It used to be called the balance sheet. Although the name of this report has changed in the nonprofit
world to the “statement of financial position” (SOP), the concept and the equation are essentially the
same as any business balance sheet or statement of personal net worth.
minus
equals
Assets
Liabilities
Net Assets
(what you have or what you are owed)
(what you owe to others)
(what’s left over)
The SOP reflects the overall financial position of your organization at a given moment in time. It is the
report that shows the accumulated results of all the individual years of your organization’s operations
put together. It is important to learn how to read and understand your organization’s SOP report.
Following is a discussion of the components of the SOP and what they can mean.
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Assets
Assets are what your organization has, what is owed to you, what you have invested in, and what you
have deposited with others.
What you have:
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Cash in bank accounts, investment accounts, and petty cash
Things your organization has bought for future use, such as merchandise inventories or supplies
Fixed assets such as furniture, equipment, and improvements to your facility, listed at cost, that
are non-liquid, as the cash has already been spent to acquire them
Accumulated Depreciation, a “contra asset” (against asset) indicating the extent the fixed asset
has decreased in value as it is used up (depreciated) over its useful life
Collections of art, artifacts, other valuables related to your mission
Payments your organization has made for goods or services that have not yet been received or
used such as annual insurance premiums that could be refunded to you if cancelled, or expenses
relating to future fiscal years paid in advance (prepaid expenses)
Long-term investments of unrestricted or temporarily restricted funds
Long-term investments of permanently restricted principal such as endowment funds that
cannot be used for operations
What is owed to you:
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Grant awards promised to your organization but not yet received
Revenue earned from services provided by your organization for which payment has not yet
been received
Loans your organization may have made to others
What you have deposited with others:

Deposits your organization has paid to others and is held by them on your behalf such as
advance rent, utilities security deposits, payroll bonds, etc.
Assets are usually listed in order of declining liquidity. Short-term assets are those available as cash or
equivalent within one year, and long-term after one year. Assets are a natural “debit balance” meaning
that, in an accounting entry, a debit to an asset account will increase it. A negative number (credit
balance) in the assets section of a balance sheet is unusual, and should be questioned and explained.
The exception is Accumulated Depreciation, which, as noted above, is a “contra asset” (against asset)
account that tracks the depletion of the value of fixed assets as they are used.
What you might want to ask when looking at the asset balances:
Cash

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Do we have enough cash to pay our bills?
Is there too much cash in non-interest bearing accounts?
Are our investments diversified per our investment policy?
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
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Have we protected the restricted funds?
Is our cash balance increasing or decreasing?
Accounts/Pledges Receivable
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Are we collecting what is owed to us in a timely way?
Are there any we will never receive?
Do we have an allowance for doubtful accounts?
What are current vs. long-term portions?
Prepaid Expenses
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Are we preparing for future programming?
Inventory
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Do we have too much on hand or is the inventory too old?
Do we need to replenish?
Other (Deposits, etc.)

How much of our assets are held by others and for what purpose?
Fixed Assets (property, plant, equipment, accumulated depreciation)
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Have we invested enough (too much) in property and equipment?
Do we need to upgrade our equipment or technology?
How much did we invest in capital assets during the year?
Liabilities
Liabilities are what your organization owes to others or holds on behalf of others.
What you owe:
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Vendor accounts payable (bills for goods and services)
Amounts payable on company credit cards
Payroll liabilities (withholdings, federal, state, and local payroll taxes owed; unemployment
owed)
Accrued expenses (usually estimated rather than based on actual bills, for instance: accrued
vacation pay or accrued interest)
The amount accessed from a bank line of credit
Short-term or long-term loans
What you hold on behalf of others:
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

Deferred revenue or refundable advances (funds paid to your organization in advance for
services not yet delivered; your organization would be liable to return these funds if the service
is not delivered, for example, play subscriptions or tuition for future classes)
Conditional contributions (funds given to your organization that you are entitled to only if the
condition is met, such as a matching grant)
Liabilities are presented in declining order of their maturity. Short-term liabilities are those due within a
year. Long-term liabilities are multi-year loans such as mortgages or other funds borrowed by the
organization and payable over more than one year. Liabilities are a natural “credit balance” meaning
that, in an accounting entry, a credit to a liability account will increase it. A negative number (debit
balance) in the liabilities section of a balance sheet is not normal and should be questioned and
explained.
What you might want to ask when looking at the liabilities balances:
Accounts Payable/Accrued Expenses
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Are vendors being paid in a timely way?
Do we have enough cash to pay our bills?
Are we carrying balances on high-interest credit cards?
How long have we had these liabilities on the books?
Payroll Liabilities

Are we meeting our tax liabilities in a timely way?
Deferred Revenue/Refundable Advances
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Are we recognizing revenues as they are earned? (This balance will decrease and income
increase as services for which the deferred revenue was given are performed.)
Are we sure no restricted contributions are included as deferred revenue?
Conditional Contributions

Can we raise the matching funds; meet the condition that gives us the right to the funds?
Line of Credit
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Do we have the means to repay our line of credit?
Are we strategically using our line of credit?
Are we using the line of credit to meet our operating expenses?
Loans/mortgages

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How much has the organization borrowed?
Is the loan internal (from cash reserve) or external?
Is there a plan for repayment of the loan/mortgage?
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Net Assets
The net assets of a nonprofit organization are equivalent to the net worth of the organization. Net
assets can be liquid (comprising cash and short-term receivables), or fixed (furniture, fixtures,
equipment, inventories, and land & buildings net of long-term debt), or long-term. Generally accepted
accounting principles (GAAP) call for an organization’s net assets to be classified as unrestricted (UR),
temporarily restricted (TR), or permanently restricted (PR).
Small and midsize nonprofit organizations usually do not have PR net assets such as endowments, and it
is usually not advisable, as having an endowment ties up a lot of cash that is not accessible to the
organization for operations or program delivery. It is far more advisable for small and midsize nonprofits
to build a working capital or operating cash reserve fund before attempting to create an endowment. If
a small or midsize nonprofit does have PR net assets, such as an endowment, these net assets usually
comprise long-term investments and are not considered liquid.
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TR net assets comprise contributions received or promised to the organization that carry a donor
imposed restriction as to when (time restriction) or for what purpose (purpose restriction) the funds can
be used. Funds that are “carried over” to the subsequent fiscal year for either restriction are shown as
TR net assets.
All net assets that are not PR or TR are Unrestricted (UR) and can be used by the organization as its
board sees fit. It is useful, at least for internal financial management purposes, to separate liquid from
non-liquid UR net assets in order to have a better idea of the organization’s liquidity, the financial
resources it can use for day-to-day transactions. A single UR line item balance does not always tell the
full story.
For instance, the total UR net asset balance in all three examples below is $100,000.
Unrestricted Net Assets
Undesignated
Property, Plant & Equipment
Total UR Net Assets
NP Org A
$100,000
$100,000
NP Org B
NP Org C
$75,000
$25,000
$100,000
( $20,000)
$120,000
$100,000
Nonprofit Org A shows total UR net assets as $100,000 without distinguishing between available vs.
fixed (non liquid) net assets. It would be easy to assume the organization was in decent shape with a
positive $100,000 in UR net assets. However, with a deeper look at more detailed information as to the
composition of the UR net assets as in Examples B or C, different conclusions about those organizations’
financial health would be reached.
Nonprofit Org B shows $75,000 in undesignated net assets that one could assume comprises cash,
receivables, and investments available for operations. In addition Org B shows net fixed assets of
$25,000, totaling $100,000, a more accurate picture of the organization’s financial position. This
organization’s board might want to consider designating some of the $75,000 into a cash reserve fund
and an equipment maintenance and replacement fund.
Nonprofit Org C also shows a positive $100,000 in total net assets as well, but its financial picture is very
different. In this scenario the organization has spent all its available cash on equipment or its facility and
has an accumulated operating deficit of $20,000. Showing the net assets in this greater detail would
help this organization’s board to understand why the organization has positive net assets but is still
struggling to pay the bills on time.
The above distinctions could be reached by “doing the math” using other totals on the balance sheet,
but the objective is to present clear and easily readable reports, and not to make the reader work so
hard to figure it out. Accounting for and reporting net assets in these more detailed categories for
internal reports is valuable and recommended and gives a clearer picture of the organization’s actual
financial position.
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Recommended SOP Internal Report Format
A well-formatted SOP report provides accurate and relevant information with enough context for the
board to thoroughly understand what’s going on with your organization financially.
Below is a general format for a statement of financial position report recommended for internal
reporting purposes. The report for your organization would include more detailed line items in each
category, but the objective would be to not exceed one page in length.
The first column is the current year total-to-date for each line item. This report format calls for
additional clarification of the line item totals, for instance, to show how much, if any, of the cash is
restricted or designated by the board for a specific purpose. This is achieved by including columns to
separate restricted funds and board designated funds, showing what is actually available for day-to-day
operating.
Showing the financial data in these separate columns allows the board to verify restricted funds are
present in the form of cash or receivables, and to see clearly the organization’s liquidity: what is
available for day-to-day operations. Because fixed assets are not liquid, they are included in the board
designated column, presuming the board approved purchases of equipment, etc.
No accounting software, particularly ones in the price range of most small and midsize nonprofits, can
produce a “canned” report with as much context and analysis as the above. Therefore this report is
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formatted in a spreadsheet and raw data are taken from the accounting software and inserted or linked
into the preformatted report for the year-to-date total. Separating the totals into the various columns is
a management task done directly in the spreadsheet, unless the accounting software has that capability.
For a “how to” on exporting financial data from QuickBooks accounting software and linking the data
into a preformatted Excel report, see the following link:
Custom Excel Reports from QuickBooks Data
For more about setting long-term financial position targets that relate to strategic goals, see the
following link:
Net Assets of Nonprofits
Also:
FASB116 & 117 (Re: restricted contributions)
SOA (Statement of Activities) aka Profit & Loss, Income Statement
© 2008 Elizabeth Hamilton Foley
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