Finance and Fund Development

Financial Statement Explanations and Checklists 

Click here to download a pdf of the below information. 

Resources
Helpful Information
  • CCE association finances are done in accrual basis (not cash basis) so the monthly statement of operations is not a cash in/cash out report, but rather an actual representation of the monthly expenses of the association.  The statement of cash flow helps to highlight the actual cash in and out the door.
  • Fiscal Years:  the variation of fiscal years can appear in your Statement of Activities or Statement of Cash Flow.  If you have state funding, the amount on your financial statements may change at the April 1 mark and may help to explain variances.
    • Federal fiscal year:  October 1 – September 30 (Smith-Lever)
    • State fiscal year:  April 1 – March 30 (224 funding)
    • Association and county fiscal year:  January 1 – December 31 (county appropriations)
  • Shared Business Network (SBN) Finance Leads are an important part of your team and can provide high level guidance, education, and deeper understanding of your association’s finances, particularly for associations without local finance managers or directors.
  • At the end of your fiscal year, associations are required to have a $0 balance, which means deficits and surpluses need to be addressed through fund balances.
  • Fund balances represent funds that have some sort of restriction. Moving funds into or out of those requires board approval and should be in line with policies on restricted funds.
  • At any time, boards may request to see additional financial reports. Some typical reports would include aged receivables or fund balance reports.
Statement of Financial Position (Balance Sheet)

The Statement of Financial Position summarizes the assets, liabilities, and fund balances of a CCE association at a point in time – the last day of the month or year. A key element of these statements is the Current Ratio:  current assets divided by the current liabilities. This will be highlighted in the report. 

Four issues boards should pay particular attention to include:

Trends

  • Compare your current statement to the one produced last month or the previous year and look for any unusual trends. For example, does the current ratio seem to be decreasing, or are there significant restricted assets that may affect the budget?

Liquidity

  • The Current Ratio should be greater than 1.0. The higher the ratio, the more liquidity you have, which indicates a stronger financial position.  This is an indicator of the association’s ability to tap into cash required to pay bills.
  • This is similar to your personal finances – do you have more debt than you have income coming in?  (less than 1.0)  

Debt

  • Does the association have a mortgage or any other loan?  What are the balances? 
  • Accounts Payable indicate the total amount of bills owed by the association. 

Receivables

  • This is the amount of money owed to the association. If this number is high, it could mean that cash flow is tight. 
  • What are the reasons for the high receivables?  Are there reimbursable grants that have not been paid by an outside entity?  Are there gaps in our internal accounting processes?  Has billing been done effectively and in a timely manner? 
  • Aged receivables – what is the association’s tolerance for unpaid invoices? What is the policy for writing off old receivables?

Unrestricted Net Assets

  • These are the assets that can be used to keep the association going in an economic downturn because they are not restricted to certain line items. At minimum, an association should have ample cash to pay bills for a minimum of 60 days.
Statement of Activities (Statement of Operations)

This report shows the financial operations for the association for  a specified period of time. As a board, you should consider these four critical areas:

Budget v. Actual

  • This compares what was budgeted versus the actual financials for that month.  You should look for significant variances, especially those that negatively impact the association.  (Is revenue lower than expected?  Are expenses higher than expected?)  Ask questions to understand the cause and effect. If the variance is large, you should expect to hear the cause(s) of the variance and plans for addressing the variance.

Revenue

  • Heavy reliance on a single source or a few sources can be risky. Are we too dependent on County Appropriations? A single large grant? A single contract?  What are the plans for moving forward should we lose a significant source of income?

Trends

  • Are expenses rising more rapidly than the corresponding revenue or support source?  Look at long-term trends. They may signal a need for increased fund development or tighter financial management.

Bottom Line

  • Overall, are we over or under budget?  Is this common?  For example, does the county appropriation come later in the year and things will even out once that is paid?  How will the association cover any expected loss?  What will do with any expected surplus?
Statement of Cash Flows

The statement of cash flow converts accrual-based activity into a cash format so you can see how cash is flowing into and out of the association. Even if an association is doing well financially, there can be trouble if the cash is fluctuating too drastically, as the association may not be able to pay bills. In this report, look for the following:

The Bottom Line (Total Change in Cash)

  • Are we using more cash than we are generating? Is this happening often or over a long period of time?

Trends

  • How does our overall cash activity compare to the prior year? Is there an unexpected problem? 
  • Are our cash balances or reserves growing over time? 
  • Do we have an expected long-term use for these reserves?  (i.e. capital improvements)
  • Do we have any long-term investments and regularly reviewed policies to guide those investments?

Cash Flow from Operations

  • Look for a positive cash flow for the month you are reviewing. This indicates that you are not relying on debt or investments to fund your operations.

Days Operating Cash

  • This is an indication of cash reserves that can be utilized if funding sources ceased or were delayed. At minimum, there should be 60 days of operating cash on hand. Divide cash balances by the sum of all cash expenses (exclude depreciation and in-kind), divided by 365 days per year.
Notes to Financial Statements

This report helps explain specific line items of your Statement of Financial Position and Statement of Activities and to elaborate on any anomalies within those reports.  Additionally, a full description of each line item can be found in FORM Code 801:  Chart of Accounts. 

Additional Information 

Audits
  • Are we required to have an audit?  (Generally, these are required with federal funding, some grants who specify the need for an audit, or when gross revenue and support exceeds certain amounts.)
  • How frequently are you putting out an RFP for a new auditor?
  • Do any of the audit footnotes cause concern?
  • Are we complying with loan covenants?
  • What impression would a donor or lender have after reading our statements?

Financial Reviews from Cornell Cooperative Extension Administration

  • On an annual basis, a team from CCE Administration conducts a limited financial review and will submit a report to the association Executive Director, Board President and Board Treasurer. If there are findings, they will be listed at the bottom and those should be discussed and addressed.
  • Financial reviews are not a substitute for an audit and do not provide any level of assurance, but may be utilized for some grant submissions to show a level of financial oversight has been conducted.