Let’s Talk Internal Financial Reporting�Presentation for USCJ Webinar�October 20, 2021

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John Grippo and David Beyth

��Top Five Suggestions

• Link your CRM to your general ledger and post daily. Link your payroll system to your general ledger and post with every payroll.
• Reconcile your bank accounts monthly, within 5 days of month end. Review the reconciliations and tie them to the bank statements. Investigate anything over 1 month old.
• Input your budget into your general ledger system and spread it by month
• Use your CRM system for information, don’t try to generate everything from the general ledger
• Scrutinize your mapping. Donations should be on a cash basis, especially restricted funds that are thinly funded.

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Next Five

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• Segregate your restricted fund activity from your general (unrestricted) fund activity in your reports
• Less is more. 300 to 400 general ledger accounts is enough
• Organize your chart of accounts by area (fundraising, religious school, etc) using roll up accounts. Alphabetical is not a system
• If you are a QuickBooks user, don’t use more than 10 class codes.
• Generate your monthly reports monthly, within 30 days of the end of the month

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Next Five

• Don’t post to roll up accounts
• Don’t include auxiliary activity or discretionary activity as part of your general fund
• Prepare a current vs actual report and a budget vs actual report on a detail and summary basis. Only share the summary level report
• Review your activity for mis-postings prior to generating the month end reports for the finance committee
• Review your balance sheet for mis-postings monthly

Reporting Packages�

• Monthly Package
• Budget vs. Actual (YTD)
• Explanations of large variances, Permanent vs. timing
• Current vs. Prior Year (YTD)
• Explanations of large variances, Permanent vs. timing

Reporting Packages (cont’d)

• Balance Sheet
• Discussion of burn rate vs available cash
• Accounts Receivable aging
• Update large past due amounts
• Member Count and break down by member type
• Rollforward of Member Count from beginning of year by month
• Same information for schools broken down by grade
• If you have a Capital Campaign:
• Status of pledges, collectability of pledges
• Status of expenditures and variance from budget
• Discussion of financing for project if appropriate

Reporting Packages (cont’d)

• Quarterly Package
• Everything in the monthly package plus
• Roll-Forward from beginning of year each of the funds
• Give details of expenses. Sometimes including the names of contributors is appropriate
• Forecast for the year if it is significantly different from the budget

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• Annual Package
• Everything in the Quarterly package
• Budget for upcoming year including details to assumptions
• Dues and tuition rates
• Member and student estimates
• Staff head counts and raise and bonus percentages, if any
• Significant assumptions (for example a fundraiser gala that will net $100,000, the hiring of new clergy, etc)
• Comparison of prior year’s budget v actual to upcoming budget and discussion of key differences and important assumptions that may be hard to achieve
• Accounts receivable write offs

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Reporting Packages (cont’d)

• If the clergy have their own separate discretionary bank accounts, discuss the conclusion of the finance committee’s review of the activity for the past year
• Things to Remember when Generating Reports
• Don’t create reports that have dozens of pages of details. Prepare summarized reports and interpret the results for your audience based on your review of the dozens of pages of details
• Review the financial information ahead of time. Give yourself time to review the information. There may be a mistake or a mis-posting that needs to be corrected before you prepare the reports
• Tie the current month’s reports to the prior month’s reports. Be ready to explain any differences (there can legitimately be differences)

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Accounting Methods

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• Accrual
• All revenues must be booked as revenue when pledged or earned. Future pledges must be booked using present value calculations
• Expenses are recorded when incurred, which may differ significantly from when paid.
• Cash
• Revenue is recorded when received
• Expenses are recorded when paid
• Modified Cash
• Revenues are recorded when received, except revenues received this fiscal year that are for a future fiscal year are deferred to the future year and the recorded in the future year.
• Expenses are recorded when incurred, which may differ significantly from when paid.

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Accounting Methods – Pros and Cons

• Accrual
• Pros
• It will make your CPA happy
• Cons
• No one else in the room will understand the reports
• Much harder to use to run your synagogue
• Cash
• Pros
• Very easy for finance committee to understand
• Easy to project cash flow
• Cons
• If you get an audit, you will have to convert to full accrual
• Modified Cash
• Pros
• Generally tracks how synagogue budgets are prepared
• Easy to project cash flow
• Cons
• If you get an audit, you will have to convert to full accrual