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CAE Study Flash Card

Key terms and definitions

Accrual Basis Accounting Recognizes revenues when earned and expenses when incurred
Accounts Receivable An asset; the amount of cash still due to the association when it sells an item to an outside entity who agrees to pay later.
Prepaid Expense An asset, an amount the association has paid currently for an item or service which will be used in the future (e.g. prepaid insurance,prepaid rent)
Accounts Payable A liability; the amount of cash the association still owes when it incurs a cost or buys an item now but will pay later
Unearned Revenues: Also deferred revenue A liability, payments received in advance for goods or services to be provided in the future (e.g. dues received at the end of the current year for the following year).
Cash Basis Accounting Recognizes revenue when received and expenses when paid
Assets What an association owns; e.g. cash on hand, accounts receivable, product inventory (educational publications and program materials), equipment, furniture, real estate, and investments
Liabilities Financial obligations owed to creditors, claims on assets, loans, accounts payable, taxes, unearned or deferred dues and other revenue
Current Liabilities Obligations due within the coming year
Long-term Liabilities Debts with maturity dates longer than a year
Other Liabilities Any liability not classified as current or long-term
Notes Payable Secured debt; i.e. building loan
Net Assets Financial net worth, net equity or reserves. Assets minus Liabilities equal Net Assets
What is GAAP? generally accepted accounting principles
Four Internal Financial Control • Don’t have same person do all (clear lines) – clear lines of authority • Give authority with responsibility • Training is key • Acceptance of responsibility
Policies spell out standards of conduct and decision making; articulate the strategy and philosophy of governing body; provide framework upon which the association builds its procedures. Developed and adopted by volunteer leaders
Procedures delineate how to administer the policy; the steps needed to turn concept into reality. Can be developed both by volunteers and staff; staff implements procedures as part of association’s operations.
Association policies and procedures generally addresses which (3) three areas? governance; management and operations; and public image and public policy
Three key elements characterize a strong national/chapter relationship clarity of the role and purpose, open communication, and mutual commitment.
Difference between subsidiaries vs affiliates Subsidiaries are owned; affiliates are independent corporations.
Reasons associations form subsidiaries Allow the association to engage in activities not permitted by its purpose, charter, or bylaws. Offer services to niche markets. Addl revenue sources. Increase the assoc capacities & scope. Protect the association financial & tax liability.
Trade associations 501(c)(6)organization; composed of individuals or firms concerned with a single product or service or those concerned with a number of related products or services
Professional associations an association of individuals with an acquired knowledge and experience that qualifies them as specialists, or sharing a field of business or practice in a profession (medical, legal, individual membership assoc)
What is a horizontal association? servicing one functional level of an industry, profession, or field
What is a vertical association? all functional levels.
Chambers of commerce and other business clubs engaged in all kinds of business activities in a defined geographical area
Federations associations are composed not of individual members but of other associations
Bylaws the main internal rules for association management and government
Articles of Incorporation An agreement between the state that grants incorporated status and the association that holds that status
Hierarchy of Documents Articles of Incorporation, Bylaws, Policies, Procedures, Practice
Statement of Purpose The most important statement of the purposes of the association is that given in the articles of incorporation
CSE Role vs CEO Role CSE directs an association’s staff and operations, with feedback from volunteers. - Elected or appointed leaders set direction and establish policies, with input from and advice of staff.
Strategic management what you do now to achieve your vision of the future
Four Steps in Strategic Mgmt Strategic thinking, planning, implementation and evaluation & feedback (SPIE)
Strategic Thinking assesses the future effects of outside force. Key component is gathering info an opinions from important constituencies
Strategic planning creates the association’s future. Includes developing a vision and identifying what the assn needs to do today to achieve the vision.
Strategic implementation translates the strategic plan into detailed programs and budgets (the work plan) and evaluates them to ensure they meet customer needs
External environment the world outside the association
Internal Environment the association’s leadership, members, management, and staff
Who is responsible for actions in Strategic Plan? Volunteers leaders responsible for strategic planning; staff (with help of volunteers) responsible for strategy implementation
Three Components of Strategic Implementation Programs: Those that directly support its mission; and Those that generate revenue. Procedures: specific, sequential steps for the tasks required to complete the programs. Budgets: Budget-driven = programs based on your budget VS strategy-driven)
STRATEGIC EVALUATION AND FEEDBACK Feedback must be prompt and unbiased. Evaluation of results, not activities
Negotiating process of getting and keeping agreements • Successful if it will work for both parties o Where each must have something to gain o Win/win, not equal win
Consumer Credit Protection Act (1 or more) prohibits employees from being terminated for garnishments for any one indebtedness
Americans with Disabilities Act (15 or more) If someone was addicted to drugs in the past – this is a covered disability • Reasonable accommodation o does not include lower production or quality standards o employer need not provide an accommodation that would impose an undue hardship
Fair Labor Standards Act (1 or more) Deals with employment status, child labor, minimum wage, overtime pay, and record keeping requirements.
Consolidated Omnibus Budget Reconciliation Act/COBRA (20 or more) continuation of healthcare coverage for employee (and enrolled spouse and kids) for a set amount of time, after employee loses healthcare benefits
Employee Retirement Income Security Act/ERISA (1 or more) deals employee benefit plans, but does not force employers to create employee benefit plans
Age Discrimination in Employment Act (20 or more) prohibits discrimination against workers aged 40 or over in any employment or employment-related decision
Family and Medical Leave Act (50 or more) Up to 12 weeks unpaid leave for: serious health condition, care for family member with a serious health condition, birth of a child, placement of a child for adoption or foster care Restore employment to same position
Occupational Safety and Health Act/OSHA (11 or more) requires employers to maintain a workplace free from recognized hazards that would cause injury or death to employees
Civil Rights Act - Title VII (15 or more) prohibits discrimination in virtually every employment circumstance on the basis of race, color, religion, gender, pregnancy, or national origin
Three key financial management reports 1. Statement of Financial Position (Balance Sheet) 2. Statement of Activities (Income Statement) 3. Statement of Cash Flows
Statement of Financial Position (Balance Sheet) Summarizes financial makeup of the organization at a specific point in time. It reflects assets, liabilities owed by the org and residual net assets representing net worth.
UBIT trade or business activity that must be regularly carried on and unrelated to exempt purpose Don’t spin off to avoid tax, only to keep non-profit exemption in tact! If own >80% then it will be treated as 1 entity
Record Retention Permanent records: articles of incorporation, other organizing and governing documents, IRS tax-exemption determination letter, minute books and bank statements Keep all canceled checks and other supporting documentation for income and expenses - 7 years
When to consult with the attorney and CPA (Best Practice) Call the attorney on any HR termination process BEFORE termination takes place. • Consult with the attorney/CPA when ethical dilemmas occur to assess legal or IRS parameters involved with the dilemma.
Antitrust Compliance Programs o A system of continuous consciousness on antitrust. o Documented proof that measures were taken. o Documented proof that the system was carried out.
Employment Contract Term of agreement; duties of executive; full effort to position; authority over other employees; anti-competitive clause; benefits; termination; indemnification; renewal; nonassignability; arbitration; document removal
Terminating Employees Focus on the problems’ affect on employee job performance and the work place. Move promptly to confront and resolve it. Clear and specific expectations and timetables. Urge employee to seek medical help. Document thoroughly. Handle with consistency
Legal Counsel Is responsible to Board. Selection of counsel is generally decision of chief executive employed in-house counsel, ad hoc selection committee, executive committee, or governing board
Merger combining one entity into another
Consolidation combining two entities together to create a new one Governed by state law
How should Employee performance plans be outlined? SMART...Specific Measurable Attainable Relevant Time-based
Androgogy adult approach; student involved in design, implementation, and evaluation of the learning experience
Pedagogy child approach; emphasizes role of teacher w/ no interaction in curriculum dev’t by student
ADDIE A = Analysis D = Design D = Development I = Implementation E = Evaluation
Two major considerations for education delivery methods content and process.
Explicit knowledge knowledge that has been or can be articulated, codified, and stored in certain media. It can be readily transmitted to others. The most common forms of explicit knowledge are manuals, documents and procedures.
Tacit knowledge what you would find in someone’s head
definition of Knowledge Management the practice of harnessing and exploiting intellectual capital to gain competitive advantage and customer commitment through efficiency, innovation and faster and more effective decision-making
Blended learning blending the educational effort with follow up beyond the classroom, using distance learning, job aids, communities of practice and on-the- job performance testing after the training is delivered.
Communities of Practice also known as knowledge networks are groups of individuals that share a common interest and are willing to communicate with each other to share ideas and best practices
Customer Relationship Management creating and communicating a single version of truth through the various channels – membership, marketing, advocacy, plus housing knowledge, data and information about an association’s members - not about software
Adult Education: adults have a desire to know what they will gain by learning; they want to make their own decision about learning content and process
Competency a set of related knowledge, abilities, and skills that directly affect a major part of an individual’s job.
Distance Education: any education or training activity in which the instructor and students are separated in time and/or space. Programs may include online education, videoconferencing and teleconferencing as well as traditional correspondence courses
Educational Methods & Learning Techniques: know the program purpose, objectives, audience and available resources. Selection of the most appropriate techniques and methods can be accomplished only after the intended outcomes and primary characteristics of instruction have been determined.
Three Primary Elements of KM how organizations gather, manage and use knowledge
Key outcome of KM knowledge transfer
KM Study/Planning commences with....? a discovery phase (research); crucial first step in discovery phase is to assess/develop taxonomy
Taxonomy hierarchical classification system that defines an organization’s information, disciplines, and activities that it undertakes as part of its routine business
Committees – generally are responsible for either designing and operating a project or recommending policy to the board.
Special Interest Groups – a group or section formed to address specific interests such as evolving technology in a trade association or a new specialty within a professional society.
Chapters – a network for distribution of power in multiple-level organizations that should, in principle, support the national organization
Who is responsible for staffing committees? A common pattern is to have a formal structure for board appointment of committees, with staff generally held accountable for the performance of those committees. Staff have the accountability without the authority (!!!)
Mergers and consolidations mergers (combining one entity into another, with the latter surviving as an entity) and consolidation (combining two entities together to create a new, separate entity)
Benefits of combining operations (merger/consolidation) 1. Efficiency and effectiveness as one 2. Can focus member dues and volunteer service toward one entity
Considerations before combining operations (merger/consolidation) 1. Personal legal risk potential to governing members 2. Knowledge of state law requirements to detail certain procedures 3. Impact of other areas of law: trademark, labor, tax, etc
Parliamentary Procedure most widely accepted authority on parliamentary rules is Robert’s Rules of Order. One matter is considered at a time (all business is brought as a motion, a report, or a communication. Motions can be amended. Some motions take precedence over others.
Privileged motions take precedence over any pending main motion. Examples. • Set a time for adjournment • To adjourn • To hold a recess • To raise a question of privilege • To call for orders of the day
What three documents should you provide volunteers: 1. Legal 2. Management 3. Internal
Benefits of Incorporation 1. Eliminates personal liability of volunteers. 2. Continuity 3. Psychological benefits (stability, etc.) 4. Provides protection under certain laws. 5. Has guidelines 6. Own real estate 7. Easier to obtain D&O
Volunteers - Selection and Management Process 1. Recruitment 2. Orientation 3. Match skills to job 4. Recognition 5. Support
Due diligence. An association must 1. Establish policies and procedures 2. Assign staff to oversee compliance 3. Use care not to delegate authority to someone who engaged in illegal activities 4. Monitor and audit 6. Discipline violations 7. Respond appropriately to violations
Policies & Procedures should include at least: 1. Record retention plan 2. Anti-trust program 3. Procedures for meetings
Governance (membership and org. structure, volunteer leadership, related businesses, association management, finance)
Operations and Management credentialing, finances, GA, meetings/conventions, customer service and dues, office admin., personnel, publications, services)
Public Policy media relations, crisis management
Steps to Build Ethics Program 1. Ensure Board commits 2. Assign sr. manager 3. Commission an independent assessment 4. Independent audit 5. Create ethics task force 6. Create strong training component 7. Individual action plans 8. Ethics hotline 9. Reporting system 10. Publicity
Create a learning environment (management) 1. Delegate responsibility 2. Set and communicate performance standards 3. Give immediate, specific, and honest feedback 4. Work with staff to identify where training/education is beneficial
Ensure the accuracy of a budget by...(finance) 1. Forecasting sales 2. Performing accurate market analysis 3. Ensuring adequate pricing policies 4. Measuring actual performance against budget
Horizontal financial analysis Compare similar figures from several years’ financial statements.
Vertical financial analysis Compares parts of a total in a single statement.
Investment management (fiduciary responsibility of Board) 1. Did plan achieve expected return and investment objectives? 2. Is manager abiding by plan’s investment policy statement? 3. What contributed to total return of portfolio
Case statement for fundraising Case statement for fundraising
Should You Use Direct Mail Campaigns for Donations? NO. Prospective direct mail campaigns aim to acquire contributors, not dollars.
Fundraising responsibilities: 1. CSE ensures that all components are in place for Board and volunteers to fundraise. Leads staff in vision and strategy, program development and implementation 2. Staff creates specific strategies, action plans, create materials and cultivate donors.
Donor guidelines and standards 1. No apparent conflict of interest 2. Refer to legal counsel 3. All information is confidential
Internal research plays a role in: 1. Issues management 2. Strategic planning 3. Meetings and trade shows 4. Member satisfaction
Sampling frame – source of names
Probability sample everyone has known probability of being included
Simple random sample each person has equal chance of being selected
Primary Research External research, taking mostly from members or nonmembers (does not/may not exist)
Secondary Research Usually first step in research project. Information that already exists, including archives, membership database, related associations, trade publications, colleges and universities, etc.
Statistical Groups Bound together by sex, income, education, and occupation. Individuals tend to respond in the same way.
Functional Groups Bound by a common purpose. Tend to conform to mutually accepted standards
Individuals conform to three basic types 1. Tradition directed: Rigid adherence to accustomed way of doing things. 2. Inner directed: People base opinions on long-standing goals and values. 3. Outer-directed: Derive opinions and values from outside peers, associates, friends, and media.
IT MANAGEMENT 1. Understand (needs analysis) 2. Analyze current IT systems (does it meet goals/where doesn’t it/information blueprint) 3. Linking the two 4. Implement and evaluate
Employment at will (HR) Employment may be terminated at any time by employer or employee without notice.
What is listed in an Employment contract? 1. Term of employment 2. Benefits 3. Starting salary 4. Responsibilities 5. Termination of agreement 6. Confidentiality 7. No conflict of interest
ADA Compliance 1. Detectable warnings (curb ramps, edges, etc.) 2. Employee work areas (approach, enter, exit) 3. Bathrooms (accessible) 4. Elevators (audible systems, reachable controls, etc.)
To build a coalition: 1. Redefine core issues in new terms 2. Create an immediate focus 3. Build from the bottom up 4. Maintain visibility 5. Never stop organizing 6. Stay focused
Permanent records (HR) 1. Organizing/governing documents 2. IRS tax-exempt documents 3. Employment records 4. Contracts, insurance policies, deeds, trademark or patent certificates, etc. 5. Lobbying certificates, etc.
Ultra vires Individual is acting beyond scope of authority
Tort Activities cause damage or injury to others
Criminal Acts Participation or approval of activities that violate laws.
Intellectual property often an association's most valuable property. (logo, name, trademarks, etc)
Key elements to chapter relations 1. Clarity of role/purpose 2. Open communication 3. Mutual commitment
Integrated chapter Comes under the corporate entity of a national organization
Affiliated chapter Chapter is a separate entity and operates independently
Facilities (emergencies) 1. Natural element 2. Civil disorder 3. Structural 4. Utility
Public Relations Public relations practitioners are not just purveyors of information; they have to discern what is happening in the environment and communicate to management. Shape public opinion and shape organization’s response to public opinion.
Attitude Is a mental position about an issue.
Opinion Expression of a belief
Developing a PR plan: 1. Research 2. Plan 3. Implement 4. Evaluate
CRISIS MANAGEMENT Pre-Crisis, The Crisis, Post Crisis
Pre-crisis (crisis mgmnt) 1. Plan (name a leader, comm. Procedures, notification list, train team, draft alternative scenarios, media command center) 2. Policy 3. Establish crisis information function
The Crisis (crisis mgmt) 1. Assemble all facts 2. Determine which members are affected 3. Determine which publics are affected 4. National, regional, local in scope 5. What other associations, etc. are involved? 6. Could they be allies? 7. Access plan 8. Respond professionally
Post Crisis (crisis mgmt) 1. Review performance 2. Plan for next crisis
Meeting Evaluation 1. Summative focuses on program’s overall effectiveness 2. Formative deals with program improvements (possibly during event itself)
PUBLICATIONS (Clarify financial goals:) 1. Intent to make money or break even? 2. How much expected revenue? 3. What level of investment?
If a pub includes advertising income, what two sides should you break out the budget? Advertising and editorial
If you are considering selling advertising what is the first step? conduct a feasibility study to determine whether potential revenue will offset investment of time and money
Accepting/rejecting book idea 1. Assess the need 2. Define market 3. Look at financial considerations Book price depends on demand, size of market, production costs, association’s goals.
Market-driven association directed by the needs of its members. Or it may be directed by broader needs of a profession. It actively scans the environment for changes that will affect members and constituents. It makes decisions based on members’ perception of their own needs.
In marketing, the CEO is responsible for 1. Serving as central staff person. 2. outline responsibilities 3. Provide staff support and budget 4. Make marketing high priority 5. Ensure plan is synchronized 6. Reward achievement 7. Insist on sound research 8. Monitor and evaluate results
Strategic marketing plan focuses on specific association functions (products, services)
What are budgets built around the marketing plan focused on? focused on revenue and revenue potential.
MEMBERSHIP Is a cycle: information collection and analysis to planning, from planning to implementation, from implementation to evaluation, and back to analysis
Membership plan: 1. Target audiences 2. Content 3. Vehicle 4. Logistics 5. Testing
INTERNATIONAL Association An association has truly gone international when it’s integrated a global dimension into all activities
What are the two international audit levels? assess how international the profession is, evaluate association’s international standing
What makes meeting successful? 1. Stimulating programs 2. Well-planned and executed logistics 3. Knowledgeable moderators and staff 4. Good physical environment 5. Opportunity to meet colleagues and exchange ideas
Audience reaction team format refers to a group of members on stage who query group of experts.
Convention resume Specific work plan for each event. Narrative overview of meeting
Can the IRS deny tax deductibility? It will unless attendance directly relates to the conduct of business by participant or unless it is reasonable to hold the meeting outside North America (reasonable = purpose, activities, mission of association, home country of members)
Voluntary product standards focus on continuation of most desirable products and services by creating definitions, terminology, symbols, etc.
AFFINITY PROGRAM AGREEMENT Agreement for affinity program is called a royalty agreement or license agreement.
Maslow’s Hierarchy of Needs 1. Survival 2. Safety 3. Affiliation 4. Self-esteem (esteem of others) 5. Self-actualization
Marketing 4 Ps Product, price, promotion, and place
Governmental Relations - 4 main tasks 1. Collect and disseminate information 2. Issues management (forecast, develop strategies, put plan into action) 3. Agree on organization's stance 4. Undertake advocacy efforts
Licensure (standards/credentialing) programs are administered by government agencies
Registration (standards/credentialing) Is less rigorous, but also set by state authorities.
Certification (standards/credentialing) is a process whereby individuals who meet an objective standard of competency receive recognition by designation and/or certificate. Credentialing often requires an individual to requalify for the credential over a period of years.
Primary function of foundations 1. Education 2. Scholarship programs 3. Research
Types of research studies 1. Industry or profession-specific studies 2. Compensation studies 3. Market studies (trade associations) 4. Benchmarking studies (best practice) 5. Operating ratios (compare against other associations)
PAC Registration must be registered within 10 days of formulation usually with the FEC, Secretary of the Senate or the Clerk of the House
Are PACs required to incorporate? PACs are not required to incorporate
Can a 501(c)3 form a PAC? 501(c)(3) cannot form a PAC
Can a PAC have a booth at an association meeting? PAC can have a booth at an association meeting but association cannot promote the booth
Does a PAC have to have a treasurer? PAC must have a treasurer at ALL TIMES Must keep record of all donations and contributions Records kept for three years
Solicitation (PAC) Do's Can solicit from corporate employees as often as desired after permission granted; can solicit noncorporate members and families; solicit specified association executive and administrative personnel and their families
Solicitation (PAC) Don't Cannot solicit or accept corporate contributions PACs may not solicit other PACs, but may accept PAC to PAC contributions.
Contributions (PAC) Not acceptable from non U.S. citizens. Cash contribution <$100 Contribution > $50 – report to FEC Contribution >$200 – report to FEC with name of employer, etc. Individual < $5,000 per year for any one PAC
CONGRESSIONAL GIFTS House – no gifts no matter the value. Senate – no gifts worth $50+ and nothing totaling $100 in a year from one source. Gifts to the family = gift to the member. No honoraria to Congress or staff. Can receive ticket to widely attended conventions
Lobbyists must register Within 45 days of first contact With the Secretary of the Senate and the Clerk of the House Must file semiannual reports
Lobbying contact oral or written communication to a covered legislative or executive branch official (staffers, aids, etc. are included)
Lobbying activity any action taken in support of a lobbying contact
Requests for Proposals Process SPIE & LERP
Managing and evaluation vendors/suppliers 1. Goals and benchmarks 2. Regular intervals of evaluations 3. SMART 4. Conflicts of Interest
Association Reserves Net assets-net liabilities. This is the surplus or rainy day fund for an association. Reserves are usually protected by the board.
ADA and pre-employment medical inquiries Only drug testing is permitted during the application and pre- screening process; ADA forbids pre-employments inquiries and exams. However a medical exam may be required ONCE an offer has been made.
Clayton Act prohibits specific distribution and growth activities that may substantially restrain trade (ie, tying arrangements, exclusive dealings, price discrimination and mergers)
The Robinson-Patman Act prohibits discriminatory pricing between different purchasers of commodities of like grade and quality.
The Federal Trade Commission Act established the FTC, giving it responsibility for the prevention for unfair methods of competition in or affecting commerce
Sherman Act prohibits restraint of trade, monopolies and other anti-competitive activity
Potential Antitrust Violations The suggestion of profit levels, price-setting, advertising prohibitions, prohibiting competitive bidding, encouraging boycotting and suggesting specific use of specific raw materials.
Exempt vs non-exempt (HR) Exempt employees are salary basis and paid the same, predetermined amount each week (not covered for any hours under FLSA) Non-Exempt: can be paid salary or hourly wage but must be paid overtime worked over 40 per week (FLSA covered)
Job descriptions provide evidence of essential functions of the job as described in the ADA. Descriptions can be used as tghe basis for discrimination, equal pay, and contract lawsuits.
Terminating employees rule of thumb Consult an HR attorney before terminating to assure you have the appropriate documentation to support termination.
Criminal vs civil liability Criminal liability - claims brought by the govt; for example antitrust actions alleging price fixing. Civil liability - claims brought by individuals or companies due to personal injury
Due Diligence (legal) The act of prudent investigation when entering into a contract
Work made for hire (legal) Work made for hire such as an article or program written by an assoc. employee, is presumed to be owned by the employer.
Five Elements of a Contract (Legal) 1. Mutual consent - offer made & accepted 2. Competent parties - persons have legal authority 3. Consideration - the price to be paid 4. Mutuality - mutual obligations of both parties 5. Enforceable - must be in writing
Personal liability claims Homeowners insurance will cover limited personal liability claims for volunteer activity. D&O protects volunteers from claims due to decisions made in good faith on behalf of the association.
Personnel Records (Should Not Include) medical or insurance records, EEO or veteran's status, I9 forms, child support, workers comp claims, reference checks and request for employment or payroll verifications
Request for Proposal (RFP) A document that details requirements for vendors that are specific to a project, outlining its major elements so that proposals received match the association needs.
Indemnification (Risk Management) allows non-profits to indemnify their officers and directors against claims made against them if the claims are based on behalf of the association.
Unearned Revenues Also deferred revenue. A liability, payments received in advance for goods or services to be provided in the future (e.g. dues received at the end of the current year for the following year).
Four Segments of Financial Transactions • Initiation–Check requests. • Authorization–approval to pay. • Custody–Keeping the checkbook. • Recording–Posting
Financial Policies 1. Investments 2. Spending 3. Operating and Capitalization
Types of Net Assets–Reportable on Form 990 1. Unrestricted Net Assets 2. Temporarily Restricted Net Assets 3. Permanently Restricted Net Asset
Fixed Assets: Property, equipment and other assets that the association expects will last more than one year.
Amortization # of years required to repay a mortgage or a loan. Operating expense and does not use cash.
Working Capital equals Current Assets minus Current Liabilities. Measures ability to pay its financial obligations.
Depreciation Policy Determines the number of years over which the cost of an asset will be expensed; diminishing value of asset. Depreciation is an operating expense and does not use cash.
Statement of Activities (Profit & Loss) Reports revenue generated and expenses incurred. Results in net income or net loss. Day-to day financial plan for operations and programs.
Statement of Cash Flows A required report in an audit. Shows where organization received and spent its cash — flow of cash. Adjusts for revenue recognized, but not received. Adjusts for expenses incurred, but not paid. Adjusts for non-cash expenses.
Statement of Change in Net Assets Shows how the results of operations have affected the organization’s unrestricted, temporarily restricted, and permanently restricted assets.
Investment Policies Goal reserve : 50% of operating expenses (test question). Investment policies should clearly outline volunteer and staff responsibilities. Breakdown of short and long-term funds. Breakdown of % at various risk levels.
Key Financial Indicators number of new members. percent of retained members. number of new business starts. number of members participating in programs. number of accounts.
Financial Projections Presented in pro forma statement. Not guarantee of performance; financial assumptions; generally speculative. Best Practice: Base on credible and conservative assumptions
Capital Budget Plan for long-term expenditures–land, building, capital equipment. Feeds into the operating budgeting in determining depreciation; maintenance expense, and the interest expense for the asset. • Also effects cash budget and anticipates flow of cash.
Cash Budget Pulls information from operating budget for revenue and expenses. Uses capital budget to determine cash needed to purchase fixed assets. Does not include non-cash items. Determine cash flow before budgeting investment income.
Incremental Budgeting Percentage increase or decrease will be added to stable programs;e.g. salary budgets.
Indirect Costs Allocates salaries (allocation of staff time) and other overhead to present the true profitability of products and services. - Calculated prorated share of overhead expenses to the specific program or service. - Best practice in program budgeting
Zero-based Budgeting Assumes every project starts with no income and no expenses; computes all detail
Direct Costs Costs directly related to the product, program, or service
Fixed Costs Costs that remain constant; e.g. rent, depreciation, insurance
Variable Costs Costs incurred in relation to product, program, or service that fluctuate; i.e. cost of materials and sales commissions
Activity Ratio Measures how quickly can convert its receivables into cash
Current Ratio Measures solvency and the ability to pay current debts with current assets with a margin of safety. General availability of cash to pay off debts as they come in. • Acceptable ratio is 2:1; $2 in assets for every $1 of debt; minimum ratio is 1:1.
Investment Turnover Ratio Annual Net Sales divided by Investments. Indicates the volume of sales dollars invested in assets produced.
Liquidity Ratio Cash and Marketable Securities (non-long term) divided by Current Liabilities. Measures ability to pay short-term obligations
Net Profit on Sales Ratio Net profit dived by Gross Sales or Net Sales. Difference between what is received in sales and what is spent. Expressed in percentage.
Net Assets As a % of Planned Operating Expense Ratio Net Assets divided by Planned Operating Expenses. Indicates that ability to continue to operate in the event of financial difficulties. How long an association can operate without new revenue.
Operating Ratios Assessment of operating efficiency. Days Receivables Days Payables. Current Ratio. Quick Ratio
Profitability Ratio Net Revenue divided by [Appropriate Amount]. Performance relative to sales, assets, or net assets.
Quick Ratio (also called Acid-Test Ratio) Measure amount of assets that can be quickly liquidated and used to pay debts. Measure of immediate liquidity; may be more accurate indicator than current ratio for a short span of time -1:1 ratio is satisfactory
Quick Ration Formula Current assets minus inventory and prepaid expenses divided by total current liabilitities
Return on Equity Ratio (ROE) = Net Profit divided by Equity. For example $50,000 divided by $300,000 = 16.7%. Represents the return on business investment. • Typically uses a 12-month period
Return on Investment Ratio (ROI) = Profits / Equity or Total Assets $50,000 / $200,000 = 25% • Tests profit performance relative to the equity or capital being used to generate the profits.
Reserve Ratio = Expandable Net Assets / Total Annual Expenses • Measures what percentage of annual budget is covered by available assets.
Taxable UBIT Criteria 1. Trade or business activity; competes unfairly with taxable businesses. 2.Regularly carried on in a frequent or continuous way (operate parking lot every Saturday all year) 3. Not substantially related to tax-exempt purpose.
UBIT Income & Losses 1. Overall profitability is NOT a factor in determining UBIT. 2. An activity can have both exempt and non-exempt activities and income. 3. Keep them separate to avoid UBIT (e.g. paid advertising & subscriptions). Have separate contracts for each activity.
Exceptions from UBIT A. Passive Income (not taxed), B. Investment Earnings: Dividends, Interest, Rents, Royalties, Payments for security loans, Annuities (that are not from a controlled subsidiary). Capital gains on passive investment assets that are NOT debt financed.
Royalty and licensing agreements (Best Practice) Endorsement or licensing contract that carries the lowest risk of UBIT, licenses the assoc name, logo, and/or mailing list, and exercises quality control rights only. Outsource administrative and marketing services to 3rd party
Gross Advertising Income All income collected from advertising in a periodical or Internet
Direct Advertising Expense Expenses associated with sale and production of the advertisement; e.g. salaries, printing, typesetting, production, and mailing costs.
Readership Costs Total cost of producing the periodical minus Direct Advertising Expense (Tip: Readership Costs equals Periodical Costs minus Advertising Costs)
Excess Readership Costs: Readership cost exceed circulation income. Circulation Income – Readership Cost = Loss (Tip: Subscription Income – Readership Cost = Loss)
Circulation Income Income collected from providing the periodical or web site; e.g. subscriptions payments and income from the portion of dues attributable to members’ subscription to periodicals.
Reporting UBI and UBIT A. Report UBIT liability over $500. B. Quarterly estimated tax payments are required. C. Foreign tax credit available for foreign associations. D. File 990-T along with 990 if annual gross UBIT income is greater than $1,000.
Statements Produced by Auditors/Complete set of financial statements under GAAP. A. Statement of Financial Position B. Statement of Activities C. Statement of Cash Flows
Sarbanes-Oxley Non-profit Requirements: A. Whistleblower Policy—protect informants from retaliation. B. Document Destruction Policy—not allowing employees to obstruct justice by destroying documents
Sarbanes-Oxley Expanded (Best Practices for Non-Profits) A. Establish Board Audit Committee; financially literate. B. Financial expert on Board. C. Board hires auditor. D. Five-year audit partner rotation. E. Code of Ethics for financial officers. F. Regular Board training & self-evaluation.
Taxes - Form 990 & 990 EZ A. Must file 990 if gross annual income exceeds $25,000. B. Can file 990 EZ if gross revenue of under $100,000 and total assets under $25,000. C. Due Dates: May 15th ; can file extension to August 15th and November 15th. Must file by November 15th.
CSE as servant-leader he CSE serves the board, but NEVER surrenders the leadership role needed. The CSE must speak the big picture perspective when no else does. The CSE must take the leadership role and set the boundaries for the relationship.
Participative Management Generally accepted as best practice, participative management means that the people who are most impacted by a decision have an opportunity for input.
Proactive Leadership Identifying & minimizing risk in antitrust compliance programs and through legal compliance audits to recognizing trends and projecting a preferred future o Assuring the org.'s leadership is engaged in the dialogue about risk, trends and the future
Three Elements Required to Build Trust achieving results, acting with integrity, and demonstrating concern
Performance Appraisals are the cornerstone to the establishment of the relative ranking of employee performance; they assist in determining how employees are paid. preferred option is to conduct all reviews after the close of the fiscal or program year
Auditors Report gives auditor’s opinion about statements. Not a management report, belongs to Auditor. Everything else is management representation. Statements belong to organization, not Auditor.
Unqualified clean, opinion auditor is happy with statement as a whole
Qualified not happy with something
Adverse statements are misleading, serious problems
Disclaimer Auditor not able to form an opinion (can’t get enough information, Auditor not independent)
Who does the Auditor report to? Auditors report to the board or auditing committee – not staff
Types of association budgets Functional expense (broad function – government relations, PR, etc.). Natural expense (type e.g. salaries, rent, etc.). Program expense (by program issue)
Annual fund vs Capital Fund Annual fund – current needs. Capital fund – specific purpose (new building)
Cash Flow Management Ability to retire debt and refinance new activity
Working capital ordinary expenses
Prices & Fees of Members Antitrust violations re prices & fees are treble damages. Written communications or discussions before, during or after a meeting are risky. Price or fee reporting programs are not themselves illegal if appropriate guidelines are strictly followed
Hydrolevel 1982 Sherman Act violation. Apparent authority. Treble damages. ASME, product standards: voluntary standard can be used to restrain competition
Credit Reporting Members submit reports naming customers whose accounts are past due, Useful to members in evaluating credit risks, Declared legal by Supreme Court, Make report available only to those with a legitimate interest in credit information
Group Buying & Selling Robinson-Patman Act: prohibits discriminatory pricing. Participation in group buy should not be restrictive/prices received or given should not be discriminatory
Defamation Should not make defamatory statements unless there is clear evidence that they are true. Should purchase liability insurance
Music Licensing Must obtain permission even if just background music Can get blanket permission through ASCAP/BMI If association benefits from event where copyright infringement, then association can be liable
Cannot discuss at association meetings (Antitrust) Prices, production, market allocation, boycotts, anti-competitive actions, reciprocal or exclusive dealings; tying arrangements, pricing procedures
Can discuss at association meetings (Antitrust) Industry trends, technology or research, methods for purchasing, manufacturing or marketing, management, government relations, employment relations, improving products, consumer and environmental issues, energy use and supply
Membership Termination Nonpayment of dues – okay Must provide due process – provide opportunity to present case to committee or board that oversees expulsions and must be able to appeal to Board of Directors If Committee decides, should have opportunity to appeal to Board
Professional Codes and Self- Regulation Must be reasonable and represent the minimum level needed Sanctions cannot be anti-competitive Need due process including proper written notice, fair hearing, and right to appeal
Price Fixing Is a per se antitrust violation – no excuses Association members and staff must immediately stop price discussions or terminate the meeting, if needed
Price Fixing (continued) Cannot agree not to raise prices Consensus pricing = price fixing Cannot set minimum fees, maximum fee schedule, relative value scales discourage advertising of professional services, or discourage competitive bidding
Noerr-Pennington Doctrine Antitrust exemption for joint approaches to government (best for members, but not good for competitors)
Nondeductibility of Dues Because of Lobbying (Proxy Tax) elect to pay flat 35% excise tax on lobbying expenditures so members can deduct full amount of dues Must inform members what % is deductible Doesn’t include local lobbying
Managing Responses to Media Inquiries Prepare for the interview •Draft message points •Speak in an inverted pyramid •Don’t say too much •Stay positive •Speak clearly •Dress appropriately for on-camera interviews
Public Relations Don'ts •Don’t Say no comment Speculate Comment off the record Mislead or lie Show media favoritism •Be cautious in drawing conclusions
Public Relation Do's 1. Accept all media inquiries & Be proactive in contacting press 2. Issue statement in writing and monitor coverage -correct errors immediately •Express compassion or sympathy for victims - • Admit when information is not known & commit to finding out
Developing a Crisis Communications Plan •Name a team leader a team leader •Establish communication procedures and Prepare a notification list •Train the crisis team •Draft alternative scenarios and establish a media command center
Accreditation refers to a process of standards setting and compliance measurement for systems, organizations, or institutions. Both processes have implications for exposure to anti-trust liability.
Purpose of credentialing to improve the QUALITY of professional competence within the areas represented by the association. An individual exhibits mastery of a specific body of knowledge
Objectives of credentialing Raise standards, Award recognition, Establish credibility
Criteria for credentialing 1. Should be NO MORE stringent than necessary to assume minimum qualifications 2. Must not restrict or boycott competitors 2. Cost must be reasonable and not set at a level prohibitive to smaller members or to nonmembers o participation must be voluntary
Credentialing program due process for denials 1. Written notice 2. Evidence presentation 3. Right to cross- examination witnesses and carry on a dialogue with individuals responsible for the denial. 4. Right to a hearing before an unbiased tribunal
Elements needed to establish credentialing program 1. Governing body. 2. Defined body of knowledge. 3.Guidelines for administration. 4. Eligibility. 5. Measurement. 6. Code of Ethics. 7. Candidate selection. 8. Procedures for maintenance, reinstatement, revocation
Governing bodies can go by several names 1. Board of governors 2. Board of trustees 3. House of delegates 4. Constituent assembly
Membership Restrictions Membership is a privilege, but may be a right if not belonging harms competitively.
Acceptable Membership Restrictions 1. Kind of trade, profession or field. 2. Functional level in an industry. 3. By geographic boundaries. 4. Adhering to a reasonable code of conduct and can pay reasonable dues.
Membership Termination If someone wants to quit, the resignations must be accepted. By-laws should state whether member is entitled to any dues refund.
Membership Termination - Can only terminate: I. For non-payment of dues ii. Withdrawal from the profession or field. iii. Loss of required government licensing iv. No longer meeting reasonable membership criteria v. Failure to comply with reasonable rules unrelated to business competition
Membership Services to Nonmembers Any program that offers important economic or business benefit of competitive value MUST be also available to non-members. Can charge them more, as long as it does not deliberately compel membership
Proxy tax an association may choose to pay a 35% tax on their lobbying expenditures and avoid charging members.
Lobbying expenditures cost of attempting to influence legislation at the federal and state level (but NOT LOCAL) and high-level administrative officials. It also includes research, preparation, planning and coordination to support attempts to influence legislation.
Globalization - Going International a. Usually means going to two or more countries. b. Different reasons and ways that associations go international c. It affects all the functional areas in an organization
What should you keep in mind when going international? • Strategy should reflect the interests of the overall membership • Will increase expenses and there are cultural differences • Buy-in from all is essential. Clearly define objectives. • Plan to the associations strengths and involves change
Factors to assess (Going Global) i. Look whether the industry or profession is international in scope. ii. How active is the membership in international activities. iii. What are the opportunities in the global economy iv. Are there enough resources to expand internationally?
Publicity Disseminates information through the news media. The uncontrollable part of public relations
Advertising Paid, one-way communication. Completely controlled
Marketing One-way communications process motivating publics to purchase goods, services, or ideas.
Promotion Includes special events and activities to create interest in person, product, organization, or cause
Community relations Communication with citizens and groups within your association’s area of operation
Industry relations Communications with other companies within the organization’s industrial sector.
Message framing Identifies the key and secondary messages that will best motivate target audiences to take the desired actions
What are the stages of an audit report? Audit planning, document review, financial statement reconciliation and analysis, and management letter
Current Ratio Formula Current assets divided by current liabilities
What is - LERP? (ethics) Legal, Ethical, Reasonable, Practical
What is LAI? (fundraising) Linkage, Ability, and Interest
What is SWOT? Strength, Weakness, Opportunity, and Threats
What is SROI? Social Return on Investment
Created by: sdjblaze
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