Financial Health Report

Background

ASURA uses the ASU Foundation for a New American University as its banker, and has several accounts in the Foundation. One of the accounts, Operations, is used to pay for ASURA’s various operational expenses which include a scholarship, printing and mailing, and technology. If the Operations account ever became empty,  ASURA would shut down. The Financial Health Report answers the question: Is ASURA managing its budget so that ASURA is unlikely to go bankrupt.

The Finance Committee decided that a financially healthy ASURA would meet two conditions:

• Condition 1:  ASURA needs a balanced budget. 
• Condition 2: The Operations account  balance should be large enough to weather a large, Unexpected Deficit.

The first condition is easy to calculate; the second condition requires a definition of what the maximum Unexpected Deficit would be. The committee decided that if ASURA could pay for the scholarship and cut expenses in half it would survive. If the deficit were larger, ASURA would likely stop operating.

In spring 2014 the Board adopted a Financial Health Policy, modified several times, that quantified these two conditions and stated that Financial Health Report would be given to the Board. The Policy translated the two conditions into the following calculatable values:

• Condition 1: current year revenue in the Operations Account is greater than current year expenses and 
• Conditions 2: there is An Adequate Cash Reserve in the Operations Account to cover a deficit equal to the current scholarship payments plus one-half of the prior year’s non-scholarship expenses.

Condition 2 defines the minimum size of an unexpected deficit that ASURA could be expect to survive.

Preparation

The report is prepared in mid August once the books have closed on the previous financial year and the proposed budget for the upcoming year has been prepared. The Finance Committee has the responsibility of creating the report but works closely with the Business Manager and the Treasurer, both member of the Finance Committee. The documents you need are 

• the June 30th financial report for the previous year, i.e., the year-end fiscal year report; contact the Financial Operations Manager or the Treasurer
• the proposed budget for the current fiscal year; contact the Treasurer

Calculate the numbers

1. Download, save and open the Financial Health Analysis Calculation Excel sheet stored in Wild Apricot. If you have not been given access to the file contact the Websites Committee Chair.
2. The last column in the Excel file are values based on last year's budget estimates so the first thing you do is update the data in this column. Using the June 30 financial report for last year enter the correct annual Operations expense and revenue (rows 2 and 4 in the spreadsheet). Check line eight to make sure it matches the amount shown on the June 30 financial report; it is not a match change it to the report value. Repeat this for line 9 shows transfers from Operations to the Scholarship endowment; update if needed. This column now reflects the financial transactions for the previous year.
3. Now you need to enter estimates for the current fiscal year, using the values in the proposed budget. In the blank column next to last fiscal year's values:
   1. enter the current fiscal year on row 1
   2. enter the estimated fiscal year expenses in row 2, no $ or commas
   3. enter the estimated fiscal year income in row 4, no $ or commas
   4. enter the scholarship amount from the budget in row 8, no $ or commas
   5. enter any transfers to the Scholarship endowment in row 9 (this will almost always be zero), no $ or commas. Be sure to enter zero if it is zero.
4. To fill in the seven blank cells in rows 3, 5, 6, 7,10,11,12, copy the cell adjacent on the left and paste it into the blank cell in the current fiscal year column. When you have completed copying and pasting your table will have not blank cells and you now have all the numbers you need for the Board Report.

Prepare report

1. Download, save, and open the previous year's report in Wild Apricot. If you have not been given access to the file contact the Websites Committee Chair.
2. The left hand column has values based on last year's budget; update these values using the data from the Excel file you have just updated and saved.
3. You need to move the first four columns to the right one column. One way to do this is to highlight the first four columns, delete the material (Ctrl X) and past them back in one column to the right. 
4. If all has gone well there should be a blank column on the left which you will fill with the values from the excel file for the current fiscal year.
5. use the update feature in Wild Apricot (see Working with Wild Apricot files) to update the Financial Health Report Template file located in the Wild Apricot's Financial Files/Financial Health folder. 

Report discussion

Once the table is completed you need to add some discussion. What you add varies for year to year depending on what is shown in the table.

• If conditions 1 and 2 are satisfied then ASURA is currently financial healthy.
• If calculation one is negative what you say depends on how negative and historically what has been the trend. Relatively small negative amounts can often be explained by one time large expenses and overlooked. If the excess funds are large it can be suggested that current excess will handle the shortfall without impacting the adequate cash reserve.
• If calculation three is negative, the association will be to consider cutting back on expenses.