Financial Management Workshop for CILs…Regulations and Beyond
IL-NET presentation on May 25-27, 2016
Module 4: Lunch Presentation with Maria Stepanyan

MARIA STEPANYAN: So yeah, I was saying that I'm not an expert by all means and I'm just going to share some of the things we are doing at our center.

And I want to thank the organizers for inviting me and giving me an opportunity to share about our organization.

So the Center for People with Disabilities, we also call ourselves CPWD was founded in 1977, with a focus on employment.

And we are still providing employment services in our community.

And we have some additional services, personal assistance services and skills training for people with developmental disabilities in addition to all the five core services.

One of our most popular programs is the services for older individuals who are blind or with low vision.

And I am proud to say that the manager of that program is here, if you have any questions, feel free to talk to Lisa.

She has a fabulous program going on.

Our main office is in Boulder but we have satellite offices.

We have, we are renting two offices and occupying space on, three satellite offices, and about 60 employees, half of it are in personal assistance services, half are IL staff.

Our funding sources are pretty diverse.

We receive federal funds Part C, Part B, federal funds for older individuals who are blind, and then state funding for IL services, that's in addition of all those little grants from local government and foundations.

We also have fee for services and we bill Medicaid for those services under home health and under day program services and our budget runs about 2 million.

We do have indirect cost rate that has been approved several times already.

We have had it for three or four years and it is at 16% currently.

It was approved originally at 12%, so we are able to increase it, and I believe that our next proposal hopefully, will show an  increase further.

The revenue sources are here we can see that we are about half and half between the grants and fee for services and that makes if of course challenging.

I'm sure all the financial people do know that the more fee for service funding and more unrestricted funds come into the budget, the more flexibility and less headaches.

But we are in a situation where they're half and half with grants.

And the majority of our grants are federal grants.

The expenses of course, are mostly programs, 15% are in general and administrative.

And I'm supposed to share about policies.

So our policies, we do review, we do not do it annually on a calendar, but we do review them any time there are changes.

If there are organizational, structural changes that requires to review the policies and make sure that they are aligned with the current staff and with the current roles of the staff in organization.

We come up with policies also, we do see the need for policies from practical, work we do and I will bring an example, we did not have a petty cash policy but we did have petty cash, very minimal, and wasn't used very much, so there was no need to really have a policy.

But then we had a new manager that started utilizing the petty cash all the time, and, that would have not been comfortable for me to go and say, no you can't do that, or you shouldn't do that.

Instead, we just created a policy, and that answers all the questions.

So I do find policies helpful, because they are a tool for the decisionmakers, and they are helpful in decision-making, so decisions are not made based on emotions.

Or just inconsistently, so policies do help us to be consistent of course, and we do look very closely and try to make it workable policies.

We do have our financial policies accessible to all financial staff.

Anyone that is enrolled with Accounting Department does have the financial policy at their desk.

Because we do require all financial staff to be following very closely the policies.

And we are right now, literally tomorrow, the new financial policy handbook will be at the board meeting, for an approval and we used the IL-NET sample, which we found very helpful.

That will, our new policy handbook will include all our policies in one place.

All the travel policy, petty cash policy and expense reimbursement.

All of those now will be in one book that I find to be helpful.

So the structure.

We have had some changes in our organizational structure to address issues that we were having, and how we fixed things was by investing into the administration.

In my experience, having an Executive Director in charge of everything, is a little bit of recipe for failure because it is important to have separate people leading different areas in the organization.

What we currently have is Executive Director and four director reports to the Executive Director.

And each direct report is responsible for their area of course.

I am the director of operations responsible for finances and human resources and we have Director of Programs, responsible for all the programs to make sure that the programs are running the way they should be running.

We have director of communications and fundraising and director of home health program.

So why this is important in my opinion and the experience shows to have separate people is not because one cannot do the other persons job but it creates checks and balances because then the financial person is concentrated on finances and responsible for the financial operation and doesn't have to think about the programmatic part.

If you give one person to be responsible for all those, it creates a little bit of a challenge, because as a program director, I would want those awesome things for the program, and I might overlook that we actually don't have the money to do that, because it sounds so cool to do these programs things and as a program person, if it is in one person's hands, it becomes out of control and out of balance.

When it is hands of different people, then it is the program person's job to dream big and come up with fabulous ideas that require a lot of money.

So the development person job to find ways to bring in money and it is the finance person's job to make sure it's all accounted correctly and aligned with the budget and all of that.

So it creates checks and balances in administration, and makes it more effective than putting all in the hands of the Executive Director.

So the separation of duties is not only for the Accounting Department in my opinion.

Separation of duties in the administration is critical.

With the separation of duties, of course, comes the fact that we have multiple people in charge, and the communication becomes a crucial point, and to have a fluid communication between the key staff and Executive Director has proven to be very important.

So by what I mean by that is that the financial person, like myself, when I see all the finances and I'm all the way in the work of the finances and something comes up, I need to be able to go and report to the director right away.

So there should be that relationship of the open door and open communication, because I'm the one who is working day and night in finances.

Executive Director doesn't really know as much as I know about the finances.

So for him to lead the organization and make the decisions, he needs to be talking with me and I need to be giving the information all the time.

The same goes, of course, when we talk about communication between the key staff.

When we have the fundraising person, for example, director of development, who is going out and getting the money, if it is not communicated with the financial people, that can create a problem, and I will bring an example of the director of communications, for example, going out and getting funds, thinking that we need money for employment program, for example.

We need money so I am going to go and apply.

Most of the funders do like to give for salaries, that's one of the things they love to give salaries of direct staff.

So the grant is getting approved, now we have this grant for salaries of the staff, but that person is already covered by another grant, and the fundraising person wouldn't necessarily know unless there was a communication with the finance person.

So having these communication often, all the time and those people being accessible to each other at all times I find to be very, very helpful, so we can figure out what we're applying for.

Having all the roles in place and together supports the growth and effective work of the organization.

The information and the communication is, of course, also necessary for the people to do their jobs, and it's both ways, of course.

Not one way communication.

A lot of the information from the Federal government comes to the Executive Director directly.

So what we have in our agency the Executive Director does forward all of those emails because most of those emails have information that directly affect the financial work.

And for me being on top of all those communications and finding out what requirements have changed or if any deadlines have changed helps me to make sure that we are in compliance.

And at the same time, between me and my staff, I need to make sure that communication comes to them as well.

So the communication is a big piece.

I think I have said that word enough to make a point.

So I will move on.

So budget.

Maria's role.

All right.

So my role.

In addition to all the janitorial work of cleaning up everyones mess and sometimes literally, I work on budget.

Budget is, I don't know, it's one of my favorite things, actually.

I call it I think a power tool.

Maybe talk a little more about the budget.

Yeah.

See, I love the budget so much, I want to talk about budget.

But this is about my role.

I do the budget, and I do make sure that we are in compliance with our grants and contracts, and to do that,

I do need to read the contracts that come and I do read it from cover- to- cover.

So when the Federal government gives us our contract it doesn't just get filed in a drawer.

I do actually read, and a lot of other contracts that have, like little government contracts, local funders, local government, they have in the contract deadlines for reporting and there's media or its quarterly reports that need to get submitted.

So I read those and put it on my calendar, as soon as I get the contract and then I file it.

I think we talked most of this already.

I do go to the board meetings and present financials myself.

One of the things that we started doing in our agency that has helped is to teach our staff the things we want them to know that would help us to stay in compliance.

So the time and effort reporting for example, is a big thing, right.

We all talk about it and it is very complicated, and if I just take that on myself to make sure we are in compliance, I don't think I can succeed.

So what we did at our staff meeting, I talked about the whole regulation in a language that was accessible to all staff of course.

But to explain then the reason why their time card had these percentages allocated or why we're asking them to do those things.

It has helped us to be in compliance because

staff now understands what it means to put part

of their time to this grant or that grant.

So it is important to educate the staff, the people who are actually doing the work, to do what we want them to do.

So if we want correct time cards, it's important to pass the message on and let them know what this is about.

So the budget.

Yay.

(Laughter.)

So see, I call it a power tool.

I first thought that the budget is a powerful financial tool, but I think it's a power tool.

You know, (buzz), because it drives the organization.

It is the plan and the ideas of the organization.

The priorities of the organization.

The budget is showing in numbers what these organizations is about, where we are going to put the money, where going to spend it, how we're going to do it.

So we do annual budget.

We create an annual budget.

It is reviewed and approved by the board prior to the beginning of the fiscal year.

And I usually come up with this picture that I share, I shared this with our board and Executive Director and our executive team, which are the key staff in our organization, and what this means is the four pictures, there is a heart and money and stars and a stop sign.

And how I think of it is, the heart is our program and our agency, they are the mission of the agency, that's why they're there.

That's why we have our agency.

So, our IL programs for example, we have to provide those services.

The money, the programs that make money.

They might not be 100% aligned with mission of the organization, but they bring money to support the other, the program, the hard programs that don't bring money.

The stars are the programs that are both.

They are mission driven and they make money.

And the STOP sign is the one that gets overlooked and forgotten that actually is not mission driven program and it's losing a lot of money.

Why do we have that program?

And I have seen those kind of programs in centers that have started at some point and stayed there, so it's not getting evaluated every year, and having this program in front of me every year doing the budget preparation helps me to think of each program and categorize them and think about where are they now?

And that's why I like this picture.

So to, and also, this is a way for me to communicate to our board and Executive Director when and if I think one of the programs is really losing lots of money to bring to the attention to the Executive Director and the board.

Whether that losing program is really a heart program or STOP sign program.

Our budget is really big.

We have 22 tabs, and I have all the programs with their own budgets.

And lots of other administrative expenses and allocations and they all grow into one budget, the final one, which gets approved and which is the one that's shared by, shared to the funders, shared with the funders.

So what I tried to say by this is that I actually start working from bottom to up in a budget and start working with all the details instead of just running P&L for the last year and here are the numbers for the budget this year.

I try to work and find out where those numbers are coming to see how the budget will look.

We do estimate our administrative staff's time towards the departments that we have internally.

In the budget worksheet, I do code all the expenses according to the accounts in our accounting system.

And we use QuickBooks, so that means it easier for the accounts payable person to know where to record the expenses, because the budget has the same account numbers that the QuickBooks has.

It also helps me to make sure that they're recorded in a right place when I look at the budget versus actuals to make sure that we have an accurate representation.

So the budget that we do provide to the board and gets approved.

I do not change that worksheet.

But I do work with budget almost every day.

It's almost every day up on my computer, and times when changes need to happen.

So I always create a copy of the budget, which I call the working budget, and make all the changes there.

The one that was approved always stays the same and we do our budget versus actuals quarterly.

We present that quarterly report to the board, and that has helped us to evaluate the budget as we go.

Because we do have a tight budget.

We don't, our center doesn't have lots of unrestricted funds.

As you saw in the beginning, it's 50% grants and most of the grants are federal grants.

So it's a tight budget, and if I don't monitor every day and every month, the expenses can get out of hand.

Because we also have fee for services that also requires close monitoring, because if the income drops from the fee for services, that is again, affecting our budget.

Which affects our end of year reports, it affects our financials.

So my goal is always to come in the black at end of the year and my way of achieving that goal is to be monitoring and working with the budget very closely.

What has also helped in our organization is to educate our managers of programs about their expenses and about their budgets.

So we do try to, we have meetings before the budget is finalized and provided it to the board I meet with each manager and work on their program budget.

That helps them to also understand how their program is run and oftentimes there are really good suggestions from the manager, managers about their program and their expenses.

Like one time we had a big cut in expenses with a suggestion of the Program Manager.

Because as soon as he saw what expenses are taking place in his program, he came up with ideas how to eliminate that and still run that program.

So that communication with the people who are doing the work is essential.

And of course, open budget, it creates trust in the organization, and it creates trust in decision-making, so if the staff and at least the managers understand how our budget is built, then there is a, there's just more confidence and more trust that whatever we are deciding, whenever we are saying yes or no, is because of all that information that now they're familiar with.

Accountability.

Can't have accountability without accountants, right.

Starts with accounting staff.

Paula was saying about how it sounds to have a center for independent living that is not accessible.

And to me, it's just as bewildering to know that some centers have people in their Accounting Department that have no connection with accounting.

They are not accountants.

But they are the ones running the books and doing the accounting.

So it is important, in my opinion, to have qualified staffing in Accounting Department for accountability reasons.

because if you just bring a good person, just to do the data entry and there is a big opportunity for the accountability not to be there.

So all the accounting staff just has to understand, they have to understand the accounting and finances, and I'm not saying everyone should be an accountant.

I'm just saying there's an accountant needed.

You can't have data entry people running the books and just doing the books.

There should be somebody in the organization depending on the size whether it is finance managers, CFO, the Executive Director or the board treasurer, depending on the size, that somebody understands accounting, understands finances.

If the finances are just treated as numbers and entering data, then I don't know how you can have accountability.

So for us it all starts with accounting staff.

The accounting system, we use, as I mentioned, QuickBooks, and it is our database.

So all the reports that I run and all the analysis that I make based on the accounting information all comes from the QuickBooks, so the way we enter things is going to drive the way we operate.

So it's important to make correct entries and be consistent.

And know exactly what goes in QuickBooks or your accounting system and how it gets there.

In the QuickBooks, for those of us who do use QuickBooks will understand what I'm talking about, in QuickBooks we use classes and jobs.

And we use classes to track our internal programs, and use jobs to track ranks.

So I'll talk a little bit about that, jobs, because we discovered that recently, that has helped us tremendously.

When we started using jobs for tracking grants, at any given time, we can run a P&L by job and it gives us the report on the grant.

It tells us how much money we have gotten, how much was used and what it was used on.

It's a report at the fingertips at any given time for any grant.

It also helps to identify any expenses that were not allocated to grants, or not covered by grants.

So using jobs and classes, in QuickBooks, has been very helpful.

We do have a policy that by the tenth working day we have to reconcile all the banks.

So why I was talking about the accountants and the knowledge of the accounting in the Accounting Department, is because without that knowledge, all those points of closing the month, closing the books, reconciling the books, can become secondary and not important.

But really that is what causes a lot of the problems, when the books are not closed on time, when the banks are not reconciled.

Not only of course, it's a safeguarding tool, when you reconcile the books, it of course, helps you to know for sure what has gone through your bank, but it also is the important component of the accounting.

So our policy says we close it and we do follow our policy.

So we always reconcile the banks every single bank account and credit card account are reconciled every month by the tenth working day.

And we do close the month.

I do put a password when we close the month and it's not because I don't trust my staff, but it's because even accidentally you can change something in QuickBooks and if there's no password and if you made a change to the previous month, then the change will take effect.

So putting the password helps me to make sure that the month that has been closed and presented to the board has stayed the same and no changes have happened to that. 

We have some protocols and policies just to make sure that we void the checks after six months if they're not cashed and we don't delete in QuickBooks because you miss all the information that was previously entered when it's deleted.

Whereas when it's voided, there's a tracking system to track what was changed or why it was voided, so we don't delete in QuickBooks.

The bank account.

I remember working with an Executive Director who had all of the bank online.

It's so easy, right.

You want to know how much money you have, let's look online.

But that's not really true, because you have, you might have checks out.

You might be expecting a check that's coming tomorrow, so reconciling the QuickBooks bank account with online bank daily, is something we do every day.

To know how much money you have, I never go to the bank account online.

I look in the QuickBooks to tell how much money we have.

Running reports in QuickBooks and utilizing the QuickBooks to the fullest, I feel like I should be a QuickBooks representative.

(Laughter.)

But it does offer a lot of good functions that I think are underused, or underutilized.

Running those reports and making sure that people who are making entries in QuickBooks know how to run those reports and check themselves.

So my staff knows how to check their own work before it comes to me.

They run multiple reports to double check them.

And that has been helpful.

We talked classes and jobs.

And some examples.

I think we have probably in the packets the profit and loss by class.

That tell us the programs, the financials for each program internally.

And we run the P&L by job, profit and loss by job to see where the grants are.

And this profit and loss by job is also helpful when you try to figure out when the end period is for the grant and how much money is left.

You can run this report and it just tell you right away how much money is left in the grant to be used.

We do run the AR aging weekly because in my opinion, that's a big item, don't want to have any money out there that's ours and should be in our account, so we are collecting everything.

The are pretty diligent about contacting and making sure that the moneys are, all the funds are collected on time.

So if you have outstanding ARs for months and months and months, and you're having maybe cash flow problem, I think that tells probably why.

But some final words on accountability.

I think it's just understanding what you're doing and why we're doing it.

So going to the trainings and referring to the materials.

I'm very proud to say we have two program people, our director of programs in our agency and the director of our vision program here, at the financial training.

I think that is what increases the accountability.

So kudos to all the program people who are so bored probably, by all this accounting stuff.

But I'm sure all the accounting people will go with some piece of information that's going to help put the pieces together, because they don't run separate.

Everything that the program person tells that this is what we're doing, the financial report should say the same thing.

So, and that's what the accountability is all about, right.

If my English is good enough to understand the definition of that word.