The document summarizes a presentation about using financial data to tell stories about nonprofit organizations. It discusses key financial statements like the balance sheet and income statement and tools for analysis such as percentages, ratios, comparisons, trends, and benchmarks. The goal is to interpret numbers in a way that answers questions from funders and other stakeholders about an organization's financial health and viability.

1. North Carolina Theatre Conference Financial Storytelling Presented by Dave Olson University of North Carolina School of the Arts July, 2011

2. (c) David L. Olson - 2011 A c c o u n t F U N i n g A c c o u n t i n g =

3. Dave’s summer, so far Seminar - learned two things Engage the audience, right from the top Use simple pictures to tell your story (preferably hand-drawn) (c) David L. Olson - 2011

4. (c) David L. Olson - 2011

5. (c) David L. Olson - 2011 Next, I thought I’d try regular pictures – last year, Shane included a picture of his dog, so I thought I’d follow suit and try that this year, so…

6. (c) David L. Olson - 2011

7. Our goal today (c) David L. Olson - 2011 1, 9, 3, 4, 6,5, 7, 8,2,1

8. Who might want to know our story? Funders Bankers The press Employees The community Management! (c) David L. Olson - 2011

9. What kinds of stories? Assess the financial/operational health of an organization Strong vs. weak financial position? Long-term viability? Is the company a good investment? (c) David L. Olson - 2011

10. What types of information? Put yourself in the shoes of a foundation grant reviewer who is evaluating your organization What kinds of questions would they like to know about the company’s financial position? (c) David L. Olson - 2011

11. Financial storytelling Can also help to make better management decisions! In the end, we can put all of these types of questions/observations together to begin to “tell a story” (c) David L. Olson - 2011

12. Sources of info for stories Stories can be based on all kinds of different sources of info Budgets Audits Monthly reports 990’s Industry benchmarks Always make sure that you’re comparing apples-to-apples info however!! (c) David L. Olson - 2011

13. A quick example The All-Pippin Dinner Theatre Audit Results - 2001 - 2009 What story does this tell? (c) David L. Olson - 2011

14. First, we must know the language (c) David L. Olson - 2011

15. Where the story begins TERMS (of Endearment) Balance sheet: ALOE Income statement: RENI FASB terminology (c) David L. Olson - 2011

16. The balance sheet Shows the accumulated resources of the co. – its financial position At a given point in time (ex: 12/31/11) The value of the business after paying all its bills (c) David L. Olson - 2011

17. The balance sheet: ALOE A = L + OE (or: A – L = OE) A = Assets (stuff you own) L = Liabilities (stuff you owe others) OE = Owner’s equity (net value of the business) Examples? (c) David L. Olson - 2011

18. The income statement Shows the results of operations over a period of time vs. the balance sheet, which is at a single point in time (c) David L. Olson - 2011

19. The Income Statement R evenue - E xpenses = N et I ncome or profit/(loss) (c) David L. Olson - 2011

20. The story continues – our goals Understand the nature of: Resources and debts (balance sheet) Operations (Income statement) Develop tools for interpreting the numbers Identifying relationships between #’s #’s always mean more when compared to something else Asking “why”? (c) David L. Olson - 2011

21. (c) David L. Olson - 2011

22. Summary of key tools %’s Ratios Totals Comparisons and trends Unusual items Audit info Benchmarking Relationships (c) David L. Olson - 2011

23. Quick review of percents % of total Used for lists or columns of #’s Ex: a list of expenses Formula = item/total % change Looking for the change between two #’s Formula = Amt of change/old # (c) David L. Olson - 2011

24. Percent of total – pie chart (c) David L. Olson - 2011 What’s the story here?

25. Percent of total example Salaries $60,000 (60/100=60%) Rent $20,000 (20/100=20%) Insurance $15,000 (15/100=15%) Other $ 5,000 (5/100=5%) Total $100,000 (100/100=100%) What’s the story here? (c) David L. Olson - 2011

26. Percent change example ‘ 10 ‘11 Diff Ticket price: $100 $150 +$50 What’s the difference? What’s the old #? What’s the % change? (c) David L. Olson - 2011 $50 $100 50/100=.5 or a 50%

27. Ratios Just a fancy word for % “ Something” relative to “something else” A relationship Formula: “something”/”something else” (c) David L. Olson - 2011

28. Some key ratios Income ratios Expense ratios Efficiency ratios Working capital ($) Current ratio (%) (c) David L. Olson - 2011

29. Income ratios % earned vs. % contributed Range of 40% - 60% in either direction not unusual Why important? (c) David L. Olson - 2011

30. Expense ratios From the income statement (audited) Program expenses (min. 70%) Management and general expenses (15%) Fundraising expenses (15%) Statement of Functional Expenses Lists exp’s by the nature of the expenditure (c) David L. Olson - 2011

31. Efficiency ratios How efficient are you at generating a certain type of revenue Compare the cost of generating the revenue, to the revenue generated Can do this for many types of revenue sources (c) David L. Olson - 2011

32. Efficiency ratio formula Expense/revenue Should give you some % <1 Why? Gives you “cost to raise (or earn) $1” of revenue Key ratios: Development, marketing (c) David L. Olson - 2011

33. Efficiency ratio example Total development expense: $20,000 Total development income: $100,000 $20,000/$100,000 = 20% Now, you can compare to other org’s (c) David L. Olson - 2011

34. Other storytelling tools Comparisons, trends, and relationships Unusual items Audit info Benchmarking against other organizations (c) David L. Olson - 2011

35. Items to always check Cash Pledges Debt Net income Net asset balances What does a negative balance here mean? (c) David L. Olson - 2011 Any relationship here?

36. Deficits – do you know the difference? Annual deficit Accumulated deficit Structural deficit (c) David L. Olson - 2011

37. Relationship example - cash Key: double entry bookkeeping! Changes are always caused by something else Let’s say that cash doubles from yr 1 to yr 2 What are four reasons cash could double from the prior year? Always ask “why” (c) David L. Olson - 2011

38. Benchmarking (and a caveat!) What’s the goal of benchmarking? Be aware of context!! Your circumstances may be different than others in the group Data collection, reporting and classification (c) David L. Olson - 2011

39. Industry benchmarking Theatre Facts www.tcg.org Non-profit professional theatres that are members of TCG Select “Tools and Research” Compare their %’s to yours By budget group size (c) David L. Olson - 2011

40. Theatre Facts (2009) Part 1: Trend Theatres The same theatres (112) that have reported over the last 5 years Part 2: Participating Theatres Theatres that responded to this year’s survey (c) David L. Olson - 2011

41. Theatre Facts “group” budgets Group 1: $10 million + Group 2: $5,000,000 - $9,999,999 Group 3: $3,000,000 - $4,999,999 Group 4: $1,000,000 - $2,999,999 Group 5: $ 500,000 - $ 999,999 Group 6: $ 499,999 – $ 999,999 (c) David L. Olson - 2011

42. Let’s take a quick look TheatreFacts_2009.pdf Average earned Inc: p. 24, Table 15 (both $ and %) Key efficiency ratios: p. 26, Table 16 Average expenses: p. 27, Table 17, 18 Average $ gift, by source: p. 29, Table 20 Average contrib’d inc.: p. 30, Table 22 Key operating benchmarks: p. 33, Table 25 (c) David L. Olson - 2011

43. Dave, let’s see this stuff in action! Now, let’s really put the FUN in account FUNi ng! All-Pippin Dinner Theatre Audit.pdf ArkansasSymphAuditFS.pdf (Work from the “unrestricted fund” only) (c) David L. Olson - 2011

44. Contact me E-mail: [email_address] Twitter: ArtsMgmtGuy LinkedIn: Dave Olson (UNCSA) Cell: 612-799-1490 (c) David L. Olson - 2011