Management/Admin

You Can’t Outsource Financial Responsibility (Chickens Always Come Home to Roost.)

Staff Post
By Heather Young

I often teach and consult for artists and arts managers who have limited background in accounting and finance, and who therefore are reluctant (or even fearful) to step into this arena. 

The bad news is that, like all relationships, it’s a package deal - once you take on a management role, you must accept decision-making responsibility, even in areas that aren’t your greatest strength. The good news is that there are some simple techniques that will help you feel more comfortable in the driver’s seat, whereas failing to make the attempt (no head for this sort of thing, terrible with numbers… you’ve heard the excuses) can set you on course for disaster.

Case in point: a certain executive director was meticulous in the artistic/programming side of their role; not a detail escaped their attention. And yet, with no apparent irony, the ED declared their inability to do math and therefore complete dependence on the part-time bookkeeper to deal with day to day finances. Financial statements? That’s what the accountant prepared for the government. The ED complained about receiving terrible service, but had trouble articulating the problems or what improvements were needed.

This didn’t stop them from blundering ahead with ill-conceived financial decisions, often based on phone advice from a couple of more economically successful artistic colleagues, and at odds with the advice they were paying for. Later, they would turn to the accountant or bookkeeper to clean up the mess… while making it clear they didn’t want to hear the mechanics of what went wrong. In their view, poor results arose from poor execution by the contractors: “Not my job; just fix it.”

No wonder they felt angry and mistrustful: they didn’t know how to collaborate with accounting staff, let alone tell whether they were doing a reasonable job. And staff heard the unspoken message: there’s no point getting into it with the boss.

Don’t be that guy!

Henry Ford got it right: "One of the greatest discoveries a man makes, one of his great surprises, is to find he can do what he was afraid he couldn't do."

Sit down with your bookkeeper or accountant and review your statements together. Ask them to walk you through the important points. Do it every month. You know your organization; financials are just another way of telling its story. You’ll soon start to recognize features that indicate whether you’re on track financially. If your staff member can’t explain the numbers with confidence – well, maybe it’s time to get a second opinion on the quality of their work.

Expand the conversation with a few good questions, such as:

Are we compliant with the CRA? Can you walk me through our latest remittances or returns? (Your bookkeeper should be able to explain how amounts are calculated and reported to the government.)

When was our most recent bank reconciliation, and can I see the list of outstanding items? (Bank recs prove that cash is stated accurately, and they normally happen monthly. It’s unusual for online or ATM transactions to be outstanding, and uncleared cheques should be recent. In Canada, cheques are stale-dated after six months.)

Are there any particular areas of concern? (This depends on your situation, but you should have a sense of whether the explanation matches your observations.)

You can be a capable financial manager without being an accountant. Some “due diligence” with the financial statements will strengthen your working relationship with accounting staff, and generate that priceless reward, ease of mind.

Mission, Vision, Values, Mandate: an “Aha!” Moment

Staff Post
By Heather Young

In addition to being Principal at Young Associates, I am also a proud member of Arts Consultants Canada / Consultants Canadiens en arts, as are my colleagues Samantha Zimmerman, Anna Mathew, and Jerry Smith. I was privileged to be part of ACCA’s most recent strategic planning retreat, in my capacity as outgoing treasurer. Twelve of us, the current board plus “graduating” directors, shared a day of focused discussion and more than a few bursts of laughter, engaging in a three-year planning process.

As I expect many of us have done with strat planning clients, we began with a review of ACCA’s mission, vision and values. I confess that I’ve always been a little hazy on how to delineate those terms, especially when mandate is added to the mix – so I was relieved that we spent a few minutes confirming a common set of definitions.

At last, it all makes sense!

Mission captures the practical, desired outcome: what should happen because of what we do? Who are we serving, and who benefits from our work? It is an expression of structure, and appeals to the head – our rational side.

The vision is aspirational. It’s a dream that may or may not come true. Captured in a brief, inspiring sentence – think postcard, not novel – it appeals to the heart. 

Values are the principles that guide our actions: the compass that helps ensure we stay on the right track.

As for mandate, there was a small difference of views. Some would see it as synonymous with mission. Another view positions it as a legal term that captures our relationship with the government. This makes complete sense to me: for most organizations, the mandate statement in their articles of incorporation or letters patent is drier and more general than the directive they articulate for their strategic plan.

Remember Star Trek?

Well, the vision of the Federation might run something like, “that humanity achieve a more complete understanding of itself through exploring the universe.”

The five-year mission is articulated in Captain Kirk’s iconic opening narration: “to explore strange new worlds, to seek out new life and new civilizations, to boldly go where no man has gone before.”

The values, embodied in the Prime Directive, have inspired endless discussion in fan literature to this day, as a quick Google search will confirm!

And, I expect that somewhere within the files of the Federation’s legal department we could find a mandate statement, couched in formal terms, capturing all of the above from a governance standpoint.

As for ACCA, we had a productive and exciting day that yielded renewed mission and vision statements for the association. ACCA has now released the final version:

VISION:

Arts Consultants Canada / Consultants canadiens en arts (ACCA) members are valued contributors in a thriving, creative Canada.
 
Les membres de Arts Consultants Canada / Consultants canadiens en arts  (ACCA) contribuent au rayonnement d'un Canada créatif et florissant.
 

MISSION:

ACCA strengthens the arts in Canada by connecting a network of experts with Canada’s arts community and by encouraging the active exchange of its members’ expertise to advance and promote the development of the sector.
 
L’ACCA renforce les arts au Canada en raccordant un réseau d’expert(e)s au  secteur artistique canadien ainsi qu’en encourageant un échange actif d’expertise parmi ses membres pour favoriser le secteur.

Read more about the ACCA Strategic Plan here

Anna Mathew talks to ACCA about the role of the information manager in the arts

Empowering Arts Organizations in an Information Age

By Anna Mathew, Knowledge Associate (Young Associates)
Originally published in the February 2015 ACCA e-bulletin

Technically, I’m a librarian. So why have I joined Arts Consultants Canada?

Well, I work for Young Associates, a team of consultants working primarily with arts organizations in a variety of areas, most significantly financial and data management. I believe the field of library science - now more frequently referred to as information science, information studies, or even just ‘information’, has broad applications to sectors beyond the public, academic, school, and traditional corporate (e.g. legal and medical) settings to which we are accustomed. The information specialist is no longer restricted to within the library walls and now frequently finds him/herself in an embedded role within an organization which has a non-information related mandate but needs someone to perform information retrieval and information management duties to support that mandate. What I’m saying is, in our ‘information age’, a librarian can find him or herself working anywhere.

It’s no surprise that we don’t come across too many arts organizations who can afford to keep a permanent, embedded information specialist on staff. Sure, some of the larger organizations have a researcher or two, but for the most part, arts organizations have too much administrative overload and too many budget constraints to deal with to consider creating a formalized role for an information manager. Enter the arts consultant.

In the Spring 2014 ACCA newsletter, my Young Associates colleague Samantha Zimmerman wrote about how consultants can play a leadership role in getting arts organizations to consider their statistical data as ‘SMART’ data, and to set goals and put systems in place to make data part of a larger picture in preserving and communicating an organization’s story. That sentiment is echoed by Negin Zebarjad, a consultant at Nordicity, a consulting firm that earlier this month hosted a panel for Artscape Launchpad on “The Power of Data on Communicating Your Impact”. Zebarjad focuses on good design and clear goal-setting, and emphasizes that arts organizations need to become aware of what data they are already collecting and think about how it can be threaded into the narrative they want to tell about themselves. During the panel, representatives from major funding bodies stressed the importance of seeing a balance of qualitative and quantitative information from organizations when assessing impact. Smartly organized data - which is collected, preserved, analysed, and presented according to well-designed systems and in support of clearly articulated goals - makes that qualitative-quantitative balance possible; this is becoming more relevant as CADAC is looking for correlations between the financial and the statistical data they receive.

The information specialist’s role in consulting with arts organizations goes beyond accessing and manipulating a client’s database. We can offer arts organizations assistance in understanding how information moves through their organizational ecosystems and how it is affected by software, hardware, and, most importantly, people. By undertaking strategic exercises like organizational data flow visualizations and goal setting, and hands on activities like database design and cleanup, we can increase efficiency and strengthen identity.

A favourite instructor at the University of Toronto’s iSchool said: “A librarian helps people find stuff”. (Full disclosure, he might not have used the word ‘stuff’). Another memorable instructor put forth a ‘cocktail party’ definition for the term information architect (a kind of information specialist) as someone who: “is supposed to make sure that people can find what they’re looking for without getting lost or confused.”

Arts consultants armed with information skills can do both those things by helping organizations become information literate and empowering their stakeholders to use that information to operate efficiently, to advance their mandates, and to extend their reach.

Samantha Zimmerman talks ‘smart data’ to Arts Consultants Canada

DATA SMART: More Than “Show me the Money.”

By Samantha Zimmerman, Practice Manager, Senior Associate & Data Management Consultant (Young Associates)
Originally published in the May 2014 ACCA e-bulletin

We’ve all heard about data: the importance of data; the need to keep data safe; the value of turning raw data into actionable information. But what does it mean for our clients? Most organizations are already comfortable making strategic decisions based on their financial data, because GAAP provides guidelines for maintaining financial data so that it is viewed as SMART (Specific, Measureable, Attainable, Realistic, Timely); but what about our statistical data? Not only is there no one set of rules for dealing with statistical data, there are also privacy laws that dictate how we must collect, store and use data. It can all be very overwhelming.

The arts sector must also conform to CADAC which requires our clients to analyze and report their statistical and financial data to Government funders. CADAC and its partner funders across the country are becoming more rigorous and demanding in reconciling and verifying statistical data, which makes it even more important for organizations to properly track the necessary data required for CADAC reporting. More and more, clients have been reaching out to Young Associates in search of either full service data entry and processing, or targeted data management support with assistance in collecting data, pulling and reviewing periodic reports (monthly, annual), and reconciliation with bookkeeping software, as well as staff training or prospect research.

There is so much potential for data collection, but the majority of small and mid-size not-for-profit organizations often lack the human resources, the technology/software packages or the time to deal with all the data. We’ve all seen those organizations that are tracking their donations, event attendance and other lists in Excel spreadsheets. Much of the data stored in these Excel spreadsheets lives independently from other organizational data, and many of the lists lack standardization in the collection and presentation of the data.

While most of us are using Excel adequately, the majority will never use it to its full potential. Generally it’s seen as a tool for tracking static data; a moment in time, an individual project, or small pieces of information from a single cycle. How many years has a patron attended that event? How many donors are attending our events as well, and vice versa, are program participants returning as supporters? Young Associates has developed a proven system for helping organizations determine their data goals, and develop systems that work within the means of the organization to collect and analyze the data that gives the true picture. Where the mindset needs to change is not thinking of those Excel spreadsheets as a moment in time, but as a piece of a larger picture. Just as the financial information of the organization tells a story, the statistical data of an organization also has a story to tell.

T4A’s: Should we or shouldn’t we?

Staff Post
By Heather Young

According to the Canada Revenue Agency, fees for services provided by contract staff should be reported on a T4A slip in Box 048.

CRA’s Guide – titled RC4157 Deducting Income Tax on Pension & Other Income, and Filing the T4A Summary – directs payers to: “Enter any fees or other amounts paid for services. Do not include GST/HST paid to the recipient for these services.”

A couple of observations.

The CRA makes no distinction regarding who provided the services. Many companies assume T4A slips are for freelancers – but that’s not what the Guide says. An email to the Canadian Payroll Association’s InfoLine confirmed that incorporated businesses should also receive T4A slips.

And for sure HST registration makes no difference! Every year, clients’ contract staff tell Young Associates bookkeepers that they don’t want a T4A slip because they have an HST number. Whether or not a contractor charges HST is irrelevant to the payer’s T-slip obligation.

Make no mistake: this has nothing to do with individual preferences. Our job is to do our best to help our clients – the payers – comply with the Income Tax Act.

We hear all sorts of variations from payers too. Some companies are willing to issue T4As to freelancers who work under their own name but not to those who have a company name. Other organizations make apparently arbitrary decisions; for instance, that they’re willing to issue T4As to actors but they don’t want to generate slips for technicians.

Indeed, there’s a lot of confusion out there – and, to boot, a tacit acknowledgement on the part of the CRA that the T4A requirement is unclear.

CRA’s Guide RC4157 goes on to say: “Currently the CRA is not assessing penalties for failures relating to the completion of box 048.”

We don’t take this as a blanket pass for organizations to do whatever they want – and we don’t think you should either.

The wisdom from the Canadian Payroll Association – experts in the field – is that organizations should implement a process for issuing T4A slips to contractors so that when the CRA provides clear guidance they are able to comply immediately.

We can add to this some experience of payroll audits, where CRA examiners have scrutinized companies’ practices around T4A slip preparation.

Young Associates’ position is that clients need to work with their auditors and boards to interpret the Guide as best they can for their own situation. We always advocate for CRA compliance – and, if anything, for a more conservative interpretation that protects you from unwelcome attention from the government.

We appreciate comments on this post, although please note that Young Associates specializes in services for organizations. If you are an individual with a question about a T4A issue related to personal tax, we suggest that you contact a bookkeeper or accountant who prepares personal tax returns. 

How can I tell whether my accounting reports are correct?

This can be a perplexing question when you’re relying on the services of bookkeepers and accountants, but you don’t entirely understand what they do.

Here are a few ideas that may help:

Revenue and expense allocations are pretty much up to you, the manager. Do you want a single expense account for Salaries? That’s entirely correct. Would you prefer to have a separate expense account for each salaried position? That’s also correct. Do you want one account for Office Overhead? Not a problem. Would you prefer to have a series of accounts to distinguish amongst various supplies, phone, insurance, etc.? Also entirely acceptable.

Management (perhaps with input as appropriate from your Treasurer, Boardaccountantbookkeeper, staff) needs to decide what level of detail works best for your organization’s situation. Once you’ve established a set of revenue and expense accounts, it’s important to confirm on a regular basis that transactions are being allocated to the right place. Many accounting software packages provide detailed reports that allow you quite easily to scan the contents of these accounts for misplaced items.

Your cash resources – contained in your bank and investment accounts – are the lifeblood of your organization. It’s important to know how much money is readily available to your day to day operations. See our FAQ on how to tell for sure what’s in the bank.

Knowing who owes you money, how much, and since when, is very important. Most accounting software will produce a “customer aging” report that contains this information. (See the glossary for a definition.)

In the same way, you need to be able to review your list of payables, itemizing the suppliers to whom you owe money, how much and since when. On most software, a “vendor aging” report provides this detail.

Beyond that, if your bookkeeper is on their game, they will be able to provide an explanation of the contents of each account, and to pull out documentation from the files that substantiates the amounts. If your organization is audited, your chartered accountant will also be able to provide these explanations, as at your fiscal year-end. If these folks can’t provide a satisfying explanation, you need to challenge them! They should be able to help you understand your accounts, and justify that each balance is properly stated.