[Lnc-business] March End-of-Month Financial Reports

[Alicia Mattson]

Deferred Convention Revenues are included in the total cash, so not backing
them out means that we're treating that cash as if there will be no
convention expenses, so we're free to just go ahead and use that money now
free and clear.

Side note:  For those to whom it isn't obvious, the total cash amount is
inflated by the amount of Deferred Convention Revenues, offset by the
portion of them which have already been spent on convention expenses, so
when calculating how much of that cash we can spend next month, we need to
subtract (Deferred Convention Revenues - Prepaid Convention Expenses) from
the Total Cash.

Also side note:  As of the end of March, the 2020 convention cash is only
inflating our total cash by about $10k, but as of the end of April, it's
going to be more like $80k.  If the reserve formula doesn't back that out,
the LNC may think we're in a lot better shape than we are.

Even under the existing definition of "reserve" in the policy manual, I
think it is warranted to back out the convention cash.

If we look at the policy definition as only authorizing math involving the
balance sheet line items that are named in the definition, then we
shouldn't adjust for the Other Accrued Expenses, either.  This report does
use the Other Accrued Expenses in the formula, though.  The rationale given
was that they "are essentially the same as accounts payable".  So it's
viewing the policy as a concept rather than a strict limitation on which
balance sheet items to use.

I think the (Deferred Convention Revenues - Prepaid Convention Expenses)
factor is also essentially the same as the restricted funds which are to be
subtracted under the policy.  The convention cash isn't technically
"restricted" under an accounting definition because you can only restrict
equity accounts, and they're not equity until we have recognized them as
revenue, which doesn't happen until the convention happens.  But
conceptually, they're essentially the same as restricted funds.  They're
supposed to be saved and used to pay for the convention.  We haven't even
earned them yet until the convention event.

So under the "essentially the same" concept used to include Other Accrued
Expenses in the formula, I think we should include the convention elements
as well.

I'd rather not rewrite the policy to name specific balance sheet lines
because then all it would take to throw the calculation off is a name
change in a balance sheet description.  I'd rather keep the policy
definition as a concept, and then include the items on the balance sheet
that are essentially the same as the concepts in the definition.

-Alicia





On Tue, Apr 30, 2019 at 4:35 PM Tim Hagan via Lnc-business <
lnc-business at hq.lp.org> wrote:

> The March End-of-Month Financial Reports are attached.
>
> The Policy Manual, page 7, says:  "Reserve" is calculated as the total
> cash balance less the sum of all restricted funds and accounts payable
> at month end.
>
> The reserve formula in these reports was changed to match this Policy
> Manual definition. It no longer includes Prepaid Expenses nor Deferred
> Revenue. Including the Prepaid Convention Expenses and Deferred
> Convention Revenue in the formula should require a change to the Policy
> Manual. Other Accrued Expenses are essentially the same as accounts
> payable, so I included them in the formula. The reserve for March is
> calculate from numbers on pages 9 and 10 thusly:
>
> Reserve = Total Cash - (Temp. Restricted Balances + Accounts Payable +
> Other Accrued Expenses)
>
>      = 34168.75 - (13706.53 + 8471.70 + 13872.50)
>
>      = -1881.98
>
> I updated the reserve chart on the bottom of page 3 to show the reserve
> for the past two years using this formula.
>
> ---
> Tim Hagan
> Treasurer, Libertarian National Committee