## It All Adds Up...

## It’s almost time...for the Audit!

In our last issue, we proffered advice on how to choose an auditor.  But for now, let’s focus on what you can do to actually get the audit ball rolling.  This ball doesn’t roll uphill as some may think.  

***If you keep association financial records current, by the time the audit rolls round, you’re ahead before you’ve started****.*

Preparation for the audit begins a whole year in advance and indeed is an on-going project.  Many associations especially the smaller ones, voice the concern to us that the audit is far too expensive and involved an exercise for smaller operations.  While we certainly sympathize with the expense, the audit is part of the cost of doing business and, as with any other overhead expense, should be factored into the annual budget.  We all do budgets, don’t we?  Whether the cost of the audit is factored into your pricing structure or it’s accrued over the year, it need never be a crippling burden.  

Forward planning always makes your life easier.  If you keep association financial records current, then by the time the audit rolls round, you’re ahead before you’ve started.  This paperwork should include:  

· Monthly financial reports

· Monthly bank reconciliations and statements

· Organizational and staffing charts

· Payroll register

· Mark-up and pricing policies

· Credit policy

· Personnel policies and procedures

· Accounting policies and procedures

· Tax records

· Inventory sub-ledgers

· Investment portfolio

· Check register

· Accounts receivable and payable ledgers

· Fixed assets register

· General ledger

· Trial balance

The Treasurer or accountant should have all these up to date.  If you’re unsure about any of these, contact our Accounting Team at CR.  

You should ensure that all general journal entries have been made and reconcile all accounts before the auditors begin their fieldwork.  Regarding the accounts reconciliation, you should perform at least the following steps:

· Review your accounts receivable with the thought of charging off all bad debts and any longstanding differences between your account receivable subsidiary and the general ledger control account.  Also, review your allowance for bad debts and make any adjustments needed.

· Make sure your bank accounts are properly reconciled and consider writing off any checks that have been outstanding for a long time (at least a year).

· Reconcile your accounts payable subsidiary to the general ledger account.  Any discrepancies should be adjusted.

· Last but not least, bring your depreciation schedules up to date.  

Accomplishing the above can actually be a timesaver by bringing order to your records prior to the audit.

Please remember, financial statements, audited or not, should be prepared according to CR’s standardized format.  These are too lengthy to go into here, but check out our collective cable on audit guidelines.  It can be found in the resource library on the CR website.  Remember, audits should be conducted according to U.S. Generally Accepted Accounting Principals (GAAP) and Generally Accepted Auditing Standards (GAAS).

##### Reminder!

###### 2001 Reporting Requirements

**Due 1st May**

· **Association Prepared Financial Statements**

· **Audit Report with Audited Financial Statement and Management Letter**

· **2001 Questionnaire responses**

**Due 1st June**

· **Compliance Certification**

**Due 15th August**

· **Semi-annual Financial Statements**

**Due 1st November**

· **Assessment Payment**

***New Kids on the Block!***

*CR welcomes three new staff members to the Accounting and Operations Teams*

Dave Williams joined the Accounting Team in October 2000.  A graduate of the University of Maryland with a degree in Finance, Dave brings several years of experience as an auditor with the Department of Defense to CR.  Dave is a D.C. native and is married with three boys, including twins.  He *says* his hobby is reading about accounting issues, but he’s more often seen with the sports pages.

Greg Moore is also a D.C. native and joined the CR Accounting Team in April 2000.  Currently a senior at Bowie State, Greg is going after a Bachelor’s in Accounting.  He is married with a newborn boy, Justin, and finds the GAAP only marginally more interesting than the Dallas Cowboys.

The newest addition to the Operations Team is Brian Keener, formerly General Manager of the Community Support Association in Frankfurt, Germany, and Board Secretary to the American Embassy Cooperative and Welfare Association in Cairo.  Brian brings over three years of employee association experience to bear at CR.  A graduate of the University of Liverpool, U.K., Brian is a Foreign Service spouse with two young boys, Miles and Alex. 

**Packed your bags?**

In the last issue of *The**CRonicle*, we announced our plans for the 2001 Employee Association Training Conference and Trade Show.  The conference will be held in Arlington, Virginia at the Ritz-Carlton Hotel from August 27-31, 2001.  A pre-conference icebreaker will be held on the Sunday evening from 7:00pm to 9:00pm.  Attendance at the icebreaker is optional but it’s a great opportunity for participants to meet CR staff members and network with other attendees, as well as any vendors present.  The conference will officially kick-off on Monday, August 27 and will feature guest speakers, peer group and one-on-one discussions, interactive workshops, and a supplier trade show.  

There is no registration fee for the conference.  What’s more, we are pleased to announce that the Central Fund Board has approved the funding of hotel rooms from the Central Fund for conference participants.  This funding will cover lodging expenses at the conference site for the evenings of Sunday, August 27 through Thursday, August 30.  Checkout will be Friday, August 31 to coincide with conference wrap-up.  To be eligible for this funding, participants are required to attend all mandatory conference sessions for the week.

Central Fund loans are available to cover the cost for airfare and other expenses to assist associations in sending a representative.  Loans will be provided interest-free upon approval of the loan application.  Please contact us if you are interested in obtaining a loan.

Seats will be limited!  We encourage Boards of Directors to consider sending an association representative to the conference.  Post officials and Board members are invited to attend.  However, please be aware that the agenda will be geared to general managers.  Although association accountants and financial managers are also welcome, advanced training in accounting will not be provided.

If you are interested in sending a representative to the conference or have any questions, please contact Conference Coordinator Annie Dickson by phone (202)663-1330, fax (202)663-1329, State Department email (dicksonar@state.gov), cable, or via the internet (crlogon@erols.com).  Annie is also interested in hearing from you on the training topics that may be of most value to participants.  Please send her any ideas in the coming month for consideration.  We look forward to seeing you in August!

*Board of Directors’ Handbook*

The New! Improved!   Board of Directors’ Handbook is now available on the CR intranet site.  The handbook was recently updated to reflect contemporary issues and concerns Boards and association managers face in the field, including the effects of globalization and expanding markets.  New and present Board members, association managers, post management, and all members are invited to have a look.  

***We’re On The Web!***

Visit our intranet site available from the Department’s internet explorer.  Just click on Administration, scroll down to Office of Operations, and click on Office of Commissary and Recreation Affairs.  There is a wealth of information to get you started off on the right foot.  Let us know how we can help.  You may contact the staff directly from our intranet site or via the internet (crlogon@erols.com).  Access to the site is via the Department’s internet explorer.  Click on “Administration M/A”, scroll down to “Office of Operations”, and click on “Office of Commissary and Recreation Affairs”.

If you have any suggestions for improving our site (and some of our best initiatives come from suggestions from the field) or would like assistance in finding guidance on a particular subject from the site, please contact Operations Team Leader Annie Dickson by phone, fax, email, internet (crlogon@erols.com), or via our intranet site.  Please remember to include your post name (city, country) when contacting us.

***Cryptic Travel Quiz***

*Where are these places...?*

*(Answers on page 6; no fair peeking!)*

*1) C*apital city in denial.

*2) S*aid to be the Venice of the North.  You want fries with that?

*3)O*nce a beautiful isle to the Portuguese; we’ve institutionalized it.

*4) H*e takes to Spanish water.

*5) P*oach engine?  Not I!  Something rotten there.

*6) W*hat folly?  “I’ll ask her”, you say.

*7) T*hrough the looking glass and out back, she jumps.

*8) M*isguided barnacle has nothing to keep it on the Med.

*9) W*e hear the laurel, backing its foundation, rises again.

10) Curry?  Once; but it’s still hot!

Non-Profit ?!?  But we’re making money...*?*

Whoa Hoss!  This is a common misconception among Boards, managers and members.  In fact, employee associations are *not* non-profit.  They are not-for-profit which is a different fish altogether.  Non-profit entities, such as charities and foundations, usually derive their income from outside the organization, such as in the form of bequests and donations.  After paying overhead costs, this money is then turned around and used for other non-profit causes.  

Employee associations, though they may accept donations, usually derive their income from their members, in the form of a fair price charged for the goods and services specified in the association charter.  Therefore, there is an obligation to the members that associations not only be self-sustaining, but also to have the potential for expansion and improvements.  And that requires profit.

*How much?* Hang on, we’re not there yet.  The association has to be self-sustaining and that means paying its own way.  All costs incurred in operating the organization (salaries, inventory, utilities, shipping, annual audit, CR’s assessment, insurance, and other overhead) should be factored into the prices for the goods and services.  This is old-fashioned capitalism.  Or rather housewife economics.  What goes out (expenditure) should be no more than what comes in (income).  Anything above that is profit.

*Okay! So How much?*Well, that depends.  There is no fixed figure.  What should rule that figure are the association’s needs and the best interest of the membership.  Profit is usually applied in four ways:  expansion of current services, introduction of new services, capital improvements and contingencies.  Need new playground equipment?  Want to add electronics to the gift shop?  Want to open child-care facilities?  That’s what your profit is for.  A caveat:  except under certain circumstances, profit should never be used to sustain money-losing activities.  If a part of your operations is draining resources from others, you need to re-examine its validity.

Okay, you didn’t ask this but *what if you make too much?*  Well, it means either you’re really, really, good at this, or perhaps you’re charging a little bit too much for your services.  OUCH!  If your association proves to be extremely profitable, then it’s a good idea to come up with ideas on how to use the excess funds.  A written plan is a good idea as we might ask to see it at some point.  In any case, it can’t hurt; a realistic management plan can only be of benefit, no matter what the size of the association.

For questions regarding association profits and management plans, please contact the CR Accounting Team by phone, fax, cable or e-mail.

**European Beef.  Must I Be Mad to Eat It?**

The Department of Defense (DOD) will soon publish a directive to further clarify DOD policy and ensure maximum awareness of and compliance with federal regulations (9 CFR 94.18) prohibiting the importation of beef and beef products from European countries where Bovine Spongiform Encephalopathy (BSE, or Mad Cow Disease) has been found.  The directive reiterates DOD’s policy that extends this ban of European ruminant and ruminant meat products to troop dining facilities, commissaries, delicatessens, shoppettes, and concessions.  The regulations and DOD’s policy are the result of continued concern over BSE and its probable association with its human analog, new variant Creutzfield-Jacob Disease encephalopathy (nvCJD), both of which are invariably fatal.

Those are some mighty big, official sounding words and you may wonder just what does all this have to do with me and my association?  Tons.  Just consider the number of DOD employees who are members of your association or utilize your facilities.  Given the DOD instituted its policy in March of 2000, members may have already asked you about the association’s meat procurement practices. 

As a food service operator, be it restaurant or commissary, your first priority must be to ensure the health and well being of your customers.  As the association’s manager, the Board of Directors must rely on your expertise to make decisions affecting the association and its members.  What are you going to do now?  Call CR?  Let us save you the phone charges.

CR was alerted to the DOD message by Dr. Cedric Dumont, the State Department’s Director of Medical Services (MED).  Dr. Dumont reasons, “The communication will, in all probability, generate questions about the sale and use of these food products in overseas State Department facilities such as (employee association) cafeterias and commissaries.  For the sake of consistency, MED advises compliance with this DOD restriction as well as the previously established USG ban on the importation of such foodstuffs to the United States.”

According to the Centers for Disease Control (CDC), cases of BSE in cattle have been reported almost exclusively (more than 99% as of 1998) from the United Kingdom.  However, endemic or isolated cases of BSE have also been reported in other European countries including Belgium, France, Germany, Liechtenstein, Luxembourg, the Netherlands, Portugal, Spain, the Republic of Ireland, and Switzerland.  For your reference, as well as that of your members, CDC provides the following guidelines for eating beef in, or from, affected European countries.

“The current risk of acquiring nvCJD from eating beef (muscle meat) and beef product produced from cattle in Europe appears to be extremely small (perhaps fewer than 1 case per 10 billion servings), if it exists at all.  However, to reduce this possible risk, travelers to Europe may wish to consider either 1) avoiding such beef and beef products altogether or  2) selecting beef or beef products, such as solid pieces of muscle meat (versus beef products such as burgers and sausages), that might have a reduced opportunity for contamination with tissues that may harbor the BSE agent.  Milk and milk products are not believed to pose any risk for transmitting the BSE agent.”

For further guidance and the latest information regarding BSE and nvCJD, take the time to log on to CDC’s website (www.cdc.gov/travel/madcow.htm).  

Closer to home, MED has compiled additional information on BSE, CJD and vCJD, as well as a summary of recent events in Europe.  The article, “Should You Eat European Beef?”, can be found on CR’s State Department intranet website in its entirety.

Bottom line, your chance of getting vCJD from eating European beef is extremely remote.  It is up to you to decide how important beef is to your diet.  If you want to minimize your risk of getting vCJD as much as possible, you should avoid beef.  If beef is integral to your diet, then you may continue incorporating it but should avoid organ meats, any products containing nervous tissues, and essentially stick to cuts of muscles.  

Who are you?

The *CR*onicle would like to hear from our colleagues in the field.  Write to us and tell us about your association, your post, services, and employees.  Share your success and your concerns.  Although each association is unique, many of you share the same problems and issues, and more importantly, there’s someone out there who can benefit from your experience or perhaps has the answer to that problem that’s been plaguing you!  

We would like to start a series of articles featuring associations overseas from their own perspective.  But that means we need to hear from you.  Please take the time to give us a run-down on your association, your goods and services, your triumphs and your pitfalls too.  Whether you run a vast retail empire, or only Homeward Bound Mail, everyone’s got a story to tell.  We’d like to tell yours.  You can send contributions to The *CR*onicle Editor, Brian Keener, by Department e-mail, fax (+1-202-663-1329), or the internet at crlogon@erols.com. 

***Cryptic Travel Quiz Answers***

1)Cairo6)Alaska

2)Hamburg7)Alice Springs

3)Taiwan8)Barcelona

4)Managua9)Beirut

5)Copenhagen10)Chennai

*Coming up in the next issue of the CRonicle,*CR will be launching a Q&A column to address the more common questions we get from Boards, managers, and post management.  There may even be the odd zinger, so watch this space!**We will also update you on the status and development of our internet site.  In addition, we will continue our feature column “*It All Adds Up*” with an accounting topic.  See you next time! 

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