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CAE exam > Finance and HR > Flashcards

Finance and HR Flashcards

1
Q

Who hires the auditor

A

The board

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2
Q

Who is responsible for the organizations financial reports

A

Management

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3
Q

What is the auditors role

A

To verify the amounts inclluded in the reports

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4
Q

What is designated net assets

A

Decision made by BOG to set aside funds for a specific project

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5
Q

What are the classes of funds in a 501c3

A

Unrestricted, temp restricted, and permanently restricted

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6
Q

What are unrestricted funds

A

funds that can be used at the discretion of the management within defined uses

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7
Q

What are permanently resticted funds

A

The donor has stipulated a specific use that do not expire with time and cannot be shiften by the org.

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8
Q

What is a common type of permanently restricted fund

A

Endowments

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9
Q

Temporary restricted funds

A

limited by donor-imposed stipulations that either expire or can be fulfilled and removed by actions of the organization

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10
Q

Which class of funds/assets are shown on the statement of financial position

A

Temporarily restricted funds

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11
Q

What is the statement of financial position

A

summarizes financial makeup of the org at a point in time

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12
Q

What assests are reflected on the statement of financial position

A

Assets owned, liabilities owed and residual net assets

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13
Q

What is the statement of activities

A

shows the orgs financial activity by the month and on a year to year basis (over a period of time)

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14
Q

What does the statement of activities report

A

revenue generated, expenses incurred, and results in net income or net loss

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15
Q

What is an example of Imprest system

A

Replenishing petty cash once a month

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16
Q

What is financial key indicators

A

selected by leaders, they are quantitative measurements of strategic importance that gives a fairly accurate picture of the orgs in relation to its strategic plan

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17
Q

What are some financial key indicators

A

number of new members, %retained members, number of new business starts, number of members participating in programs

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18
Q

What is a net asset

A

the residual value of the association after liabilities have been paid. =cash, prepaid expenses, accounts receivable, inventory and fixed assets

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19
Q

What is average tenure measure

A

measures how long a members stays with the org.

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20
Q

What is the formula for average tenure

A

1/(1-renewal rate)

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21
Q

What is renewal rate meausuring

A

measures the number of members that you keep form the previous year

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22
Q

What is the formula for renewal rate

A

total number of members now - members gained over the last 12 months/total number fo members last year

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23
Q

What does lifetime value of a member measure

A

measures the average anticipated revenue form a member

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24
Q

What is the formula to figure out the lifetime value of a member

A

(dues plus non dues revenue) x average tenure

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25
Q

What is dues structure

A

the entire dues framework, including dues base, dues rate and the way in which members determine the specific abount of dues owed to the association

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26
Q

What is dues base

A

a description of the units or entities on which dues are measured i.e. based on total sales

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27
Q

What is dues rate

A

the specific amount of money assessed.

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28
Q

What is a sliding scale in dues

A

Dues rates decrease as the base increases but can lead to miscalculations

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29
Q

What is the statement of cash flows

A

provides relevant info about cash receipts and cash disbursements from operations, investments and financing activities during a period of time

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30
Q

How is the statement of cashflows helpful

A

helps creditors and others assess the organization’s ability to generate a positive future cash flows to meet its oblications and its need for external financing

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31
Q

What type of asset is the most liquid and how is it important

A

Cash, because sufficient cash along with the ability to convert other assets into cash = financial flexibility

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32
Q

What is a functional budget

A

budget of income and/or expeditures applicable to a specific function such as a department. Frequently includes overhead costs if org has no no strategic program budgeting

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33
Q

What is pricing models

A

systematic methology that sets and updates prices. Presents us with a total product cost and the margins we can expect from future sales.

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34
Q

Why do we use financial projections

A

to forecast future financial results. Generally speculative. Presented in the pro-forma statement

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35
Q

What are overhead expenses

A

Expenses incurred that are not acutal direct expenses to a specific program like admin costs, telephone, computer expenses

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36
Q

What is strategic program budgeting

A

cost analysis. Allocatign salaries and other overheads to know true profitability

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37
Q

What is the formula for association reserves and ratio

A

Net assets minus net liabilities. Ration should equal half reserve goal

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38
Q

What is association reserves

A

“surplus” or rainy day fund. Usually protected by the BOG. Shows you how long you can operate. Some may contribute if they have extra cash at the end of the year

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39
Q

What is capital expenditures

A

Long term objectives such as major facility improvements or major equipment purchases

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40
Q

What is a combined statement

A

Cash and accrual statement. Unpaid bills are recorded on accrual and uncollected income is recorded on the cash basis

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41
Q

Which asset class should capital gains or losses be reported and what are the two exceptions to the rule

A

Should be unrestricted class unless there are explicit donor restrictions on the gains or applicable state law is judged by the orgs governing board to require this retention then it must be reported in restricted class

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42
Q

What is cost benefit analysis

A

weighing the total expected costs against the toatl expected benefit of the actions in order to choose the best or most profitable option

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43
Q

What is deferred revenue

A

Cash that is not yet earned but bookes as a liaility because one would owe it back if the association did not provide the service

44
Q

What is a clean opinion

A

also unmodified opinion, and provides the highest level of assurance that the statement of financial position fairly presents the orgs financial position, the statement of activiites fairly presents the opeations, and statemnt of cash flows fairly presents its cash flows

45
Q

What is fiduciary

A

Designating an entity or person who holds something in trust for another

46
Q

What is segregation of duties

A

No individual should control all 4 essential aspects of any transaction, initiation (check request), authorization (approval to pay), asset custody (keeping the checkbook) or recording the transaction (posting)

47
Q

What are the 4 essential factors essential to good internal financial controls

A

clear lines of authority, clear definition and accpetance of repsonsibility, authority commenusare with responsibility, and proper training

48
Q

What is chart of accounts

A

A system fo rorganizing financial data, a listing of all the line item accounts. Numbers are assigned to each account.

49
Q

What is zero based budgeting

A

technique of planning ans decision making which reverses the working process of traditional budgeting. All expenditures must be approved and budget requests must be justified.

50
Q

What is perpetuity

A

when cash flow is expected to be received (or paid) every time peried through infinity like consols.

51
Q

What are the reasons to form a subsidiaries

A

Protect the associations exempt status; facilitate joint ownership in property; insulate the associsation from liability; enable an association to properly reflect income from an activity; aid in reducing taxable income; and perform services for members

52
Q

What does an org have to do inorder to have a subsidiary

A

have to engage in seprate activities, have separarate boards, books and records, separate banck accounts and can’t be alter ego of its parent org

53
Q

What is C-corps and S-corps

A

C- may have unlimited shareholders and many classes of stock; S- may have no more than 75 shareholders, none of whom may be nonresident alien status, and may only have one class of stock

54
Q

What are the 3 signals that should trigger creation of a subsidiaries

A

Substantial revenue generated from unrelated activity; sustantial staff time devoted to unrelated activity; and loss generated by unrelated activity

55
Q

In what order would financial documents be created

A
  1. Strategic plan 2. annual scope of work 3. budget 4. projected year end 5. Income statement/statement of financial position 6. Audited financial statement 7. IRS 990
56
Q

What is a prepaid expense and how is it recorded

A

cash paid prior to receiving a service; recorded as an asset

57
Q

What is a term used in accounting to describe the method fo attributing the price of an asset across its useful life (non cash expenses)

A

depreciation and amortization

58
Q

What type of assets are included in depreciation and amortization

A

Depreciation is fixed assets like computers, new roof ; Amortization is intangible assets such as website infrastructure and new software

59
Q

What is accrued liability

A

a liability that has occurred but has not been paid or logged under accounts payable during an accounting period

60
Q

What is the annual rate change often tied to

A

consumer price index = inflation

61
Q

What are the different audit assurance levels

A

unmodified or clean (best); modified (fair); adverse (needs work); disclaimer (help)

62
Q

What is a management letter

A

Issued by auditor to communicate areas that management needs to address in order to come into compliance with GAAP accounting principles

63
Q

What is current ratio and what is its formula

A

Meaures the orgs ability to pay short term bills; formula is current assets divided by current liabilities

64
Q

What is profitability ratio

A

measures the profits (losses) over a speficied period of time

65
Q

What is coverage ratio

A

measures the projections for the interest and principal payments to long-term creditors and investors

66
Q

What is activity ratio

A

measures the resources required to carry out certain activities (also called efficiency ratio)

67
Q

Cost benefit ratio

A

used ot define the value of a project versus money spent doing the project in the overall assessment fo a cost benefit analysis

68
Q

What is accrual basis accounting

A

recognizes revenues when earned and expenses when incurred

69
Q

cash basis accounting

A

recognizes revenues when cash is received and expenses when cash is expended

70
Q

What is the annual fund in fundraising

A

generates money for ongoing suppor and seeks to enroll new donors, renew donations, and upgrade level of donations. Supports programs through unrestricted gifts.

71
Q

What is planned giving

A

it refers to the solicitation of gifts from current asset holdings or a person’s estate

72
Q

What is grantmanship in fundraising

A

A skill nneded for successful fundraising through application to other foundations, government agencies or other funding org.
The grantsman writes a professional proposal that ust persuade the granting foundation to give the money to you

73
Q

What is a capital campaign

A

it raises funds aimed at constructing or renovating a building or purchasing equipment. It is a tiem-limited campaign and encourages gifts in multi-year pledges.

74
Q

What is LAI of fundraising

A

It proves helpful when researching and identifying true donor prospects. It?s a linkage of any contact, bridge or access thought a peer to a potential donor.

75
Q

What is performance management

A

Goal setting, day to day coaching, and performance appraisals

76
Q

Human Performance Improvement (HPI)

A

an effective means for associations to improve organizational performance by identifying performance gaps at the individual performer level

77
Q

What is compressed time versus flextime

A

Compressed time allows employees to work four 10 hour days and have one day off each week or work 9 days for 80 hours in a two week period with a day off every two weeks. Flex time allows them to vary schedules within limits established by the assoc. allows occasional changes.

78
Q

What is Non expempt versus exempt employees

A

Nonexpempt must be paid at least the minimum wage and overtime for hours worked over 40 and exempt do not have to be paid min wage or overtime if certain requirements are met. Both can be paid a salary(predetermined amount each pay) but non expempt must still get paid overtime.

79
Q

What is a Professional Employer Organizations

A

a co-employment arrangement where you are employee of both the association and the PEO.

80
Q

What are PEOs benefits

A

Better benefits to staff like less expensive health insurance, training resources, employee upkeep (they file workers comp) and PEO won’t tell the employer who to terminate, just how.

81
Q

Outsourcing Human resources

A

A current trend. Done through PEOs. Need to have an outsource coordinator to monitor contracts.

82
Q

What is an EAP

A

Employee assistant program which coordinates alternative treatment fo rsubstance abuse rehab and recovery as well as other treatment for mental health.

83
Q

What are some examples of Diasabled Person under ADA

A

speech, hearing, sight, and mental impairment, HIV, cancer, diabetes, missing limb, recovery from substance abuse.

84
Q

What is equal opportunity employer

A

voluntary status which allows them to use tagline if they abide by certain reguations including compliance with written policy of nondiscrimination, promotion and equal access for all employees as well as posting rights of employees.

85
Q

What are the criteria of job description compliance with ADA

A
  1. Must provide evidence of the ‘essential functions’ of the job 2. description can be used as the basis for discrimination, equal pay and contract lawsuits. Minimum: list everything person will have to do on the job. Distinguish essential major job functions from peripheral ones. LIst skills, physical demands, credentials and experience required. Mandatory, preferred, or desired.
86
Q

How can you prevent wrongful termination

A

Keep focus on conduct and not the problem’s effect on jov performance.

87
Q

How should you discipline

A

focus on unsatisfactory attendance, sub-standard job performance or possession of drugs on employer property. Addictions are considered under ADA and reasonable accommodations must be made to address medical concerns

88
Q

What is a business continuity plan

A

Details how employees will keep doing their jobs in the even of a disaster or emergency such as a fire at the office. What’s the plan until recovery is accomplished

89
Q

What is a Disaster Recovery Plan

A

Oriented towards short-term recovery after a disaster

90
Q

What are the elements of a BCP

A
  1. Document internal key personnel and ackups 2. Identify who can telecommute 3. Document external contracts and critical equipment 4. Identify critical documents, contingency equipment options, and contingency location 5. Outline step by step instructions on what to do, who should do it, and how. 6. Communicate the plan 7. test the plan 8. plan to change the plan
91
Q

What are the pre-employment medical inquires allowed by ADA

A

Only drug testing is permitted during application and pre-screening process. Forbids pre-emploment inquiries and exams. Medical exams can be required after hire.

92
Q

What is the role of CSE and sexual harassment

A

To provide a safe work environment for all persons

93
Q

What are the steps to prevent sexual harassment

A

Provide a policy for employees, board members and a mechanism for reporting complaints without fear of reprisal 2. Investigate promptly and carefully all complaints 3. Provide for sexual harassment training for employees and board

94
Q

What are the steps in Crisis Planning

A

Safeguarding staff, informing constituents, protecting infrastructure, increase financial flexibility

95
Q

What are the legal checklist for staff reduction

A

Review your personnel handbook 2. Map out relevant issues on paper 3. Be consistent 4. Know the law on early retirement 5. Rund down your WARN act checklist 6. Look into relevant state regulations

96
Q

What are the three phases of crisis management planning

A

Phase 1 Precrisis: is plan for crisis, establish policy, establish a crisis info function (communication) Phase 2: The Crisis: Define the crisis, access existing crisis plan, respond professionally Phase 3 Post crisis: Review crisis performance, plan for next crisis

97
Q

What should be included in a personnel file

A

Employment application and resume, college transcripts, job descriptions, records relating to hiring and promotion, training, letters of recognition, discilinary notices, performance evals, exit interview, termination records

98
Q

What should NOT be included in personnel records

A

Medical or insurance records, EEO, Immigration forms, child support, litigation documents, work comp claims, requests for employee or payroll verification, reference checks

99
Q

What are the 5 steps to effective crisis communication plan

A

Have a plan, review plan annually, educate all involved in plan on their role, sete up google alerts and other feed readers to monitor communication, develop and practice plan with crisis scenarios

100
Q

What is a successful negotiations

A

it is a win/win is mutual gain. Very seldom can each party win equally

101
Q

Explain diversity

A

more than demographic differences. It’s about inclusiveness. Not just racial ethnic and gender but also age, physical ability, skill set, socioeconomic status, family status, life preferences, language, religious beliefs.

102
Q

How do you address conflict starting at the individual level

A

to the smallest group possible and then if that doesn’t work go to a bigger group.
Example: individual to exec committee to board

103
Q

What is current ratio?

A

The ability to pay short term debt

Current assets/current liabilities

104
Q

What is quick ratio, acid, or liquidity ratio?

A

Current assets + marketable securities + net receivables/ current liabilities

105
Q

Activity (efficiency) ratio ?

A

Measures the resources required to carry out certain activities

106
Q

Coverage ratio?

A

Measures the projections for the interest and principal payments to long term creditors and investors

107
Q

Profitability ratio?

A

Measures profits over a specific period of time

Net income/net sales

CAE exam (6 decks)

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