Frank Koch, NMRA CFO
This month I’ll discuss the Assets and Liabilities aspects of the NMRA financial world. Assets are things with a positive cash value that contribute to our value. Liabilities are obligations we have that decrease our value. The difference between the two is the net value of the corporation. (Remember, I am trying to keep this simple.)
ASSETS – We organize our assets into six categories: cash, receivables, capital assets, investments, inventory, and pre-paid expenses. Cash is the sum of the deposits in our various bank accounts and the cash in our investment account. Receivables are those sums owed to NMRA by others, i.e., invoices we made that are not paid by someone else. The biggest items in this area are the unpaid HDM pledges. Capital Assets are the depreciated book value (we depreciate capital assets above threshold values and life expectancy) for our equipment. There was a major change when we sold the HQ building as we converted a physical asset into a “cash” asset (it actually mostly went to investments). Investments are the current market value of the various investments – stocks, bonds, money market – that are held by the NMRA. I’ll cover this in a future column. Inventory is the value of the various items remaining in our company store – books, gauges, apparel, etc. Pre-paid expenses are those deposits and bills we have paid that provide services in a future fiscal year.
For 2013, here is a summary of our Assets at the end of the year:
Cash $ 502,01
Receivables 28,166
Receivables (HQ Sale) 896,360
Capital Assets 16,752
Investments 834,634
Inventory 33,880
Pre-paid Expense 64,463
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Total Assets $2,376,266
LIABILITIES – The other side of the ledger is more complex in some ways as the NMRA has a large number of commitments that fall into broad classifications according to common accounting principles. The major elements are unearned revenue, taxes payable, fund balances, and equity. Unearned revenue is anything that has been paid in advance and is to be used in a future year to cover an obligation. This includes part of the Life Fund, member payments for future memberships or conventions, and a portion of the current year payments for dues and subscriptions which are reserved for next fiscal year. Unearned funds are moved into current income in the year in which they are to be used. Taxes payable are those taxes due to governmental groups that have been set aside for later payment – think of it as a kind of escrow. Fund balances are the various committed set-asides where the money is reserved for a specific purpose, either by the donor or the BOD. I’ll cover these in more detail in the future, but it includes the Diamond Club, the Howell Day Museum Fund, the Heart of America Fund, and several other commitments.
At the end of 2013, NMRA Liabilities were:
Accounts Payable $ 8,895
Accrued Vacation Liability 12,000
Unearned Revenue 798,717
Taxable Payable 175
Unrestricted designated Assets* 323,209
Unrestricted, non-designated Assets** 910,997
Temporarily Restricted Assets*** 322,273
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Total Liabilities and Equity $2,376,266
*Life Service Obligation, Dean Freytag Memorial Fund
**Approximately 2.5 months operating expenses and BOD reserve fund
***Heart of America, HowellDayMuseum, Diamond Club
At the end of every fiscal year, the NMRA hires an independent accounting firm to audit our finances and prepare a report for the BOD and to prepare our tax filings. The firm reviews all our records and spends about a week at HQ to examine the documentation and to ask questions of the staff. We passed the 2013 audit with no issues or weaknesses. The results will be posted on the new website after the audit is accepted by the BOD.
Next time, I’ll review the various funds we use to keep track of specific commitments that will require cash at some point in the future…and we need to be sure to set it aside.
Bill Hupe
