Mar 20 2018
Mar 20

The Drupal Association Board is responsible for the Drupal Association’s financial health and as part of their duty, they vote to approve monthly financial statements. The board met virtually on February 27th, 2018 and voted to approve the Q3 & Q4 2017 financial statements.

Each month we compare our results against the two financial KPIs that we measure against:

  • Cash Reserve: have a cash balance of 15-30% of Total Revenue
  • Net Income Profit Margin: end 2017 with a net income profit of 10%

These two goals focus on increasing Net Income in order to build a stronger cash reserve.

Below is a summary of how we performed in the third and fourth quarters of 2017 against our KPIs. As you look at this chart, you can see that we improved on our KPI month over-month.

Prior to the start of the year, we stated that if we could achieve a 10% Net Income this would move us to the minimum percentage (10%-30%) of the cash reserve. As we move month-over-month, you can see the cash reserve build as our net income percentage increases. December has us land at a Net Income percentage of 16%, and our “money in the bank” was 11%, or $570K (not including restricted cash).

Revenue

$5.1M

Cash Balance (including Restricted Cash)

$770K

Net Income

$785K

Cash Reserve %

15%

Net Income Percent

16%

Cash Balance (excluding Restricted Cash)

$570K

Cash Reserve %

11%

Monthly Highlights

The month of July saw us move closer to our cash reserve KPI. We ended the month within 80% of that goal. As we moved closer to DrupalCon Vienna, we saw cash reserves drop because we paid expenses towards the conference. The net income goal outperformed the cash forecast due to fundraising revenue being $31k higher and membership sales coming in $11k more than forecasted. The costs for July tracked to forecast, with a small amount of trailing costs (about 4k) from DrupalCon Baltimore, and bank fees being $5k lower than forecasted.

August had supporter sales and digital sponsorships down $30k from the forecast, however this was offset by an unforecasted time and materials project for $25k. Operating expenses for DrupalCon, along with overall administration costs, stayed in line with the forecast.

September’s focus was DrupalCon Vienna. Overall, net income significantly exceeded expectations for September because of much lower than expected costs for Vienna, and a boost of an additional $46k in revenue. This increase in revenue was mostly due to fundraising ($20k over forecast) and other programs ($26k over forecast). We do expect a significant amount of trailing costs in October for Vienna that will impact the net income in the upcoming months.

Activity for October saw some trailing costs for DrupalCon Vienna, and a clear picture on how DrupalCon Vienna closed out. We were below the forecasted loss of $267k, however the trend towards a loss. Some revenue help was in trailing ticket sales and sponsorship sales, which did beat the forecast. The events team did a great job containing costs, and maximizing savings in catering, supplies and our print signage for approximately $71k of savings in those budgets. Additionally, we were able to reclaim $32k of VAT through deductions on tax returns. This moved the anticipated net margin loss from -31% to -22% on this event.

November saw trailing costs from DrupalCon Vienna, which increased the forecasted loss of $68k to $114k. (October’s predicted loss was much less than forecasted) This was due to timing issues, as these invoices were expected to come in October.

December had some variances between actual and forecasted, ending up with a $59k loss instead of the forecasted $66k. Some of the more material events were:

  • Revenue was up $50k over forecast due to VAT deductions from Vienna booked to uncategorized income at month’s end that totaled $57k.
  • Board expense came in at $4k but we had none forecast. We have updated the forecast for the recurring $4k item to be included each month.
  • IT expense in the admin section was $7k for December, but we forecasted $16K.
  • Cash ended the month (and year) at $770k, which was $119k higher than our forecasted $651k. This ends our year with our minimum cash reserve goal sitting at 10%.

With reforcasting in process, and not quite finalized, we expect cash to grow over the next four months, leading into DrupalCon Nashville in April 2018.

We will be blogging soon about our 2017 close, which includes our CPA driven financial review (a lighter “audit”), production of our 2017 990 tax return and a 2017 weather report review from our virtual CFO group Summit.

We would not be able to do our mission-driven work without the support and contributions of our community. Contributions come in many forms, through the purchase of DrupalCon tickets and event sponsorships, through our Supporters and Members, Drupal.org sponsors, recruiters who post jobs on Drupal Jobs and many other fantastic ways our community supports the Drupal eco-system. We are deeply grateful for everyone who has contributed their time, talent, and treasure to move Drupal forward.

Thank you!

File attachments:  Drupal Association - Q3 2017 Financial Statements.pdf Drupal Association - Q4 2017 Financial Statements.pdf
Jan 29 2018
Jan 29

Last year, the Drupal Association committed to not only providing more transparency into our financials, but also more clarity about where our funds come from and what they fund.

We completed our 2016 Audit and official financial reporting at the end of 2017. This post gives insight into 1) the audit 2) the 990s (our official financial report for the year) and 3) a new financial report called the “Weather Report”. 990s provide a one-year snapshot of program financials, but some of our programs have two years of expenses, like DrupalCon, so just looking at the 990s never gives the exact insight into how our events perform. The weather report provides this clarity. It will expand over time to provide clarity for more of our programs as well.

We did a financial audit for 2016

Audits are a good thing. In fact, our operations department welcomes them and appreciates the feedback.

To assist our board in their fiduciary obligations, we strive to conduct audits every other year. In the years that we don’t do an audit, we contract with our CPA firm, McDonald Jacobs, to do a financial review.

We conduct an audit for several reasons:

  • to demonstrate our commitment to financial transparency.
  • to assure our community that we follow appropriate procedures to ensure that the community funds are being handled with care.
  • to give our board of directors outside assurance that the financial statements are free of material misstatements.

For our 2016 audit, our auditors focused on three points:

  • Proper recording of income and expense: our auditors ensure that our financial statements are an accurate representation of the business we have conducted. Did we record transactions on the right date, to the right account, and the right class? In other words, if we said that 2016 revenue was a certain amount, is that really true?
  • Financial controls: preventing fraud is an important part of the audit. It is important to put the kinds of controls in place that can prevent common types of fraud, such as forged checks and payroll changes. Our auditors looked to see that there are two sets of eyes on every transaction, and that documentation is provided to verify expenses and check requests.
  • Policies and procedures: there are laws and regulations that require we have certain policies in place at our organization. Our auditors looked at our current policies to ensure they were in place and, in some cases, had been reviewed by the board and staff.

The primary goal of this audit is for our auditor to express an opinion on two aspects of the financial statements of the Association: the financial statements are fairly presented, and they are in accordance with generally accepted accounting principles (GAAP). Generally accepted accounting principles are the accepted body of accounting rules and policies established by the accounting profession. The purpose of these rules is to promote consistency and fairness in financial reporting throughout the business community. These principles provide comparability of financial information.

Our audit for 2016 is complete and has been reviewed and approved by the board. The results of our audit can be found here

In short, we received a clean bill of health with one recommendation from our Auditors (which is VERY good).  It is in how we open and deposit incoming checks:

"Controls over Checks Received
With the elimination of our physical office during 2016, the control of segregating certain duties has been eliminated. The Accountant now processes checks received in the mail. In this situation where the Accountant has access to the physical asset and the accounting records, there is an opportunity to misappropriate a check and void or delete the invoice billing in the accounting system. To mitigate the risk of this occurring without detection, the following recommendations can provide additional control:

  • As part of the monthly reconciliation process performed by the outside CPA firm, a review of voided and/or deleted invoices can be done with appropriate follow up and resolution.
  • Consider using a lockbox with your bank."

While our security checks are tight, adding the bank lock box process was suggested by our auditors to add an additional layer of security to prevent potential fraudulent activity.

A lockbox is a physical post office box controlled by the bank.  Checks are directed to this post office box, or “lockbox”, and checks are opened and scanned by bank employees.  Those checks are deposited into our account, and scans of the checks are uploaded and recorded in our banking portal.  This can be accessed and seen by all members of our accounting team.  Checks are now recorded into our accounting system by a different team member, since checks are now digitized and deposited by the bank - and are no longer physically deposited by only one team member.

Tax filing: The IRS Form 990

Once the audit is finished, our CPA can complete the 990 tax return for the year.

All U.S.-based 501c3 exempt organizations are required to file a 990 each year. Additionally, this form is also filed with state tax departments as well. The 990 is used by the IRS and state regulators to ensure that non-profits continue to serve their stated charitable activities. The 990 can be helpful when you are reviewing our programs and finances, but know this is only a “snapshot” of our year.  

You can find our past 990s here.

Here are some general points, when reviewing our 990:

FORM 990, PART I—REVENUES, EXPENSES, AND CHANGES IN NET ASSETS OR FUND BALANCES

Lines 8-12 indicates our yearly revenue. Not only how much total revenue (line 12), but also where we have earned our income, broken out into four groups. Line 12 is the most important: total income for the year which ended at $5.1 million.

Lines 13-18 shows expenses for the year which totaled $6.1 million for the year.

Cash Reserves are noted on line 20 of page 1.  Our year ended with 186k in net assets. The 990 has a comparison of the net assets from last year (or the beginning of the year) and the end of the current year, as well as illustrates the total assets and liabilities of the Association.  We ended 2015 with -$92K, and with our refocus in 2016 we closed the year up, at $185k in net assets.

FORM 990, PART II—SIGNATURE BLOCK

Sign off on our 990 by our Treasurer Tiffany Farriss & CPA Representative McDonald Jacobs partner Sang Ahn.

FORM 990, PART III—STATEMENT OF PROGRAM SERVICE ACCOMPLISHMENTS

In Part III, we describe the activities performed in the previous year that adhere to our 501c3 designation.  You can see here that Drupal.org, DrupalCon and our Fiscal Sponsorship programs are highlighted noting the expenses and income for each program.  Keep in mind that this is only a year snapshot, as DrupalCons span a couple of years, ramping up and winding down.

FORM 990, PART IV -  CHECKLIST OF REQUIRED SCHEDULES

This is a checklist of schedules that must be completed and accompany the 990 filing.  Any “yes” answers checked here will produce a schedule to explain the “yes” answer in detail.

FORM 990, PART V - STATEMENTS REGARDING OTHER IRS FILINGS AND TAX COMPLIANCE

This is a place for statements about other IRS filings and tax compliance such as receiving tax deductible contributions, and noting that we have provided donors with required substantiation for their donations.

FORM 990, PART VI - GOVERNANCE, MANAGEMENT AND DISCLOSURE

This is for us to note detailed information regarding our governing body, management, and policies of our organization.

FORM 990, PART VII - LIST OF OFFICERS, DIRECTORS, TRUSTEES AND KEY EMPLOYEES

Part VII lists our board and staff who are responsible in whole or in part for the operations of an organization. These entries do include titles and compensation of key employees.

Section B—Compensation of the Five Highest Paid Independent Contractors for Professional Services
We list any of our contractors, if we have paid them more than $50,000, on this schedule.

FORM 990, PART VIII - Statement of Revenue

This is a snapshot of where our revenue comes from, what is exempt or not exempt as taxable income. For 2016, $573,247 was considered taxable.

FORM 990, Part IX Statement of Functional Expenses

This section classifies the total amount earned for the year into three different buckets; fundraising, general, and program expense. These are expenses related to running those three different types of programs.

FORM 990, Part X, XI and XII Balance Sheet

This is a comparison of our 2016 balance sheet from beginning of the year to the end of the year, along with notes about the account method we use (accrual) and independent auditor and who is responsible for oversight.

Additional Filing to the 990, Schedule A — Public Charity Status and Public Support

A tax exempt organization must meet certain public support tests in order to maintain its status as a public charity. Schedule A provides an opportunity to see the various sources of revenue have increased or declined over the last four or five years. Please be aware that the definitions of revenue for the purposes of the support schedule are not directly comparable to Part I of the Form 990.

Additional various schedules following the 990, show large contributions (5k +), activities outside of the United States (ie grants given outside of the US), assets depreciation and other various activities.

Now that our 2016 990 has been reviewed by the board and approved, we have filed it. From there we are required to post the return publicly, which we do here on our website. 

Weather Report — Review of 2016

As part of our work to ensure financial health, our virtual CPA firm Summit compiles a “weather report” monthly so we can compare particular data points and see if we are reaching to our set KPIs. 

In closing the year 2016, Summit prepared this report for the year.

Revenue —the Drupal Association creates income in four different ways:

  • Advertising, which consists of ad sales on Drupal.org.
  • Events - DrupalCon income
  • Fundraising consisting of any donations or membership sales
  • Other Income, which comprises income from digital sponsors, Supporting Partner sales and time and material projects.

The graph below shows the breakdown of revenue for 2016.

Expenses — The Drupal Association has expenses which are categorized in the following ways:

  • Production Expense:These are the costs associated directly with earning revenue (for example: paying employees who work directly with the revenue streams described above, direct event costs, marketing event costs, IT costs, etc.)
  • Administrative Costs: These are general costs associated with running the organization (for example: administrative employees, accounting fees, insurance, professional fees, etc)
  • Sales and Marketing Costs: These are costs for marketing the Drupal organization (mostly Marketing employees)
  • Facility Costs: These are costs associated with the physical office space employees work. (Drupal moved a distributed workforce in the end of 2016, so these costs will be minimal going forward.)

KPI Goals — Moving into 2017, we set the following goals for Drupal.org.

  • Cash Reserve – Have 30% of forecasted YTD revenue in the bank.  As of the end of 2016 we have $397K (27% of the goal) in the bank.
  • Net Income – Have a Year End Net Income greater than 10%.  In 2016 we achieved a Net Income margin of -1%.

Event Summary — The graphs below present the 2016 and 2015 DrupalCon events

2016 results show us in the middle of our financial recovery.  As we moved into 2017, we took deep looks into our operations and programs to ensure financial health and growth. We will have a 2017 update after we close our financial review and 990 filing for the year.

We are thankful for the great team work that went into new financial reporting process and the resulting data to help us push towards our financial goals. Additionally, and as always, we are truly thankful to our financial contributors who provide the financial fuel for us to do our mission work.

Nov 15 2017
Nov 15

The Drupal Association Board is responsible for the Drupal Association’s financial health and as part of their duty, they vote to approve monthly financial statements. The board met on September 23, 2017 at the board retreat that took place before DrupalCon Vienna and voted to approve the Q2 2017 financial statements that were prepared by our virtual CFO service, Summit CPA.

This blog walks you through our Q2 2017 Financials and how we performed against the two financial KPIs that we measure against each month:

Below is a summary of how we performed against our KPIs each month in the second quarter of 2017.

KPI Goal April May June Cash Reserve 15-30% 60% of goal 84% of goal 88% of goal Net Income Margin (NIM) % 10% 49.9% -29.8% -48.9%

The table above shows that Q2 was strong as a whole, due to the big income assist DrupalCon Baltimore gave.

With May and June below the KPI goal, we reviewed the entire quarter results as a whole. The quarter was buoyed by DrupalCon Baltimore which produced a majority of the $2,328,367 in April’s revenue and after its expenses, April landed $1,163,390 in net income. Following DrupalCon, May and June collectively accounted for $542,530 in revenue, producing a $214,711 net loss. When taken in total, we generated revenue of $2,870,897 and net income of $948,679. This equates to a NIM of 33.04% for the second quarter measuring above the net income margin goal.

You can see we did not achieve our cash reserve goal this quarter. The Drupal Association is still in its financial turn around so we did not meet our goal for the second quarter, however we are much closer to doing so than we have been in the past.

This chart below shows how cash reserves are building in Q2 and getting closer to hitting the cash reserve goal for this quarter.

Closing Cash Balance to Reserve chart shows we're trending closer to hitting cash balance reserve goal

Monthly Updates

April results toward our KPIs had us holding $1.2M in cash, which is 84% of the stated cash reserve goal.  Due to DrupalCon Baltimore reporting strong sales in both trainings and general conference tickets, we resulted in 49.9% of net income KPI.  Expenses for DrupalCon Baltimore came in lower, catering had significant savings of $50K.

For May, our cash reserve goal increased 11% through additional sales in Digital Sponsorships programs and DrupalCon ticket sales.  May expenses had DrupalCon Baltimore $15.8k less than forecasted, and IT had some savings in their budget as well, which helped cash reserves. 

June had costs from Baltimore which lowered net income by $70k than originally forecasted. This was seen in event production costs that were $100k higher than anticipated, along with an unanticipated $14k in professional expenses. Reducing the impact of those costs, income in other programs came in $55k higher, the majority being rebates from DrupalCon Baltimore. This impacted the cash reserve KPI, where we reached 88% of our goal.

We would not be able to do our mission-driven work without the support and contributions of our community. Contributions come in many forms, through the purchase of DrupalCon tickets and event sponsorships, through our Supporters and Members, Drupal.org sponsors, recruiters who post jobs on Drupal Jobs and many other fantastic ways our community supports the Drupal eco-system. We are deeply grateful for everyone who contributes their time, talent, and treasure to move Drupal forward.

Thank you!

Aug 30 2017
Aug 30

The Drupal Association Board is responsible for the Drupal Association’s financial health and as part of their duty, they vote to approve monthly financial statements. The board met on June 28, 2017 at the open board meeting held online. Summit CPA, the Drupal Association’s financial advisors, reviewed the Q1 2017 financial statements, which the board voted to approve afterwards.

For those who could not attend this session, this blog will provide more details about the Q1 2017 Financials, and how we performed against the KPIs that Megan Sanicki, Executive Director laid out in her blog post of June 22, 2017.

As mentioned in previous posts, the Drupal Association has two financial KPIs that we measure against each month:

Below is a summary of how we performed against our KPIs each month in the first quarter of 2017. Overall, we are pleased with our financial progress in this quarter. It shows that we are becoming more sustainable since we made hard choices in 2016 to address our cost structure issues. Cash reserves increased due to DrupalCon Baltimore ticket sales and by selling new programs like the Drupal.org industry page sponsorships and the Charter Customer Supporting Partner Program.

KPI

Goal

January

February

March

Cash Reserve

15-30%

14%

22%

30%

Net Income Margin %

10%

29%

-30%

-32%

This chart below shows how our cash reserves were building in Q1, primarily due to DrupalCon ticket sales. You can see the cash reserves were still low at the start of 2017, as we were still in recovery. Additionally, November through January are our low cash months due to being between DrupalCons.

Net Income Margin will move up and down based on the month’s activities. Overall with the strong January, and the less solid February and March, we are still tracking to our cash forecast.

Monthly Updates

January cash reserves ended at 14% of the recommended cash reserve of 30%.  January’s net income margin finished at 10%.  Revenue had a nice percentage bump due to some unanticipated sales in the digital and industry pages sponsorships.  Additionally, we received a 28k travel grant from Travel Ireland. Thanks Travel Ireland!

February’s cash balance reserve closed in at 22%, due to a strong collections effort on accounts receivables (A/R) by our staff.  The net income margin for February was reduced due to some reclassification of deferred income.  These reclassifications made Febuary come in lower against the cash forecast.  However, with the strong performance of January, the YTD income goal is still on track against our cash forecast.

The cash balance for March exceeded the goal of 30%.  Why? Based on the 2017 forecasted revenue a 30% cash reserve goal is around $1.4M. The March balance of $1.8M was higher than this goal. The jump in cash is due to the strong collections in A/R and timing variances for payments in our A/P. You can see from our A/R tracking that we generally perform better than industry counterparts when it comes to payment on our accounts receivable; as at the end of March we were at 20 days to collect payments.  Additionally, ticket sales from DrupalCon added to the cash balance.

The board meets again on 23/24 September, 2017 at DrupalCon Vienna where they will approve Q2 financials. We will share a similar update to the community after that meeting takes place.

We would not be able to do our mission-driven work without the support and contributions of our community. Contributions come in many forms, through purchase of DrupalCon tickets and event sponsorships, through our Supporters and Members, Drupal.org sponsors, recruiters who post jobs on Drupal Jobs and many other fantastic ways our community supports the Drupal eco-system. We are deeply grateful for everyone who contributes their time, talent, and treasure to move Drupal forward.

Thank you!

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