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PAUL, MN 55103 (651) 222-0022
March 16, 2012 MEMORANDUM FOR FILES: TREASURER’S REPORT-MARCH EXECUTIVE COMMITTEE MEETING, RPM FINANCIAL STATEMENTS AS OF FEBRUARY 29, 2012 FOR THE MONTH AND YEAR-TO-DATE THEN ENDED FR: BRON J. SCHERER, CPA, SECRETARY-TREASURER, REPUBLICAN PARTY OF MINNESOTA TO: REPUBLICAN PARTY OF MINNESOTA EXECUTIVE COMMITTEE OVERVIEW: The purpose of this memorandum is to discuss the finance position, results of operations and changes in financial position for the Republican Party of Minnesota (RPM or the Party) as of February 29, 2012 and for the two months and year-to-date then ended. See accompanying financial statements and detailed schedules for additional information. The accompanying statements of revenues and expenses and related supplemental schedules include year-to-date as well as monthly reporting periods for your review. FINANCIAL POSITION: As of February 29, 2012, RPM cash balances were approximately $27,000 as compared to a “book” overdraft of approximately $24,000 as of December 31, 2011. This is obviously a substantial improvement over the two month period. However, as most of the Party’s financial activity flows through the “Federal” account, it is important to note that there is still a “book” overdraft of approximately $7,000 in such account as of February 29, 2012 (but again, a substantial improvement from December 31, 2011 when such balance reflected a “Federal” “book” overdraft of approximately $44,000). One other factor to consider is that in either March or April of 2012, there are a fair number of older, dated outstanding checks that either must be written off or will be cancelled, then reissued as a final attempt to get the payee to cash such checks. Ultimately, if not cashed and
such expenditures reversed, our book cash balances will improve to that extent. We are working with Counsel as to disposition of un-cashed contribution refund checks (generally remitted to the U.S. Treasury) and as to other un-cashed checks. We also have a substantial cash transfer required (approximately $70,000) due to prior period federal and state cost allocation adjustments that will move cash from the federal to the state account. This transfer (or transfers), which is expected to occur in June or early July of this year, will be partially offset with re-allocated personnel costs, previously accounted for as exclusively “federal” expenditures, but now partially allocated to “state” activities based upon guidance received from the Minnesota State Campaign Finance and Public Disclosure Board staff. We continue to make our required debt service payments, retiring the F.E.C. “penalty” note ($15,000 monthly) and the Alliance Bank note payable at approximately $3,500 monthly (principal reduction). Trade accounts payable grew slightly from January 31st to February 29th from approximately $957,000 to approximately $982,000, respectively (approximately 80% allocated to “federal” activity). There is nothing unusual to report here other than what has already been discussed except that we continue to be in a precarious working capital position. Consequently, please note that we are not paying our office lease rent payment currently (but have been in discussions with our landlord) and have not yet negotiated long-term payment schedules and/or negotiated settlements relating to most of the vendors on the accounts payable aging (see accompanying financial statements and schedules for summary accounts payable aging reports as of February 29 and January 31, 2012). We continue to refine our monthly accounting period closing process which has been somewhat of a challenge given the many “cooks in the kitchen”. Our monthly reporting procedures are substantially more complicated due to the federal and state transaction reporting requirements that are not always in accordance with generally accepted accounting principles. Further, staff and our outside compliance firm, “F.E.C. Cardinals” are not yet used to the new procedures I’ve set up to require a firm closing date after which no entries can be made to prior periods. This is obviously necessary so that reports issued to the Executive Committee are indeed “final”. In that regard, please note a small difference in the January 2012 results of operations and certain balance sheet amounts as of January 31, 2011 due to a late (while immaterial) posting issue. As the months go on, we’ll have this process working effectively. OPERATIONS: For the month ended February 29, 2012, RPM incurred a loss of approximately $8,000 but for the year-to-date period then ended has earned approximately $34,000. A key fact to take away from the accompanying Statements of Revenues and Expenses is that while net revenues (contributions and other income, net of related fund raising expenses) are substantially below budget for the fiscal month of February and on a year-to-date basis ($155,000 and $125,000 negative variances, respectively), total expenses are also below budget ($74,000 and $66,000
for the month and year-to-date ended February 29, 2012, respectively), partially offsetting the negative net revenue variance. Such financial results caused a negative variance in net earnings for the year as actual earnings were less than the budget on a year-to-date basis by approximately $58,000 ($81,000 for the month of February 2012). Having said this, I believe it’s a fair statement to remind us that the 2012 five month budget was perhaps not prepared in a detailed manner, certainly on a month to month basis and thus we shouldn’t be focused solely on actual to budget results at least only over two months. Fund raising is the key and we need to generate adequate (substantial) net earnings every month in order to not only retire our debt, but to retire our significant trade accounts payable balance as referred to above. Finally, the importance of “Major Donor” programs historically and on-going cannot be over-emphasized, as again reflected in both January and February 2012 results of operations. Finally, as I referenced at the February 2012 Executive Committee meeting, I had not had a chance to review the 2012, five month budget in detail prior to publishing the January 2012 financial statements. A significant data entry error was discovered subsequently that had overstated the reported budget amounts reflected in the January 2012 financial statements. Such error has been corrected and is now reflected properly for both the months of January and February 2012 in the accompanying financial statement report. We need to be working on our 2012 stub period (June 2012-December 2012) and preferably a 2013 budget soon. Also, as noted at the February Executive Committee meeting, there are two months office rent expense reflected in the January 2012 financial statements (for January and February 2012). Again, we are working to clean up our monthly closing process to assure all period expenses are reflected in the proper month. I did not re-state the January financial statements due to consistency reporting issues with previously filed F.E.C reports but had we done so, both January and February would have had an excess of revenues over expenses (net income). Full-time-equivalents (FTE’s) and contributor number information are not yet available. We will add in future reports. OTHER ACTIVITIES: We continue to be very busy in the Finance Department with not only our day to day activities including the essential fund raising processes that are critical to the short and long-term success of the RPM, but continue to make progress in terms of implementing new accounting and reporting processes, procedures and internal controls as will be more formally documented via the RPM Financial Controls Committee documents to follow prior to the RPM State Convention in May. We have filed all 2011 monthly F.E.C amendments as well as the amended Minnesota State Campaign Finance and Public Disclosure Board (CFB) year-end reports for 2011 and 2010. We are working closely through counsel and directly with the F.E.C. and C.F.B on a number of
reporting issues such as proper accounting and disclosure of “invoices not received” in the case of CFB reporting and personnel cost allocations between federal and state accounts, among others. We have responded in writing to both the federal “CREW” complaint and the CFB “Common Cause” complaint as well as additional requests for information from the CFB in this regard. Finally, I want to commend Mr. Ron Huettl, Finance Director for his professionalism and his day to day commitment to helping me implement the new processes referred to above. Bob Wyant, our outside accountant has done great, detailed work to get our supporting documentation, vendor analysis and general ledger in good order. Also, much thanks goes to our outside federal and state compliance legal counsel(s) and to Mr. Mike Vekich for his assistance in dealing with several of our more troublesome past due vendor accounts as well as other matters. I apologize for not being able to attend the March 2012 Executive Committee meeting. Please do not hesitate to contact me anytime with your questions and comments.
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