Subject: Inspection Report (II) (fwd)

From: Hongguang Zhou <[email-masked]>
Date: Fri, 19 Nov 1993 02:20:17 -0500 (EST)

---------- Forwarded message ----------
From: [email-masked]
To: [email-masked]
Subject: Inspection Report (II)

			    AN EVALUATION OF
		THE IFCSS'S FINANCIAL/BUDGETARY SYSTEM
				11/13/93

	As a result of field inspection and observation at the Headquarter of
the IFCSS, this evaluation summarizes the preliminary findings on the structure
and operations of the IFCSS's financial, accounting, and budgetary activities.
Despite the great achievements in financial management, this evalution focuses
on the shortcomings that potentially hold back the IFCSS's managerial progress
toward efficiency and effectiveness. To this end, the preliminary findings are
stated in the form of suggestions and recommendations.
	
	This evaluation should not be considered as a complete summary of the 
IFCSS's entire fiscal operation, though it is intent on providing a realistic 
picture as comprehensive as possible. Indeed, there is no way such a complete 
evaluation could be attempted at this time given the short duration of on-site
inspection and the shortage of detailed information.

A. Program Accounting and Budgeting
The accounting and budgeting format adopted by the IFCSS is commonly called as
line-item, which is oriented toward control of objects of expenditure. Although,
the line-item format facilitates control of expenditures according to kinds of 
supplies and services purchased, this format does not effectively identify what
has actually happened in the services furnished by the IFCSS to the Chinese 
Students and Scholars (CSS) community. Additionally, this format does not
provide genuine information on how the budgeted programs/functions are executed
as planned. In view of this, program accounting and budgeting is recommendated
wherein expenditures are based primarily on programs of work such as CSPA and
5th Congress.

	Once programs are identified, specific account should be established to
account for its administration, including acquisitionss, processing, and 
personnel. Any residual fund balance, whether surplus or deficit, of programs
should then be tied with the IFCSS's general fund for operation. Considering 
the nature of limited life-span of many programs, the IFCSS's revenues should
be allocated in accordance with the objectives of various defined programs 
rather than be lumped indiscriminately for general operation.

B. Balanced Budget
As a legal requirement, the IFCSS's budget must be balanced on a year-to-year
basis. The Executive Office of the IFCSS must see to it that each expenditure
must stay within the limit of budget. To better supervise spending under the
ceiling, a statement of budget-to-actual comparisons must be prepared by the
Executive Office of the IFCSS for all accounts and funds that have annual 
appropriated budgets.

	For this purpose, financial statements must be prepared for fiscal year
rather than calender year. One confusing event that obscures the line of  
financial obligation is the IFCSS's Annual Conference (Congress). This means 
that the expenses for each Annual Conference (Congress) must be realized for 
the year-period covered by previous budget. Payments for any accrued l
iabilities of Annual Conference should be therefore considered as obligation 
of the last fiscal year.

C. Accessibility of Financial Statements
Whatever organization has a responsibility to others for its actions and the
consequences of these actions is accountable to them. The organization is
accountable to those who furnish resources and receive services. In this sense,
financial statements must be made available to users--donors, investors, the
Council, and the members of the IFCSS and CSS. There is no withholding of the
above said information that can be justified from reasonable request..

	Like other not-for-profit organizations, the annual financial statements
are made open for public scrutiny in many forms. One feasible way for the IFCSS
in terms of low cost and convenience is to store these documents at FTP site.
Please be adviced that financial statements are not secret documentations; they
are public information. 

	In the same token, accountability encompasses accounting stewardship,
which refers to the sufficient or full disclosure of revenue resources, 
administration of resources and the execution of plans for conserving and 
consuming them. The afore-said users must have access to knowing where money 
comes from and where it goes. The names of June 4th victims can be treated as
exceptional. 

D. Separation of Nonproft Account and Profit Account
The IFCSS's general fund is composed of two distinct accounts--IFCSS, Foundation
for nonproft purpose and IFCSS, Inc. for profit seeking purpose. Right now these
two accounts are combined and filed together under one tax form (Form 990).
The problem of this practice is the failure of providing distinct information 
on each activity as separate entity. Furthermore, it constitutes a potential
challenge from IRS.

	It is suggested that these two accounts be separated and recorded as
distinct operations for totally different purposes. This separation is also 
helpful to the IFCSS's identity and functions--Democracy and Services. 
Synthesizing the foregoing, a combined comprehensive financial statements are
desirable at the year-end, which not only delineates separate accounts but
provides a whole picture of entire operation of the IFCSS.