MMDCCLX NOVA ROMA FINANCIALS STATUS REPORT December 31, 2007
NOVA ROMA FINANCIALS STATUS REPORT Prepared by Equestria Iunia Laeca, December 31, 2007
This status report explains budget methodology and discusses other financial areas currently being reviewed. The budget information reports known data for the ten months ended October 31, 2007.
1. Comments on the Preliminary Budget for 2761 AVC 2. The State of the Funds 3. Missing and Unknown Data 4. Cost-Benefit Analysis of QBOE 5. Actual and Proposed Expenses 6. Internal Controls 7. Tax Rebates to Provinces 8. Budget Period & Future Discussions
1. Comments on the Preliminary Budget for 2761 AVC
The preliminary budget was created using known data for 2760 AVC, and prior years actuals presented to the Senate. Proposed amounts for 2761 AVC, have been developed using conservative assumptions. As such, expected revenues remain even. Donations to Magna Mater Project and Nova Roma are also unchanged. Usually donated amounts would be adjusted to zero in the proposed budget due to the voluntary nature of the revenues. However, the past several years have consistently proven the generosity of citizens and the continued interest in the Magna Mater Project. Known expenses are included in the proposal. It should be noted that some citizens have absorbed the cost of, or provided free of charge, products or services during the current period that Nova Roma would have otherwise been required to purchase. These amounts have been budgeted with the expectation that those future products and services will need to be paid for.
2. The State of the Funds
Aside from the Magna Mater Project Fund, there is no data available on any of the other Funds for the past three years. This includes the Scholarship Fund, Land Fund and Emergency Fund. As a result, they have not been included for consideration in the proposed budget.
Since 2004, the Magna Mater Project Fund has accumulated a net balance of $3,932 (as of 11/30/2007). This amount has been properly restricted in the current reporting period.
The lack of records on the other Funds is an extremely serious problem that should be addressed immediately.
3. Missing and Unknown Data
The financial information that is missing or unknown for the current and prior periods is material and therefore restricts the ability to judge Nova Roma's financial condition. This should be taken into consideration during budget discussions to ensure proper evaluation of proposed numbers.
4. Cost-Benefit Analysis of QBOE
The QuickBooks Online Edition (QBOE) used for the current accounting period has provided a good structure for the recording and reporting of available data. The estimated cost to continue utilizing this program for the upcoming year will be $399 ($36.95/month x 10% discount if paid annually).
QBOE is an internet-based accounting software that provides a basis for keeping and tracking our financial data. It is easy to use and allows us a stable structure to maintain and manage the financial information. Other benefits include user access to it from anywhere, automated backups, budget tracking, a standardized reporting format and an audit trail.
The Senate has a fiduciary responsibility to not only safeguard Nova Roma's assets, but also to preserve and control all financial data necessary to maintain the organization. In my assessment, QBOE is currently the best tool available to meet this objective and therefore, its benefits outweigh its cost.
5. Actual and Proposed Expenses
The donated QBOE Subscription from May through the end of November totaled $169.70. The amount donated and paid for December and January of $96.90 is not included in the budget data.
The costs estimated for moving to new banking institution is $150. This was calculated by assuming the purchase of a new checkbook for $30 ($20 for book plus 100 checks at .10/ea.) and annual fees of $120 ($10/mo.).
6. Internal Controls
Establishing a strong system of internal controls is critical to any organization. Nova Roma is a very unique company. There is no central location in which business is conducted and turnover of citizens can be high and without notice. The organizational structure is decentralized and magistrates reside in many countries throughout the world. It would seem that designing an effective strategy for protecting the financial information would be difficult and complex in this situation. However, even though citizens could theoretically come and go freely from Nova Roma, the corporate culture and mission has attracted a large pool of successful and esteemed professionals who take their positions seriously and perform their duties faithfully. All of this makes up the "control environment" and is the first step in building a functioning and effective infrastructure.
The additional steps that will need to be considered and defined in a future meeting are risk assessment (economic consequences, asset diversification, compliance with laws and regulations, fiduciary responsibility, credibility, and any mitigating factors, et al.), control procedures (approvals, authorizations, reconciliations, security of assets, segregation of duties, reliable and verifiable data, timeliness of reporting, etc.), and monitoring (meaningful budgets, regular reviews of budget to actual performance, independent audits by someone not involved with any step of the process, etc.).
It is imperative that the internal control system is reviewed annually to ensure its continued effectiveness. Changes should be made as processes evolve or become obsolete, or risk factors increase or decrease.
7. Tax Rebates to Provinces
For several provinces, NR has made arrangements for 50% of the taxes to be shared with that province. Payments are normally remitted to NR through PayPal. PayPal assesses a service charge of approximately 5% of the gross payment . Once the payments have been received and processed by NR, the rebates are approved and sent back to the province and PayPal fees charged again. In total, the tax revenues can be reduced by up to 10% through PayPal fees when using the tax rebate program.
There are two internal control considerations with this program. First, to ensure the governors are correctly submitting half of all taxes collected (i.e. reporting everyone that has paid). And second, whether or not to allow governors the ability to make decisions on how to spend the monies retained to benefit the province.
Keeping the program in place for the first consideration is an unnecessary practice as it has no affect on the confidence that provincial tax revenues have been properly reported. Most citizens would notify the Censors if their status has not been listed as Assidui within a reasonable timeframe. Once a resolution is sought, an investigation would identify unreported payments.
Additionally, all provinces currently provide an accounting of how this money is being spent. It is recommended that governors be requested to fill out a standard reporting form and keep receipts along with other records on file for up to three years for all monies kept. Furthermore, disbursements, in-kind donations, cash on hand (and its safeguarding), current obligations and future expenses, should all be reported on a quarterly basis with audits performed on a rotating basis through the provinces over a three year period.
The second consideration is a good internal control measure to meet Nova Roma's duty of judiciously expending taxpayer money for the reasons in which it was entrusted and intended. The Senate provides oversight to ensure that monies kept by governors are being prudently spent and not squandered on activities unrelated to Nova Roma's mission.
8. Budget Period & Future Discussions
Revenues and expenses are being recorded using a ten month fiscal year from January through October which corresponds to the annual election cycle. Any transactions occurring after October 31st are being recognized in 2761 AVC. There is no information available from prior years on the practices used to account for the additional two month period.
For the future, a consistent method for handling this situation should be defined to allow for comparative data in monitoring budget and financial performance.
Status Report, December 31, 2007 Equestria Iunia Laeca, Accensus