Assume your a new board member for the following hypothetical not-for-profit organization. Assume you're given the balance sheet, revenue over expenses and direct cash flow statements for the last quarter. Your Chief Financial Officer is competent and accurately produced financial statements for the last 10 years. You identify that the organization is generating plenty of charges resulting in strong revenue over expenses. But you also identify that the operating cash flow has been negative, with no change in investing or financing cash flows. Remember that for a not-for-profit organizations, the term 'excess revenue over expenses' is used instead of 'profit'. To be dramatic, if this were a for-profit company, one would say the situation is that your company is 'profitable' but 'bleeding cash'. That's unsustainable, and if left to continue, will lead to bankruptcy. Questions: 1) Explain what will happen to various accounts of the company if all operating accounts remain the same thru the next quarter. 2) Explain what remedial action(s) you recommend, for example what balance sheet accounts should increase, decrease or stay the same, and by what operating action(s) will to affect those changes. An explanation might start: "A continued INCREASE in charges would result in a (increase/decrease/no change) revenue over expenses causing (increase/decrease/no change) ending AR, then (increase/decrease/no change) of ending Net Assets. Additionally........Therefore I recommend ...... " (Hint: use the Secret Sauce with a very simple matrix like below, with High Charges, then track the horizontal and vertical calculations and dependencies, and explain what needs to be done to increase Cash at the end of the next quarter)

Q3			Q4
Cash		Net Cash	Cash
Acct. Rec.	Charges	Collections	Acct. Rec.
Acct. Pay.	Expenses	Disbursements	Acct. Pay.
Net Asset	Rev. over Exp.		Net Asset