Often, Tribal Leadership relies on the Single Financial Statement audit.
In some cases, Leadership may be reviewing Income Statements and Balance Sheets.
Unfortunately, Tribe’s seldom analyze the Cash Flow Statement even though cash is often the most limited resource.
If you think about the Single Audit, it is like the box score for a sporting event. It shows the end results well after the game is over but provides little insight as to what happened during the contest.
As for the Income Statement, Tribal programs spend their grant funds and the net balance between program revenue and program expenses usually equals zero. But if the grant is cost reimbursement, what is paying for the expenses? The cash is coming from somewhere.
With the Balance Sheet, we start to see meaningful information, but it is limited to being only the closing values, which are static. For example, Cash, Grants Receivable, Due From, Unearned Revenue and Due To come into play but we are still missing critical change in Cash information.
If the Cash Flow Statement is generated internally on a regular basis, Leadership now has a dynamic tool to understand where the money is coming from and going to.
This article (Why Is Cash Flow Important To A Business – (TIPS) SmallBusinessify.com) does a nice job explaining the importance of the Cash Flow Statement for businesses. So, when reading, think Tribal Government when you see business.
Using the Cash Flow Statement consistently will show Leadership how Tribal operations and finance are functioning together.