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CFC’s Financial Webinar SeriesThe CFC KRTA:
Putting it to Work for Your Co-op!
Financial Webinar Series
How to Submit Your Question
Step 2: Click on the Send button.
Step 1: Type in your question here.
Financial Webinar Series
CFC’s Financial Webinar SeriesThe CFC KRTA:
Putting it to Work for Your Co-op!
Financial Webinar Series
Today’s speakers include:
Terry Mallard, CFC
Burns Mercer, Meade County REC
Bettina Kimmel, CFC
Financial Webinar Series
CPE Guidelines…
� Attend the webinar for the full session.
� Submit at least one question during the
webinar’s Q&A section.
� Complete the evaluation at the end of the
session.
Financial Webinar Series
• List the features of the KRTA.
• Describe how these features can be used at an electric cooperative.
• Describe how to access their personal KRTA
• List sources where they can gain additional information about using the KRTA.
Learning objectives for the CFC KRTA Webinar:
As a result of this session you will be able to:
Financial Webinar Series
What was the total number of service interruption minutes attributed to major storms in 2010?
A. 1,850 minutes
B. 75,000 minutes
C. 188,000 minutes
D. 248,000 minutes
E. 425,000 minutes
Polling Question
Financial Webinar Series
Terry Mallard,
Regional Vice President,
CFC
Financial Webinar Series
Today’s Goals
• Introduce the Key Ratio Trend Analysis (KRTA)
• How Is It structured?
• How to Interpret the Results
• Uses of the Analysis
• Other Tools
Financial Webinar SeriesXYZ Rural Electric Cooperative (XXX)
Financial Webinar Series
Key Ratio Trend Analysis: An
Introduction
• Produced Annually• Created From Year End Financial Statements Submitted by Cooperatives (815 in 2010)
• Generally Available in July
Financial Webinar Series
Key Ratio Trend Analysis: An
Introduction
• Mailed To Cooperative’s CEO
• On CFC’s Extranet website• CFC Independent Borrowers Report Also Available
Financial Webinar SeriesXYZ Rural Electric Cooperative (XXX)
The KRTA Format
145 Ratios
5 Year History
Includes Ranking By Comparison Group
Financial Webinar Series
Power of the KRTA
Peer Groups 1. Nation
2. State
3. Similar Size
4. Same G&T
5. Similar growth
Categories1. Base Group2. Financial Ratios 3. Revenue & Margins Ratios 4. Sales Ratios5. Controllable Expense Ratios 6. Fixed Expense Ratios7. Total Expense Ratios8. Employee Ratios9. Growth Ratios10. Plant Ratios
145 in total
Financial Webinar SeriesXYZ Rural Electric Cooperative (XXX)
How The KRTA Works
Compares System Value to Medians of Five
Comparison Groups by Year
Financial Webinar Series
KRTA Shows Data Using Medians
• Median Example
–1–8–43–76–8,000
• Median = 43
• Average Example
– 1– 8– 43– 76– 8,000
• Average = 1,626
Total/5
Financial Webinar SeriesXYZ Rural Electric Cooperative (XXX)
Comparisons
Financial Webinar SeriesXYZ Rural Electric Cooperative (XXX)
Ranking
Financial Webinar Series
Ranking
Ratios are calculated and ranked from high
to low
TIER Rank
Coop A 1.25 4
Coop B 1.75 3
Coop C 1.00 5
Coop D 2.25 2
Coop E 2.50 1
Financial Webinar SeriesXYZ Rural Electric Cooperative (XXX)
Trends
Financial Webinar Series
What The KRTA DOES
• Assists in Analyzing System Operations
• Highlight Areas of Strengths and Weaknesses
• Indicator of Future Performance
• Provides Positive and Negative Trending
Financial Webinar Series
What The KRTA DOES
• A High Level Look at Comparisons to Peers
• Must be Looked At as a Whole
• Requires Interpretation by Knowledgeable Staff
• Viewed in Context of the Year’s Unusual Events
Financial Webinar Series
What The KRTA DOES
In Short . . . It Provides a Good Place to Begin Asking Questions
Financial Webinar Series
The KRTA DOES NOT
• Answer Why a Cooperative is High or Low
in a Specific Ratio or Ratios
• Provide Interpretation of– Financial goals
–Geographic, socioeconomic & demographic trends
– Peculiar operating characteristics
Financial Webinar Series
The KRTA DOES NOT
• View Ratios in Context of the Year’s Unusual Events
• Paint an Entire Picture
Financial Webinar Series
The KRTA DOES NOT
In Short . . . Provide Enough Data to Draw Conclusions Without Interpretation
Financial Webinar Series
How Do I Use It?
• The “Right” Ratios Should be Determined by Your Cooperative’s Goals
• Each Ratio Should be Viewed as a Piece of the Overall “Business Puzzle”
Financial Webinar Series
How to Interpret the Analysis
• Look for the Unexpected• Look for Trends Over Several Years• Look for Ratios with Large Variances• A Large Variance on the Low Side of an Expense Item May be as Bad as Being on
the High Side
• Variances Should Evoke Questions
Financial Webinar Series
Cautions
Differences exist in:
―System characteristics
• Density
• Terrain
• Member mix
• Sales mix
―Accounting practices
• RUS vs. independent borrowers
• Differing opinions
Financial Webinar Series
Cautions
Differences exist in:
―Weather
―Strategic initiatives
―Reporting errors
In short – how are you different from the
“average” cooperative
Financial Webinar Series
Example
• Your cooperative’s Investment per Mile of
Line (Ratio 124) is higher than “peer” group
• Before assuming inefficient operations, ask
questions and investigate
―Are line extension policies similar?
― Is there a difference in terrain (rocky vs. sandy)?
―Has the coop made recent plant investments due to member growth?
Financial Webinar Series
Example (continued)
• Additional questions:
―Was your cooperative behind on replacing old plant and have strategically increased ordinary
replacements?
• If the variance cannot be explained then one has to ask:
―Is the coop investing more than they should and corrective actions needed?
Financial Webinar Series
Burns Mercer,
Meade County REC
Financial Webinar Series
Uses of Report
• Overview of System Operations
• Strategic Planning
• Integral part of the environmental scan
• Incentive Compensation Plans
• Balanced Scorecard
Financial Webinar Series
Other Tools
Financial Webinar Series
Summary
• The KRTA is a Tool Designed to Help Begin Asking Questions
• Look for Both Positive & Negative Trends
• Each Ratio Must be Analyzed Relative to Other Ratios and the Unique Characteristics of the System
• The KRTA Should be Reviewed Annually by Management and the Board of Directors
Financial Webinar Series
Now…let’s turn it over to our audience!
Financial Webinar Series
How to Submit Your Question
Step 2: Click on the Send button.
Step 1: Type in your question here.
Financial Webinar Series
Please take a minute to complete
the NRECA survey.
If you are requesting CPE credits, this is If you are requesting CPE credits, this is
a requirement.a requirement.
Financial Webinar Series
WWW.NRUCFC.COOP
Events &
Training Tab
Look for the
replay of this
program early
next week
Financial Webinar Series
Mark Your Calendar For Our Next Event:August 10, 1 p.m. Eastern Time
The Topic isThe Topic is……
FEMA: Working with an Important Government FEMA: Working with an Important Government Agency!Agency!
Financial Webinar Series
CFC BudgetPro™ Series
July 18 through July 22 at 1 p.m. Eastern
Register at:http://www.surveymonkey.com/s/BPJuly
Financial Webinar Series