Financial Analysis of Lee College

1527 Words Aug 27th, 2014 7 Pages
Financial Analysis of Lee College Not-for-profit organizations are required to produce financial statements that provide information about their financial position and performance. Lee College is a private, not-for-profit college that prepares its financial statements in accordance to the accounting standards of the National Association of College and University Business Officers (NACUBO). I will prepare a Statement of Activities, a Statement of Unrestricted Revenues, Expenses, and Other Changes in Unrestricted Net Assets, as well as a Statement of Changes in Net Assets for use in determining the financial health of Lee College.
The statement of activities
A not-for-profit organization prepares a statement of activities, instead of the
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This is not a bad sign of financial stability for the reasons previously mentioned. Since a not-for-profit organization is expected to have a negative change in net assets, it could be argued that Lee College did live within its means.
The program expense ratio is a measure of a not-for-profit organization’s ability to utilize resources for the fulfillment of its mission, and it is considered to be of great interest for evaluating the organization. It is calculated by dividing program service expenses by the total expenses. For Lee College, the program service expense of totals $14,450,000, and total expenses are $18,175,000. Therefore, the equation would be 14,450,000 / 18,175,000 = 0.795 = 80%. The Better Business Bureau recommends a minimum ratio of 60% (Copley, 2015), so Lee College is in good standing with its ratio of 80%. Based on these observations, Lee College is operating above standards for a not-for-profit organization, and would be considered to be financially healthy.

References
Cirtin, A. (1996) Financial statement analysis for private colleges and universities National Public Accountant, 41(8), 29
Copley, P. (2015) Essentials of accounting for governmental and not-for-profit organizations (12th Ed) New York, NY: McGraw-Hill Education
Larkin, R & DiTammaso, M. (2013) Somerset, NJ, USA: John
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