Financial Management of Not-for-Profit Organizations

Since a non-profit organization provides community services without monetary profit, the external environmental conditions that exist outside of the non-profit significantly influence its growth and survival. Specifically, economical elements such as disposal income levels, unemployment trends, taxation rules, inflation, and cost of living may impact the likelihood of obtaining new donors or continuing donations from existing donors. In an economic climate of decreasing disposable income may result in decreased donations. Furthermore, increasing unemployment rates may increase the need for public assistance wherein the non-profit organization may find it difficult to obtain increased funding to provide their philanthropic services.

According to our text, “Not-for-profit organizations lack a residual ownership claim and the organization’s purpose is something other than to provide goods and services at a profit.” “Because significant resources are provided to governments and not-for-profit organizations, financial reporting by these organizations is important.” (Page 2).

Successful management of a not-for-profit organization requires providing high-quality service, but at the same time, careful administration - to reduce expenses and automate processes are ongoing requirements. Each type of not-for-profit organization has unique management needs. For example:

This paper was originally written for Financial Management for Nonprofits 380, taught by Professor Zelhart.

Nonprofit organizations broadly described operate to achieve missions that serve the common good. Graduate study in the field of nonprofit management focuses on the development of leadership skills for nonprofit managers and provides education in areas such as general operations, human resources, strategies, and fund development (Nachmias, 2008). Students of nonprofit management also develop proficiency in other matters such as nonprofit legal issues, organizational development, donor relations, financial management and fund-raising, volunteer, and human resource management, and pro-gram evaluation, to name a few competencies (Nachmias, 2008).Many nonprofit management programs have a theoretical component, and most programs rely on experiential learning as a vital element of a graduate student’s education. Future studies of community impact should include analysis components from the fields of nonprofit management education, service learning, capacity building, and nonprofit evaluation, and take into consideration specific factors that may affect study outcomes.

The purpose of this paper is to gain a deeper understanding of the non-profit sector by analyzing a non-profit organization. The organization chosen for this report is SickKids Foundation located at, 525 University Ave, Toronto, ON M5G 2L3.

In the modern fear of inflation and taxes a huge concern arises by allowing millions of dollars of taxes remain uncollected by religious exempt property (Hageman 405). Many wonder why they are forced to pay the tax burden when religious organizations could easily lessen the economic burden. Nonprofit property in all 50 states are exempt and this creates problems for assessors and tax departments. Assessors must determine if the activities of the non-profit organization like churches are providing a sufficient amount of charitable care. In a 2011 survey done among assessors by the Center for Business and Economic Researches, 96% of assessors say churches will become tax exempt after an evaluation.

Several reasons can account for the criteria necessary to working and meeting the expectations of the not-for-profit (NFP) organization. First and foremost, if wanting to be successful in any job position, health care managers, and executives regardless of the specific area within a health care organization they lead, must have a firm understanding of accounting and financial management, (Finkler, S.A., Ward, D.M. & Calabrese, I.D. 2013). These are qualities I possess, and feel that those are one of the many criteria to succeed in a not-for-profit (NFP) organization. Also, I have a thorough understanding of profitability because whether for-profit or not-for-profit, a wider access to health care is needed as well as profits. It is clear,

A nonprofit organization (NPO), can be self-sustaining by adhering to some very simple rules. A nonprofit is described as an organization that “Operates for the common good and not for generating individual wealth: does not distribute its profits to individuals who control the organization such as its members, officers, directors, or trustees. While a non-profit organization can make a profit, the profit it earns must be used toward the core missions of the organization and not towards any personal benefits” (Bennett, 2013). One of the enormous challenges that a

NPOs are entities almost the same as for-profit organizations save for two distinct features of NPOs (Nolan, 2013). First, it is prohibited to distribute its profits to the public. The second one is that NPOs do not have shareholders; therefore, no one owns the entity. What it includes are the trustees who merely administer the organization and oversee its operations.

A vital part of the leadership system in many not-for-profit organizations is an unpaid board of directors or trustees. Often these individuals are bound by a common interest in the goals of the not-for-profit but come from dramatically diverging backgrounds.

This paper will examine budgeting procedures for profit and non-profit businesses and compare similarities, and if they exist, differences in accounting practices. This paper will also attempt to review what is Generally Accepted Accounting Procedures (GAAP) for budgeting for any organization to be successful.

According to Lecovich (2005), non-profit organizations varies with dependence concerning external resources e.g. finance. The author also suggest that main resources for operation and providing services to clients, are obtained through public financining and donations. In similarity, all the other programs except BAC Behavioral Health Licensed Article 31 clinic, which is considered to be a separate entity and new addition to the program; all the other programs such as health education, substance abuse, housing, and HIV testing programs, are funded by grants (Bridging Access to Care). In addition, grants are written to request funding for agency programs sustainability, and contract and credentials from different Health Maintenance Organizations

A not for profit organization is a corporation or an association that conducts business for the benefit of the general public without shareholders and without a profit motive (Legal, 2013).” There are immense community benefits as a not-for-profit generally accepts everyone regardless of ability to pay. Nonprofit organizations are granted tax-exempt status which helps them to provide services to the public and are expected to be effective managers of their finances as well as being efficient (Financial Management, 2010). In doing so, they can gain exemptions from federal and state incomes taxes and have the ability to solicit tax-deductible contributions (Financial Management, 2010). Organization must follow legal financial

In government, there is always tremendous potential for financial waste because there are no stakeholders who are directly affected by financial losses. Bad financial decisions and overpayment simply increase the expenses and the annual budget of the organization and those costs are passed along to the tax-paying general public. In recent years, public disclosure of the extent to which financial waste costs all taxpayers money has led to increasing demand for financial oversight to ensure that public funds are not wasted at the expense of the general public. In non-profit organizations, there is a