Financial Mgmt in Nonprofit Essay

The nonprofit board and its governance are critical to an organization’s success. Brown (2007) stresses the need for governing boards to be informed, effective, and engaged, especially because the current environment (i.e. increasing competition for resources, etc.) demands high-quality board performance. The purpose of this paper is to examine existing literature as it relates to nonprofit board governance and performance. This analysis includes an examination of nonprofit boards’ roles, responsibilities, and functions along with a review of best practices. In addition, board roles and best practices, and their correlation to board performance is emphasized. Finally, a discussion of the practical implications of the literature as it relates to DavidsonWorks’ board ties the literature to real-world application.

As for some nonprofit organizations, lack of volunteers is their biggest worry. To other NPOs who are privileged enough to get volunteers to fund their operations, their problem goes a notch higher to getting commitment from their funders. This aggravates the NPOs problems of paying for their most important expenses such as human resource, infrastructure and utility bills. As a result, this makes it difficult for them to meet the societal expectations leading to suspicion of poor management or worse still embezzlement of funds in the name of alienating poverty. Some NPOs spend the little finances they have in applying for funds. Others spend money trying to attain the thresholds set by the promising funders. This is the general scenario in voluntary organizations but the small organizations are affected the most by financial problems.

The diversity of nonprofit organizations, services provided and the problems faced shows that nonprofits require leadership with an in-depth understanding of the multifaceted nonprofit landscape. Understanding the culture of nonprofit work is also crucial and much easier to understand once you have been through a nonprofit management program. My career interests lead me towards an avocation of a deeper knowledge of strategic management/planning, legal structure and standards, increase my skills in quantitative analysis of policy, financial governance and developing fundraising strategies. These areas allow for macro management within the nonprofit

There are steps that could be taken to eliminate or reduce the possibility of theft as well as specific areas within the organization which can provide checks and balances. In a small nonprofit, often the business manager acts alone and operates as an

Most nonprofit agencies follow the same management structure. The structure normally consists of a vertical hierarchal structure with the chief executive manager at the helm, and divisional leaders rounding out the strategic leadership team. Since 9/11, then government shutdowns, multiple wars, natural disasters, and the government sequester, the challenge to most nonprofits is to compete for every available charitable dollar. Chief Executive Officers (CEO) of nonprofits must not only be skillful in maximizing the outcomes with fewer dollars, but also politically savvy in vying for monies for federal, state, local, foundation, and private funding sources.

Independently if the organization is not-for-profit or for-profit, a vital duty of the management team is to keep the organization finances in a status that allows it to operate, and produce a level of revenue that secure its existence over the years. To reach these objectives, managers must perform key functions that involve planning, decision

Net assets are defined as “the difference between an organization’s assets and liabilities.” For nonprofit organizations, net assets are related to an organization’s ability to borrow funds. Tuckman and Chang (1991) found nonprofit organizations less likely to alter their programs and mission, following a financial shock, if they can leverage their net assets. An operating margin, or surplus, is “the difference between an organization’s revenue and expenses, divided by its total revenue.” A Nonprofit organization holding a great surplus can readily operate at a reduced surplus following a financial shock – allowing it not to alter any programs. The third factor for nonprofit financial vulnerability is revenue concentration. Revenue concentration is “the proportion of income an organization receives from its various sources of revenue.” Nonprofit organizations who receive many sources of revenue can better withstand the impact of a financial shock than those with little sources of revenue. After a financial shock, nonprofit organizations, along with all businesses, will try to cut down expenses. Woronkowicz (2016) states “administrative costs are preferred to those to program

Beginning with the economic theory of nonprofits, the essays examine current budgeting systems in both theoretical and practical terms. Resource allocation systems from other domains such as health care are explored for germane insights. Throughout, dispersing functions remains a major theme. Topics range from the eminently practical--how to establish an ecumenical accounting system or cull an endowment spending rate--to the more abstract--the theory of how sundry non-profit enterprises balance academic values against market pressures. The volume ends by proposing value responsibility budgeting, which offers institutions a potentially better way of pursuing their academic values while remaining responsive to market

One of the things that I have seen happen repeatedly is that some Executive Directors truly “fall in love” with their agency and fail to adjust to the needs of the stakeholders. One of the things that nonprofits need to do is to learn from the

Kingma (1993) discusses for a nonprofit organization, an increase in its financial risk, for a given level of expected revenues, is undesirable. A manager in a nonprofit organization who risks the expense of requesting funding from a particular revenue stream and perhaps the expense of promising additional services also risks not receiving the additional expected funding. For donations, a nonprofit organization risks fundraising expenses. For government revenues, a nonprofit organization risks the expenses of complying with government standards (p-106). At this points, without existence of competent staff, supportive policies, internal systems to manage assets and financial, will the organization be

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.

Once the followers of a nonprofit organization realize that their CEO is unaware of finances, they might attempt to take advantage of the situation. This could allow embezzlers to go unnoticed. If followers see that the CEO is uninterested in accounting they might also take an attitude of indifference concerning accounting regulations. Establishing a culture of accountability is a key duty of a nonprofit CEO and by hiring a professional to help teach nonprofit accounting would help create a culture of accountability, and awareness around nonprofit accounting. Another way to ensure a nonprofit leader is a strong financial leader is by having an outside organization periodically audit a nonprofit’s records. Accurate record keeping can be a true indicator of a nonprofit organization’s leadership. If records are kept haphazardly the normal assumption would be the CEO is not providing strong leadership for the

A non-profit organization cannot be effectively managed if it is not effectively planned. One of the challenges facing non-profit organizations has been long range, strategic planning. Long range, strategic planning in the non-profit sector is essential to the success of an organization. Long range, strategic planning encompasses broad policy and direction setting, internal and external assessments, attention to key stakeholders, the identification of key issues, development of strategies to deal with each issue, decision making, action and the continuous monitoring of results. (Herman, The Jossey-Bass Handbook of Nonprofit Leadership and Management, 154) While it is important to deal with the short term planning and activities of non-profits, managers or directors must consider the future of their organizations. Successful planning should be comprehensive, integrating all areas of responsibility of an organization.

Financially healthy nonprofits use income-based, rather than budget-based spending which allows them to have income projections that are realistic and helps to determine realistic costs (Zietlow, Seidner, 2014). The most successful nonprofit should have an operating reserve to finance shortfalls and hopefully allows them to have a positive cash flow at the end of the year (Zietlow, Seidner, 2014). However, most nonprofit organizations fight to manage cash flow due to how income and the expenses often may occur at different times, so that there may not be enough cash to pay for the expenses as they become due and payable (Zietlow, Seidner, 2014).

Hence, financial management is vital for all types of organizations, profit making as well as non-profit making. In case of non-profit making organizations also the effectiveness and performance depends on their financial resources management. Financial Management = == ==