Nonprofit Accounting

More specifically, cash flow for example; for-profit organization stake holders would expect a steady cash flow and even mirror that flow as a sign of success. On the other hand, in a non-profit cash flow may not be as steady so financial management expectations would differ.

Anna Marie’s Alliance is classified under 501 (c) (3) classification of tax exempt status since it is an organization operated for philanthropic purposes. Stakeholders of nonprofit organizations that use not-for-profit financial statements include donors, grantors, members, lenders, consumers, and others who provide resources to the not-for-profit organizations (Reck, Lowensohn, & Wilson, 2013, p. 543). It is usual for some not-for-profit entities to use cash basis of accounting for internal

Other accounting literature, including GASB Concepts Statements; pronouncements in categories (a) through (d) of the hierarchy for nongovernmental entities when not specifically made applicable to state and local governments; FASB Concepts Statements; FASAB Statements, Interpretations, and Technical Bulletins, AICPA Issues Papers; International Accounting Standards Committee Statements, pronouncements of other professional associations or regulatory agencies; AICPA Technical Practice Aids; and accounting textbooks, handbooks, or articles.

Financial statements in for-profit health care organizations and in not for-profit care organizations are commonly called statements of, balance sheet reports, operations, changes in net assets, and cash flows (Zelman, McCue, Glick, & Thomas, p. 28-68, 2014).

In this week’s lesson we are looking at the importance of having a chart of accounts in our nonprofit business. At HOPE which is the business that I support. The main focus is to house and provide support to those who are homeless, mentally ill and may be struggling with dual issues. Because there is a need in a nonprofit to show measurements to determine success in each area. Charts are created for every service area the HOPE supports ( Margolis, S. (2014, 11).

I enjoyed reading Chapter 11 especially what the author writes on page 281 as it summarizes the importance of a message. It keys on the relevance of accessibility, accountability, education, interaction, and empowerment. I think that is the key element of fundraising. I also believe that from a theory to reality there are some gaps. Nonprofits are often under tremendous pressure to perform with very little resources. Some nonprofits can navigate the process successfully and grow, while others do not.

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.

Although the stating of the differences in expectations for stakeholders of a nonprofit vs. for profit organizations introduces the idea of differing methods to measure the effectiveness of either a nonprofit or a for profit organization, it should be suggested the author covers that area in more detail. For example, according to Kaplan, Sawhill and Williamson, as cited by Leipnitz (2014), "financial performance is not the primary objective of NPOs (nonprofit organizations), so financial measures alone are insufficient to measure their performance. (p. 166)" Financial statements, such as a statement of cash flows or income sheet, will be useless measurement tool for a nonprofit organization to gauge the level of effectiveness in carrying out its organizational goals. Within the same article, nonprofit organizations can use satisfaction barometer tools that measures the satisfactory levels of the stakeholders in regards to the nonprofit organization's performance: "The resulting information enables firms, industries, and economic sectors to evaluate, compare, and enhance their performance. That is they offer a basis for strategic decision

Stakeholders play a critical role in the management and decision-making process of an organization. An example of a stakeholder includes employees, managers, patients, vendors, suppliers, the community, creditors, customers and the government (Daft, 2013). Also, Daft (2013) says, “Stakeholders are groups “within or outside of the organization that has a stake in the organization’s performance” (p. 23). There are a few differences surrounding stakeholder expectations between non-profit and for-profit organizations. The differences in nonprofit organizations and for-profit business organizations are the direction of activities for the end goal (Daft, 2013). Although it is very difficult to measure the impact that a nonprofit has on society, community, or a particular group as opposed to evaluating an income statement from a for-pro-profit organization. The same level of attention should be paid to stakeholder for nonprofit organizations as stakeholders of for-profit organizations.

Nonprofit Chief Executive Officers are charged with providing leadership for the entire organization. This leadership is not limited to any one area of the nonprofit. The CEO is expected to provide mission, financial, and personal leadership for the workers employed or volunteering at a nonprofit organization. If a CEO is not an accounting professional the right move is often to hire a financial professional to serve on their staff (Bell & Schaffer,2005). Not only should this professional to do the accounting work they could also be expected to teach the CEO and other key leaders the basics around nonprofit accounting. This is not to imply a CEO can simply delegate financial management instead the CEO is responsible for the total leadership

“Hospitals can be non-profit, for-profit, and government-owned and/or operated” (Baker & Baker, 2006). There are different terms for each classification in how to report and handle the finances but the basics are the same for any type of business. Business finances require the following basic fundamentals: creating “budgets, understanding capital expenditure, loan acquisition, and financial fees” (Baker & Baker, 2006). Government owned and operated hospitals offer unprofitable services; which

Nonprofit organizations have several functions, and not each one is alike. Essential to all non-profit organizations are four functions: planning, budgeting, funding and management.

A nonprofit organization is an organization that does not distribute its surplus funds to owners or shareholders, but instead uses them to help pursue its goals. Therefore, people involved with NPO's do not make money for themselves. Any money made by an NPO in the U.S. can be viewed on the organization's 990 forms, which are required to be made available to public.

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).

Any company aim is to increase the profit for the share holders, receive dividend (distribution of profits) in order to invest again or issue shares (selling part of the capital, method mainly used by big business to avoid asking bank loans and have liquidity – cash flow), take bank loans, while non for profit organization aim, is not to gain profit or save money but to spend for social purposes, explaining how the money was spent. There are four main types of charities structure; Charitable incorporated organization, Charitable Company,