Financial Management for Nonprofit Organizations – Policies and Practices

<p>About the Authors xxiii</p>
<p>Preface xxv</p>
<p>Acknowledgments xxix</p>
<p>1 Understanding Nonprofit Organization Finances 1</p>
<p>1.1 The Impact of the Great Recession 2</p>
<p>1.2 Definition of Nonprofit Organizations 3</p>
<p>1.3 Characteristics of Nonprofit Organizations 7</p>
<p>1.4 Understanding the Language of the Nonprofit Organization 9</p>
<p>1.5 Financial Policies 10</p>
<p>1.6 Financial Practices 11</p>
<p>1.7 Primary Financial Objective 12</p>
<p>1.8 Conclusion 17</p>
<p>2 Liquidity Management 29</p>
<p>2.1 Introduction 29</p>
<p>2.2 Noncommercial Nonprofit Organizations 34</p>
<p>2.3 Evidence on Liquidity Management in the Nonprofit Sector 37</p>
<p>2.4 Facets of Liquidity Management 40</p>
<p>2.5 Importance of Liquidity Management 42</p>
<p>2.6 What Is the Appropriate Level of Liquidity? 51</p>
<p>2.7 Conclusion 54</p>
<p>3 Managing Mission, Strategy, and Financial Leadership 59</p>
<p>3.1 Value of Strategic Planning 60</p>
<p>3.2 What Is Strategic Planning? 61</p>
<p>3.3 What Are the Organization s Mission, Vision, and Goals/Objectives? 61</p>
<p>3.4 Strategic Management Process 65</p>
<p>3.5 Implementing the Strategic Plan 73</p>
<p>3.6 Performance Management Systems 78</p>
<p>3.7 Strategic Planning Practices: What Does the Evidence Show? 88</p>
<p>3.8 Conclusion 89</p>
<p>4 Managing Structure, Accountability, and Ethics 93</p>
<p>4.1 Financial Tools and Support Structure 93</p>
<p>4.2 Organizational Structure and Governance 96</p>
<p>4.3 Accountability Structure 122</p>
<p>4.4 Ethics 129</p>
<p>4.5 Structure, Accountability, and Ethics in Practice 135</p>
<p>4.6 New Forms 137</p>
<p>4.7 Conclusion 138</p>
<p>5 Developing Financial Policies 165</p>
<p>5.1 Introduction 165</p>
<p>5.2 Financial Policies 176</p>
<p>5.3 Putting Policies into Place 189</p>
<p>5.4 Establishing Procedures 190</p>
<p>5.5 Financial Policies and Procedures in Practice 191</p>
<p>5.6 Additional Resources 193</p>
<p>6 Understanding Financial Accounting Basics and Financial Statements 201</p>
<p>6.1 Introduction 201</p>
<p>6.2 Financial Statement Users and Uses 202</p>
<p>6.3 Accounting Basics 210</p>
<p>6.4 Three Financial Statements 213</p>
<p>6.5 The Audit and the Audit Committee 235</p>
<p>6.6 Financial Statement Users and Uses in Practice 236</p>
<p>6.7 Social Accounting 237</p>
<p>6.8 Additional Resources 237</p>
<p>7 Developing Financial Reports and Ratios: Making Sense of the Numbers 257</p>
<p>7.1 Introduction 257</p>
<p>7.2 Major Differences From For–Profit Business Reports 258</p>
<p>7.3 Objectives of Financial Reports 263</p>
<p>7.4 Reporting System Design 267</p>
<p>7.5 Major Reports 268</p>
<p>7.6 Internal Reports 268</p>
<p>7.7 External Reports 304</p>
<p>7.8 Conclusion 306</p>
<p>8 Developing Operating and Cash Budgets 333</p>
<p>8.1 Introduction 333</p>
<p>8.2 Overview of the Budgeting Process 335</p>
<p>8.3 Are Nonprofit Organizations Doing Their Budgeting Properly? 336</p>
<p>8.4 Developing and Improving Your Budgeting Process 337</p>
<p>8.5 Setting the Budgetary Amounts 346</p>
<p>8.6 Budget Technique Refinements 357</p>
<p>8.7 Cash Budget 363</p>
<p>8.8 Managing off the Budget 367</p>
<p>8.9 Conclusion 372</p>
<p>9 Long–Range Financial Planning and Capital Budgeting 389</p>
<p>9.1 Introduction 389</p>
<p>9.2 Planning for the Future 391</p>
<p>9.3 Financial Evaluation of New and Existing Programs 415</p>
<p>9.4 Capital Budgeting: Financial Evaluation of Projects That Arise from Existing Programs 418</p>
<p>9.5 Financial Evaluation of Mergers, Joint Ventures, and Strategic Alliances 425</p>
<p>9.6 Financial Planning and Capital Budgeting in Practice 434</p>
<p>9.7 Conclusion 435</p>
<p>10 Managing Your Organization s Liabilities 447</p>
<p>10.1 Managing the Balance Sheet 448</p>
<p>10.2 Balance Sheet Management: Benefits and Steps 449</p>
<p>10.3 Payables 454</p>
<p>10.4 Short–Term Borrowing 455</p>
<p>10.5 Strategic Financing Plan 456</p>
<p>10.6 Steps to Successful Borrowing 458</p>
<p>10.7 Matching Financial Sources to Strategic Objectives 463</p>
<p>10.8 Preparing the Financing Proposal 464</p>
<p>10.9 Making the Presentation 465</p>
<p>10.10 Other Factors in Borrowing/Lending Decisions 466</p>
<p>10.11 Municipal and Taxable Bonds 470</p>
<p>10.12 Leasing and Nontraditional Financing Sources 477</p>
<p>10.13 Developing a Debt and Hedging Policy 479</p>
<p>10.14 Liability Management in Practice 481</p>
<p>10.15 Conclusion 484</p>
<p>11 Cash Management and Banking Relations 489</p>
<p>11.1 Introduction 489</p>
<p>11.2 What Is Cash Management? 492</p>
<p>11.3 Collection Systems: Managing and Accelerating Receipt of Funds 501</p>
<p>11.4 Disbursements 507</p>
<p>11.5 Structuring a Funds Management System 509</p>
<p>11.6 Monitoring Bank Balances and Transactions 509</p>
<p>11.7 Cash Forecasting 511</p>
<p>11.8 Short–Term Borrowing 512</p>
<p>11.9 Short–Term Investing 513</p>
<p>11.10 Benchmarking Treasury Functions 517</p>
<p>11.11 Upgrading the Caliber of Treasury Professionals 518</p>
<p>11.12 Security and Risk Management Issues 521</p>
<p>11.13 Trends in Treasury Management 522</p>
<p>12 Investment Policy and Guidelines 533</p>
<p>12.1 Investment Policy 533</p>
<p>12.2 Investment Guidelines 538</p>
<p>12.3 Checklist of Elements for Long–Term/Endowment Investment Policy and Guidelines 548</p>
<p>12.4 Investment Committee 550</p>
<p>12.5 Trends in Investment Management 551</p>
<p>12.6 Investment Policy Summary 553</p>
<p>13 Information Technology and Knowledge Management 587</p>
<p>13.1 Introduction 587</p>
<p>13.2 How Much Technology and Which to Choose? 591</p>
<p>13.3 Knowledge Management and Information Technology 596</p>
<p>13.4 Information Technology in Today s Nonprofits 597</p>
<p>13.5 What Should I Know/Do Before Investing in Technology Tools? 602</p>
<p>13.6 Software: Design Internally or Purchase? 604</p>
<p>13.7 Disclosure, the Law, and Security 604</p>
<p>13.8 Needs Assessment and Analysis 609</p>
<p>13.9 Policies and Practices in Knowledge Management and Information Technology 613</p>
<p>Notes 617</p>
<p>14 Managing Risk, Legal Issues, and Human Resources 629</p>
<p>14.1 What Is Risk Management? 629</p>
<p>14.2 Identifying Risk 635</p>
<p>14.3 Primary Financial Risk: Illiquidity 636</p>
<p>14.4 Legal Environment 637</p>
<p>14.5 Safeguarding People 639</p>
<p>14.6 Directors and Officers Liability 647</p>
<p>14.7 Safeguarding Your Financial and Physical Assets 649</p>
<p>14.8 Risk Management and Human Resource Management</p>
<p>15 Evaluating Your Policies and Progress 671</p>
<p>15.1 Introduction 671</p>
<p>15.2 Evaluation 673</p>
<p>15.3 Evaluating Your Decisions and Ethics 673</p>
<p>15.4 Evaluating Your Communications 679</p>
<p>15.5 Evaluating Your Mentoring and Supervisory Skills 683</p>
<p>15.6 Testing Your Supervisory and Managerial Skills 684</p>
<p>15.7 Evaluating the Strategic Nature of Your Role 684</p>
<p>15.8 Evaluating the Financial Health of Your Organization 689</p>
<p>15.9 Evaluating Your Financial Policies in Six Key Areas 691</p>
<p>15.10 Evaluating Quality and Outcomes 705</p>
<p>15.11 Using External Consultants and Data Sources 706</p>
<p>15.12 Conclusion 706</p>
<p>Notes 707</p>
<p>Index 711</p>