Financial management for nonprofit organizations: policies and practices
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| Main Authors: | , , |
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| Format: | Book |
| Language: | English |
| Published: |
Hoboken, N.J.
Wiley
2007
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| Subjects: | |
| Online Access: | Inhaltsverzeichnis |
| Item Description: | Rev. of: Financial management for nonprofit organizations / Jo Ann Hankin, Alan G. Seidner, John T. Zietlow. c1998. -- Includes index. |
| Physical Description: | XXVI, 590 S. |
| ISBN: | 0471741663 9780471741664 |
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MARC
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| 500 | |a Rev. of: Financial management for nonprofit organizations / Jo Ann Hankin, Alan G. Seidner, John T. Zietlow. c1998. -- Includes index. | ||
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Record in the Search Index
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| adam_text | CONTENTS
About the Authors xxi
Acknowledgments xxiii
Preface xxv
1 Understanding Nonprofit Organization Finances 1
1.1 Definition of Nonprofit Organizations 2
(a) 501 (c)(3) Corporations 3
(b) Bylaws and Articles of Incorporation 4
1.2 Characteristics of Nonprofit Organizations 6
(a) Organizational Mission 6
(b) Organizational Structure 7
1.3 Understanding the Language of the Nonprofit Organization 7
1.4 Financial Policies 8
1.5 Financial Practices 9
1.6 Primary Financial Objective 10
(a) Differences between Businesses and Donative Nonprofits 11
(i) Businesses Have a Numerical, Specific Objective:
Maximize Stock Price 11
(ii) Businesses Can Price Their Services and Then Use
Revenues to Gauge Their Marketing Success 11
(iii) Businesses Typically Know Who Their Customers and
Owners Are 11
(iv) The Typical Pattern of Cash Flows Often Differs,
Particularly for the Donative Nonprofit 12
(b) Survey Evidence on the Primary Financial Objective 12
(c) Financial Objective for Purely Financial Decisions 13
(d) Recommended Primary Financial Objective: Approximate
Liquidity Target 13
1.7 Conclusion 14
Appendix 1A The Lilly Study Findings 16
2 Liquidity Management 22
2.1 Introduction 22
(a) Importance of Liquidity 23
(b) Are Nonprofits Overly Risk Averse? 24
2.2 Donative Nonprofit Organizations 25
(a) Guidance from Finance Theory 26
(b) Evaluation of Finance Theory 26
V
vi Contents
2.3 Evidence on Liquidity Management in the Nonprofit Sector 26
(a) Liquidity Management in the Healthcare Sector 27
(b) Liquidity Management in Colleges and Universities 27
(c) Liquidity Management in Faith Based Donative Organizations 28
(i) Study Findings 28
(ii) Short Term Policies and Planning 28
(iii) Executing Liquidity Management 29
(iv) Controlling 29
(v) Primary Financial Objective: Lessons from the
Field Studies 30
2.4 Facets of Liquidity Management 30
(a) Layers of Liquidity 30
(b) Solvency 30
(c) Liquidity 30
(d) Financial Flexibility 31
2.5 Importance of Liquidity Management 31
(a) Institutional Factors 31
(i) Primary Financial Objective 31
(ii) Limited and Volatile Revenue Stream 32
(iii) Inability to Issue Stock to Raise Equity Capital 33
(iv) Time Restricted and Use Restricted Donations 33
(v) Operating Characteristics of Donative Nonprofits 33
(b) Managerial Philosophy Factors 34
(i) Major Reluctance to Earn Surpluses 34
(ii) Resistance to Engage in Short Term Borrowing 35
(iii) Insufficient Liquidity Monitoring, Management,
or Projection 35
(c) Liquidity Implications of Institutional and Managerial
Philosophy Factors 35
(d) Watchdog Agency Standards on Solvency and Liquidity 36
(i) BBB Wise Giving Alliance Standard 36
(ii) American Institute on Philanthropy Standard 37
(iii) Charity Navigator Standard 37
(iv) Philanthropic Research, Inc. Standard 38
(e) Assessment of Watchdog Standards 39
2.6 What Is the Appropriate Level of Liquidity? 40
(a) Establishing the Liquidity Position Based on Financial
Vulnerability 41
(b) Diagnostic Tools to Assist in Setting the Approximate
Liquidity Target 41
2.7 Conclusion 43
Contents vii
3 Managing Mission and Strategy 46
3.1 Value of Strategic Planning 47
3.2 What Is Strategic Planning? 47
3.3 What Are the Organization s Mission, Vision, and Goals/Objectives? 48
(a) Strategy and the Bottom Line 50
(b) What Are Strategic Decisions? 51
3.4 Strategic Management Process 52
(a) SWOT Analysis 53
(b) What Are Internal Strengths and Weaknesses? 54
(c) Using Environmental Scanning to Detect External
Opportunities and Threats 54
(d) Strategic Management Is an Ongoing Process 55
3.5 Implementing the Strategic Plan 55
(a) Three Steps in Implementation 55
(b) Cutback Strategies 55
3.6 Performance Management Systems 60
(a) Balanced Scorecard 60
(i) Balanced Scorecard 61
(ii) Financial Objectives and Measures/Metrics Useful for a
Balanced Scorecard 61
(b) Portfolio Approaches 64
(i) Generic Portfolio Modeling 65
(ii) Diagnosing the Services Portfolio 65
(iii) Financial Return and Financial Coverage Matrix 65
(iv) Three Dimensional Portfolio Model 66
(v) Organized Abandonment Grid® (Boschee) 67
3.7 Strategic Planning Practices: What Does the Evidence Show? 67
3.8 Conclusion 69
4 Managing Structure, Accountability, and Ethics 72
4.1 Financial Tools and Support Structure 72
(a) Elements of the Financial Structure 73
(i) Importance of Financial Structure 73
(ii) Development of Financial Structure 73
(iii) Financial Structure Soundness 74
(b) Internal Controls 74
(c) Financial Policy 74
(d) Financial Procedures 74
4.2 Organizational Structure and Governance 75
(a) Board of Trustees/Directors 75
(i) Choosing Trustees/Directors 77
(ii) Board Financial Responsibility and Liability 77
viii Contents
(b) Officers of the Nonprofit Organization 80
(i) President/Chair of the Board 80
(ii) Treasurer/Chief Financial Officer 81
(iii) Secretary 81
(c) Board Committees 81
(i) Finance Committee 82
(ii) Audit Committee 82
(iii) Investment Committee 83
(d) Executive Director/Chief Executive Officer 84
(e) Staff 85
(i) Program Managers 86
(ii) Marketing Director 86
(iii) Strategic Management/Long Range Planning 86
(f) Volunteers 87
(g) Independent Contractors 87
(h) Constituents 87
(i) Finance Function 87
(i) Chief Financial Officer 87
(ii) Treasurers Office and Controllers Office 91
(iii) Financial Function: Service Center or Profit Center? 95
(iv) How Can Finance and Accounting Activities Be Evaluated? 97
(j) Interface of CFO with CEO 97
(k) Interface of CFO with the Board 97
4.3 Accountability Structure 97
(a) Accountability Structure 97
(i) Definition 97
(ii) Purpose 97
(b) Establishing an Accountability Policy 98
(i) General Policy Statement 98
(ii) Core Principles 98
(iii) Interpretation of Policy 98
(c) Checklist for Assigning Responsibility 100
(d) Designing an Accountability Structure 101
(e) Monitoring an Accountability Structure 103
(i) Types of Reviews 104
(ii) Schedule of Reviews 104
4.4 Ethics 104
(a) Ethics Check 105
(b) Making Ethical Decisions 106
(c) Ethical Challenges Faced by Nonprofits 106
(d) An Effective Ethics and Compliance Program Goes Beyond a
Code of Ethics/Conduct 108
Contents ix
4.5 Structure, Accountability, and Ethics in Practice 110
4.6 Conclusion 111
Appendix 4A By Laws of the ABC Educational Foundation 116
Appendix 4B Summary of Responsibilities and Qualifications 130
5 Developing Financial Policies 136
5.1 Introduction 136
(a) What Is Policy? 136
(b) Why Are Policies Required? 137
(c) Complying with and Establishing Policy and Procedure 137
(d) Who Sets Policy? 139
(e) Where to Start? 140
5.2 Financial Policies 140
(a) Roles of Board, Board Treasurer, and CEO/ED 142
(b) Financial Policies: Prescriptive or Restrictive? 144
(c) Categories of Financial Policies 146
(d) Accountability and Regulatory Compliance Policies 147
(i) Accountability Policies 147
(ii) Regulatory Compliance Policies 147
(e) Financial and Financial Management Policies 151
(f) Data Integrity Policies 153
5.3 Putting Policies into Place 154
5.4 Establishing Procedures 155
5.5 Financial Policies and Procedures in Practice 156
5.6 Additional Resources 158
Appendix 5A Nonprofit Financial Policy Examples on the Internet 160
6 Understanding Accounting Basics and Financial Statements 162
6.1 Introduction 162
(a) Financial Statement Users and Uses 163
(b) What Do Donors Representatives Say? 165
(i) BBB Wise Giving Alliance Standards 165
(ii) ECFA Standards 165
(c) External and Internal Financial Statements 168
(d) Who Does the Accounting? 168
(i) In House versus Outsourced 168
(ii) Accounting Software 169
(e) Roles of the Controller and Treasurer 169
6.2 Accounting Basics 170
(a) Financial Standards and Standards Setters 170
(i) Financial Accounting Standards Board 170
(ii) Generally Accepted Accounting Principles 170
x Contents
(b) Fund Accounting versus Consolidation 171
(c) Cash Basis versus Accrual Basis Accounting 171
(d) Audit, Review, or Compilation? 171
6.3 Three Financial Statements 172
(a) Statement of Financial Position or Balance Sheet 172
(i) Assets 173
(ii) Liabilities 174
(iii) Net Assets 175
(iv) Financial Strength and Target Liquidity 176
(b) Statement of Activities or Statement of Net Revenues 176
(c) Statement of Cash Flows 180
(d) Financial Accounting Standards 116 and 117 182
(i) SFAS116 182
(ii) SFAS117 182
(e) What about the IRS Form 990 Tax Return? 183
(i) Who Files a 990 or 990 EZ? 183
(ii) Do 990s Have the Same Financial Statements as GAAP? 183
(iii) Problems with 990s 183
(iv) Continued Reliance on 990s by Users 185
(f) Healthcare and Human Service Agency Financial Statements 185
(g) Educational Institution Financial Statements 185
(h) Cautions for Financial Statement Interpretation 185
(i) Accounting Standards Issues 185
(ii) Cost Allocation Choice Issues 187
(iii) Comparison Data and Issues 188
6.4 The Audit and the Audit Committee 188
6.5 Financial Statement Users and Uses in Practice 189
6.6 Social Accounting 189
6.7 Additional Resources 189
(a) Sources for Nonprofit Accounting and Accounting Standards 189
(b) Source for Nonprofit Accounting Software Reviews 190
(c) Source for Nonprofit Accounting Firm Contacts 190
(d) Sources for Nonprofit Audit Committee Toolkit 190
(e) Sources for Social Accounting Information and Techniques 190
7 Developing Financial Reports and Ratios 193
7.1 Introduction 193
7.2 Major Differences from For Profit Business Reports 194
(a) Financial Results Are No Longer the Primary Focus in
Management Reports 194
(b) Primary Financial Objective Is Target Liquidity, Not Profit or
Shareholder Wealth 195
Contents xi
(c) Fewer External Users, with a Different Accountability Focus 196
(d) Different Funds and the (Temporarily or Permanently)
Restricted versus Unrestricted Net Asset Distinction 196
7.3 Objectives of Financial Reports 198
(a) Accurate and Timely Representation of Financial Situation 198
(b) Mission Attainment Supportive Role 198
(c) Evidence of Accountability 199
(d) Tool for Turnaround Management 201
(i) Church of the Brethren 201
(ii) Church of God Missionary Board 201
7.4 Reporting System Design 202
7.5 Major Reports 202
7.6 Internal Reports 203
(a) Annual 203
(b) Level 1: Budget Variance Analysis 204
(i) Operating Budget 204
(ii) Capital Budget 204
(iii) Cash Budget 204
(iv) Supplemental Report: Deferred Giving 204
(c) Level 2: Annual Financial Statements and Ratios 205
(i) Statements of Activity, Financial Position,
and Cash Flows 205
(ii) Financial Ratio Analysis 213
(d) Level 3: Fundraising Management and Evaluation 223
(i) Setting the Philosophy and Major Objective of
Fundraising 225
(ii) Plan and Then Schedule the Campaign Expenditures 225
(iii) Assist in the Midcampaign Evaluation and Redirection 226
(iv) Oversee Postcampaign Effectiveness and Efficiency
Ratio Analysis 226
(e) Level 4: Cash and Liquidity Analysis and Projection 227
(i) Monthly or Quarterly Reports 228
(ii) Daily or Flash Reports 228
7.7 External Reports 229
(a) Statements of Activity, Financial Position, and Cash Flows 229
(b) Form 990 and Other Public Reports 229
(i) Forms 990, 990 EZ, and 990 T 229
(ii) Donor Mailings and Publicly Available Reports 229
(iii) State Requirements 230
(iv) Granting Agency Reports 230
7.8 Conclusion 230
Appendix 7A Sample Ratio Calculations 236
xii Contents
Appendix 7B Additional Financial Ratios 238
Appendix 7C Credit Ratings Agencies and DOE Ratios 249
8 Developing Operating and Cash Budgets 252
8.1 Introduction 252
8.2 Overview of the Budgeting Process 253
8.3 Are Nonprofit Organizations Doing Their Budgeting Properly? 254
(a) Operating Budgets in Practice 255
(b) Cash Budgets in Practice 255
8.4 Developing and Improving Your Budgeting Process 255
(a) Preparation for Budgeting (Operations) 255
(i) Function of the Budget Director 256
(ii) Procedural Prerequisites 256
(b) Step 1: Establish a Budget Policy 257
(i) Purposes of a Budget 257
(ii) Uses of the Budget 258
(c) Budget Preparation Philosophy and Principles 259
(i) Budget Revisions 262
(ii) Interim Reports 262
(d) Step 2: Gather Archival Data 262
(e) Step 3: Assign or Begin Collection of Other Area Data Input
or Projections 263
8.5 Setting the Budgetary Amounts 263
(a) What Do I Need to Know about Forecasting? 263
(b) Revenues 265
(c) Expenses 265
(d) Extended Example of Actual Budget Development 266
(e) Budget Approval 271
(f) Budget Variance Reports and Responses 271
(i) Operating Budget 271
(ii) Capital Budget 273
(iii) Cash Budget 273
(g) Cautions 274
(i) Budget Ploys 274
(ii) What Hinders an Effective Budget System? 275
(iii) Is the Finalized Budget Consistent with Financial Targets
and Policies? 275
8.6 Budget Technique Refinements 275
(a) Nonfinancial Targets 275
(b) Flexible Budgeting 276
(c) Program Budgeting 278
Contents xiii
(d) Zero Based Budgeting 278
(e) Rolling Budgets 279
8.7 Cash Budget 280
(a) Uses of the Cash Budget 280
(b) Steps in Cash Budgeting 281
(c) Forecasting Your Cash Position 281
(i) Determine Cash Receipts 283
(ii) Determine Cash Disbursements 283
(iii) Put It All Together 284
(iv) Use the Cash Budget to Help Set Target Liquidity Level 284
8.8 Managing Off the Budget 286
(a) Budget Variance Analysis Revisited 286
(b) Cash Position 287
(c) Responses to Financial Difficulties 287
(d) Internal Measures 288
(e) External Measures 288
8.9 Conclusion 289
Appendix 8A Case Study: The Cash Crisis at the Children s Treatment
Center 291
Appendix 8B Case Study: Tricity Academy 298
9 Long Range Financial Planning and Capital Budgeting 301
9.1 Introduction 301
9.2 Planning for the Future 303
(a) Importance of Long Range Financial Planning 303
(b) CFO s Role in Financial Planning and Capital Budgeting 304
(c) Long Range Financial Planning Process 305
(d) Financial Planning Basics 306
(e) Develop a Financial Model 311
(f) Project and Reevaluate Target Liquidity 316
(i) Scenario Analysis and Sensitivity Analysis 319
(ii) Other Financial Goals and the Organization s Life Cycle 321
(iii) Based on Our Financial Policies and Structure, How Fast
Can We Crow? 322
9.3 Financial Evaluation of New and Existing Programs 325
(a) Simple Portfolio Analysis 327
(b) Advanced Portfolio Analysis 327
(c) Annual Necessary Investment 328
9.4 Capital Budgeting: Financial Evaluation of Projects that Arise from
Existing Programs 329
(a) Example 1: Net Present Value and Benefit Cost Ratio
Illustrated 329
xiv Contents
(i) Approaching a Capital Expenditure Analysis 329
(ii) Making the Capital Expenditure Decision 331
(b) Example 2: Equivalent Annual Cost Illustrated 332
(c) How to Manage the Total Capital Budget 334
(d) Capital Budget and Capital Rationing 334
(e) Rationing the Capital 335
9.5 Financial Evaluation of Mergers, Joint Ventures, and Strategic
Alliances 335
(a) Mergers and Acquisitions 335
(b) Motives for Mergers and Acquisitions 336
(i) Programmatic Synergy 336
(ii) Financial Synergy 336
(c) Partnerships, Joint Ventures, and Strategic Alliances 340
(d) Strategic Alliances 341
(i) Motives for Strategic Alliances 342
(ii) Financial Aspects of Strategic Alliances 343
(iii) Financial Projections of Mergers, Acquisitions, or
Joint Ventures 343
9.6 Financial Planning and Capital Budgeting in Practice 345
9.7 Conclusion 346
Appendix 9A Case Study: Kiawah Island Community Association 350
Appendix 9B Evaluating Social Enterprises 353
10 Managing Your Organization s Liabilities 356
10.1 Managing the Balance Sheet 357
(a) Balance Sheet Management: Benefits and Steps 358
(b) Determining Your Organization s Debt Capacity 361
10.2 Payables 362
10.3 Short Term Borrowing 363
10.4 Strategic Financing Plan 365
(a) Borrower s Strategic Financial Objectives 365
(b) Borrowing Requirements 366
10.5 Steps to Successful Borrowing 366
(a) Understanding Debt 367
(i) Risk Reward Trade Offs 367
(ii) Leverage 367
(b) Loan Approval Process 368
(i) Basic Preparation for a Loan Presentation 368
(ii) Reasons for Borrowing 368
(iii) Immediate Concerns of Lenders 369
(iv) Evaluating the Application 369
(v) How Lenders Are Repaid 369
Contents xv
(vi) Refinancing 370
(c) Alternative Sources of Short Term Funds 370
10.6 Matching Financial Sources to Strategic Objectives 371
10.7 Preparing the Financing Proposal 372
(a) Term Sheet 372
(b) Plan Overview 372
(c) Presentation Contents 372
10.8 Making the Presentation 373
(a) Importance of Questions 373
(b) Answering Objections 373
(c) Personalizing the Presentation 374
10.9 Other Factors in Borrowing/Lending Decisions 374
(a) Borrowing from the Bank 374
(i) Domestic Short Term Bank Loans 375
(ii) International Short Term Bank Loans 376
(b) Trends in Short Term Lending 377
10.10 Municipal and Taxable Bonds 378
(a) Municipal Bonds 378
(i) Selection of an Underwriting Firm 379
(ii) Preparation of Bond Documents 379
(iii) Municipal Bond Issuers and Purposes 381
(b) Taxable Bonds 382
(i) How Can My Organization Use Taxable Bonds? 382
(ii) Can I Also Get Short Term Financing through
Taxable Bonds? 383
(c) What Qualifies My Organization to Issue Bonds? 383
(d) What If My Organization Is Not Perceived as Creditworthy? 384
10.11 Leasing and Nontraditional Financing Sources 384
(a) The Leasing Process 384
(b) Leasing versus Borrowing 385
10.12 Developing a Debt and Hedging Policy 385
10.13 Liability Management in Practice 387
10.14 Conclusion 389
11 Cash Management and Banking Relations 392
11.1 Introduction 392
11.2 What Is Cash Management? 394
(a) Banking Environment 396
(b) Purchasing Bank Services 396
(c) Managing Bank Service Charges 402
11.3 Collection Systems: Managing and Accelerating Receipt
of Funds 403
xvi Contents
(a) Lockbox Processing 406
(b) Checklist of Collections Related Services and Activities 407
11.4 Disbursements 409
(a) Designing the Disbursement System 409
(b) Fraud and Internal Control in Disbursements 409
11.5 Structuring a Funds Management System 410
11.6 Monitoring Bank Balances and Transactions 410
(a) Balance Reporting and Transaction Initiation 411
(b) Account Reconciliation 411
11.7 Cash Forecasting 412
(a) Cash Scheduling 413
(b) Data Elements for Cash Flow Estimates 413
11.8 Short Term Borrowing 413
11.9 Short Term Investing 414
(a) Bank Sweep Accounts/Investment Services 415
(b) Institutional Money Market Funds 417
11.10 Benchmarking Treasury Functions 418
(a) Larger Organizations 418
(b) Smaller Organizations 419
11.11 Upgrading the Caliber of Treasury Professionals 419
11.12 Security and Risk Management Issues 421
(a) Types of Financial Risk 421
(b) Fraud 422
11.13 Trends in Treasury Management 422
(a) Reengineering 422
(b) Automation and Technology 423
(c) Tapping Service Provider Expertise 424
(d) Cash Management in Practice 424
Appendix 11A Nonprofit Organization Guide to Direct Payment 426
Appendix 11 B Direct Payment Case Study 429
12 Investment Policy and Guidelines 430
12.1 Investment Policy 430
(a) Short Term Investment Policy 431
(b) Long Term Investment Policy 432
12.2 Investment Guidelines 433
(a) Who Is Responsible for the Investing Program? 433
(b) Who Does the Investing? 434
(c) How Are Assets to Be Allocated? 434
(i) Investment Instruments 435
(ii) Fixed Income Instruments 436
Contents xvii
(iii) Equity Instruments 436
(iv) Alternative Investments 436
(v) Socially Responsible Investing 437
(d) How Is Performance Measured and Reported? 438
(i) Measurement 438
(ii) Reporting 439
(e) What Level of Risk Is to Be Assumed? 439
(i) Limitations on Maturity 439
(ii) Currency Denomination 440
(f) Review and Modification of the Investment Guidelines: Who
Is Responsible for What? 441
12.3 Checklist of Elements for Long Term Endowment Investment Pol¬
icy and Guidelines 441
12.4 Investment Policy Summary 441
Appendix 12A Sample of Short Term Investment Policy and Guidelines 444
Appendix 12B ABC Foundation Unendowed Short Term Investment
Pool Policy 447
Appendix 12C Short Term Investment Policy for HIJ Foundation 450
Appendix 12D Sample of Investment Policy Statement for the ABC
Foundation s Long Term Endowment Pool 452
Appendix 12E Definitions of Fixed Income Instruments 456
Appendix 12F Definitions of Equity Instruments 462
Appendix 12G Glossary 463
13 Information Technology and Knowledge Management 465
13.1 Introduction 465
13.2 How Much Technology and Which to Choose? 468
(a) What Types of Technology Tools Should I Consider? 468
(b) Are They Required? 470
(c) Do I Need Them? 470
(d) What Will They Do for Me? 470
(e) What Will They Not Do for Me? 471
(f) Can I Afford Them? 471
(g) What Changes Will They Introduce to My Organization? 472
(i) Example 1: Slow Integration 472
(ii) Example 2: Flawed Integration 473
13.3 Knowledge Management and Information Technology 473
(a) How Critical Is Data? 473
(b) Knowledge Management 474
(i) Is Yours a Learning Organization? 474
(ii) Steps Toward Building a Learning Culture 474
(iii) Managing Intellectual Capital 475
xviii Contents
13.4 Information Technology in Today s Nonprofits 475
(a) Electronic Commerce 475
(i) Doing Business Electronically 475
(ii) Your Organization s Web Site 475
(b) Spreadsheets and Beyond for Data and Decisions 475
(i) Spreadsheets 475
(ii) Data Warehouse 475
(iii) Bank/Financial Service Provider Online Services 475
(iv) Application Service Provider 476
(v) Treasury Workstation 477
(vi) Enterprise Resource Planning System 477
(c) Dedicated Software 477
(i) Dashboards 477
(ii) Fundraising Software 477
(iii) Purchasing, E Billing, and E Payment Software 478
(iv) Budgeting and Planning Software 478
(v) Human Resource Management Software 478
13.5 What Should I Know/Do before Investing in Technology Tools? 478
(a) Planning for Growth 479
(b) Outsourcing? 480
13.6 Software: Design Internally or Purchase? 480
13.7 Disclosure, the Law, and Security 480
(a) A Company Data Policy 480
(b) Security Issues and Trends 481
13.8 Needs Assessment and Analysis 482
(a) Assess 482
(b) Analyze 482
(i) Weighting Table Analysis 482
(ii) Return on Investment or Benefit Cost Analysis 484
(c) Critique 485
(d) Decide 485
(e) Implement: Getting People to Use The New Tool 485
13.9 Policies and Practices in Knowledge Management and Informa¬
tion Technology 485
Appendix 13A Glossary of Basic Technical Terms 490
Appendix 13B Framework for an Implementation Strategy 493
Appendix 13C Case Study: Using Technology to Improve Cash and
Treasury Management 495
14 Managing Risk, Legal Issues, and Human Resources 498
14.1 What Is Risk Management? 498
Contents xix
(a) Who Is Responsible for Managing Risk in the Nonprofit
Organization? 501
(i) Board Duties 501
(ii) Leadership Sets the Tone 502
(b) Communicate Risk Management Policy 502
14.2 Identifying Risk 502
14.3 Primary Financial Risk: Illiquidity 502
14.4 Legal Environment 504
(a) Sarbanes Oxley in the Nonprofit Sector 504
(b) Ethical Considerations 504
(c) Relevant Agency and Regulatory Rules 504
14.5 Safeguarding People 504
(a) Tools for Effective Human Resource Management 505
(i) Job Descriptions 505
(ii) Background Checks 506
(iii) Bonding 506
(b) Physical and Emotional Safety 506
(c) Protecting the Organization from Lawsuits and Grievances 507
(d) Dealing with Difficult or Problem Employees 507
(e) Grounds for Immediate Termination 508
(f) Compensation 509
(g) Personal Use of Organizational Resources 509
(h) Conflict of Interest 510
(i) Getting the Most Bang for Your Buck 510
(j) Staff and Volunteers—What Motivates Them? 510
(k) What Qualities Should Leadership Possess? 513
(i) Concern 513
(ii) Connectivity 513
14.6 Directors and Officers Liability 513
(a) Methods by Which Boards Can Protect Themselves 514
(b) Conflicts of Interest 514
(c) Executive Pay 515
(d) Duties of Care, Loyalty, and Obedience 515
14.7 Safeguarding Your Financial and Physical Assets 515
(a) Insurance 515
(b) Risk Retention versus Risk Transfer 516
(c) Internal Controls 517
(d) Fundraising 518
(i) Charitable Solicitations 518
(ii) Philosophy and Practice 518
(e) How to Begin the Financial Assessment Process 518
xx Contents
(i) Due Diligence—Compliance with Policies, Procedures,
and Guidelines 519
(ii) Solutions: To Reduce Risk and Stay Out of Court 519
(iii) Disaster Preparedness and Business Continuity Planning 520
14.8 Risk Management and Human Resource Management Practices 521
Appendix 14A Derivatives Checklist 524
Appendix 14B Case Study of Association s Foreign Exchange Risk
Management 529
15 Evaluating Your Policies and Progress 531
15.1 Introduction 531
15.2 Evaluation 533
15.3 Evaluating Your Decisions and Ethics 533
15.4 Evaluating Your Communications 538
15.5 Evaluating Your Mentoring and Supervisory Skills 538
15.6 Testing Your Supervisory and Managerial Skills 543
15.7 Evaluating the Strategic Nature of Your Role 543
15.8 Evaluating the Financial Health of Your Organization 547
(a) Importance and Definition of Financial Health 547
(b) Criteria for Measuring Your Financial Health 548
15.9 Evaluating Your Financial Policies in Five Key Areas 548
(a) Governance and Accountability 548
(b) Investments 550
(c) Fundraising 551
(d) Risk Management 552
(e) Human Resources 552
15.10 Evaluating Quality and Outcomes 553
15.11 Using External Consultants and Data Sources 554
15.12 Conclusion 555
Appendix 15A Moral Competency Inventory (MCI) 557
Index 569
|
| adam_txt |
CONTENTS
About the Authors xxi
Acknowledgments xxiii
Preface xxv
1 Understanding Nonprofit Organization Finances 1
1.1 Definition of Nonprofit Organizations 2
(a) 501 (c)(3) Corporations 3
(b) Bylaws and Articles of Incorporation 4
1.2 Characteristics of Nonprofit Organizations 6
(a) Organizational Mission 6
(b) Organizational Structure 7
1.3 Understanding the Language of the Nonprofit Organization 7
1.4 Financial Policies 8
1.5 Financial Practices 9
1.6 Primary Financial Objective 10
(a) Differences between Businesses and Donative Nonprofits 11
(i) Businesses Have a Numerical, Specific Objective:
Maximize Stock Price 11
(ii) Businesses Can Price Their Services and Then Use
Revenues to Gauge Their Marketing Success 11
(iii) Businesses Typically Know Who Their Customers and
Owners Are 11
(iv) The Typical Pattern of Cash Flows Often Differs,
Particularly for the Donative Nonprofit 12
(b) Survey Evidence on the Primary Financial Objective 12
(c) Financial Objective for Purely Financial Decisions 13
(d) Recommended Primary Financial Objective: Approximate
Liquidity Target 13
1.7 Conclusion 14
Appendix 1A The Lilly Study Findings 16
2 Liquidity Management 22
2.1 Introduction 22
(a) Importance of Liquidity 23
(b) Are Nonprofits Overly Risk Averse? 24
2.2 Donative Nonprofit Organizations 25
(a) Guidance from Finance Theory 26
(b) Evaluation of Finance Theory 26
V
vi Contents
2.3 Evidence on Liquidity Management in the Nonprofit Sector 26
(a) Liquidity Management in the Healthcare Sector 27
(b) Liquidity Management in Colleges and Universities 27
(c) Liquidity Management in Faith Based Donative Organizations 28
(i) Study Findings 28
(ii) Short Term Policies and Planning 28
(iii) Executing Liquidity Management 29
(iv) Controlling 29
(v) Primary Financial Objective: Lessons from the
Field Studies 30
2.4 Facets of Liquidity Management 30
(a) Layers of Liquidity 30
(b) Solvency 30
(c) Liquidity 30
(d) Financial Flexibility 31
2.5 Importance of Liquidity Management 31
(a) Institutional Factors 31
(i) Primary Financial Objective 31
(ii) Limited and Volatile Revenue Stream 32
(iii) Inability to Issue Stock to Raise Equity Capital 33
(iv) Time Restricted and Use Restricted Donations 33
(v) Operating Characteristics of Donative Nonprofits 33
(b) Managerial Philosophy Factors 34
(i) Major Reluctance to Earn Surpluses 34
(ii) Resistance to Engage in Short Term Borrowing 35
(iii) Insufficient Liquidity Monitoring, Management,
or Projection 35
(c) Liquidity Implications of Institutional and Managerial
Philosophy Factors 35
(d) Watchdog Agency Standards on Solvency and Liquidity 36
(i) BBB Wise Giving Alliance Standard 36
(ii) American Institute on Philanthropy Standard 37
(iii) Charity Navigator Standard 37
(iv) Philanthropic Research, Inc. Standard 38
(e) Assessment of Watchdog Standards 39
2.6 What Is the Appropriate Level of Liquidity? 40
(a) Establishing the Liquidity Position Based on Financial
Vulnerability 41
(b) Diagnostic Tools to Assist in Setting the Approximate
Liquidity Target 41
2.7 Conclusion 43
Contents vii
3 Managing Mission and Strategy 46
3.1 Value of Strategic Planning 47
3.2 What Is Strategic Planning? 47
3.3 What Are the Organization's Mission, Vision, and Goals/Objectives? 48
(a) Strategy and the "Bottom Line" 50
(b) What Are Strategic Decisions? 51
3.4 Strategic Management Process 52
(a) SWOT Analysis 53
(b) What Are Internal Strengths and Weaknesses? 54
(c) Using Environmental Scanning to Detect External
Opportunities and Threats 54
(d) Strategic Management Is an Ongoing Process 55
3.5 Implementing the Strategic Plan 55
(a) Three Steps in Implementation 55
(b) Cutback Strategies 55
3.6 Performance Management Systems 60
(a) Balanced Scorecard 60
(i) Balanced Scorecard 61
(ii) Financial Objectives and Measures/Metrics Useful for a
Balanced Scorecard 61
(b) Portfolio Approaches 64
(i) Generic Portfolio Modeling 65
(ii) Diagnosing the Services Portfolio 65
(iii) Financial Return and Financial Coverage Matrix 65
(iv) Three Dimensional Portfolio Model 66
(v) Organized Abandonment Grid® (Boschee) 67
3.7 Strategic Planning Practices: What Does the Evidence Show? 67
3.8 Conclusion 69
4 Managing Structure, Accountability, and Ethics 72
4.1 Financial Tools and Support Structure 72
(a) Elements of the Financial Structure 73
(i) Importance of Financial Structure 73
(ii) Development of Financial Structure 73
(iii) Financial Structure Soundness 74
(b) Internal Controls 74
(c) Financial Policy 74
(d) Financial Procedures 74
4.2 Organizational Structure and Governance 75
(a) Board of Trustees/Directors 75
(i) Choosing Trustees/Directors 77
(ii) Board Financial Responsibility and Liability 77
viii Contents
(b) Officers of the Nonprofit Organization 80
(i) President/Chair of the Board 80
(ii) Treasurer/Chief Financial Officer 81
(iii) Secretary 81
(c) Board Committees 81
(i) Finance Committee 82
(ii) Audit Committee 82
(iii) Investment Committee 83
(d) Executive Director/Chief Executive Officer 84
(e) Staff 85
(i) Program Managers 86
(ii) Marketing Director 86
(iii) Strategic Management/Long Range Planning 86
(f) Volunteers 87
(g) Independent Contractors 87
(h) Constituents 87
(i) Finance Function 87
(i) Chief Financial Officer 87
(ii) Treasurers Office and Controllers Office 91
(iii) Financial Function: Service Center or Profit Center? 95
(iv) How Can Finance and Accounting Activities Be Evaluated? 97
(j) Interface of CFO with CEO 97
(k) Interface of CFO with the Board 97
4.3 Accountability Structure 97
(a) Accountability Structure 97
(i) Definition 97
(ii) Purpose 97
(b) Establishing an Accountability Policy 98
(i) General Policy Statement 98
(ii) Core Principles 98
(iii) Interpretation of Policy 98
(c) Checklist for Assigning Responsibility 100
(d) Designing an Accountability Structure 101
(e) Monitoring an Accountability Structure 103
(i) Types of Reviews 104
(ii) Schedule of Reviews 104
4.4 Ethics 104
(a) Ethics Check 105
(b) Making Ethical Decisions 106
(c) Ethical Challenges Faced by Nonprofits 106
(d) An Effective Ethics and Compliance Program Goes Beyond a
Code of Ethics/Conduct 108
Contents ix
4.5 Structure, Accountability, and Ethics in Practice 110
4.6 Conclusion 111
Appendix 4A By Laws of the ABC Educational Foundation 116
Appendix 4B Summary of Responsibilities and Qualifications 130
5 Developing Financial Policies 136
5.1 Introduction 136
(a) What Is Policy? 136
(b) Why Are Policies Required? 137
(c) Complying with and Establishing Policy and Procedure 137
(d) Who Sets Policy? 139
(e) Where to Start? 140
5.2 Financial Policies 140
(a) Roles of Board, Board Treasurer, and CEO/ED 142
(b) Financial Policies: Prescriptive or Restrictive? 144
(c) Categories of Financial Policies 146
(d) Accountability and Regulatory Compliance Policies 147
(i) Accountability Policies 147
(ii) Regulatory Compliance Policies 147
(e) Financial and Financial Management Policies 151
(f) Data Integrity Policies 153
5.3 Putting Policies into Place 154
5.4 Establishing Procedures 155
5.5 Financial Policies and Procedures in Practice 156
5.6 Additional Resources 158
Appendix 5A Nonprofit Financial Policy Examples on the Internet 160
6 Understanding Accounting Basics and Financial Statements 162
6.1 Introduction 162
(a) Financial Statement Users and Uses 163
(b) What Do Donors' Representatives Say? 165
(i) BBB Wise Giving Alliance Standards 165
(ii) ECFA Standards 165
(c) External and Internal Financial Statements 168
(d) Who Does the Accounting? 168
(i) In House versus Outsourced 168
(ii) Accounting Software 169
(e) Roles of the Controller and Treasurer 169
6.2 Accounting Basics 170
(a) Financial Standards and Standards Setters 170
(i) Financial Accounting Standards Board 170
(ii) Generally Accepted Accounting Principles 170
x Contents
(b) Fund Accounting versus Consolidation 171
(c) Cash Basis versus Accrual Basis Accounting 171
(d) Audit, Review, or Compilation? 171
6.3 Three Financial Statements 172
(a) Statement of Financial Position or Balance Sheet 172
(i) Assets 173
(ii) Liabilities 174
(iii) Net Assets 175
(iv) Financial Strength and Target Liquidity 176
(b) Statement of Activities or Statement of Net Revenues 176
(c) Statement of Cash Flows 180
(d) Financial Accounting Standards 116 and 117 182
(i) SFAS116 182
(ii) SFAS117 182
(e) What about the IRS Form 990 Tax Return? 183
(i) Who Files a 990 or 990 EZ? 183
(ii) Do 990s Have the Same Financial Statements as GAAP? 183
(iii) Problems with 990s 183
(iv) Continued Reliance on 990s by Users 185
(f) Healthcare and Human Service Agency Financial Statements 185
(g) Educational Institution Financial Statements 185
(h) Cautions for Financial Statement Interpretation 185
(i) Accounting Standards Issues 185
(ii) Cost Allocation Choice Issues 187
(iii) Comparison Data and Issues 188
6.4 The Audit and the Audit Committee 188
6.5 Financial Statement Users and Uses in Practice 189
6.6 Social Accounting 189
6.7 Additional Resources 189
(a) Sources for Nonprofit Accounting and Accounting Standards 189
(b) Source for Nonprofit Accounting Software Reviews 190
(c) Source for Nonprofit Accounting Firm Contacts 190
(d) Sources for Nonprofit Audit Committee Toolkit 190
(e) Sources for Social Accounting Information and Techniques 190
7 Developing Financial Reports and Ratios 193
7.1 Introduction 193
7.2 Major Differences from For Profit Business Reports 194
(a) Financial Results Are No Longer the Primary Focus in
Management Reports 194
(b) Primary Financial Objective Is Target Liquidity, Not Profit or
Shareholder Wealth 195
Contents xi
(c) Fewer External Users, with a Different Accountability Focus 196
(d) Different Funds and the (Temporarily or Permanently)
Restricted versus Unrestricted Net Asset Distinction 196
7.3 Objectives of Financial Reports 198
(a) Accurate and Timely Representation of Financial Situation 198
(b) Mission Attainment Supportive Role 198
(c) Evidence of Accountability 199
(d) Tool for Turnaround Management 201
(i) Church of the Brethren 201
(ii) Church of God Missionary Board 201
7.4 Reporting System Design 202
7.5 Major Reports 202
7.6 Internal Reports 203
(a) Annual 203
(b) Level 1: Budget Variance Analysis 204
(i) Operating Budget 204
(ii) Capital Budget 204
(iii) Cash Budget 204
(iv) Supplemental Report: Deferred Giving 204
(c) Level 2: Annual Financial Statements and Ratios 205
(i) Statements of Activity, Financial Position,
and Cash Flows 205
(ii) Financial Ratio Analysis 213
(d) Level 3: Fundraising Management and Evaluation 223
(i) Setting the Philosophy and Major Objective of
Fundraising 225
(ii) Plan and Then Schedule the Campaign Expenditures 225
(iii) Assist in the Midcampaign Evaluation and Redirection 226
(iv) Oversee Postcampaign Effectiveness and Efficiency
Ratio Analysis 226
(e) Level 4: Cash and Liquidity Analysis and Projection 227
(i) Monthly or Quarterly Reports 228
(ii) Daily or Flash Reports 228
7.7 External Reports 229
(a) Statements of Activity, Financial Position, and Cash Flows 229
(b) Form 990 and Other Public Reports 229
(i) Forms 990, 990 EZ, and 990 T 229
(ii) Donor Mailings and "Publicly Available" Reports 229
(iii) State Requirements 230
(iv) Granting Agency Reports 230
7.8 Conclusion 230
Appendix 7A Sample Ratio Calculations 236
xii Contents
Appendix 7B Additional Financial Ratios 238
Appendix 7C Credit Ratings Agencies and DOE Ratios 249
8 Developing Operating and Cash Budgets 252
8.1 Introduction 252
8.2 Overview of the Budgeting Process 253
8.3 Are Nonprofit Organizations Doing Their Budgeting Properly? 254
(a) Operating Budgets in Practice 255
(b) Cash Budgets in Practice 255
8.4 Developing and Improving Your Budgeting Process 255
(a) Preparation for Budgeting (Operations) 255
(i) Function of the Budget Director 256
(ii) Procedural Prerequisites 256
(b) Step 1: Establish a Budget Policy 257
(i) Purposes of a Budget 257
(ii) Uses of the Budget 258
(c) Budget Preparation Philosophy and Principles 259
(i) Budget Revisions 262
(ii) Interim Reports 262
(d) Step 2: Gather Archival Data 262
(e) Step 3: Assign or Begin Collection of Other Area Data Input
or Projections 263
8.5 Setting the Budgetary Amounts 263
(a) What Do I Need to Know about Forecasting? 263
(b) Revenues 265
(c) Expenses 265
(d) Extended Example of Actual Budget Development 266
(e) Budget Approval 271
(f) Budget Variance Reports and Responses 271
(i) Operating Budget 271
(ii) Capital Budget 273
(iii) Cash Budget 273
(g) Cautions 274
(i) Budget Ploys 274
(ii) What Hinders an Effective Budget System? 275
(iii) Is the Finalized Budget Consistent with Financial Targets
and Policies? 275
8.6 Budget Technique Refinements 275
(a) Nonfinancial Targets 275
(b) Flexible Budgeting 276
(c) Program Budgeting 278
Contents xiii
(d) Zero Based Budgeting 278
(e) Rolling Budgets 279
8.7 Cash Budget 280
(a) Uses of the Cash Budget 280
(b) Steps in Cash Budgeting 281
(c) Forecasting Your Cash Position 281
(i) Determine Cash Receipts 283
(ii) Determine Cash Disbursements 283
(iii) Put It All Together 284
(iv) Use the Cash Budget to Help Set Target Liquidity Level 284
8.8 Managing Off the Budget 286
(a) Budget Variance Analysis Revisited 286
(b) Cash Position 287
(c) Responses to Financial Difficulties 287
(d) Internal Measures 288
(e) External Measures 288
8.9 Conclusion 289
Appendix 8A Case Study: The Cash Crisis at the Children's Treatment
Center 291
Appendix 8B Case Study: Tricity Academy 298
9 Long Range Financial Planning and Capital Budgeting 301
9.1 Introduction 301
9.2 Planning for the Future 303
(a) Importance of Long Range Financial Planning 303
(b) CFO's Role in Financial Planning and Capital Budgeting 304
(c) Long Range Financial Planning Process 305
(d) Financial Planning Basics 306
(e) Develop a Financial Model 311
(f) Project and Reevaluate Target Liquidity 316
(i) Scenario Analysis and Sensitivity Analysis 319
(ii) Other Financial Goals and the Organization's Life Cycle 321
(iii) Based on Our Financial Policies and Structure, How Fast
Can We Crow? 322
9.3 Financial Evaluation of New and Existing Programs 325
(a) Simple Portfolio Analysis 327
(b) Advanced Portfolio Analysis 327
(c) Annual Necessary Investment 328
9.4 Capital Budgeting: Financial Evaluation of Projects that Arise from
Existing Programs 329
(a) Example 1: Net Present Value and Benefit Cost Ratio
Illustrated 329
xiv Contents
(i) Approaching a Capital Expenditure Analysis 329
(ii) Making the Capital Expenditure Decision 331
(b) Example 2: Equivalent Annual Cost Illustrated 332
(c) How to Manage the Total Capital Budget 334
(d) Capital Budget and Capital Rationing 334
(e) Rationing the Capital 335
9.5 Financial Evaluation of Mergers, Joint Ventures, and Strategic
Alliances 335
(a) Mergers and Acquisitions 335
(b) Motives for Mergers and Acquisitions 336
(i) Programmatic Synergy 336
(ii) Financial Synergy 336
(c) Partnerships, Joint Ventures, and Strategic Alliances 340
(d) Strategic Alliances 341
(i) Motives for Strategic Alliances 342
(ii) Financial Aspects of Strategic Alliances 343
(iii) Financial Projections of Mergers, Acquisitions, or
Joint Ventures 343
9.6 Financial Planning and Capital Budgeting in Practice 345
9.7 Conclusion 346
Appendix 9A Case Study: Kiawah Island Community Association 350
Appendix 9B Evaluating Social Enterprises 353
10 Managing Your Organization's Liabilities 356
10.1 Managing the Balance Sheet 357
(a) Balance Sheet Management: Benefits and Steps 358
(b) Determining Your Organization's Debt Capacity 361
10.2 Payables 362
10.3 Short Term Borrowing 363
10.4 Strategic Financing Plan 365
(a) Borrower's Strategic Financial Objectives 365
(b) Borrowing Requirements 366
10.5 Steps to Successful Borrowing 366
(a) Understanding Debt 367
(i) Risk Reward Trade Offs 367
(ii) Leverage 367
(b) Loan Approval Process 368
(i) Basic Preparation for a Loan Presentation 368
(ii) Reasons for Borrowing 368
(iii) Immediate Concerns of Lenders 369
(iv) Evaluating the Application 369
(v) How Lenders Are Repaid 369
Contents xv
(vi) Refinancing 370
(c) Alternative Sources of Short Term Funds 370
10.6 Matching Financial Sources to Strategic Objectives 371
10.7 Preparing the Financing Proposal 372
(a) Term Sheet 372
(b) Plan Overview 372
(c) Presentation Contents 372
10.8 Making the Presentation 373
(a) Importance of Questions 373
(b) Answering Objections 373
(c) Personalizing the Presentation 374
10.9 Other Factors in Borrowing/Lending Decisions 374
(a) Borrowing from the Bank 374
(i) Domestic Short Term Bank Loans 375
(ii) International Short Term Bank Loans 376
(b) Trends in Short Term Lending 377
10.10 Municipal and Taxable Bonds 378
(a) Municipal Bonds 378
(i) Selection of an Underwriting Firm 379
(ii) Preparation of Bond Documents 379
(iii) Municipal Bond Issuers and Purposes 381
(b) Taxable Bonds 382
(i) How Can My Organization Use Taxable Bonds? 382
(ii) Can I Also Get Short Term Financing through
Taxable Bonds? 383
(c) What Qualifies My Organization to Issue Bonds? 383
(d) What If My Organization Is Not Perceived as Creditworthy? 384
10.11 Leasing and Nontraditional Financing Sources 384
(a) The Leasing Process 384
(b) Leasing versus Borrowing 385
10.12 Developing a Debt and Hedging Policy 385
10.13 Liability Management in Practice 387
10.14 Conclusion 389
11 Cash Management and Banking Relations 392
11.1 Introduction 392
11.2 What Is Cash Management? 394
(a) Banking Environment 396
(b) Purchasing Bank Services 396
(c) Managing Bank Service Charges 402
11.3 Collection Systems: Managing and Accelerating Receipt
of Funds 403
xvi Contents
(a) Lockbox Processing 406
(b) Checklist of Collections Related Services and Activities 407
11.4 Disbursements 409
(a) Designing the Disbursement System 409
(b) Fraud and Internal Control in Disbursements 409
11.5 Structuring a Funds Management System 410
11.6 Monitoring Bank Balances and Transactions 410
(a) Balance Reporting and Transaction Initiation 411
(b) Account Reconciliation 411
11.7 Cash Forecasting 412
(a) Cash Scheduling 413
(b) Data Elements for Cash Flow Estimates 413
11.8 Short Term Borrowing 413
11.9 Short Term Investing 414
(a) Bank Sweep Accounts/Investment Services 415
(b) Institutional Money Market Funds 417
11.10 Benchmarking Treasury Functions 418
(a) Larger Organizations 418
(b) Smaller Organizations 419
11.11 Upgrading the Caliber of Treasury Professionals 419
11.12 Security and Risk Management Issues 421
(a) Types of Financial Risk 421
(b) Fraud 422
11.13 Trends in Treasury Management 422
(a) Reengineering 422
(b) Automation and Technology 423
(c) Tapping Service Provider Expertise 424
(d) Cash Management in Practice 424
Appendix 11A Nonprofit Organization Guide to Direct Payment 426
Appendix 11 B Direct Payment Case Study 429
12 Investment Policy and Guidelines 430
12.1 Investment Policy 430
(a) Short Term Investment Policy 431
(b) Long Term Investment Policy 432
12.2 Investment Guidelines 433
(a) Who Is Responsible for the Investing Program? 433
(b) Who Does the Investing? 434
(c) How Are Assets to Be Allocated? 434
(i) Investment Instruments 435
(ii) Fixed Income Instruments 436
Contents xvii
(iii) Equity Instruments 436
(iv) Alternative Investments 436
(v) Socially Responsible Investing 437
(d) How Is Performance Measured and Reported? 438
(i) Measurement 438
(ii) Reporting 439
(e) What Level of Risk Is to Be Assumed? 439
(i) Limitations on Maturity 439
(ii) Currency Denomination 440
(f) Review and Modification of the Investment Guidelines: Who
Is Responsible for What? 441
12.3 Checklist of Elements for Long Term Endowment Investment Pol¬
icy and Guidelines 441
12.4 Investment Policy Summary 441
Appendix 12A Sample of Short Term Investment Policy and Guidelines 444
Appendix 12B ABC Foundation Unendowed Short Term Investment
Pool Policy 447
Appendix 12C Short Term Investment Policy for HIJ Foundation 450
Appendix 12D Sample of Investment Policy Statement for the ABC
Foundation's Long Term Endowment Pool 452
Appendix 12E Definitions of Fixed Income Instruments 456
Appendix 12F Definitions of Equity Instruments 462
Appendix 12G Glossary 463
13 Information Technology and Knowledge Management 465
13.1 Introduction 465
13.2 How Much Technology and Which to Choose? 468
(a) What Types of Technology Tools Should I Consider? 468
(b) Are They Required? 470
(c) Do I Need Them? 470
(d) What Will They Do for Me? 470
(e) What Will They Not Do for Me? 471
(f) Can I Afford Them? 471
(g) What Changes Will They Introduce to My Organization? 472
(i) Example 1: Slow Integration 472
(ii) Example 2: Flawed Integration 473
13.3 Knowledge Management and Information Technology 473
(a) How Critical Is Data? 473
(b) Knowledge Management 474
(i) Is Yours a Learning Organization? 474
(ii) Steps Toward Building a Learning Culture 474
(iii) Managing Intellectual Capital 475
xviii Contents
13.4 Information Technology in Today's Nonprofits 475
(a) Electronic Commerce 475
(i) Doing Business Electronically 475
(ii) Your Organization's Web Site 475
(b) Spreadsheets and Beyond for Data and Decisions 475
(i) Spreadsheets 475
(ii) Data Warehouse 475
(iii) Bank/Financial Service Provider Online Services 475
(iv) Application Service Provider 476
(v) Treasury Workstation 477
(vi) Enterprise Resource Planning System 477
(c) Dedicated Software 477
(i) Dashboards 477
(ii) Fundraising Software 477
(iii) Purchasing, E Billing, and E Payment Software 478
(iv) Budgeting and Planning Software 478
(v) Human Resource Management Software 478
13.5 What Should I Know/Do before Investing in Technology Tools? 478
(a) Planning for Growth 479
(b) Outsourcing? 480
13.6 Software: Design Internally or Purchase? 480
13.7 Disclosure, the Law, and Security 480
(a) A Company Data Policy 480
(b) Security Issues and Trends 481
13.8 Needs Assessment and Analysis 482
(a) Assess 482
(b) Analyze 482
(i) Weighting Table Analysis 482
(ii) Return on Investment or Benefit Cost Analysis 484
(c) Critique 485
(d) Decide 485
(e) Implement: Getting People to Use The New Tool 485
13.9 Policies and Practices in Knowledge Management and Informa¬
tion Technology 485
Appendix 13A Glossary of Basic Technical Terms 490
Appendix 13B Framework for an Implementation Strategy 493
Appendix 13C Case Study: Using Technology to Improve Cash and
Treasury Management 495
14 Managing Risk, Legal Issues, and Human Resources 498
14.1 What Is Risk Management? 498
Contents xix
(a) Who Is Responsible for Managing Risk in the Nonprofit
Organization? 501
(i) Board Duties 501
(ii) Leadership Sets the Tone 502
(b) Communicate Risk Management Policy 502
14.2 Identifying Risk 502
14.3 Primary Financial Risk: Illiquidity 502
14.4 Legal Environment 504
(a) Sarbanes Oxley in the Nonprofit Sector 504
(b) Ethical Considerations 504
(c) Relevant Agency and Regulatory Rules 504
14.5 Safeguarding People 504
(a) Tools for Effective Human Resource Management 505
(i) Job Descriptions 505
(ii) Background Checks 506
(iii) Bonding 506
(b) Physical and Emotional Safety 506
(c) Protecting the Organization from Lawsuits and Grievances 507
(d) Dealing with Difficult or Problem Employees 507
(e) Grounds for Immediate Termination 508
(f) Compensation 509
(g) Personal Use of Organizational Resources 509
(h) Conflict of Interest 510
(i) Getting the Most "Bang for Your Buck" 510
(j) Staff and Volunteers—What Motivates Them? 510
(k) What Qualities Should Leadership Possess? 513
(i) Concern 513
(ii) Connectivity 513
14.6 Directors'and Officers'Liability 513
(a) Methods by Which Boards Can Protect Themselves 514
(b) Conflicts of Interest 514
(c) Executive Pay 515
(d) Duties of Care, Loyalty, and Obedience 515
14.7 Safeguarding Your Financial and Physical Assets 515
(a) Insurance 515
(b) Risk Retention versus Risk Transfer 516
(c) Internal Controls 517
(d) Fundraising 518
(i) Charitable Solicitations 518
(ii) Philosophy and Practice 518
(e) How to Begin the Financial Assessment Process 518
xx Contents
(i) Due Diligence—Compliance with Policies, Procedures,
and Guidelines 519
(ii) Solutions: To Reduce Risk and Stay Out of Court 519
(iii) Disaster Preparedness and Business Continuity Planning 520
14.8 Risk Management and Human Resource Management Practices 521
Appendix 14A Derivatives Checklist 524
Appendix 14B Case Study of Association's Foreign Exchange Risk
Management 529
15 Evaluating Your Policies and Progress 531
15.1 Introduction 531
15.2 Evaluation 533
15.3 Evaluating Your Decisions and Ethics 533
15.4 Evaluating Your Communications 538
15.5 Evaluating Your Mentoring and Supervisory Skills 538
15.6 Testing Your Supervisory and Managerial Skills 543
15.7 Evaluating the Strategic Nature of Your Role 543
15.8 Evaluating the Financial Health of Your Organization 547
(a) Importance and Definition of Financial Health 547
(b) Criteria for Measuring Your Financial Health 548
15.9 Evaluating Your Financial Policies in Five Key Areas 548
(a) Governance and Accountability 548
(b) Investments 550
(c) Fundraising 551
(d) Risk Management 552
(e) Human Resources 552
15.10 Evaluating Quality and Outcomes 553
15.11 Using External Consultants and Data Sources 554
15.12 Conclusion 555
Appendix 15A Moral Competency Inventory (MCI) 557
Index 569 |
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| discipline_str_mv | Wirtschaftswissenschaften |
| format | Book |
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| id | DE-604.BV021791283 |
| illustrated | Not Illustrated |
| index_date | 2024-07-02T15:44:38Z |
| indexdate | 2024-07-09T20:44:42Z |
| institution | BVB |
| isbn | 0471741663 9780471741664 |
| language | English |
| lccn | 2006031245 |
| oai_aleph_id | oai:aleph.bib-bvb.de:BVB01-015003925 |
| oclc_num | 71812686 |
| open_access_boolean | |
| owner | DE-703 DE-M347 DE-2070s |
| owner_facet | DE-703 DE-M347 DE-2070s |
| physical | XXVI, 590 S. |
| publishDate | 2007 |
| publishDateSearch | 2007 |
| publishDateSort | 2007 |
| publisher | Wiley |
| record_format | marc |
| spelling | Zietlow, John T. Verfasser aut Financial management for nonprofit organizations policies and practices John Zietlow ; Jo Ann Hankin ; Alan Seidner Hoboken, N.J. Wiley 2007 XXVI, 590 S. txt rdacontent n rdamedia nc rdacarrier Rev. of: Financial management for nonprofit organizations / Jo Ann Hankin, Alan G. Seidner, John T. Zietlow. c1998. -- Includes index. Financieel management gtt Niet-commerciële organisaties gtt Nonprofit organizations Finance Management Finanzmanagement (DE-588)4139075-1 gnd rswk-swf Nonprofit-Bereich (DE-588)4115404-6 gnd rswk-swf Nonprofit-Bereich (DE-588)4115404-6 s Finanzmanagement (DE-588)4139075-1 s DE-604 Hankin, Jo Ann Verfasser aut Seidner, Alan G. Verfasser aut HBZ Datenaustausch application/pdf http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&local_base=BVB01&doc_number=015003925&sequence=000002&line_number=0001&func_code=DB_RECORDS&service_type=MEDIA Inhaltsverzeichnis |
| spellingShingle | Zietlow, John T. Hankin, Jo Ann Seidner, Alan G. Financial management for nonprofit organizations policies and practices Financieel management gtt Niet-commerciële organisaties gtt Nonprofit organizations Finance Management Finanzmanagement (DE-588)4139075-1 gnd Nonprofit-Bereich (DE-588)4115404-6 gnd |
| subject_GND | (DE-588)4139075-1 (DE-588)4115404-6 |
| title | Financial management for nonprofit organizations policies and practices |
| title_auth | Financial management for nonprofit organizations policies and practices |
| title_exact_search | Financial management for nonprofit organizations policies and practices |
| title_exact_search_txtP | Financial management for nonprofit organizations policies and practices |
| title_full | Financial management for nonprofit organizations policies and practices John Zietlow ; Jo Ann Hankin ; Alan Seidner |
| title_fullStr | Financial management for nonprofit organizations policies and practices John Zietlow ; Jo Ann Hankin ; Alan Seidner |
| title_full_unstemmed | Financial management for nonprofit organizations policies and practices John Zietlow ; Jo Ann Hankin ; Alan Seidner |
| title_short | Financial management for nonprofit organizations |
| title_sort | financial management for nonprofit organizations policies and practices |
| title_sub | policies and practices |
| topic | Financieel management gtt Niet-commerciële organisaties gtt Nonprofit organizations Finance Management Finanzmanagement (DE-588)4139075-1 gnd Nonprofit-Bereich (DE-588)4115404-6 gnd |
| topic_facet | Financieel management Niet-commerciële organisaties Nonprofit organizations Finance Management Finanzmanagement Nonprofit-Bereich |
| url | http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&local_base=BVB01&doc_number=015003925&sequence=000002&line_number=0001&func_code=DB_RECORDS&service_type=MEDIA |
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