O'Reilly logo

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

Financial and Strategic Management for Nonprofit Organizations, Fourth Edition

Book Description

The highly acclaimed Financial and Strategic Management for Nonprofit Organizations provides an encyclopedic account of all the key financial, legal, and managerial issues facing nonprofit executives. This is today's definitive single-source text and reference for managing any nonprofit organization. Designed for both professional and graduate student readers, this work thoroughly addresses all key aspects of building managerial skill and promoting imagination and innovation in organizations across the nonprofit spectrum. Herrington J. Bryce presents every technique and concept in the context of today's public policies, leading practices, laws, norms, and expectations.

Herrington J. Bryce was a senior economist at the Urban Institute, a Brookings Economic Policy Fellow, a Fellow at the Institute of Politics at Harvard and a visiting professor in regional economics and planning at the Massachusetts Institute of Technology. He taught micro economic theory and public finance at Clark University in Worcester, Massachusetts, and was director of the program in legal and budget studies at the University College at the University of Maryland. He currently teaches courses at the College of William & Mary in nonprofits but mostly in corporate financial strategy and cost management—heavily reflected in this text. He has published extensively and has served on many state, local and federal government advisory committees. He has a PhD in economics from the Maxwell School at Syracuse University, and a CLU and ChFC from the American College.

Table of Contents

  1. Title Page
  2. Copyright
  3. Dedication
  4. Acknowledgements
  5. About the Author
  6. Contents
  7. Introduction: Teasing Your Managerial Imagination, Creativity and Resolve
  8. Part I: Why Us
    1. Chapter 1: The Foundations of Nonprofit Management as Asset Management
      1. The Hierarchy
      2. The Need for a Nonprofit Perspective
      3. The Core Tasks of Managing Nonprofit Organizations
      4. Secular Growth of the Nonprofit Sector
      5. A Varied Sector
      6. The Nonprofit as an Asset
      7. Isomorphic Forces and Organizational Identity
      8. The Mission as Contract, Source of Expectation, Confidence and Style
      9. The Public Policy Process as the Principal Action Space
      10. Organization-Specific Opportunities in the Action Space
      11. The Link: Ethics, Effectiveness and Efficiency in Performance
      12. Stewardship
      13. Keeping Track for Evaluation and Direction
      14. Cost as a Driver and as Object of Efficiency
      15. Insufficiency of Contributions
      16. Collaboration
      17. Social Entrepreneurship
      18. Disclosures as Functional Tools
      19. Disclosure as a Management Philosophy or Attitude
      20. The Role of the State
      21. Conflict of Interest and Transactions with Related Parties
      22. Nonprofits as Tax Payers and the Value of Exemption
      23. Summary and Preview
      24. Postscript to Perspectives
      25. Footnotes
    2. Chapter 2: Managing the Corporation, Its Powers, and Exemption
      1. The Nonprofit Corporation: Its Creation, Powers and Prohibitions on Management
      2. Specific Powers of the Nonprofit Corporation
      3. Specific Prohibitions
      4. How Does the Nonprofit Corporation Differ from a For-Profit Corporation
      5. Financial Advantages and Disadvantages of Exemption
      6. The Tax-Exempt Status: Its Privileges, Prohibitions, Responsibilities
      7. How is the Tax-Exempt Status Acquired First at the Federal Level
      8. How is Tax-Exempt Status Acquired on the State and Local Levels
      9. Factors That Threaten the Loss of Tax-Exempt Status Under 501(C)(3)
      10. Carrying Out a Dissolution
      11. Summary and Preview
      12. Footnotes
    3. Chapter 3: Managing the Nonprofit as a Public Corporation
      1. Forming the Publicly Supported Organization
      2. The Basic Requirements of 501(c)(3)s
      3. Privileges of Public Organizations
      4. The Public Charities: Section 509(a)(1) Organizations
      5. Proof of Public Support: 509(a)(1)
      6. Calculation of Public Financial Support: 509(a)(1)
      7. The Effect of Large Contributions on Public Support
      8. Unusually Large Gifts and Grants
      9. IRS Certification of Organization’s Tax-Exempt Status
      10. Fee-For-Service Organizations: 509(A)(2) Organizations
      11. Diversification and Preservation of Tax-Exempt Status
      12. Comparison if 509(A)(1) and (A)(2) Organizations
      13. Category One: Subordinate Corporations
      14. Category Two: Closely Cooperating Affiliates
      15. Summary and Preview
    4. Chapter 4: Managing the Nonprofit as a Private Corporation
      1. The Private Foundation—What It Is
      2. The 501(C)(3) That Is Not Private
      3. The Performance-Based Group
      4. The Formula-Based Group
      5. Private Nonoperating Foundations
      6. Restrictions on Expenditures, Economic Transactions, and Investment
      7. Disqualified Persons
      8. Private Operating Foundations
      9. The Income Test
      10. Asset, Endowment, and Support Tests
      11. Soliciting Private and Community Foundations
      12. Private Foundations
      13. Community Foundations
      14. The Affiliated or Supporting Organizations
      15. The Donor Advised Fund
      16. Private Foundations, Public Foundations, and Charitable Organizations In Canada
      17. Summary and Preview
    5. Chapter 5: Managing the Nonprofit as Instrument of Groups, Business, and Politics
      1. Powers of Associations
      2. Associations of Individuals
      3. Civic Leagues and Welfare Organizations
      4. Agricultural Associations
      5. Business Associations
      6. Common Interest of Business Associations
      7. Non-deductibility of Business Lobbying Expenses
      8. Examples of Missions of Business Associations
      9. PACs, SUPERPACs, and Political Organizations including Parties and Committees
      10. Federal Disclosures by Section 527 Organizations
      11. Social Clubs
      12. Fraternal Associations
      13. Cooperatives
      14. Religion
      15. Veterans
      16. Associations of Organizations
      17. Federations
      18. Affiliations
      19. Groups
      20. The Lodge System
      21. Holding Companies
      22. Common Trusts or Charitable Risk Pools
      23. Membership Powers, Duties, and Liabilities
      24. Stocks as Evidence of Membership
      25. Termination of Membership
      26. Political Involvement of Nonprofit Organizations
      27. Advantage of 501(c)(4) as a Political Vehicle
      28. State Example of Trying to Reign-in the 501(c)(4)
      29. The Feds and 501(c)(4)
      30. Citizens United v. Federal Election Commission as Decided January 21, 2010
      31. Non-partisan civic related actions of 501(c)(3)
      32. Summary and Preview
      33. Footnotes
    6. Chapter 6: The Governing Body: Trustees and Directors
      1. Public Interest in the Boards of Nonprofits
      2. A Functioning Board I
      3. A Functioning Board II
      4. Size and Composition of the Board
      5. Independent Members of the Board
      6. Public Officials as Trustees
      7. Organization of The Board into Committees
      8. Interlocking Directorates
      9. Term of Service on The Board
      10. Qualification and Removal of Trustees
      11. Transactions and Trustees
      12. Prohibition by Trustee Classification
      13. Dealing with Possibilities of Conflicts of Interests
      14. States and Trustee Conflict of Interest
      15. A Five-Part Conflict of Interest Policy
      16. Three General Standards of Action of Trustees
      17. Emergency and Appointive Powers of Trustees
      18. Instituting Procedures for Complaints and Corruption
      19. Duty of Organizations to Trustees and Their Rights
      20. Economic Transactions and The Trustees
      21. Bankruptcy and The Trustees
      22. Limitations on Trustee Indemnification
      23. Annual Disclosures of Involvement of Current and Past Trustees and Senior Management
      24. Summary and Preview
      25. Footnotes
  9. Part II: We Need to Raise Money
    1. Chapter 7: Stimulating Gifts and Contributions: Crafting The Appeal
      1. Individual and Corporate Motives for Giving
      2. Why People Give: New Findings
      3. Why Corporations Give
      4. Why Corporations May Say No
      5. Dangers in Receiving Gifts
      6. Type of Gift and Precaution
      7. Government Promotion of Giving
      8. Payroll Deduction
      9. Tax Deduction and Credit
      10. The Importance of Tax Deductibility of Contributions
      11. Tax Deductibility: Three Cases
      12. Required Characteristics of a Tax-Deductible Gift
      13. Borrowing to Make A Donation
      14. Problems of Accepting Gifts Subject to Debt
      15. Value of Gifts of Present Interests
      16. Gifts of Stocks: Perspectives of Donor And Donee
      17. Reporting Requirements and IRS Vigilance
      18. Limits On Giving
      19. Problems and Strategies of Large Gifts
      20. Mix Strategies
      21. Soliciting Disclosure: Charitable Fundraising 501(C)(3)
      22. Summary and Preview
      23. Footnotes
    2. Chapter 8: Deferred Giving: The Risk/Reward and Virtue of Patience
      1. The Uses of Trusts: Deferred, Extended Benefits, and Cash Flow
      2. Trusts as Charitable Organizations
      3. The Law and The Management of Trust Funds
      4. The Performance of Charitable Remainder Annuity Trusts
      5. Types of Charitable Remainder Trusts
      6. Charitable Lead Trusts
      7. Examples of The Application of Trust Concepts
      8. An Advanced Application of A Remainder Unitrust
      9. An Advanced Application of a Charitable Lead Trust
      10. The Uses of Wills: Gifts Deferred Until Death
      11. Life Insurance: Magnifying The Value of Small Gifts
      12. Death and the Collection of Gift
      13. Ownership
      14. Form of Gift
      15. Types of Policies
      16. Comparing Characteristics of Contracts
      17. Role of Insurance In Fund-Raising Strategy
      18. Annuities: Providing Income Flows
      19. Steps for Determining Deferred Giving Instruments
      20. Endowments: Perpetuating a Gift
      21. The Law and The Investment of Endowment and Other Institutional Funds
      22. Four Essential Steps For An Endowment
      23. Valuation of Future Gifts
      24. Summary and Preview
      25. Footnotes
    3. Chapter 9: Entrepreneurial Revenues Generated by Mission
      1. What Is Business Income
      2. Sources of Business Income Opportunities
      3. Compatibility of Charity and Profits
      4. Now That You Know the Organization Can, Should It and How?
      5. How Will the Investment Affect the Tax-Exempt Status?
      6. How Suitable Is the Level of Entrepreneurship for This Organization?
      7. How to Acquire a Business
      8. Should the Business Be Related or Unrelated?
      9. Should the Business Be Separately Incorporated?
      10. Where Does the Money Come From To Acquire The Business?
      11. Is the Business Profitable?
      12. Is Profitability Enough?
      13. Can the Business Be Made Profitable?
      14. What Will the Investment Cost?
      15. From A Financial Perspective, Is the Investment Worth It?
      16. Do the Benefits Exceed the Costs?
      17. When Will The Organization Recapture Its Investment?
      18. What Are the Risks?
      19. What Will It Take to Break Even?
      20. What Can Be Done with The Earnings of The Business?
      21. How Will Entry into the Business Be Made?
      22. Is the Business Understood and Reflected in A Viable Plan Including When to Exit, Shift Gears, and How to Operate?
      23. Is A Collaboration Appropriate for This Venture or Organization?
      24. Is There Competition? Is It Fair?
      25. What Do the Trustees Think of the Plan?
      26. Ethical Dilemma of Business Competition
      27. Summary and Preview
      28. Footnotes
    4. Chapter 10: Entrepreneurial Revenues Unrelated to Mission
      1. Definition of Related and Unrelated Nonprofit Businesses
      2. Excess Profits: A Distinction Between Related and Unrelated Income
      3. Integration of Business Operations into A Conglomerate Structure
      4. The Organization of an Unrelated Business
      5. Benefits, Consequences, and Opportunities of Unrelated Businesses
      6. Consequences of Unrelated Businesses
      7. Benign Origins of Unrelated Businesses
      8. Unrelated Business for Cost-Sharing Purposes
      9. Tax Treatment of Different Types of Business Income
      10. Sources of Unrelated Business Income: A Simplified View
      11. Ten Questions to Judge Whether Business Will Be Unrelated
      12. The Federal Tax
      13. Other Costs of Unrelated Business Income
      14. Key Points on Entrepreneurial Income in Nonprofits
      15. Summary and Preview
  10. Part III: Marketing the Good and Bad News: Convincing
    1. Chapter 11: Marketing and Solicitation Guidance
      1. Solicitation
      2. The Solicitors for Charitable Purposes (Fundraisers)
      3. Federal Solicitation Rules for Charitable Purposes
      4. The Choice of Fundraising Contractor
      5. Non-Charitable Solicitation
      6. Commercial Marketing
      7. Choosing an Object of Marketing
      8. Choosing A Target
      9. Targeting by Income Levels
      10. Specific Risk Exposures of Nonprofits In Commercial Marketing
      11. The Importance of A Trustee Policy
      12. Charitable Solicitation: Massachusetts And Others
      13. Summary and Preview
      14. Footnotes
    2. Chapter 12: Restoring Trust: A Use of Relationship Marketing
      1. First, What Is Trust?
      2. Contracting
      3. The Distinction between Unrestricted and Restricted Donations as Trust Transactions
      4. A Conundrum and Constraints On Restoring The Public Trust
      5. A Guide to Managing The Public Trust
      6. Summary
      7. Footnotes
  11. Part IV: The Inescapable Risks and Costs
    1. Chapter 13: Corruption
      1. Types and Effects of Corruption in Nonprofit Organizations
      2. Sources and Opportunities for Corruption
      3. Managing the Risks of Corruption and Fraud
      4. Controls: A Transaction Approach
      5. Intelligence: Information and The Protection of Sources and Records
      6. The Internal Audit and Required Disclosures
      7. Summary and Review
      8. Footnotes
    2. Chapter 14: Negligence, Discrimination, Harassment and Abuse
      1. The Basics of Risk Management
      2. A Simplified Approach to Risk Identification and Intervention
      3. Types of Risks
      4. Protecting Against Liability of Independent Contractors
      5. Coverage: Shields Can Be Penetrated
      6. Discrimination Against the Disabled
      7. Summary and Preview
    3. Chapter 15: Compensation and Employee Benefits
      1. Excess Executive Compensation
      2. Key Employees and Reasonable Compensation
      3. Accidental Death and Dismemberment
      4. The Affordable Care Act and Nonprofits
      5. The Traditional Medical and Hospitalization Insurance Plans
      6. Health Maintenance Organizations
      7. COBRA
      8. Pensions
      9. Rabbi Trust
      10. SIMPLE Ira or 401(K)
      11. Cafeteria Plans
      12. Profit-Sharing Plan
      13. Fringe Benefits
      14. Discrimination in Medical Benefits
      15. To Discriminate or Not
      16. Ten Steps to Setting Up the Benefit Package
      17. Independent Contractors and Social Security
      18. Summary and Preview
    4. Chapter 16: Budgets: Controlling Costs and Sending a Message
      1. The Budget as A Management Tool
      2. The Budget as A Sum Of Parts
      3. The Budget as Contemporary History
      4. Capital and Operating Budgets
      5. Budgets as Baseline
      6. Budgets as Fiction
      7. Principles Underlying Budgets
      8. Zero-Based Budgeting and PPBS
      9. Efficiency: Costs and Support
      10. The Importance of Distinguishing Between Cash (Expenditures) and Costs In Budgeting
      11. Classification and Treatment of Costs in Budgeting
      12. Unallowable Indirect Costs
      13. Capital, Operating, and Replacement Costs and Expenses
      14. Costs and Responsibility Centers
      15. Ten Steps to Cost Budgeting
      16. How to Estimate Costs Simply
      17. Key to Controlling Costs
      18. Leasing as A Fixed-Cost Strategy
      19. Outsourcing as A Cost Strategy
      20. Support and Revenues
      21. Allocating Dollars Across Programs
      22. Permanent Revenues and Fixed Costs
      23. Forecasting
      24. Illustration: Costs and Revenues and Their Relationship to the Budget
      25. Budgeting by Scenario
      26. Discretionary Forecasting and Budgeting
      27. Budget Formats: Form Follows Function
      28. Combinations of Program and Item Budgets
      29. Variances
      30. A Recommended Format for Using the Budget As a Control Tool
      31. A Budget Format for The Board
      32. Summary and Preview
  12. Part V: Financial Performance Future and Prolog
    1. Chapter 17: The Financial Performance and the Strength to Continue
      1. Financial Statements as An Aid to Management
      2. The Balance Sheet or Statement of Financial Position
      3. Accounting for Financial Assets and Liabilities on the Balance Sheet
      4. Statement of Support, Revenues, and Expenses or Statement of Activities
      5. Comparative Statement of Activities
      6. Statement of Changes In Financial Position
      7. Statement of Cash Flow
      8. Funds: A Managerial Accounting Perspective
      9. Illustration of Managerial Use of Financial Statements
      10. How Much Do Financial Statements Tell?
      11. Summary and Preview
    2. Chapter 18: Evaluating Old Targets and Setting New Ones
      1. Questions for Evaluating Old Targets
      2. Risks Inherent in Target Setting and in Target Achievement
      3. The Treasurer’s Report as A Source of Intelligence for Setting Financial Targets
      4. Cash Management and Investment Strategies: Increasing Cash
      5. Borrowing as A Source of Cash
      6. Short-Term Borrowing
      7. Uses of Cash
      8. Summary and Preview
  13. Part VI: Steady Growth
    1. Chapter 19: Growth: The Search for Opportunities and Alliances
      1. Issues to Guide Growth Considerations
      2. Collaboration
      3. Summary and Preview
      4. Footnotes
    2. Chapter 20: Organic Growth by Program Expansion
      1. Strategic Stations for Program Choice
      2. Strategic Options: Profits Versus Mission
      3. Summary And Review
    3. Chapter 21: Growth by Accretive Action and Dissolution
      1. The Importance of Structure
      2. A Holding Company and Its System
      3. Principles behind Corporate Organizations
      4. Pitfalls of Reorganizing a Nonprofit in any Way
      5. Antitrust
      6. States in Reorganizations
      7. Types of Reorganization
      8. Summary and Conclusion
  14. Appendix A
  15. Appendix B: National Taxonomy of Tax-Exempt Entities —Core Codes
  16. Appendix C: Mathematics of Lobbying Expenditures
    1. Lobbying expenditures limits
  17. Appendix D: Sample Conflicts of Interest Policy (Revised 5/22/97)
    1. Article I: Purpose
    2. Article II: Definitions
    3. Article III: Procedures
    4. Article IV: Records Of Proceedings
    5. Article V: Compensation Committees
    6. Article VI: Annual Statements
    7. Article VII: Periodic Reviews
    8. Article VIII: Use of Outside Experts
  18. Appendix E: New York State
    1. Conflict of Interest Policy: Minimum Statutory Requirements
  19. Appendix F: Breakeven Point
  20. Appendix G: Key Concepts in Federal Contracting and Glossary of Common Financial Terms Found in Such Contracts
    1. Key Concepts in Federal Contract Management
  21. Appendix H: Risks of Cost Denial
  22. Index