Financial Management for Nonprofit Organizations, 3rd Edition

Financial Management for Nonprofit Organizations, 3rd Edition

by John Zietlow, Jo Ann Hankin, Alan Seidner, Tim O'Brien
Released April 2018
Publisher(s): Wiley
ISBN: 9781119382560

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Book description

Essential tools and guidance for effective nonprofit financial management

Financial Management for Nonprofit Organizations provides students, professionals, and board members with a comprehensive reference for the field. Identifying key objectives and exploring current practices, this book offers practical guidance on all major aspects of nonprofit financial management. As nonprofit organizations fall under ever-increasing scrutiny and accountability, this book provides the essential knowledge and tools professional need to maintain a strong financial management system while serving the organization’s stated mission. Financial management, cash flow, and financial sustainability are perennial issues, and this book highlights the concepts, skills, and tools that help organizations address those issues. Clear guidance on analytics, reporting, investing, risk management, and more comprise a singular reference that nonprofit finance and accounting professionals and board members should keep within arm’s reach.

Updated to reflect the post-recession reality and outlook for nonprofits, this new edition includes new examples, expanded tax-exempt financing material, and recession analysis that informs strategy going forward.

  • Articulate the proper primary financial objective, target liquidity, and how it ensures financial health and sustainability
  • Understand nonprofit financial practices, processes, and objectives
  • Manage your organization’s resources in the context of its mission
  • Delve into smart investing and risk management best practices
  • Manage liquidity, reporting, cash and operating budgets, debt and other liabilities, IP, legal risk, internal controls and more
  • Craft appropriate financial policies

Although the U.S. economy has recovered, recovery has not addressed the systemic and perpetual funding challenges nonprofits face year after year. Despite positive indicators, many organizations remain hampered by pursuit of the wrong primary financial objective, insufficient funding and a lack of investment in long-term sustainability; in this climate, financial managers must stay up-to-date with the latest tools, practices, and regulations in order to serve their organization’s interests. Financial Management for Nonprofit Organizations provides clear, in-depth reference and strategy for navigating the expanding financial management function.  

Table of contents

  1. COVER
  2. TITLE PAGE
  3. ABOUT THE AUTHORS
  4. PREFACE
  5. ACKNOWLEDGMENTS
  6. CHAPTER 1: UNDERSTANDING NONPROFIT ORGANIZATION FINANCES
    1. 1.1 THE IMPACT OF THE GREAT RECESSION
    2. 1.2 DEFINITION OF NONPROFIT ORGANIZATIONS
    3. 1.3 CHARACTERISTICS OF NONPROFIT ORGANIZATIONS
    4. 1.4 UNDERSTANDING THE LANGUAGE OF THE NONPROFIT ORGANIZATION
    5. 1.5 FINANCIAL POLICIES
    6. 1.6 FINANCIAL PRACTICES
    7. 1.7 PRIMARY FINANCIAL OBJECTIVE
    8. 1.8 CONCLUSION
    9. NOTES
    10. APPENDIX 1A: THE LILLY STUDY FINDINGS
      1. THE LILLY STUDY
      2. MANAGEMENT AND FINANCIAL OBJECTIVES
      3. ON-SITE INTERVIEWS, QUESTIONNAIRES, AND ARCHIVAL STUDIES
      4. THE APPROPRIATE LIQUIDITY TARGET MODEL
      5. NOTE
  7. CHAPTER 2: LIQUIDITY MANAGEMENT
    1. 2.1 INTRODUCTION
    2. 2.2 NONCOMMERCIAL NONPROFIT ORGANIZATIONS
    3. 2.3 EVIDENCE ON LIQUIDITY MANAGEMENT IN THE NONPROFIT SECTOR
    4. 2.4 FACETS OF LIQUIDITY MANAGEMENT
    5. 2.5 IMPORTANCE OF LIQUIDITY MANAGEMENT
    6. 2.6 WHAT IS THE APPROPRIATE LEVEL OF LIQUIDITY?
    7. 2.7 CONCLUSION
    8. NOTES
  8. CHAPTER 3: MANAGING MISSION, STRATEGY, AND FINANCIAL LEADERSHIP
    1. 3.1 VALUE OF STRATEGIC PLANNING
    2. 3.2 WHAT IS STRATEGIC PLANNING?
    3. 3.3 WHAT ARE THE ORGANIZATION'S MISSION, VISION, AND GOALS/OBJECTIVES?
    4. 3.4 STRATEGIC MANAGEMENT PROCESS
    5. 3.5 IMPLEMENTING THE STRATEGIC PLAN
    6. 3.6 PERFORMANCE MANAGEMENT SYSTEMS
    7. 3.7 STRATEGIC PLANNING PRACTICES: WHAT DOES THE EVIDENCE SHOW?
    8. 3.8 CONCLUSION
    9. NOTES
  9. CHAPTER 4: MANAGING STRUCTURE, ACCOUNTABILITY, AND ETHICS
    1. 4.1 FINANCIAL TOOLS AND SUPPORT STRUCTURE
    2. 4.2 ORGANIZATIONAL STRUCTURE AND GOVERNANCE
    3. 4.3 ACCOUNTABILITY STRUCTURE
    4. 4.4 ETHICS
    5. 4.5 STRUCTURE, ACCOUNTABILITY, AND ETHICS IN PRACTICE
    6. 4.6 NEW FORMS
    7. 4.7 CONCLUSION
    8. NOTES
    9. APPENDIX 4A: BY-LAWS OF THE ABC EDUCATIONAL FOUNDATION – A CALIFORNIA NONPROFIT PUBLIC BENEFIT CORPORATION
      1. ARTICLE I. NAME
      2. ARTICLE II. OFFICES
      3. ARTICLE III. PURPOSES AND POWERS
      4. ARTICLE IV. MEMBERSHIP CORPORATION
      5. ARTICLE V. TRUSTEES
      6. ARTICLE VI. STANDING BOARDS OF THE FOUNDATION
      7. ARTICLE VII. OFFICERS
      8. ARTICLE VIII. PROCEDURES
      9. ARTICLE IX: MISCELLANEOUS
      10. ARTICLE X. AMENDMENTS TO BY-LAWS
      11. NOTES
    10. APPENDIX 4B: SUMMARY OF TRUSTEE RESPONSIBILITIES AND QUALIFICATIONS
      1. BOARD OF TRUSTEES
      2. BOARD CHAIR
      3. EXECUTIVE DIRECTOR/CHIEF EXECUTIVE OFFICER
      4. TREASURER/CHIEF FINANCIAL OFFICER
      5. SECRETARY
      6. NOMINATING COMMITTEE
      7. FINANCE COMMITTEE
      8. VOLUNTEERS
    11. APPENDIX 4C: RECOMMENDED GOVERNANCE AND ETHICS RESOURCES
  10. CHAPTER 5: DEVELOPING FINANCIAL POLICIES
    1. 5.1 INTRODUCTION
    2. 5.2 FINANCIAL POLICIES
    3. 5.3 PUTTING POLICIES INTO PLACE
    4. 5.4 ESTABLISHING PROCEDURES
    5. 5.5 FINANCIAL POLICIES AND PROCEDURES IN PRACTICE
    6. 5.6 ADDITIONAL RESOURCES
    7. NOTES
    8. APPENDIX 5A: NONPROFIT FINANCIAL POLICY EXAMPLES ON THE INTERNET
    9. APPENDIX 5B: GOOD, BETTER, AND BEST MEASURES OF TARGET LIQUIDITY
  11. CHAPTER 6: UNDERSTANDING FINANCIAL ACCOUNTING BASICS AND FINANCIAL STATEMENTS
    1. 6.1 INTRODUCTION
    2. 6.2 FINANCIAL STATEMENT USERS AND USES
    3. 6.3 ACCOUNTING BASICS
    4. 6.4 THREE FINANCIAL STATEMENTS
    5. 6.5 THE AUDIT AND THE AUDIT COMMITTEE
    6. 6.6 FINANCIAL STATEMENT USERS AND USES IN PRACTICE
    7. 6.7 SOCIAL ACCOUNTING
    8. 6.8 ADDITIONAL RESOURCES
    9. NOTES
    10. APPENDIX 6A: REVISED FINANCIAL STATEMENT FORMAT – ACCOUNTING STANDARDS UPDATE 2016-14
      1. REASON FOR AND SUMMARY OF STATEMENT PRESENTATION CHANGES
      2. COMPARING THE NEW FORMAT TO THE OLD FORMAT
      3. ILLUSTRATING THE NEW FORMAT FOR STATEMENT OF ACTIVITIES, STATEMENT OF CASH FLOWS, LIQUIDITY AND AVAILABILITY DISCLOSURE
      4. INTERPRETATIONS AND IMPLICATIONS
      5. NOTES
  12. CHAPTER 7: DEVELOPING FINANCIAL REPORTS AND RATIOS: MAKING SENSE OF THE NUMBERS
    1. 7.1 INTRODUCTION
    2. 7.2 MAJOR DIFFERENCES FROM FOR-PROFIT BUSINESS REPORTS
    3. 7.3 OBJECTIVES OF FINANCIAL REPORTS
    4. 7.4 REPORTING SYSTEM DESIGN
    5. 7.5 MAJOR REPORTS
    6. 7.6 INTERNAL REPORTS
    7. 7.7 EXTERNAL REPORTS
    8. 7.8 CONCLUSION
    9. NOTES
    10. APPENDIX 7A: EXAMPLE FINANCIAL RATIO CALCULATIONS
    11. APPENDIX 7B: ADDITIONAL FINANCIAL RATIOS
      1. 7B.1 BUSINESS LIQUIDITY, FUNDING, AND OPERATING RATIOS
      2. 7B.2 OTHER RATIOS USED BY CHARITY RATING SERVICES
      3. 7B.3 STATEMENT OF CASH FLOWS RATIOS
      4. 7B.4 RATIOS WITH COMPARATIVE BENCHMARK DATA AVAILABLE (BASED ON FORM 990)
      5. 7B.5 COMPARATIVE BENCHMARK DATA FOR FAITH-BASED ORGANIZATIONS (BASED ON SA AND SFP)
    12. APPENDIX 7C: CREDIT RATING AGENCIES AND DOE RATIOS
      1. WEBSITES FOR CREDIT RATING AGENCIES
  13. CHAPTER 8: DEVELOPING OPERATING AND CASH BUDGETS
    1. 8.1 INTRODUCTION
    2. 8.2 OVERVIEW OF THE BUDGETING PROCESS
    3. 8.3 ARE NONPROFIT ORGANIZATIONS DOING THEIR BUDGETING PROPERLY?
    4. 8.4 DEVELOPING AND IMPROVING YOUR BUDGETING PROCESS
    5. 8.5 SETTING THE BUDGETARY AMOUNTS
    6. 8.6 BUDGET TECHNIQUE REFINEMENTS
    7. 8.7 CASH BUDGET
    8. 8.8 MANAGING OFF THE BUDGET
    9. 8.9 CONCLUSION
    10. NOTES
    11. APPENDIX 8A: CASE STUDY: THE CASH CRISIS AT THE CHILDREN'S TREATMENT CENTER
      1. THE HONOLULU CHILDREN'S TREATMENT CENTER
      2. SOURCES OF REVENUES
      3. EXPENSES
      4. THE BANK LOAN
      5. QUESTIONS
    12. APPENDIX 8B: CASE STUDY: TRI-CITY ACADEMY
      1. CASH BUDGET
      2. CASH BUDGET
  14. CHAPTER 9: LONG-RANGE FINANCIAL PLANNING AND CAPITAL BUDGETING
    1. 9.1 INTRODUCTION
    2. 9.2 PLANNING FOR THE FUTURE
    3. 9.3 FINANCIAL EVALUATION OF NEW AND EXISTING PROGRAMS
    4. 9.4 CAPITAL BUDGETING: FINANCIAL EVALUATION OF PROJECTS THAT ARISE FROM EXISTING PROGRAMS
    5. 9.5 FINANCIAL EVALUATION OF MERGERS, JOINT VENTURES, AND STRATEGIC ALLIANCES
    6. 9.6 FINANCIAL PLANNING AND CAPITAL BUDGETING IN PRACTICE
    7. 9.7 CONCLUSION
    8. NOTES
    9. APPENDIX 9A: CASE STUDY: KIAWAH ISLAND COMMUNITY ASSOCIATION
    10. APPENDIX 9B: EVALUATING SOCIAL ENTERPRISES
      1. FRAMEWORK INTERPRETATION AND IMPLEMENTATION
      2. CAVEATS
      3. NOTES
  15. CHAPTER 10: MANAGING YOUR ORGANIZATION'S LIABILITIES
    1. 10.1 MANAGING THE BALANCE SHEET
    2. 10.2 BALANCE SHEET MANAGEMENT: BENEFITS AND STEPS
    3. 10.3 PAYABLES
    4. 10.4 SHORT-TERM BORROWING
    5. 10.5 STRATEGIC FINANCING PLAN
    6. 10.6 STEPS TO SUCCESSFUL BORROWING
    7. 10.7 MATCHING FINANCIAL SOURCES TO STRATEGIC OBJECTIVES
    8. 10.8 PREPARING THE FINANCING PROPOSAL
    9. 10.9 MAKING THE PRESENTATION
    10. 10.10 OTHER FACTORS IN BORROWING/LENDING DECISIONS
    11. 10.11 MUNICIPAL AND TAXABLE BONDS
    12. 10.12 LEASING AND NONTRADITIONAL FINANCING SOURCES
    13. 10.13 DEVELOPING A DEBT AND HEDGING POLICY
    14. 10.14 LIABILITY MANAGEMENT IN PRACTICE
    15. 10.15 CONCLUSION
    16. NOTES
  16. CHAPTER 11: CASH MANAGEMENT AND BANKING RELATIONS
    1. 11.1 INTRODUCTION
    2. 11.2 WHAT IS CASH MANAGEMENT?
    3. 11.3 COLLECTION SYSTEMS: MANAGING AND ACCELERATING RECEIPT OF FUNDS
    4. 11.4 DISBURSEMENTS
    5. 11.5 STRUCTURING A FUNDS MANAGEMENT SYSTEM
    6. 11.6 MONITORING BANK BALANCES AND TRANSACTIONS
    7. 11.7 CASH FORECASTING
    8. 11.8 SHORT-TERM BORROWING
    9. 11.9 SHORT-TERM INVESTING
    10. 11.10 BENCHMARKING TREASURY FUNCTIONS
    11. 11.11 UPGRADING THE CALIBER OF TREASURY PROFESSIONALS
    12. 11.12 SECURITY AND RISK MANAGEMENT ISSUES
    13. 11.13 TRENDS IN TREASURY MANAGEMENT
    14. NOTES
    15. APPENDIX 11A: DIRECT PAYMENT FOR NONPROFITS
      1. SAVE TIME AND COSTS, AND ADVANCE ORGANIZATIONAL GOALS
      2. INCREASE EFFICIENCIES IN YOUR ORGANIZATION
      3. INCREASE DONATION DOLLARS AND ENCOURAGE CONTINUED GIVING
      4. KEEP YOUR BUSINESS PAYMENTS AND DONATIONS SECURE
      5. CALCULATE SAVINGS
      6. GET STARTED
      7. RESOURCES
    16. APPENDIX 11B: DIRECT PAYMENT CASE STUDY
  17. CHAPTER 12: INVESTMENT POLICY AND GUIDELINES
    1. 12.1 INVESTMENT POLICY
    2. 12.2 INVESTMENT GUIDELINES
    3. 12.3 CHECKLIST OF ELEMENTS FOR LONG-TERM/ENDOWMENT INVESTMENT POLICY AND GUIDELINES
    4. 12.4 INVESTMENT COMMITTEE
    5. 12.5 TRENDS IN INVESTMENT MANAGEMENT
    6. 12.6 INVESTMENT POLICY SUMMARY
    7. NOTES
    8. APPENDIX 12A: SAMPLE OF SHORT-TERM INVESTMENT POLICY AND GUIDELINES
      1. INVESTMENT COMMITTEE
      2. INVESTMENT POLICY
      3. INVESTMENT RESPONSIBILITY
      4. REPORTING
      5. INVESTMENTS
      6. MATURITY LIMITATIONS
      7. REVIEW AND/OR MODIFICATION
    9. APPENDIX 12B: INVESTMENT POLICY
      1. INTRODUCTION
      2. INVESTMENT ASSETS
      3. PURPOSE OF THE INVESTMENT POLICY
      4. DELEGATION OF AUTHORITY
      5. RESPONSIBILITIES OF THE INVESTMENT AND FINANCE COMMITTEE
      6. RESPONSIBILITIES OF THE INVESTMENT MANAGER
      7. RESPONSIBILITIES OF THE CUSTODIAN
      8. CASH FLOW REQUIREMENTS
      9. GENERAL INVESTMENT PRINCIPLES/ASSUMPTIONS
      10. ASSET DIVERSIFICATION
      11. ASSET QUALITY
      12. INVESTMENT OBJECTIVES
      13. ASSET ALLOCATIONS
      14. SOCIAL RESPONSIBILITY
      15. PERFORMANCE EVALUATION AND REPORTING REQUIREMENTS
    10. APPENDIX 12C: SHORT-TERM INVESTMENT POLICY FOR HIJ FOUNDATION
    11. APPENDIX 12D: SAMPLE OF INVESTMENT POLICY STATEMENT FOR THE ABC FOUNDATION'S LONG-TERM ENDOWMENT POOL
      1. STATEMENT OF INVESTMENT OBJECTIVES
      2. ASSET ALLOCATION
      3. GUIDELINES FOR THE SELECTION OF FIXED-INCOME SECURITIES
      4. GUIDELINES FOR SELECTION OF EQUITIES: DIVERSIFICATION FOR EACH MANAGER
      5. PERFORMANCE
      6. PERMISSIBLE AND NONPERMISSIBLE ASSETS
      7. SELECTION OF INVESTMENT MANAGERS
      8. RESPONSIBILITIES OF THE INVESTMENT MANAGER
    12. APPENDIX 12E: DEFINITIONS OF FIXED-INCOME INSTRUMENTS
      1. US TREASURY SECURITIES
      2. US GOVERNMENT AGENCY OBLIGATIONS
      3. MUNICIPAL SECURITIES
      4. BANK OBLIGATIONS
      5. ASSET-BACKED SECURITIES
      6. COMMERCIAL PAPER
      7. LOAN PARTICIPATIONS
      8. CORPORATE NOTES AND BONDS
      9. REPURCHASE AGREEMENTS
      10. MONEY-MARKET MUTUAL FUNDS
      11. NOTE
    13. APPENDIX 12F: DEFINITIONS OF EQUITY INSTRUMENTS
    14. APPENDIX 12G: GLOSSARY
  18. CHAPTER 13: INFORMATION TECHNOLOGY AND KNOWLEDGE MANAGEMENT
    1. 13.1 INTRODUCTION
    2. 13.2 HOW MUCH TECHNOLOGY AND WHICH TO CHOOSE?
    3. 13.3 KNOWLEDGE MANAGEMENT AND INFORMATION TECHNOLOGY
    4. 13.4 INFORMATION TECHNOLOGY IN TODAY'S NONPROFITS
    5. 13.5 WHAT SHOULD I KNOW/DO BEFORE INVESTING IN TECHNOLOGY TOOLS?
    6. 13.6 SOFTWARE: DESIGN INTERNALLY OR PURCHASE?
    7. 13.7 DISCLOSURE, THE LAW, AND SECURITY
    8. 13.8 NEEDS ASSESSMENT AND ANALYSIS
    9. 13.9 POLICIES AND PRACTICES IN KNOWLEDGE MANAGEMENT AND INFORMATION TECHNOLOGY
    10. NOTES
    11. APPENDIX 13A: GLOSSARY OF BASIC TECHNICAL TERMS
    12. APPENDIX 13B: FRAMEWORK FOR AN IMPLEMENTATION STRATEGY
    13. APPENDIX 13C: CASE STUDY: USING TECHNOLOGY TO IMPROVE CASH AND TREASURY MANAGEMENT
      1. THE SAN DIEGO ZOO'S CFO BROUGHT THE RIGORS OF CASH FLOW FORECASTING
      2. THE CULTURAL REVOLUTION
      3. ALMOST IN REACH
      4. NOTE
  19. CHAPTER 14: MANAGING RISK, LEGAL ISSUES, AND HUMAN RESOURCES
    1. 14.1 WHAT IS RISK MANAGEMENT?
    2. 14.2 IDENTIFYING RISK
    3. 14.3 PRIMARY FINANCIAL RISK: ILLIQUIDITY
    4. 14.4 LEGAL ENVIRONMENT
    5. 14.5 SAFEGUARDING PEOPLE
    6. 14.6 DIRECTORS' AND OFFICERS' LIABILITY
    7. 14.7 SAFEGUARDING YOUR FINANCIAL AND PHYSICAL ASSETS
    8. 14.8 RISK MANAGEMENT AND HUMAN RESOURCE MANAGEMENT PRACTICES
    9. NOTES
    10. APPENDIX 14A: DERIVATIVES CHECKLIST
      1. WHY DERIVATIVES?
      2. FORWARDS VERSUS FUTURES
      3. GUIDELINES FOR DERIVATIVES USE: A CHECKLIST
      4. NOTES
    11. APPENDIX 14B: CASE STUDY OF ASSOCIATION'S FOREIGN EXCHANGE RISK MANAGEMENT
  20. CHAPTER 15: EVALUATING YOUR POLICIES AND PROGRESS
    1. 15.1 INTRODUCTION
    2. 15.2 EVALUATION
    3. 15.3 EVALUATING YOUR DECISIONS AND ETHICS
    4. 15.4 EVALUATING YOUR COMMUNICATIONS
    5. 15.5 EVALUATING YOUR MENTORING AND SUPERVISORY SKILLS
    6. 15.6 TESTING YOUR SUPERVISORY AND MANAGERIAL SKILLS
    7. 15.7 EVALUATING THE STRATEGIC NATURE OF YOUR ROLE
    8. 15.8 EVALUATING THE FINANCIAL HEALTH OF YOUR ORGANIZATION
    9. 15.9 EVALUATING YOUR FINANCIAL POLICIES IN SIX KEY AREAS
    10. 15.10 EVALUATING QUALITY AND OUTCOMES
    11. 15.11 USING EXTERNAL CONSULTANTS AND DATA SOURCES
    12. 15.12 CONCLUSION
    13. NOTES
  21. INDEX
  22. END USER LICENSE AGREEMENT

Product information

  • Title: Financial Management for Nonprofit Organizations, 3rd Edition
  • Author(s): John Zietlow, Jo Ann Hankin, Alan Seidner, Tim O'Brien
  • Release date: April 2018
  • Publisher(s): Wiley
  • ISBN: 9781119382560