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Not-for-Profit Budgeting and Financial Management / Edition 4

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Overview

Take control of your organization's short- and long-term financial plan

Now fully revised, Not-for-Profit Budgeting and Financial Management, Second Edition, offers a financial planning system that is not only easy to use and monitor, but also ensures true fiscal accountability in the complex not-for-profit arena.

  • Adds three entirely new chapters on Footnoting the Statement of Activity, Presenting Cash Prepared and Accrual Statements on the same page, and The Importance of the Executive Summary
  • Fully updated with the latest financial advice to benefit your nonprofit
  • Explains how to separate controllable, semi-controllable, and fixed expenses
  • Reveals how you can prepare and present such top-notch budget documents that budgets will be approved the first time

Written in a nontechnical, understandable format, incorporating dozens of relevant forms and documents, this completely revised and expanded edition will enable your nonprofit organization to create and manage reasonable financial plans that fit their organization's needs.

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Product Details

  • ISBN-13: 9780470575413
  • Publisher: Wiley
  • Publication date: 6/28/2010
  • Edition number: 4
  • Pages: 220
  • Sales rank: 835,505
  • Product dimensions: 8.40 (w) x 10.80 (h) x 0.70 (d)

Meet the Author

EDWARD MCMILLAN is a Certified Public Accountant and Certified Association Executive, and is a nationally recognized speaker on not-for-profit financial and management topics since 1992 for the United States Chamber of Commerce, the American Society of Association Executives, the American Institute of Certified Public Accountants, the American Chamber of Commerce Executives and the Destination Marketing Association International. He has written six books, including five for Wiley, as well as Guide to Fringe Benefits for Not-for-Profit Organizations, Complying with SFAS #116 and #117, and The Audit: A Novel. He is also the author of numerous articles appearing in such publications as Association Management, Leadership, and Dollars and Cents.

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Read an Excerpt


Not-for-Profit Budgeting and Financial Management



By Edward J. McMillan


John Wiley & Sons



Copyright © 2003

Edward J. McMillan
All right reserved.



ISBN: 0-471-45314-5



Chapter One


Basic Accounting and
Financial Operations


A WELL-RUN ORGANIZATION must have an efficient financial operation in place to
implement an effective budgeting program. An effective financial operation should
integrate the following:

* Accurate financial data

* Understandable financial statements that meet the organization's needs

* Timely financial statements

* Actual versus budget figures for the period presented

* An annual audit by an independent certified public accountant (CPA) firm


Accurate Financial Data

Financial statements are prepared by one of two accounting methods:

* Cash basis of accounting-recognizes revenues when cash is received and expenses
when cash is disbursed.

* Accrual basis of accounting-recognizes revenues when they are earned and
expenses when they are incurred. The actual receipt and disbursement of cash
generally does not result in recognizing revenues and expenses. Accrual accounting
also attempts to match revenues with corresponding expenses in the proper
accounting period.

Unless an organization is very small or is a true cash business, the accrual
method of accounting results in muchmore accurate and meaningful financial statements
than the cash basis does. Accrual-based financial statements are more difficult
to prepare, but the resulting accuracy is crucial to good budgeting.


Understandable Financial Statements

Financial statements should be constructed to provide management with what it
needs to effectively control the organization. The statements should compare actual
versus budget data for both the current month and the year to date. They should be
understandable to nonaccounting management and easy to interpret. In addition,
the statements should be streamlined, relatively brief, and not bogged down with
unnecessary detail that will frustrate the reader.


Timely Financial Statements

Internal financial statements should be prepared and distributed monthly and
within 10 business days after the close of the prior month. When the statements are
prepared other than monthly and it takes longer than 10 days to prepare and distribute
them, management's ability to take well-thought-out action to correct problems
diminishes. Rather, decisions are likely to be based on old data, problems may
worsen, and valuable time that could have been used to correct the problem will
have been lost.

Internal financial statements should include, at a minimum, the two primary
financial statements:

* The Statement of Financial Position (the balance sheet)

* The Statement of Activity (the income statement)


Statement of Financial Position

The Statement of Financial Position shows the overall financial health of an organization
at a point in time by comparing the organization's assets, liabilities, and net
assets. It usually does not reflect actual versus budget goals. The Statement of Financial
Position illustrates an organization's solvency and cash position but does not
reflect profitability. A sample Statement of Financial Position for a typical not-for-profit
organization is shown in Exhibit 1.1.


Statement of Activity

The Statement of Activity shows the profitability of an organization for a specific
period by comparing revenues and expenses. It does not reflect the organization's
solvency. The Statement of Activity illustrates both current-month and year-to-date
figures to help management understand the financial condition of the organization.
It also serves as a budgeting tool. A sample Statement of Activity for a typical not-for-profit
organization is shown in Exhibit 1.2.


Annual Audit

An effective budget is based on accurate financial data. Management can ensure
records are accurate by having the records audited by an independent CPA firm. The
audit process requires the CPA firm to advise and make recommendations to management
as to weaknesses and problems with accounting systems. Management may
not be aware of these problems, and the audit will afford an opportunity to correct
deficiencies. In addition, an audit will include an internal control survey and a management
letter:

* An internal control survey is designed to expose weaknesses surrounding the
safeguarding of cash and other assets and is an annual requirement of a CPA's
auditing standards.

* A management letter is the vehicle CPA firms use to alert management to inefficiencies
that come to light during the audit. The management letter also includes
recommendations for improvement.

Organizations that cannot afford a full audit should at least consider a less costly
review or compilation.

(Continues...)







Excerpted from Not-for-Profit Budgeting and Financial Management
by Edward J. McMillan
Copyright © 2003 by Edward J. McMillan.
Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

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Table of Contents

Preface.

Disclaimer.

Chapter: Budgeting and Financial Operation.

Chapter 2: Cash vs. Accrual Accounting.

Chapter 3: Basic Accounting and Financial Operations.

Chapter 4: Effective Use of Footnotes and Financial Ratio Calculations for the Statement of Financial Position.

Chapter 5: Controllable and Uncontrollable Expenses.

Chapter 6: Controllable, Semi-Controllable, and Fixed Expenses.

Chapter 7: Noncash Expenses.

Chapter 8: Effective Footnotes for the Statement of Activity.

Chapter 9: Natural and Functional Statements of Activity.

Chapter 10: Internal Financial Statements.

Chapter 11: Converting Accrual-Method Financial Statements to Cash-Method Financial Statements.

Chapter 12: Budgeting Philosophy.

Chapter 13: Continuous Budgeting System Overview.

Chapter 14: The Executive and the Budget Process.

Chapter 15: Executive Summary.

Chapter 16: Comparative Financial Statements.

Chapter 17: Expense Reduction Plans.

Chapter 18: The Monthly Budgeting Process.

Chapter 19: The Cash Flow Budget.

Chapter 20: Getting the Budget Approved.

Chapter 21: Suggested Format of Budget Documents for an Approving Body.

Chapter 22: The Role of the Budget Coordinator.

Chapter 23: Accounting and Budgeting for Fringe Benefits.

Chapter 24: The Capital Budget and Depreciation.

Chapter 25: Inventory Purchases and Calculation of Cost of Goods Sold.

Chapter 26: Accounting and Budgeting for Dues.

Chapter 27: Capital Assets: Lease-or-Buy Decisions.

Chapter 28: The Long-Range Plan.

Chapter 29: Financial Ratios.

Chapter 30: Zero-Based Budgeting.

Chapter 31: Putting It All Together.

Glossary.

Index.

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