BN.com Gift Guide

Streetsmart Financial Basics for Nonprofit Managers / Edition 3

Paperback (Print)
Rent
Rent from BN.com
$11.20
(Save 75%)
Est. Return Date: 02/23/2015
Buy Used
Buy Used from BN.com
$26.47
(Save 41%)
Item is in good condition but packaging may have signs of shelf wear/aging or torn packaging.
Condition: Used – Good details
Used and New from Other Sellers
Used and New from Other Sellers
from $21.76
Usually ships in 1-2 business days
(Save 51%)
Other sellers (Paperback)
  • All (15) from $21.76   
  • New (5) from $26.35   
  • Used (10) from $21.76   

Overview

Praise for Streetsmart Financial Basics for Nonprofit Managers, Third Edition

"Tom McLaughlin is a proven master at making the daunting concepts of nonprofit financial management clear and engaging. This book is a superb introduction for new nonprofit executives, board members, and students. It is also an excellent refresher and reference for those of us who have been around the nonprofit sector for a while. It is well written, concise, and thought provoking."
J. Gregory Dees, Professor of the Practice of Social Entrepreneurship and Nonprofit Management at Duke University's Fuqua School of Business, and coauthor of Enterprising Nonprofits and Strategic Tools for Social Entrepreneurs

"A very practical guide to understanding and managing the finances of a nonprofit organization. As nonprofits strive for greater accountability, Tom McLaughlin's real-world examples and accessible style make this book indispensable for nonprofit executives, managers, and board members at organizations of any size."
Gordon J. Campbell, President and CEO, United Way of New York City

"Tom McLaughlin's powerful book is far more than a useful tool. It provides the philosophical approach to instill strong stewardship and future viability to those in the world of nonprofits. He takes apart the complex issues of nonprofit stewardship just as Einstein translated relativity into a simple equation. Purely masterful."
Jim Mellor, Senior VP, Chief Financial Officer, YMCA of the USA

Note: CD-ROM/DVD and other supplementary materials are not included as part of eBook file.

Read More Show Less

Product Details

  • ISBN-13: 9780470414996
  • Publisher: Wiley
  • Publication date: 4/6/2009
  • Edition number: 3
  • Pages: 304
  • Sales rank: 286,390
  • Product dimensions: 5.90 (w) x 8.90 (h) x 0.90 (d)

Meet the Author

Thomas A. McLaughlin is Director of Consulting Services, Nonprofit Finance Fund, and member of the faculty at the Heller School for Social Policy and Management at Brandeis University. He is also the author of Nonprofit Strategic Positioning: Decide Where to Be, Plan What to Do and Nonprofit Mergers and Alliances, both published by Wiley. His email address is tommclaughlin@aol.com.

Read More Show Less

Read an Excerpt

Streetsmart Financial Basics for Nonprofit Managers


By Thomas A. McLaughlin

John Wiley & Sons

ISBN: 0-471-20570-2


Chapter One

Organizational Structure: Programs and Corporations

The nonprofit industry is enormous. Tens of thousands of such organizations are created every year. Exhibit 1.1 shows the growth curve for the last several years. Nonprofit organizations in the United States spend over $340 billion each year. They employ nearly 7 percent of the total workforce and are responsible for 6 percent of the Gross Domestic Product. Universities, research centers, religious institutions, and museums produce priceless accomplishments. Nonprofit hospitals are major elements of our health care system and in many communities are the largest employer. Social service agencies provide a wide variety of services to those less fortunate citizens. Other nonprofits educate people of all ages and at all levels. Still others develop communities and support our social lives.

There are many ways to categorize this industry. The IRS's way is discussed later in this chapter. The traditional way is by the service provided and, to a lesser extent, the size of the nonprofit organization. This approach may not be particularly useful from a financial management perspective since services and even size alone do not necessarily say much about the nature of the financial management challenge.

TYPES OF NONPROFIT ORGANIZATIONS

For financial purposes, a better way of looking atthis industry is to sort it into categories according to the primary economic function the organizations perform. Six distinct types of nonprofit corporations can be defined:

1. Direct service providers

2. Information managers

3. Resource distributors

4. Support and development providers

5. Grant makers or funders

6. Social organizations

Note that these groupings are chiefly for analytical purposes, and that the activities of many organizations can span several categories.

Direct Service Providers

These organizations are the classic nonprofits. Usually public charities, they are the hospitals, clinics, social service providers, and the like that provide some sort of direct and recognizable service to some or all of the public at large. Often major employers of professionals, these corporations provide a "hands-on" service.

Financial issues in direct service providers vary according to size and funding source. One characteristic that many share is the need to assemble a workable mix of funders, and to be careful about managing the relationships between funders' requirements. Complexities abound in their financial management profile because governmental and quasi-governmental entities are often major funding sources. One study from Johns Hopkins University found that 29 percent of all U.S. nonprofits' funding comes from government sources. Due to the limitations of government funding, philanthropy must also often play a role in direct service providers' management, and the stakes are high if money is accounted for inaccurately.

Payment in this field is moving from the traditional reimbursement for costs incurred to a defined price for a defined service such as one finds in health maintenance organizations. Level funding for many years has been the norm.

Information Managers

Another large category of nonprofits are the information managers-universities, museums, advocacy groups, trade associations, and a variety of similar organizations. Their role is to accumulate information of a predefined sort and share it with selected users, often in the role of broker. A university, for example, can be viewed as a broker between professors and students, or between researchers and consumers of research. Information management agencies range widely in size from the very smallest advocacy group to multibillion-dollar universities with international branches.

Consumers of information management services are multiple and naturally quite independent of each other; their financial systems must be capable of handling unusually massive quantities of information. These types of organizations tend to have memberships; therefore, the financial systems must store information about the same people for retrieval and usage over a period of years. In effect, membership records are the financial data.

In practice this scenario dictates a financial system, especially the revenue tracking component, that is capable of handling large numbers of small or large transactions. Frequently, the financial task is paralleled by the program manager's need to communicate with hundreds or even thousands of people, members and nonmembers. Fast and effective data management often becomes the only thing distinguishing one information manager from another, laying a heavy burden on the administrative infrastructure of each organization.

Resource Distributors

Resource distribution agencies reached their zenith during the Great Society days of the 1960s. For a variety of political, psychological, and logistical reasons, the federal government did a lot of business directly with local nonprofit agencies, positioning them as the last stop before direct contact with eligible clients.

No doubt it was politically useful for these local players to wield ultimate distribution responsibility, thereby shielding the federal government from criticism. It was also smart to graft onto the organizations' existing formal or informal support systems rather than re-creating them from scratch. Community action programs from the 1960s such as antipoverty programs are a good example of resource distribution nonprofits.

The premiere financial demand of resource distribution nonprofits is strict accountability. In many ways, they serve as the social equivalent of general contractors, assembling a team of benefit or service providers in order to accomplish a coordinated job. In other cases, they act mainly as a final distribution point for transfer payments, usually as part of an entitlement program. Their work typically involves outreach, evaluation, and servicing of eligible clients. From the funders' perspective, however, their real value comes after the client transaction has occurred and they make their reports to the payments' source.

Owing to the demand for accountability, resource distribution nonprofits' financial systems will tend to be shaped by individual transactions and the funding source's rules. Most programs of this sort are expected to track the flow of money, not the effectiveness of the programs. Accountability in this context means careful accounting, not managerial success. Perhaps not surprisingly given their role as intelligent conduits, many resource distribution nonprofits end up looking a lot like the governmental unit that funds them.

Support and Development Providers

The fourth category of nonprofit corporations refers to support and development groups. These organizations are limited in number but play a major role in areas of the health and social welfare sector. In size and focus they are not unlike resource distribution nonprofits, except that they concentrate on leveraging resources rather than simply marshaling them.

Financial management for support and development groups will be unremarkable except when ownership or financing of capital projects is involved. The task in these cases often relates to properly valuing assets, estimating the percentage of a project completed, and properly accounting for and reporting on funds received. The difficult aspect of financial management in the property acquisition or rehabilitation environment is dealing with irregular flows of cash in and out of the corporation, and keeping track of what are expenses of the current period versus what expenses should be considered part of the capital project.

Grant Makers or Funders

One of the most common of all types of nonprofits, grant makers or funders can range from the very smallest fund-raising agencies to massive private foundations. Their task is to raise money and decide who should get it, and, in the case of private foundations, raising the money may consist chiefly of effectively managing a portfolio of equities.

One of the things that makes the funder's financial management job at least theoretically easier than many in the nonprofit field-foundation CFOs, block your ears-is that things like revenue management may have to be done by outsiders such as investment managers. No financial officer can be expected to have the skills to manage a major chunk of investments, nor would the responsible board expect it. Moreover, there are arguments for accountability that favor separating investment management from operational tasks.

On a broader level, to do the grant-making job correctly, the funder needs to operate in a planned, disciplined fashion. Happily, good financial management can thrive under the same conditions. In effect, a funder is engaged in the business of shaping and directing streams of money over a period of years. This is a profoundly different dynamic than most other nonprofit categories, and it should not be underestimated in the context of designing a financial management system.

For all practical purposes, funders are accountable to no one. While the technical aspects of fund-raising and grant-making must be handled properly, it is relatively easy to hire skilled staff to see to that. Beyond the minimal level of legal compliance in both the public charity and the private foundation worlds, no significant person or authority is in a position to routinely challenge the workings of a funder. Ironically, this can be as much a hindrance to good financial management as anything else, since there is the possibility that complacency will crowd out effectiveness.

Social Organizations

The final entry in the list of major nonprofit types is social clubs and organizations. Whether fraternities, lodges, sporting clubs, quilting associations, or any of a vast array of other entities, they share the common theme that they exist in order to further the social interests of their members. Funding comes almost entirely from members' dues and from business transacted with members (such as restaurant and bar sales at clubs), and occasionally from rents or investments.

Typically, the financial stakes are low in a social club. Members usually have little interest in the details of financial management beyond seeing that the dues are collected and the bills paid on time. As a result, two of the greatest threats to a club's financial health are sloppy record keeping and fraud. The need for fiscal accountability is just as strong as in other categories, but much of the focus is likely to be on cash. One thing that tends to be true for social clubs is that their financial prowess is never any greater than what the membership demands.

STRUCTURE OF NONPROFIT ORGANIZATIONS

Programs

Programs are the most visible and best understood aspect of the nonprofit form of business organization, and its chief means of carrying out its mission. Also called services, projects, clinics, divisions, departments, floors, or any one of a thousand other names, programs are the activities of the nonprofit organization.

Coming up with a fair and workable definition of a program is difficult. Here's an attempt: A program is a coherently packaged group of activities, usually associated with a specific physical location, designed to accomplish a stated result.

Nonprofit organizations run all kinds of programs, and often more than one. Day care centers offer infant care programs, environmental groups operate recycling systems, museums run art appreciation courses, and so forth. The two keys to understanding programs are that they generally have some coherent internal structure, and that they appear as distinct choices to potential users.

In most nonprofit organizations, programs are like little businesses, with a structure reinforced by nonprofit accounting rules and one that has immense if largely unnoticed consequences for everything from compensation to organizational effectiveness. They represent a delegation of responsibility from the chief executive officer, and so they are the engines of mission. It is at the program level where the organization's goals are accomplished or not, and therefore those in charge of programs carry heavy moral pressure to get the job done.

Notice the use of the word "moral" in the preceding sentence. Typically, the motivations of those who run nonprofit organizations are different from those who do the same thing in the for-profit world, and the motivations of program managers everywhere are often different still from their bosses. We'll explore some of those differing interests later. For the moment, we'll use the program as the smallest management unit of the nonprofit corporation.

Corporations

The next major level of nonprofit management is the corporation that "owns" or runs the programs. The corporation is a statutory entity established by the legally sanctioned actions of one or more individuals. As a legally approved entity separate from its constituent individuals, the corporation has its own continuing existence. In legal theory, corporations are treated as distinct entities just like individual people, and corporations have their own collection of responsibilities, liabilities, and powers.

Why a corporation? The answer is disarmingly simple: because it's easier for the rest of us. Corporations can be mentioned in the same legal breath as the individuals who use their services, work in them, or simply exist in the same state with them. All are on the same legal footing, in that respect. The complicated and narrower answer to the question has to do with such practical considerations as revenue source regulations and liability strategies.

Revenue source regulations and political realities often nudge nonprofits in the direction of a specific type of organizational structure. Programs such as battered women's shelters almost of necessity start out as single-service corporations, while older and more established social service and health care groups may have developed a multiple corporate structure.

There are also liability laws to consider when operating different types of businesses. Nonprofit public charities traditionally have been granted generous protection from state liability laws, although that tendency is beginning to change. It's a tradition growing out of English Common Law that has been codified in many places around the country. Often there will be either an explicit limitation on suits or a prohibition altogether on the grounds that agencies funded by the public at large ought not to be siphoning resources into private hands via lawsuits. Liability considerations alone are not normally strong enough to determine a corporate structure, but the more favorable liability climate for public charities is clear.

Continues...


Excerpted from Streetsmart Financial Basics for Nonprofit Managers by Thomas A. McLaughlin 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.

Read More Show Less

Table of Contents

Acknowledgments.

Note to Reader.

PART ONE ANALYSIS.

CHAPTER 1 Organizational Structure: Programs and Corporations.

Types of Nonprofit Organizations.

Structure of Nonprofit Organizations.

Loss of Tax-Exempt Status—The Monster Within.

CHAPTER 2 Mission: Managing Your Two Bottom Lines.

The Role of a Value System.

The Nonprofit’s Dilemma and How to Solve It.

CHAPTER 3 Accounting as a Second Language—A Nine-Point Program.

The Entity Principle.

Money Measurement.

Conservatism Principle.

The Cost Concept.

The Materiality Principle.

Going Concern.

Dual Aspect.

Realization Principle.

Matching Principle.

CHAPTER 4 Assets Are for Boards, Activities Are for Managers.

Concepts versus Details.

Boards Invest, Managers Spend.

If It Has to Be Decided Today, It’s Probably the Wrong Question.

Boards Own the Controls, Managers Implement Them.

CHAPTER 5 Balance Sheets: How They Get That Way.

Current Assets.

Noncurrent Assets.

Current Liabilities.

Noncurrent Liabilities.

Making the Balance Sheet Dance.

Transparency, Thy Name Is IRS Form 990.

Sweeping Change.

What to Do.

CHAPTER 6 Financial Analysis: A Few Diagnostic Tools.

Financial Statement Analysis for Math Phobics.

Current Ratio.

Days’ Cash.

Days’ Receivables.

Cash Flow to Total Debt.

Debt to Net Assets.

Total Margin.

Operating Margin.

Accounting Age of Plant/Equipment (or Land, Buildings, and Equipment).

A Footnote.

PART TWO ACCOUNTING.

CHAPTER 7 Nonprofit Accounting: Acknowledging the Strings Attached.

Net Asset Categories.

Other Provisions.

What It All Means.

CHAPTER 8 Cost Accounting: How Much Does It Cost?

A Form of Management Accounting.

Indirect Costs.

Certain Support Costs Get Assigned to Other Support Costs.

Breakeven Analysis—Another Use for Cost Data.

Cost Accounting versus Cost Reporting.

CHAPTER 9 Auditing: Choosing and Using an Auditor.

Audit, Review, and Compilation.

The Auditor Market.

Getting Value from the Audit.

Conclusion.

PART THREE OPERATIONS.

CHAPTER 10 Cash Flow Management: Why Cash Is King.

Up the Balance Sheet.

How Much Cash Is Enough?

Conclusion.

CHAPTER 11 Capital: Why Capital Is Not a Four-Letter Word.

The Mechanics of Capital Financing.

The Present Value of Money.

Sources of Capital.

The Great Divide among Nonprofits.

Future Access to Capital Markets.

The Role of Net Assets.

Strategic Capital Management.

CHAPTER 12 Budgeting: Taming the Budget Beast.

Playing Revenues Like a Symphony.

Expenses.

Indirect (General and Administrative) Costs.

Conclusion.

CHAPTER 13 Indirect Costs and Other Despised Items.

Still, It’s Low That Counts.

Secret of the Indirect Cost Game.

CHAPTER 14 Pricing: How Much Should It Cost?

Pricing Methodologies.

Going the Other Way—Contractual Adjustments and Subsidies.

Pricing Strategies.

How to Price.

CHAPTER 15 Profit: Why and How Much?

Profit Defined.

Uses of Profit.

Profit—How to Get It.

What Can Be Done.

CHAPTER 16 To Raise More Money, Think Cows.

Donations.

Bequests—Cow to Charity.

Charitable Remainder Trusts—Milk to Beneficiaries, Cow to Charity.

Pooled Income Funds—Donors Put Their Cows in a Herd, Keep Rights to Milk.

CHAPTER 17 Insurance: The Maddeningly Complicated Art of Covering Your Assets.

To Insure or Self-Insure?

Risk Management.

CHAPTER 18 Internal Controls for External Goals.

The Elements of Internal Control.

How to Monitor the System.

Maintaining the System.

Conclusion.

CHAPTER 19 Enron Spawn.

Some Predictions.

The New Industry of Charity Watching.

CHAPTER 20 Management Controls: Toward Accountability for Performance.

Management Controls Circa 1980.

Beyond Management Controls in the Twenty-First Century: How to Do It.

Messages.

How to Prepare—The CFO of the Future.

Appendix A A Financial Management Cultural Primer.

Appendix B Budget Bloopers.

Appendix C Using the Web Site.

Index.

Read More Show Less

Customer Reviews

Average Rating 4
( 3 )
Rating Distribution

5 Star

(2)

4 Star

(0)

3 Star

(0)

2 Star

(1)

1 Star

(0)

Your Rating:

Your Name: Create a Pen Name or

Barnes & Noble.com Review Rules

Our reader reviews allow you to share your comments on titles you liked, or didn't, with others. By submitting an online review, you are representing to Barnes & Noble.com that all information contained in your review is original and accurate in all respects, and that the submission of such content by you and the posting of such content by Barnes & Noble.com does not and will not violate the rights of any third party. Please follow the rules below to help ensure that your review can be posted.

Reviews by Our Customers Under the Age of 13

We highly value and respect everyone's opinion concerning the titles we offer. However, we cannot allow persons under the age of 13 to have accounts at BN.com or to post customer reviews. Please see our Terms of Use for more details.

What to exclude from your review:

Please do not write about reviews, commentary, or information posted on the product page. If you see any errors in the information on the product page, please send us an email.

Reviews should not contain any of the following:

  • - HTML tags, profanity, obscenities, vulgarities, or comments that defame anyone
  • - Time-sensitive information such as tour dates, signings, lectures, etc.
  • - Single-word reviews. Other people will read your review to discover why you liked or didn't like the title. Be descriptive.
  • - Comments focusing on the author or that may ruin the ending for others
  • - Phone numbers, addresses, URLs
  • - Pricing and availability information or alternative ordering information
  • - Advertisements or commercial solicitation

Reminder:

  • - By submitting a review, you grant to Barnes & Noble.com and its sublicensees the royalty-free, perpetual, irrevocable right and license to use the review in accordance with the Barnes & Noble.com Terms of Use.
  • - Barnes & Noble.com reserves the right not to post any review -- particularly those that do not follow the terms and conditions of these Rules. Barnes & Noble.com also reserves the right to remove any review at any time without notice.
  • - See Terms of Use for other conditions and disclaimers.
Search for Products You'd Like to Recommend

Recommend other products that relate to your review. Just search for them below and share!

Create a Pen Name

Your Pen Name is your unique identity on BN.com. It will appear on the reviews you write and other website activities. Your Pen Name cannot be edited, changed or deleted once submitted.

 
Your Pen Name can be any combination of alphanumeric characters (plus - and _), and must be at least two characters long.

Continue Anonymously
Sort by: Showing 1 – 5 of 3 Customer Reviews
  • Anonymous

    Posted February 29, 2012

    Great for Students

    I am currently using this book for a class called "Issues in Nonprofit Management." This book does not read like an average textbook, which at first threw me off. The author may use casual language, but to truly understand the lessons of each chapter, I suggest either reading it twice or creating a detailed outline. After that, understanding and applying the lessons is easy!

    Was this review helpful? Yes  No   Report this review
  • Anonymous

    Posted April 8, 2011

    No text was provided for this review.

  • Anonymous

    Posted January 18, 2010

    No text was provided for this review.

  • Anonymous

    Posted October 12, 2010

    No text was provided for this review.

  • Anonymous

    Posted December 22, 2009

    No text was provided for this review.

Sort by: Showing 1 – 5 of 3 Customer Reviews

If you find inappropriate content, please report it to Barnes & Noble
Why is this product inappropriate?
Comments (optional)