NCLC 375/GOVT 358 -- Nonprofit Financial Planning
Understanding social mission and entrepreneurial cross pressures
NCLC 375/GOVT 358 -- Nonprofit Financial Planning
Prerequisite: 60 credits or POI
Catalog description --
Provides an understanding of the social mission and entrepreneurial cross
pressures underlying financial planning and accounting in the nonprofit sector.
Topics include revenue sources, revenue projections, entrepreneurial
techniques, and cost analysis for nonprofit and nongovernmental entities. Three
hours of lectures complemented by one hour of field case studies for experiential
Context - The impact of the global market and global environment on nonprofit
sector financing and accounting
With world capital flowing more in accord with market pressures and with
entrepreneurial expectations geared to gain a good return on investment,
nonprofit organizations will find it increasingly difficult to isolate themselves from
these competitive demands and entrepreneurial techniques associated with
raising money. While philanthropy remains an important societal force in
allocation of scarce resources, nonprofit organizations need to consider which
philanthropic and entrepreneurial concepts and tools are appropriate to adopt in
order to remain fiscally solvent. Such a task for these social mission oriented
entities is formidable. Often, these nonprofit organizations face pressures and
cross pressures that do not meld with competing for money and capital on the
basis of economic efficiency nor return on capital. Nonprofit organizations are
built on trust. Additionally, statutory requirements, social mission statements,
donor restrictions, and bureaucratic lethargy can work against use of the
economic efficiency and the return on investment drive associated with global
economic markets. Historically, nonprofit organizations have viewed the saliency
of their social mission, not how entrepreneurial they were, as the way to stay
solvent. Moreover, opposition to economic or market efficiency goals is
frequently considered appropriate in value laden, socially conscious, democratic
societies. The anti-global, sometime cell based terrorist movement makes the
survival challenge more imposing for nonprofit organizations. The even present
demand since 9/11/01 makes preparedness (often via database construction and
access) an added task for nonprofit organizations.
Objectives -- explore, observe, and use traditional and entrepreneurial financial
planning and business accounting tools in nonprofit organizations facing the
cross pressures of markets, social missions and disaster preparedness
• Examine the nature of the cross-pressures between trust, social mission
and market criteria.
• Provide a basic understanding of special legal status and role private
nonprofit organizations are granted by governments for providing certain
• Introduce students to the traditional social mission driven approach of
nonprofit organizations, the historic reliance on charitable contributions,
and traditional financial planning and accounting
• Consider entrepreneurial financial planning strategies and tools such as
in-house savings for investment, obtaining a line of credit, social
investment capital (sometimes through angels), long term borrowing,
royalty payments, endorsements, franchising and sale of products, that
can reasonably be adopted by nonprofit organizations facing market and
social mission cross pressures
• Incorporate emerging accounting and financial reporting models amenable
to judging entrepreneurial financial and social mission results realized by
• Provide an atmosphere where students can learn by hearing from and
interacting with nonprofit and business professionals who deal with these
pressures on a daily basis.
• Use database, document management and intranets to organize, access
and format information
• Use spreadsheets, such as Excel, to test and implement financial
challenges faced by nonprofit organizations.
Course Project -- Working with Nonprofit Professionals
The course project will offer students the opportunity to explore individual
interests in specific nonprofit organizations and apply the academic material from
the class. The purpose of the project is to assess how well or poorly the entity is
doing financially. Interviews, tours, reading the annual financial reports and doing
a spreadsheet analysis of pertinent financial data will help judge financial
performance. As part of the project, identify and critique an entrepreneurial
technique(s) used by a nonprofit organization. Cases discussed in class will
provide a starting point for ideas and contacts. Specific nonprofit organizations
such as INOVA Health Care Systems, the Alliance for Children and Families,
Northern Virginia Family Services, and the National Urban League are examples
of places that can provide illustrations for student projects. Detailed requirements
for the course project are listed at the end of the syllabus. A timetable is also
presented. A partial list of nonprofit organizations is given at the end of the
The course will be based on two take home exams (each worth 35%), a project
(worth 20%), and set of computer exercises (10%). The first take home is the
mid-term and second of the two exams is a final and is due on the date set for
the final in the course. Grades are based on 90-100, A; 80-89, B; 70-79, C;
60-69, D; below 60, F. Generally, medical excuses are the only reason for
missing an exam or other graded work.
GMU Computer Accounts
Check this URL if you have not activated your GMU email account:
If you use your own ISP, you will have redirect your GMU email to the email for
that ISP. Many of your assignments will be email to your GMU email accounts.
Texts and Readings
McLaughlin, T. (2002). Streetsmart Financial Basics for Nonprofit Management.
In the topics section, a number of the readings are marked handouts. The
professor will provide these readings to you. The syllabus also includes a
reference section for further. If you are interested in one of these and cannot
locate it, ask the professor or one of the reference librarians.
1) Introduction to Database organization, Spreadsheet Use and Document
Formatting – done through out the semester
a) Some of the fundamental ideas and techniques of database organization
and spreadsheet will be introduced by the Star staff
b) Information about Star can be found at
c) Material will be provided (usually via GMU email) for the computer
2) Special status and traditional financial planning and accounting in nonprofit
organizations. The trust element is examined in this section.
a) Readings: In this initial section, the readings are designed to provide a
picture of the special legal and traditional social mission orientation of
private nonprofit organizations as well as different types of nonprofits.
(1) McLaughlin. Chapter 1. "Organizational Structure: Programs and
(2) See http://www.bizfilings.com/learning/nonprofitfaq.htm for
information on steps to incorporation a 501(c) 3. An IRS chart of
types of nonprofits is also given in the above URL. Look under
“What are the IRS classifications of nonprofit corporations?” Click
on the bottom that takes one to the chart
3) Challenges nonprofit organizations face when multiple organizations see
themselves as equally capable of providing services traditionally rendered
mainly by a nonprofit.
a) "The Future of the Nonprofit Sector: Its entwining with private enterprise
and government." Weisbrod, B. (1997) in Journal of Policy Analysis and
Management. V. 16. # 4. 541-555. Professor will announced how to obtain
4) A budget system for nonprofit organizations
a) Integrate with strategic plan
b) Integrate with IT capacity
c) Use of flexible budgets
ii) McLaughlin. Chapter 11. Budgeting
iii) Practice problem with flexible budgets- this practice problem will offer
students an opportunity to use a database, spreadsheet, and
document formatting and organization
5) Cross pressures on finance and accounting in nonprofit organizations - trust,
markets, and gaps
a) Historically, nonprofit organizations have operated on the basis of trust
and service. Nonprofits do not distribute any earnings and do not seek to
maximize profits. Thus, the assumption is that nonprofits can provide
efficiently to the needy and receive adequate resources from society's
philanthropic values. However, this view has been challenged by the
emergence of global economic markets as a major force for distributing
i) The readings in this section examine the debate over whether global
economic markets can improve or adversely affect social equity and
stability, two values associated with governments and nonprofits.
(1) M. Lindenberg. 1999. "Declining State Capacity, Voluntarism, and
the Globalization of the Not-for-Profit Section." Nonprofit and
Voluntary Sector Quarterly. 28:4: Supplement: 147-167. Professor
will announced how to obtain this article
ii) Practice problem to show challenges faced by nonprofit entities in this
competitive global market -- when should nonprofits operate globally?
Use of database and Excel with a progressively better formatted
document. This assignment will provide a simple example of working
with databases, Excel, and document manipulation
6) A financial management, reporting and accounting system for nonprofit
organizations and preliminary report on project.
i) The financial management system of a nonprofit is shaped by these
different forces, namely,
(2) market pressures,
(3) a gap left by the problems of the social welfare state.
ii) Perhaps different types of nonprofits can select different mixes of trust,
markets, and gaps to design and operate their financial management
iii) This financial management system tried to strike a balance among the
iv) General guidelines for financial management systems are
(1) A genuine cause to attract support
(2) Diversity in revenue sources
(3) A willingness and openness to accept market pressures and
v) A carefully designed accounting and financial reporting and monitoring
system to report internally as well as to contributors and other
i) Use the budget as a central planning tool. Connect it to the overall
strategic plan of the nonprofit and the information technology capacity.
Fund raising strategies, revenue estimates and needs estimates are
integral to the budget process. A tool called flexible budgeting is a
helpful device for nonprofits. Flexible budgets allow for different levels
of service and funding. They show performance, and, under or
overruns, for different levels of service and funding.
ii) Financial statements with nonfinancial measures are an important
counterpart to the budget. The budget is the plan; the financial
statements and performance measures show results.
iii) Internal control essentially provides for security of assets and for
careful observation of whether policy is being followed.
(1) "Mission: managing your two bottom lines." Chapter 2 in
McLaughlin (2002). Streetsmart Financial Basics for nonprofit
c) Preliminary Report on Project
7) Midterm, in class, about here
8) Entrepreneurial financial management in complex systems. Entrepreneurial
means using business like tactics to raise money and control spending.
Licensing is an entrepreneurial technique.
a) Once nonprofits move aggressively into entrepreneurial techniques they
face several challenges. These include
ii) Private sector rivals
iii) Reluctance of staff and boards
b) A nonprofit may allow a company to use the name or logo of the nonprofit
for a fee. Here is a list of entrepreneurial techniques.
i) Royalties - A royalty is a payment for the use of a valuable right.
Payments for the use of trademarks, trade names, or copyrights are
ordinarily classified as royalties by the IRS (Internal Revenue Service).
ii) Endorsement - A nonprofit can earn a healthy profit by lending its
name and logo for a fee to a for profit. The motivation is to allow the for
profit to show that the nonprofit endorses the for profit's products and
services. The Arthritis Foundation had an agreement with Johnson and
Johnson to endorse aspirin.
iii) Affinity cards - A nonprofit's name or logo is imprinted on a commercial
credit card and marketed to the organization's constituents.
Universities use this techniques. The nonprofit receives a percentage
of what is charged by the cardholder. The danger is that the nonprofit
may be providing personal services to its members in working with the
credit card company. That is, the nonprofit is finding credit card deals
for its constituents.
iv) Advertising - Nonprofit organizations can sell space in their
publications. If done on a regular basis this practice is UBI (unrelated
business income) and is taxable.
v) Corporate sponsorship - Nonprofit organizations can display corporate
logos and receive payment from the corporation.
vi) Mailing lists - Nonprofit organizations can receive rental income from
allowing others to use their mailing list.
vii) Educational travel tours - The social mission of a nonprofit organization
can be advanced by offering travel tours to education people on the
value of the social mission.
viii) Borrowing - using the credit markets to raise capital and money
instead of relying on donors solely.
(a) "Pricing: How much should it cost?" Chapter 13 in McLaughlin
(2002). Streetsmart Financial Basics for nonprofit managers.
(b) "Capital: why capital is not four letter word." Chapter 10 in
McLaughin (2002). Streetsmart Financial Basics for nonprofit
(c) Anreasen, A. (1999). "Profits of Nonprofits." Harvard Business
Review. Nov-Dec: 47-50+ optional
(d) Practice problems on entrepreneurial techniques, including time
value of money issues
9) The financial reporting and accounting system -- measures of success,
health, and compliance
a) Using these systems for decision making by insiders and outside parties
b) Understanding that these financial reports can dramatically affect
allocation of scarce resources to the nonprofit
c) The role of FASB (financial accounting standards board)
d) Accounting basics
i) The accounting equation
10)The statement of activities (similar to the income statement)
i) Use of accrual, matching, and fair value and how "paper" losses can
adversely affect the report on operating success
iii) "Nonprofit Accounting: Acknowledging the Strings Attached." Chapter
6 in McLaughin (2002). Streetsmart Financial Basics for nonprofit
(1) Practice problem on statement of activities
(a) Types of revenue
(b) Handling pledges receivable
(c) Paper losses and gains
11)The statement of financial position (similar to the balance sheet), the use of
fair value and how "paper" losses can adversely affect the operating success
and how poor management of endowments can make the statement of
financial position look bad
ii) "Balance sheets: how they get that way." Chapter 4 in McLaughlin
(2002). Streetsmart Financial Basics for nonprofit managers. Wiley.
(1) Practice problem showing the components of net assets,
unrestricted, temporarily restricted, and permanently restricted
12) Week 12:
i) "Cash flow management." Chapter 9 in McLaughlin.
b) Practice problem -- more on pledges receivable
13) Week 13 Progress report on Project
14)Do NGOs have a difference financial management system? -- time permitting.
16) Final Exam- take home
• "Globalization and its limits." Wade, R. in Dickens, P (1998). Global
• Chapter 1 - "A View from the Top" in Herzlinger, R. and Ntterhouse,
D. (1994). Financial Accounting and Managerial Control for
Nonprofit Organizations. South-Western Publishing Co. Cincinnati,
• "Post-Walrasian Political Economy." Bowles and Gintis (1993). In
Bowles, S, Ginitis, H, and Gustafsson. Markets and Democracy:
Participation, Accountability, and Efficiency. Cambridge University.
• "The Role of Nonprofit Enterprise in '1993': Hansmann Revisited."
Steinberg, R. and Gray, B. (1993). Nonprofit and Voluntary Sector
Quarterly. V. 22. # 4. Winter: 297-315.
• "Modern Economic Theory and the Study of Nonprofit
Organizations: why the twain shall meet." (1996). Nonprofit and
Voluntary Sector Quarterly. V. 25. # 4. December: 470-483.
• "Application of cost-volume-profit analysis in the governmental
environment." Caldwell and Welch. (1989). Association of
Government Accountants Journal. Summer. 3-9.
• "Evaluating the Economics of Public Sector Outsourcing." The
Government Accountants Journal. Winter: 30-35.
• "The bigoted Scouts of America. (discrimination against
homosexuals and atheists in the Boy Scouts of America)." Dority,
B. (1998). The Humanist. July-August v. 58 # 4: 35(3).
• Ryan, W. (1999). "The New Landscape for Nonprofits." Harvard
Business Review. Jan-Feb: 127-136. Handout.
GOVT 358/NCLC 375 -- Nonprofit Financial Planning and Accounting
The primary questions to be answered in this project are derived from the class
material. The questions are:
a) Which goals or mix of goals seem to dominate the nonprofit organization --
social equity, social change, political change, others?
b) How can the financial management and accounting system be described?
For example, which rule making body covers the organization? Which
financial management model does the entity use? Is there a treasurer, an
accounting department, and who does the audit?
2) How do you judge the financial success of the nonprofit organization? Is it
good, poor, average? Some models will be given in class to analyze the
financial statements. Use a spreadsheet to do your analysis of the financial
3) Entrepreneurial Techniques
a) Describe an entrepreneurial technique used or if none are apparent,
b) What is the history of the selection of this entrepreneurial technique?
c) How has its success been measured?
4) What recommendations would you make for change in the overall financial
management and in entrepreneurial technique? Take a position. If the
financial condition is declining, what changes might be made? If you feel the
entrepreneurial technique is the wrong one for the organization or that is has
been imposed or forced on the organization, what changes should be made?
Each project will consist of
• An interview with a staff member of the nonprofit
• A careful review of the financial statements -- financial statements usually
have two years of data in the annual report.
• Coverage of the points noted above under questions
• A spreadsheet analysis of the financial statements. Models will be provided in
Projects should be about 10-15 pages in length (double spaced and typed). Be
consisted with references. A range of references should be used, including
academic, trade organization, and sources relevant to the organization being
studied. You can consult and discuss the topic with other members of the class,
but the paper must be your own product. Remember, the material from the
course can be used for organizing and writing the paper.
Tentative schedule for the project
Week 3 Identify 2 or 3 nonprofit organizations
that might be of interest for the project
Week 5 Select a nonprofit; present sources
(including an interview) that you expect
Week 8 Detailed outline -- two pages
description, plus the financial
statements to be used in assessing the
financial success of the nonprofit, and a
Last class Final project
The Technology Component
The Information Technology - Data Organization and Spreadsheets
Central to student appreciation data organization, algorithms and spreadsheets is
to begin with simple financial problems, then, move to progressively more difficult
problems. As the problems become intellectually more challenging, students
begin to see value of focusing on literature behind the algorithms for financial
problem solving rather than spending hours using only isolated data and
spreadsheet tools and trial and error. Staff for Starworks will demonstrate the use
of data organization techniques and Excel and be available for assisting
students. Information for contacting Starworks is attached.
Multiple Data Sources and Data Organization
Although a carefully prepared and cross-referenced tabbed notebook is still
important, database logic and techniques can add considerable power to storing,
accessing and formatting the various types of data and information in this course.
Use of database logic and techniques can not only reduce the labor intensive
and frustrating qualities of a course with various sources of data and information,
but such use can make the student contribution more powerful and it can be of
value for job and academic career use.
One of the fundamental data elements in this class is a database on revenues
and expenses for nonprofit and nongovernmental organizations. Often the task is
to select from the databases to address a particular question such as whether a
nonprofit should more from local or domestic venue to a global one. The data
input (from the database) and what if (pro forma) spreadsheet analysis can be
done more than once to show alternatives and make decisions. Readings can be
scanned as text files to search for academic and professional material relevant to
the database and spreadsheet operations. Finished or quasi finished documents
can be stored using document management systems that arrange and make
these documents searchable by content and file name. Image searching a variety
of files on key words such as "revenue from foreign sources." The even present
demand since 9/11 makes preparedness (often via database construction and
access) added tasks for nonprofit organizations. Students will get an opportunity
to repeat this database, what if, document manipulation process when they do
their field study. The database, what if, document manipulation process will be
gradually introduced with the instructor and the Star unit showing the basic
techniques. In other words, staff for Starworks will be available to demonstrate
the use of data organization techniques and Excel and be available for assisting
Partial List of Nonprofit Organizations
National Arts Stabilization
The Congressional Award
The Fund for American Studies
Washington Performing Arts Society
Project On Government Oversight
WVSA arts connection
National Clean Cities, Inc.
The Bloomingdale Fund, Inc.
Catholics for Housing, Inc.
City Lights School, Inc.
Habitat for Humanity of Northern Virginia
United Way - Fairfax / Falls Church
Alexandria Volunteer Bureau
Americans Helping Americans
Alexandria Christmas in April / Rebuilding Together
New Hope Housing
The Campagna Center
Capital Area Immigrants' Rights Coalition
Children's Trust Neighborhood Initiative
International Service Agencies
American Humanist Association
Washington Council of Agencies
National Center for Nonprofit Boards
The Reading Connection
League of Women Voters
Northern Virginia Family Services
Housing and Community Services of Northern Virginia, Inc. (HCSNV)
Advocates for Youth
Multiple Sclerosis Assn of America
Fairfax Choral Society
Kircher - Marketing Communications | Advertising & Design | Interactive
Alzheimer's Association, National Capital Area.
National City Foundation
American Health Assistance Foundation
Instructor -- Prof. John Sacco