PUAD 664 -- Nonprofit Financial Management
    Sample Syllabus - this syllabus is designed to provide an idea of the
     ...
demand since 9/11/01 makes preparedness (often via database construction and
access to good sources of information) an add...
http://mason.gmu.edu/ISO/SysEng/Mason/account.html
If you use your own ISP, you will have redirect your GMU email to the e...
b) http://www3.interscience.wiley.com/cgi-bin/fulltext/49870/PDFSTART
4) A budget system for nonprofit organizations
   a)...
a) “Balance sheet: How they get that way.” Chapter 4 in McLaughlin
   b) “Nonprofit Accounting: Acknowledging the Strings ...
18) Final Exam- take home

Some nonprofit sites
http://www.guidestar.org/
http://www.nationalcne.org/papers/corp_partner.h...
The primary questions to be answered in this project are derived from the class
material. The questions are:
1) Background...
Project Requirements
Select a nonprofit with the consent of the professor
The primary questions to be answered in this pro...
•   A careful review of the financial statements in the annual-- financial
    statements usually have two years of data i...
•   "Application of cost-volume-profit analysis in the governmental
    environment." Caldwell and Welch. (1989). Associat...
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  1. 1. PUAD 664 -- Nonprofit Financial Management Sample Syllabus - this syllabus is designed to provide an idea of the course; it will change every semester Understanding social mission and entrepreneurial cross pressures Professor John F. Sacco, all rights reserved@2006; material from this syllabus cannot be used for publication or any use outside prof. Sacco’s class. jsacco@gmu.edu Catalog description -- Provides an understanding of the social mission and entrepreneurial cross pressures underlying financial planning and accounting in the nonprofit sector. Topics include budgeting, revenue sources, revenue projections, entrepreneurial techniques, auditing and cost analysis for nonprofit and nongovernmental entities. Information technology associated with nonprofit financial management will also be covered. Preparation and course requirements –Need a basic knowledge of MS Excel or a spreadsheet of your choice. However, GMU supports MS Excel and all spreadsheet assignment will be sent in MS excel. Webct will be used. For details on WebCT, another document will be provided. 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 social and humanitarian 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
  2. 2. demand since 9/11/01 makes preparedness (often via database construction and access to good sources of information) 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 public services • Introduce students to the traditional social mission driven approach of nonprofit organizations, the historic reliance on charitable contributions, and traditional financial planning and accounting • Examine budgeting and auditing including working with the Board on these matters • 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 nonprofit organizations • 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 spreadsheets, such as Excel, to test and implement financial challenges faced by nonprofit organizations. Grading The course will be based on an in-class midterm worth 45%, a set of homework computer exercises worth 35% and a project worth 20%. For the project, each student will find the financial statements for two nonprofits, scan the financial statements and do a spreadsheet analysis. For the statements, apply ratio and trend analysis. A theoretical basis will be developed in the course. Further details on the project will be via webct. Some of the exercises will involve evaluating actual financial statements. The project 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. All work must be done electronically on webct (no hand written work). GMU Computer Accounts Check this URL if you have not activated your GMU email account:
  3. 3. http://mason.gmu.edu/ISO/SysEng/Mason/account.html 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. Wiley. 2nd edition. In the topics section, a number of the readings are marked email or the URL is given. For email the professor will send these readings. Place the cursor over the URL and you should get the keys needed to depress to obtain the documents. The syllabus also includes a reference section for further reading. If you are interested in one of these and cannot locate it, ask one of the reference librarians. A list of assignment by document name is given. Not all will be sent; some not listed will be added. The class may have to use Webct. A decision will be made by the 2nd week of class. Topics 1) Use Star Labs if you need help with the Excel Spreadsheet assignments a) Information about Star can be found at i) http://media.gmu.edu/ b) Material will be provided (usually via GMU email) for the computer exercises 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) "Mission: managing your two bottom lines." Chapter 2 in McLaughlin (2002). Streetsmart Financial Basics for nonprofit managers. Wiley. (2) McLaughlin. Chapter 15. "To Raise More Money, Think Cows" Textbook (3) 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 (4) Selected assignments will be emailed 3) Challenges nonprofit organizations face when multiple organizations (private firms and government) 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.
  4. 4. b) http://www3.interscience.wiley.com/cgi-bin/fulltext/49870/PDFSTART 4) A budget system for nonprofit organizations a) Integrate with strategic plan b) Integrate with IT capacity c) Use of flexible budgets i) Readings: ii) McLaughlin. Chapter 11. Budgeting iii) Discussion assignment, see Budgeting for a Nonprofit Organization, via email iv) Static budget assignment, email np budget static mclaughlin v) Demo for flexible budgets- this spreadsheet will offer students an opportunity to see how a flexible budget is presented and calculated, np budget flex demo ans via email vi) assignment for flexible budgets, (1) np budget flex homework no ans via email 5) Cross pressures on finance and accounting in nonprofit organizations - trust, global 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 scarce resources. 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. Issues are also raised about anti-globalization forces and their impact on nonprofit financing (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. http://nvs.sagepub.com/cgi/reprint/28/suppl_1/147 (2) Sense and Nonsense in the Globalization Debate (in Globalization: The Debate), Dani Rodrik. Foreign Policy, No. 107. (Summer, 1997), pp. 19-37. Click on the “button” to get the sense and nonsense article (3) Email np financing and globalization definitions (4) Email, np financing in global context (discussion questions assignment) ii) Notes and practice problem to show challenges faced by nonprofit entities in this competitive global market -- when should nonprofits operate globally? This assignment will provide another example of working with Excel (1) Email np global reach spreadsheet assignment 6) Readings for financial statements
  5. 5. a) “Balance sheet: How they get that way.” Chapter 4 in McLaughlin b) “Nonprofit Accounting: Acknowledging the Strings Attached.” Chapter 6 in McLaughlin 7) The financial reporting and accounting system -- measures of success, health, and compliance a) Using these financial statements 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 8) 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 (a) Types of revenue (b) Handling pledges receivable (c) Paper losses and gains 9) 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 (1) Assignment via email, np fin statement (sheet 1 is the problem; sheet 2 gives the answers), showing the components of net assets, unrestricted, temporarily restricted, and permanently restricted ii) Additional practice financial statement problems are available if you wish to do more 10)Preliminary Report on Project 11)Midterm, in class, about here 12)Readings, Borrowing and Pricing (a) "Capital: why capital is not four letter word." Chapter 10 in McLaughin (2002). Streetsmart Financial Basics for nonprofit managers. Wiley. (i) Email assignment np capital chapter questions (ii) Email np capital net present value demo and problem (np capital net present value no ans (b) "Pricing: How much should it cost?" Chapter 13 in McLaughlin (2002). Streetsmart Financial Basics for nonprofit managers. Wiley. (i) Assignment np pricing [discussion] (ii) Np pricing students demo and exercise 13)Readings, "Cash flow management." Chapter 9 in McLaughlin. 14)Readings, “Internal controls for External Goals.” Chapter 17 in Mclaughlin 15)Readings, “Auditing and Using an Auditor.” Chapter 8 in Mclaughlin 16)Progress report on Project 17)Review
  6. 6. 18) Final Exam- take home Some nonprofit sites http://www.guidestar.org/ http://www.nationalcne.org/papers/corp_partner.htm http://www.independentsector.org/mission_market/tax.htm 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 i) Taxation 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. Project Project Requirements
  7. 7. The primary questions to be answered in this project are derived from the class material. The questions are: 1) Background a) Which goals or mix of goals seem to dominate the nonprofit organization -- social equity, social change, political change, others? In addition, make an explicit statement or the mission. 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. These will include ratio and trend analysis. Use a spreadsheet to do your analysis of the financial statements. In addition, place the values from the statement of activities and state of financial position in a spreadsheet. It is these two statements from which your ratio and trend analysis will come. You will need two years of data from these statements as well as two years of the Form 990. 3) Entrepreneurial Techniques a) Describe an entrepreneurial technique used or if none are apparent, explain why. 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 must have two years of data and that is usually the case in the annual report. The review includes the same two years for the Form 990. • Coverage of the points noted above under questions • A spreadsheet analysis of the financial statements and Form 990. Models will be provided in class, including ratio and trend analysis. • A copy of the statement of activities (similar to an income statement) and a copy of the statement of financial position (sometimes called the balance sheet) with all the data in a spreadsheet. These must have two years of data. • All material must be in one document that can be emailed via webct. This means you’ll like have to scan the financial statement It is wise to copy and paste this format (i.e., Project requirements) into a Word Document and fill in information as you gather it.
  8. 8. Project Requirements Select a nonprofit with the consent of the professor The primary questions to be answered in this project are: 5) What nonprofit and financial theories are you testing? For example, a) Commercialization of nonprofits b) Management theories c) External relations 6) Background a) Which goals or mix of goals seem to dominate the nonprofit organization? b) How can the financial management and accounting system be described? For example, i) which rule making body covers the organization? ii) Which financial management model does the entity use? iii) Is there a treasurer, an accounting department, and who does the audit? 7) 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. These models will be based on ratio and trend analysis. Some typical ratios are the liquidity ratios such as the current ratio and capital structure such as long term debt to total net assets. Two years of Form 990s for the nonprofit selected are a must. The annual is also a must for the project. In addition, what indicators, including but going beyond ratios and trends would show whether the nonprofit is a risk taker or risk adverse? 8) Use a spreadsheet to do your analysis of the financial statements. What external factors such as economic conditions affect the finances? 9) Do for-profit firms in activities similar to the nonprofit feel the nonprofit is unfair competition? 10)Entrepreneurial Techniques a) One definition is willingness to disregard conventional wisdom; others will be discussed such as royalties b) Describe an entrepreneurial technique used or if none are apparent, explain why. c) What is the history of the selection of this entrepreneurial technique? d) How has its success been measured? e) In your analysis of the nonprofit’s risk taking propensity. 11)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
  9. 9. • A careful review of the financial statements in the annual-- financial statements usually have two years of data in the annual report; two years of Form 990 are a must • Coverage of the points noted above under questions • A spreadsheet analysis of the financial statements and Form 990. Models will be provided in class for ratios and trends • Use tables for presentation to supplement your written and quantitative analysis • A copy of the statement of activities (similar to an income statement) and a copy of the statement of financial position (sometimes called the balance sheet). These usually have two years of data. Put the data into a spreadsheet • All material must be in one document that can be emailed via webct. This means you’ll likely have to scan some material, e.g., a pamphlet if it’s appropriate. Do not scan hand written It is wise to copy and paste this format (i.e., Project requirements) into a Word Document and fill in information as you gather it. Projects should be about 10-15 pages in length (double spaced and typed). Be consisted with references. A variety 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. Other references: • "Globalization and its limits." Wade, R. in Dickens, P (1998). Global Shifts. • 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, OH. • "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. Optional.
  10. 10. • "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. • http://ksghome.harvard.edu/~ekeatin/finassess.pdf

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