FINANCIAL MANAGEMENT IN NONPROFIT ORGANIZATIONS Executive Summary Several aspects form the basis of financial management in nonprofit organizations. The nonprofit organizations can operate with more independence than the profit making organizations. They are free from the influence of government, financial institutions or other parties…
As for example, social service organizations are required to be more specific with their financial reporting practices so as to comply with the existing rules and regulations. Next, religious nonprofit organizations have vital issues related to the complex requirements of its memberships. Management of finances in nonprofit organizations is quite a challenging task. The sources of revenues of nonprofit organizations are very much vulnerable to changes in political environment or economic issues. Nonprofit organizations being accountable to public require more accurate and reliable presentation of information by the financial management team. The fiscal health of nonprofit organizations can be inferred from its financial statements prepared by the financial mangers. This essay gives a descriptive view about the application of financial management in nonprofit organizations by taking into account various aspects like their fund sources, utilization of its debts, performance evaluation techniques used by them and the governance mechanisms used. It ends with a conclusion and a few recommendations that can be suggested. Table of Contents Table of Contents 3 Introduction 5 Sources of Funds 5 Use of Debt 7 Performance Evaluation 8 Efficient use of contributions 9 Fulfilling organizational objectives 10 Government Mechanisms 11 Conclusion 11 References 13 Introduction A nonprofit organization can be defined as a group which operates for purpose like public services and are not driven by profit motive aspect. The incomes that are generated from nonprofit organizations are usually not shared with the members of the organization. Nonprofit organizations can be in the fields of education, health, human services, environment, etc. Individual grants and donations are the primary sources of funds for nonprofit organizations. Both equity and debt can form the capital structure of the nonprofit organizations but equity is preferred more. This is because loans are not easily available for them due to the unavailability of sufficient collateral and cash flow requirements sought by the banks. Several plans can be employed by the nonprofit organizations for their sustainability and achieving their objectives. Many performance evaluation techniques are also available to help boosting their performance and maintain it for a long term. Government funding can also form a key component and most nonprofit organizations are engaged in several contractual agreements with the government. Hence, managing finance is a vital issue for the continued growth and sustainability of the nonprofit organizations. Sources of Funds Any organization’s plan is the basis of formulation of a successful fund raising strategy. Understanding of the proper funding requirements of an organization and its sources constitutes a good organizational plan. The formulated plan should be balanced too. For any nonprofit organization, the primary sources of funds are as follows: a. Grants: Funding through grants is available from either the charitable trusts or from the public sector. These funds are not meant to be repaid and are usually tax exempted. In most of the cases grants are associated with some conditions like, attainment of particular results, achievement of certain milestones that have been agreed upon, excess unutilized money are to be returned back, providing regular progress report of the utilization of the money, etc. Hence, before ...
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This would involve taking sensible investment as well as financing decisions that would add value to the business. One of the core reasons for concentrating on shareholder wealth is that the businesses that are failed to do so may be taken over by other companies.
In addition, the paper is an attempt to identify challenges that cause confrontations for managers in non-profit organizations. The researcher has put efforts to acquire a global perspective while analyzing the role of non-profit organizations that will be very beneficial for students and professionals in comprehensive understanding of the role of non-profit organizations globally.
Today companies pay specific attention to setting financial management strategies. Several strategies have been developed to maintain a tie between enterprises’ cash inflow and outflow. Evidently, there are certain legal restrictions that limit the scope of financial management operations in nonprofit enterprises.
The researcher discussed various issues related to the financial systems of both types of organizations. The issues that the researcher discussed included sources of funds, use of debt, and organizational objectives. The researcher made use of online resources and journal articles to find support from literature.
Accordingly, it has been identified that there exists a radical differences between business leaders and leaders in the nonprofit sector on the ground of demographic variables and diversity. It has been further observed that it is crucial for older leaders in the nonprofit sector to display concrete roles in order to motivate next generation leaders.
Regardless of the services that are being provided by nonprofit organizations, they still contribute largely in sustaining society’s well-being, smooth functioning and development of a compassionate society (Hill, 90).
However, for the purpose of delivering these
They offer such services either freely or at subsidized rates with the view to improving the social wellbeing of the society. Just as their names suggests, such organizations lack an effective and reliable source of funding. They rely on donations from well-wishers.
pes, with each institution developed and structured to ensure profitability, provide a greater good for domestic or international societies, improve employment for a community or region, or distribute a finished product or service that can enhance a consumers’ lifestyle.
15 Pages(3750 words)Research Paper
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