Financial measures provide an empirical basis from which nonprofit researchers and practicing managers can approximate organizational capacity, financial health, and performance. These measures are used in nonprofit research to predict organizational activities and funding opportunities. Yet, little empirical evidence exists to tell us what these measures assess and whether they capture underlying concepts in the way we assume. Using Internal Revenue Service (IRS) Form 990 data, this article explores the following research question: Can accounting measures be organized into theoretically intuitive and empirically defensible constructs? To answer this question, a literature review of nonprofit financial health studies and textbooks was conducted, and dimension reduction techniques were employed. The findings suggest that the answer to the research question is not as simple as expected, and we should exercise more caution in how we use financial measures in nonprofit research.

Why So Many Measures of Nonprofit Financial Performance? Analyzing and Improving the Use of Financial Measures in Nonprofit Research

In this study, the authors explore how the dynamics associated with the founding of new nonprofit organizations, the characteristics of the founders, and the developmental life cycles of nonprofit organizations contribute to the seemingly fragmented landscape of the nonprofit sector. Based on data collected from interviews with 31 nonprofit organizations, we find that new nonprofits are being created by passionate, entrepreneurial individuals who hope to make a difference in the community.  Although these organizations are typically small, with few staff members and small budgets, the extent to which they rely on volunteers and are connected to the broader community varies considerably. Moreover, many founders had little experience volunteering or working in the sector. The findings from this study have important implications for the professional development of nonprofit staff, leaders, and volunteers, and they shed new light on how we think about and describe the founders of nonprofit organizations.

Founding New Nonprofit Organizations: Syndrome or Symptom?

The European Proceedings of Social & Behavioural Sciences

This article explores how various dimensions of market structure, often used to measure organizational crowding, affect the fiscal health of nonprofit organizations. Using 2011 National Center for ...

A Field Too Crowded? How Measures of Market Structure Shape Nonprofit Fiscal Health:

This project concerns the use of performance measurement in the nonprofit sector, including the growing use of this tool to increase program function, enhance decision-making, and compare organizations. It explores the implementation and modification of a small nonprofit agency’s performance measurement system and includes the design and implementation of additional tools. Key staff members of the nonprofit were interviewed about their experiences regarding measurement of a federal grant, and 22 program participants completed a survey of medium-term outcomes. The data suggest several changes to enhance program delivery and increase word of mouth referrals. The present researcher designed a logic model, program dashboard, survey, and phone survey to add to the nonprofit’s existing data collection tools.

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Performance Measurement: Theory and Practice

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

/pdf/streetsmart-financial-basics-for-nonprofit-managers-3i1n542swp.pdf

Streetsmart Financial Basics for Nonprofit Managers

Acknowledgments. Introduction. Chapter 1 A Valid Strategic Option for the Future. Government's Retreat. Chapter 2 The Freestanding Nonprofit and Other Rugged Individualists. Why Nonprofit Services Are Fragmented: A Story. A Nonprofit's Economics Are Part of Its Strategy. Chapter 3 Logic of Integrated Service Delivery. Applications of Integrated Service Delivery. Elements of Integration. Chapter 4 Deciding to Collaborate. Rescue Mergers. Merger from Strength. Deciding to Collaborate as a Function of Larger Forces. Chapter 5 Preserving Identity. Nonphysical Components of Organizational Identity. What Is Not Part of "Identity" and What Is. Chapter 6 The Role of Funders. What Funders Can Do. Funding Collaborations. Models for Funding Collaborations. Quality Assurance through Foundations. Chapter 7 C.O.R.E. Continuum of Collaboration. Our Model. Applying the C.O.R.E. Chapter 8 Economic-Level Collaboration. Sharing Information. Bidding Jointly Joint Purchasing. Chapter 9 Responsibility-Level Collaboration. "Circuit Riders". High-Integration Collaboration Models. A Cautionary Note. Chapter 10 Operations-Level Collaboration. Shared Training. Joint Programming. Joint Quality Standards. Chapter 11 Corporate-Level Collaboration: Merger. Authority Is Concentrated. Offi cial Start Dates May Be Anticlimactic. What It Means to Merge. The Essence of a Nonprofit Merger. Advantages and Disadvantages of a Merger. Chapter 12 Models of Collaboration: Merger by Management Company. Structure. Control and Governance. Advantages of a Management Company. Disadvantages of a Management Company. Faulty Integration in a Management Company Model. Chapter 13 Models of Collaboration: Alliances. Structure. Chapter 14 Models of Collaboration: Partnerships with and between Nonprofits. Structure. Control and Governance. Special Considerations. Partnerships with For-Profit Companies. Limited Liability Companies. Chapter 15 Merger Myths. We Will Save Administrative Costs. There Will Be Massive Job Cuts. We Will Lose Our Identity. Let Us Figure Out the Structure First. Shhh. Only Failing Organizations Merge. Increase in Mergers Is a Product of an Economic Downturn. Chapter 16 First Steps. Geographic Proximity. Absence of a Permanent CEO. Nonoverlapping Markets. Industrializers and Prototypers. Compatibility of Services. Special Assets. Role of Culture. Role of Class. Quick Culture Check. Building Trust. Seeds of Trust: Disclosure, Consultation, and Collaboration. Chapter 17 Merger or Alliance? How to Decide. Corporate Control. Chapter 18 First Phase of a Merger: Feasibility Assessment. Informal Phase of a Collaboration. Role of Consultants. Form a Collaboration Committee. Why Due Diligence? What Is a Due Diligence Investigation? Governance. Finances. Assets. Liabilities and Obligations. Some Financial Red Flags. Valuations. Carrying Out the Valuation. Pro Forma Financials, Including Cash Flows. Regulatory Filings. Human Resources Information. Assess the Feasibility. Chapter 19 Second Phase of a Merger: Implementation Planning. Form Subcommittees of the Collaboration Committee. Internal Communication. External Communication. Some Sample Collaboration Committee Structures. Who Will Be the Boss? Some Tools to Accomplish a Leadership Transition. Once the Selection Is Made ... Creating the Formal Agreement. Merger Announcement (Create a Splash). Chapter 20 Third Phase of a Merger: Integration. Time Required for Integration. Common Sources of Resistance. Chapter 21 The Seven Stages of Alliance Development. Categories of Alliances. Seven Tasks of Alliance Development. Task One: Initiate, Explore, and Analyze. Task Two: Synthesize and Plan. Task Three: Establish Shared Objectives. Task Four: Develop Working Committee Structure. Task Five: Gain Quick Victories. Task Six: Secure Institutionalize Buy-in Task Seven: Implement and Evaluate. Chapter 22 Postscript and Conclusion. About the Author. Index.

Thomas A. McLaughlin

Papers

Streetsmart Financial Basics for Nonprofit Managers

Nonprofit Mergers and Alliances