Financial Management for Public, Health, and Not-for-Profit Organizations, Essay Example

Consider the revenue results from telephone solicitations by Meals for the Homeless in 2011 (see Exhibit 10-2). What do you make of this? What are some possible explanations? What questions do you have?

Based on the revenue results from telephone solicitations by Meals for the Homeless, the first thing that I notice is that the total revenues and support is greater in 2011 than it was in 2010 (Finkler, 2010). Likewise, there is an overall increase in assets in 2011 and this is not the case in 2010. It is also noticeable that this information is not presented in terms of organizational unit. Because of this, it would not be possible for the organization to determine the exact locations that are gaining money and losing money, and it would need this information in order to determine how to prevent future losses. While a breakdown of category of expense and income is helpful, it seems that all of these categories are necessary in order to ensure that Meals for the Homeless can run properly.

Some of the questions that could be asked of the leaders of the volunteer organization is whether they are doing their best to fundraise to support their expenses, why they are not making cuts to their services if they are unable to generate enough income, and if there is a way for them to pay less money to fund their services to ensure that donations to their organization are able to run a longer way.

 Does the difficulty in determining the current value of an asset create a problem in determining the depreciation expense that should be charged for a year?

The difficulty in determining the current value of an asset creates a problem in determining the depreciation expense that should be charged for a year. Since we cannot be certain of the current value of the asset, we also cannot be sure how much it has depreciated. Accountants have developed a formula to help predict this depreciation value, but it is important to consider that this value is just an approximation (Finkler, 2010). Simply put, this calculation takes the initial cost of the asset and the value of the less salvage value is subtracted from it. It assumes that assets are used up the same amount each years, when this is not necessarily true in reality. However, this is the most reasonable way for this determination to be made, because the usage of the asset isn’t always certain. An excellent example of asset depreciation comes into play when considering building ownership. When a building is new, less money will be spent on maintenance. However, as time goes on, these costs will continue to increase. In terms of calculating the depreciation value, however, we can consider that the depreciation taken over an asset’s lifetime stays the same.

Is the information on the balance sheet, activity statement, and cash flow statement independent of one another or connected? Explain.

The information on the balance sheet, activity statement, and cash flow statement are connected. This is due to the fact that changes in the balance sheet account helps the cash flow be prepared. The changes in liabilities, assets, and other factors in the balance sheet are reported in the statement of cash flows. The assets and liabilities based on the operating activities in the cash flow statement are included in a summary of the profit-making activity of the business. Therefore the values that are calculated and recorded for these three components are reliant upon one another (Finkler, 2010).

What is the difference in the way that bonds are reported by for-profit and not-for-profit organizations?

Unlike for-profit organizations, non-for-profit organizations are able to acquire tax exempt bonds. If the bonds are exchanged for profit, these companies are required to report these gains on the balance sheet, activity statement, and cash flow statement. However, if the bonds or other forms of investments are just acquired and not exchanged for cash, they do not have to be reported. On the other hand, for-profit organizations must track all purchases and sales of such bonds (Finkler, 2010).

References    

Finkler, S. A. (2010). Financial management for public, health, and not-for-profit organizations (3rd ed.). Upper Saddle River, NJ: Prentice Hall.