Table of Contents

1. COVER
2. TITLE PAGE
3. ABOUT THE AUTHORS
4. PREFACE
5. ACKNOWLEDGMENTS
6. CHAPTER 1: UNDERSTANDING NONPROFIT ORGANIZATION FINANCES
   1. 1.1 THE IMPACT OF THE GREAT RECESSION
   2. 1.2 DEFINITION OF NONPROFIT ORGANIZATIONS
   3. 1.3 CHARACTERISTICS OF NONPROFIT ORGANIZATIONS
   4. 1.4 UNDERSTANDING THE LANGUAGE OF THE NONPROFIT ORGANIZATION
   5. 1.5 FINANCIAL POLICIES
   6. 1.6 FINANCIAL PRACTICES
   7. 1.7 PRIMARY FINANCIAL OBJECTIVE
   8. 1.8 CONCLUSION
   9. NOTES
   10. APPENDIX 1A: THE LILLY STUDY FINDINGS
       1. THE LILLY STUDY
       2. MANAGEMENT AND FINANCIAL OBJECTIVES
       3. ON-SITE INTERVIEWS, QUESTIONNAIRES, AND ARCHIVAL STUDIES
       4. THE APPROPRIATE LIQUIDITY TARGET MODEL
       5. NOTE
7. CHAPTER 2: LIQUIDITY MANAGEMENT
   1. 2.1 INTRODUCTION
   2. 2.2 NONCOMMERCIAL NONPROFIT ORGANIZATIONS
   3. 2.3 EVIDENCE ON LIQUIDITY MANAGEMENT IN THE NONPROFIT SECTOR
   4. 2.4 FACETS OF LIQUIDITY MANAGEMENT
   5. 2.5 IMPORTANCE OF LIQUIDITY MANAGEMENT
   6. 2.6 WHAT IS THE APPROPRIATE LEVEL OF LIQUIDITY?
   7. 2.7 CONCLUSION
   8. NOTES
8. CHAPTER 3: MANAGING MISSION, STRATEGY, AND FINANCIAL LEADERSHIP
   1. 3.1 VALUE OF STRATEGIC PLANNING
   2. 3.2 WHAT IS STRATEGIC PLANNING?
   3. 3.3 WHAT ARE THE ORGANIZATION'S MISSION, VISION, AND GOALS/OBJECTIVES?
   4. 3.4 STRATEGIC MANAGEMENT PROCESS
   5. 3.5 IMPLEMENTING THE STRATEGIC PLAN
   6. 3.6 PERFORMANCE MANAGEMENT SYSTEMS
   7. 3.7 STRATEGIC PLANNING PRACTICES: WHAT DOES THE EVIDENCE SHOW?
   8. 3.8 CONCLUSION
   9. NOTES
9. CHAPTER 4: MANAGING STRUCTURE, ACCOUNTABILITY, AND ETHICS
   1. 4.1 FINANCIAL TOOLS AND SUPPORT STRUCTURE
   2. 4.2 ORGANIZATIONAL STRUCTURE AND GOVERNANCE
   3. 4.3 ACCOUNTABILITY STRUCTURE
   4. 4.4 ETHICS
   5. 4.5 STRUCTURE, ACCOUNTABILITY, AND ETHICS IN PRACTICE
   6. 4.6 NEW FORMS
   7. 4.7 CONCLUSION
   8. NOTES
   9. APPENDIX 4A: BY-LAWS OF THE ABC EDUCATIONAL FOUNDATION – A CALIFORNIA NONPROFIT PUBLIC BENEFIT CORPORATION
      1. ARTICLE I. NAME
      2. ARTICLE II. OFFICES
      3. ARTICLE III. PURPOSES AND POWERS
      4. ARTICLE IV. MEMBERSHIP CORPORATION
      5. ARTICLE V. TRUSTEES
      6. ARTICLE VI. STANDING BOARDS OF THE FOUNDATION
      7. ARTICLE VII. OFFICERS
      8. ARTICLE VIII. PROCEDURES
      9. ARTICLE IX: MISCELLANEOUS
      10. ARTICLE X. AMENDMENTS TO BY-LAWS
      11. NOTES
   10. APPENDIX 4B: SUMMARY OF TRUSTEE RESPONSIBILITIES AND QUALIFICATIONS
       1. BOARD OF TRUSTEES
       2. BOARD CHAIR
       3. EXECUTIVE DIRECTOR/CHIEF EXECUTIVE OFFICER
       4. TREASURER/CHIEF FINANCIAL OFFICER
       5. SECRETARY
       6. NOMINATING COMMITTEE
       7. FINANCE COMMITTEE
       8. VOLUNTEERS
   11. APPENDIX 4C: RECOMMENDED GOVERNANCE AND ETHICS RESOURCES
10. CHAPTER 5: DEVELOPING FINANCIAL POLICIES
    1. 5.1 INTRODUCTION
    2. 5.2 FINANCIAL POLICIES
    3. 5.3 PUTTING POLICIES INTO PLACE
    4. 5.4 ESTABLISHING PROCEDURES
    5. 5.5 FINANCIAL POLICIES AND PROCEDURES IN PRACTICE
    6. 5.6 ADDITIONAL RESOURCES
    7. NOTES
    8. APPENDIX 5A: NONPROFIT FINANCIAL POLICY EXAMPLES ON THE INTERNET
    9. APPENDIX 5B: GOOD, BETTER, AND BEST MEASURES OF TARGET LIQUIDITY
11. CHAPTER 6: UNDERSTANDING FINANCIAL ACCOUNTING BASICS AND FINANCIAL STATEMENTS
    1. 6.1 INTRODUCTION
    2. 6.2 FINANCIAL STATEMENT USERS AND USES
    3. 6.3 ACCOUNTING BASICS
    4. 6.4 THREE FINANCIAL STATEMENTS
    5. 6.5 THE AUDIT AND THE AUDIT COMMITTEE
    6. 6.6 FINANCIAL STATEMENT USERS AND USES IN PRACTICE
    7. 6.7 SOCIAL ACCOUNTING
    8. 6.8 ADDITIONAL RESOURCES
    9. NOTES
    10. APPENDIX 6A: REVISED FINANCIAL STATEMENT FORMAT – ACCOUNTING STANDARDS UPDATE 2016-14
        1. REASON FOR AND SUMMARY OF STATEMENT PRESENTATION CHANGES
        2. COMPARING THE NEW FORMAT TO THE OLD FORMAT
        3. ILLUSTRATING THE NEW FORMAT FOR STATEMENT OF ACTIVITIES, STATEMENT OF CASH FLOWS, LIQUIDITY AND AVAILABILITY DISCLOSURE
        4. INTERPRETATIONS AND IMPLICATIONS
        5. NOTES
12. CHAPTER 7: DEVELOPING FINANCIAL REPORTS AND RATIOS: MAKING SENSE OF THE NUMBERS
    1. 7.1 INTRODUCTION
    2. 7.2 MAJOR DIFFERENCES FROM FOR-PROFIT BUSINESS REPORTS
    3. 7.3 OBJECTIVES OF FINANCIAL REPORTS
    4. 7.4 REPORTING SYSTEM DESIGN
    5. 7.5 MAJOR REPORTS
    6. 7.6 INTERNAL REPORTS
    7. 7.7 EXTERNAL REPORTS
    8. 7.8 CONCLUSION
    9. NOTES
    10. APPENDIX 7A: EXAMPLE FINANCIAL RATIO CALCULATIONS
    11. APPENDIX 7B: ADDITIONAL FINANCIAL RATIOS
        1. 7B.1 BUSINESS LIQUIDITY, FUNDING, AND OPERATING RATIOS
        2. 7B.2 OTHER RATIOS USED BY CHARITY RATING SERVICES
        3. 7B.3 STATEMENT OF CASH FLOWS RATIOS
        4. 7B.4 RATIOS WITH COMPARATIVE BENCHMARK DATA AVAILABLE (BASED ON FORM 990)
        5. 7B.5 COMPARATIVE BENCHMARK DATA FOR FAITH-BASED ORGANIZATIONS (BASED ON SA AND SFP)
    12. APPENDIX 7C: CREDIT RATING AGENCIES AND DOE RATIOS
        1. WEBSITES FOR CREDIT RATING AGENCIES
13. CHAPTER 8: DEVELOPING OPERATING AND CASH BUDGETS
    1. 8.1 INTRODUCTION
    2. 8.2 OVERVIEW OF THE BUDGETING PROCESS
    3. 8.3 ARE NONPROFIT ORGANIZATIONS DOING THEIR BUDGETING PROPERLY?
    4. 8.4 DEVELOPING AND IMPROVING YOUR BUDGETING PROCESS
    5. 8.5 SETTING THE BUDGETARY AMOUNTS
    6. 8.6 BUDGET TECHNIQUE REFINEMENTS
    7. 8.7 CASH BUDGET
    8. 8.8 MANAGING OFF THE BUDGET
    9. 8.9 CONCLUSION
    10. NOTES
    11. APPENDIX 8A: CASE STUDY: THE CASH CRISIS AT THE CHILDREN'S TREATMENT CENTER
        1. THE HONOLULU CHILDREN'S TREATMENT CENTER
        2. SOURCES OF REVENUES
        3. EXPENSES
        4. THE BANK LOAN
        5. QUESTIONS
    12. APPENDIX 8B: CASE STUDY: TRI-CITY ACADEMY
        1. CASH BUDGET
        2. CASH BUDGET
14. CHAPTER 9: LONG-RANGE FINANCIAL PLANNING AND CAPITAL BUDGETING
    1. 9.1 INTRODUCTION
    2. 9.2 PLANNING FOR THE FUTURE
    3. 9.3 FINANCIAL EVALUATION OF NEW AND EXISTING PROGRAMS
    4. 9.4 CAPITAL BUDGETING: FINANCIAL EVALUATION OF PROJECTS THAT ARISE FROM EXISTING PROGRAMS
    5. 9.5 FINANCIAL EVALUATION OF MERGERS, JOINT VENTURES, AND STRATEGIC ALLIANCES
    6. 9.6 FINANCIAL PLANNING AND CAPITAL BUDGETING IN PRACTICE
    7. 9.7 CONCLUSION
    8. NOTES
    9. APPENDIX 9A: CASE STUDY: KIAWAH ISLAND COMMUNITY ASSOCIATION
    10. APPENDIX 9B: EVALUATING SOCIAL ENTERPRISES
        1. FRAMEWORK INTERPRETATION AND IMPLEMENTATION
        2. CAVEATS
        3. NOTES
15. CHAPTER 10: MANAGING YOUR ORGANIZATION'S LIABILITIES
    1. 10.1 MANAGING THE BALANCE SHEET
    2. 10.2 BALANCE SHEET MANAGEMENT: BENEFITS AND STEPS
    3. 10.3 PAYABLES
    4. 10.4 SHORT-TERM BORROWING
    5. 10.5 STRATEGIC FINANCING PLAN
    6. 10.6 STEPS TO SUCCESSFUL BORROWING
    7. 10.7 MATCHING FINANCIAL SOURCES TO STRATEGIC OBJECTIVES
    8. 10.8 PREPARING THE FINANCING PROPOSAL
    9. 10.9 MAKING THE PRESENTATION
    10. 10.10 OTHER FACTORS IN BORROWING/LENDING DECISIONS
    11. 10.11 MUNICIPAL AND TAXABLE BONDS
    12. 10.12 LEASING AND NONTRADITIONAL FINANCING SOURCES
    13. 10.13 DEVELOPING A DEBT AND HEDGING POLICY
    14. 10.14 LIABILITY MANAGEMENT IN PRACTICE
    15. 10.15 CONCLUSION
    16. NOTES
16. CHAPTER 11: CASH MANAGEMENT AND BANKING RELATIONS
    1. 11.1 INTRODUCTION
    2. 11.2 WHAT IS CASH MANAGEMENT?
    3. 11.3 COLLECTION SYSTEMS: MANAGING AND ACCELERATING RECEIPT OF FUNDS
    4. 11.4 DISBURSEMENTS
    5. 11.5 STRUCTURING A FUNDS MANAGEMENT SYSTEM
    6. 11.6 MONITORING BANK BALANCES AND TRANSACTIONS
    7. 11.7 CASH FORECASTING
    8. 11.8 SHORT-TERM BORROWING
    9. 11.9 SHORT-TERM INVESTING
    10. 11.10 BENCHMARKING TREASURY FUNCTIONS
    11. 11.11 UPGRADING THE CALIBER OF TREASURY PROFESSIONALS
    12. 11.12 SECURITY AND RISK MANAGEMENT ISSUES
    13. 11.13 TRENDS IN TREASURY MANAGEMENT
    14. NOTES
    15. APPENDIX 11A: DIRECT PAYMENT FOR NONPROFITS
        1. SAVE TIME AND COSTS, AND ADVANCE ORGANIZATIONAL GOALS
        2. INCREASE EFFICIENCIES IN YOUR ORGANIZATION
        3. INCREASE DONATION DOLLARS AND ENCOURAGE CONTINUED GIVING
        4. KEEP YOUR BUSINESS PAYMENTS AND DONATIONS SECURE
        5. CALCULATE SAVINGS
        6. GET STARTED
        7. RESOURCES
    16. APPENDIX 11B: DIRECT PAYMENT CASE STUDY
17. CHAPTER 12: INVESTMENT POLICY AND GUIDELINES
    1. 12.1 INVESTMENT POLICY
    2. 12.2 INVESTMENT GUIDELINES
    3. 12.3 CHECKLIST OF ELEMENTS FOR LONG-TERM/ENDOWMENT INVESTMENT POLICY AND GUIDELINES
    4. 12.4 INVESTMENT COMMITTEE
    5. 12.5 TRENDS IN INVESTMENT MANAGEMENT
    6. 12.6 INVESTMENT POLICY SUMMARY
    7. NOTES
    8. APPENDIX 12A: SAMPLE OF SHORT-TERM INVESTMENT POLICY AND GUIDELINES
       1. INVESTMENT COMMITTEE
       2. INVESTMENT POLICY
       3. INVESTMENT RESPONSIBILITY
       4. REPORTING
       5. INVESTMENTS
       6. MATURITY LIMITATIONS
       7. REVIEW AND/OR MODIFICATION
    9. APPENDIX 12B: INVESTMENT POLICY
       1. INTRODUCTION
       2. INVESTMENT ASSETS
       3. PURPOSE OF THE INVESTMENT POLICY
       4. DELEGATION OF AUTHORITY
       5. RESPONSIBILITIES OF THE INVESTMENT AND FINANCE COMMITTEE
       6. RESPONSIBILITIES OF THE INVESTMENT MANAGER
       7. RESPONSIBILITIES OF THE CUSTODIAN
       8. CASH FLOW REQUIREMENTS
       9. GENERAL INVESTMENT PRINCIPLES/ASSUMPTIONS
       10. ASSET DIVERSIFICATION
       11. ASSET QUALITY
       12. INVESTMENT OBJECTIVES
       13. ASSET ALLOCATIONS
       14. SOCIAL RESPONSIBILITY
       15. PERFORMANCE EVALUATION AND REPORTING REQUIREMENTS
    10. APPENDIX 12C: SHORT-TERM INVESTMENT POLICY FOR HIJ FOUNDATION
    11. APPENDIX 12D: SAMPLE OF INVESTMENT POLICY STATEMENT FOR THE ABC FOUNDATION'S LONG-TERM ENDOWMENT POOL
        1. STATEMENT OF INVESTMENT OBJECTIVES
        2. ASSET ALLOCATION
        3. GUIDELINES FOR THE SELECTION OF FIXED-INCOME SECURITIES
        4. GUIDELINES FOR SELECTION OF EQUITIES: DIVERSIFICATION FOR EACH MANAGER
        5. PERFORMANCE
        6. PERMISSIBLE AND NONPERMISSIBLE ASSETS
        7. SELECTION OF INVESTMENT MANAGERS
        8. RESPONSIBILITIES OF THE INVESTMENT MANAGER
    12. APPENDIX 12E: DEFINITIONS OF FIXED-INCOME INSTRUMENTS
        1. US TREASURY SECURITIES
        2. US GOVERNMENT AGENCY OBLIGATIONS
        3. MUNICIPAL SECURITIES
        4. BANK OBLIGATIONS
        5. ASSET-BACKED SECURITIES
        6. COMMERCIAL PAPER
        7. LOAN PARTICIPATIONS
        8. CORPORATE NOTES AND BONDS
        9. REPURCHASE AGREEMENTS
        10. MONEY-MARKET MUTUAL FUNDS
        11. NOTE
    13. APPENDIX 12F: DEFINITIONS OF EQUITY INSTRUMENTS
    14. APPENDIX 12G: GLOSSARY
18. CHAPTER 13: INFORMATION TECHNOLOGY AND KNOWLEDGE MANAGEMENT
    1. 13.1 INTRODUCTION
    2. 13.2 HOW MUCH TECHNOLOGY AND WHICH TO CHOOSE?
    3. 13.3 KNOWLEDGE MANAGEMENT AND INFORMATION TECHNOLOGY
    4. 13.4 INFORMATION TECHNOLOGY IN TODAY'S NONPROFITS
    5. 13.5 WHAT SHOULD I KNOW/DO BEFORE INVESTING IN TECHNOLOGY TOOLS?
    6. 13.6 SOFTWARE: DESIGN INTERNALLY OR PURCHASE?
    7. 13.7 DISCLOSURE, THE LAW, AND SECURITY
    8. 13.8 NEEDS ASSESSMENT AND ANALYSIS
    9. 13.9 POLICIES AND PRACTICES IN KNOWLEDGE MANAGEMENT AND INFORMATION TECHNOLOGY
    10. NOTES
    11. APPENDIX 13A: GLOSSARY OF BASIC TECHNICAL TERMS
    12. APPENDIX 13B: FRAMEWORK FOR AN IMPLEMENTATION STRATEGY
    13. APPENDIX 13C: CASE STUDY: USING TECHNOLOGY TO IMPROVE CASH AND TREASURY MANAGEMENT
        1. THE SAN DIEGO ZOO'S CFO BROUGHT THE RIGORS OF CASH FLOW FORECASTING
        2. THE CULTURAL REVOLUTION
        3. ALMOST IN REACH
        4. NOTE
19. CHAPTER 14: MANAGING RISK, LEGAL ISSUES, AND HUMAN RESOURCES
    1. 14.1 WHAT IS RISK MANAGEMENT?
    2. 14.2 IDENTIFYING RISK
    3. 14.3 PRIMARY FINANCIAL RISK: ILLIQUIDITY
    4. 14.4 LEGAL ENVIRONMENT
    5. 14.5 SAFEGUARDING PEOPLE
    6. 14.6 DIRECTORS' AND OFFICERS' LIABILITY
    7. 14.7 SAFEGUARDING YOUR FINANCIAL AND PHYSICAL ASSETS
    8. 14.8 RISK MANAGEMENT AND HUMAN RESOURCE MANAGEMENT PRACTICES
    9. NOTES
    10. APPENDIX 14A: DERIVATIVES CHECKLIST
        1. WHY DERIVATIVES?
        2. FORWARDS VERSUS FUTURES
        3. GUIDELINES FOR DERIVATIVES USE: A CHECKLIST
        4. NOTES
    11. APPENDIX 14B: CASE STUDY OF ASSOCIATION'S FOREIGN EXCHANGE RISK MANAGEMENT
20. CHAPTER 15: EVALUATING YOUR POLICIES AND PROGRESS
    1. 15.1 INTRODUCTION
    2. 15.2 EVALUATION
    3. 15.3 EVALUATING YOUR DECISIONS AND ETHICS
    4. 15.4 EVALUATING YOUR COMMUNICATIONS
    5. 15.5 EVALUATING YOUR MENTORING AND SUPERVISORY SKILLS
    6. 15.6 TESTING YOUR SUPERVISORY AND MANAGERIAL SKILLS
    7. 15.7 EVALUATING THE STRATEGIC NATURE OF YOUR ROLE
    8. 15.8 EVALUATING THE FINANCIAL HEALTH OF YOUR ORGANIZATION
    9. 15.9 EVALUATING YOUR FINANCIAL POLICIES IN SIX KEY AREAS
    10. 15.10 EVALUATING QUALITY AND OUTCOMES
    11. 15.11 USING EXTERNAL CONSULTANTS AND DATA SOURCES
    12. 15.12 CONCLUSION
    13. NOTES
21. INDEX
22. END USER LICENSE AGREEMENT

Guide

1. Cover
2. Table of Contents
3. Begin Reading

List of Exhibits

1. Chapter 1
   1. Exhibit 1.3 Spectrum of Nonprofit Organizations
   2. Exhibit 1A.1 Overlap of Several Popular Financial Objectives
   3. Exhibit 1A.2 Overlap of Several Popular Financial Objectives
   4. Exhibit 1A.3 Intertemporal Appropriate Liquidity Target Model
2. Chapter 2
   1. Exhibit 2.1 Why Net Assets Will Not Pay the Bills
   2. Exhibit 2.3 Cash Flow Model of Donative Nonprofit Finances
   3. Exhibit 2.5 Organizations Downgraded by AIP Due to “Excess Solvency”
   4. Exhibit 2.6 Financial Manager's View of the Cash Flow and Revenue Stream
   5. Exhibit 2.7 Diagnostic Tool for Setting Organization's Appropriate Liquidity Target
3. Chapter 3
   1. Exhibit 3.1 Strategic Management Phases
   2. Exhibit 3.2 Worksheet for Strength, Weakness, Opportunity, and Threat (SWOT) Analysis
   3. Exhibit 3.4 Example of Human Services Organization Balanced Scorecard
   4. Exhibit 3.7 Three-Dimensional Portfolio
   5. Exhibit 3.8 The Organized Abandonment Grid
4. Chapter 4
   1. Exhibit 4.6 Treasury Analyst and CFO as Strategic Partner
   2. Exhibit 4.9 Range of Ethics
5. Chapter 5
   1. Exhibit 5.2 Simplified Diagram Illustrating the Hierarchy of Policy within the US Government
   2. Exhibit 5.8 Accountability and Charity Watchdog Standards Compliance
   3. Exhibit 5.12 Results of Inadequate Liquid Reserve Policy for New York City Nonprofits
6. Chapter 7
   1. Exhibit 7.3 Financial Reporting Pyramid
   2. Exhibit 7.12 Financial Manager's View of the Cash Position and Revenue Stream
7. Chapter 8
   1. Exhibit 8.1 Budgeting Process
   2. Exhibit 8.2 Steps Prior to Budget Development
   3. Exhibit 8.3 Forecasting Methods
   4. Exhibit 8.4 Peoria Rescue Ministries Capital Budget Template
   5. Exhibit 8.9 Cash Budget: Uses
   6. Exhibit 8.11 Basic Cash Budgeting/Forecasting Template
   7. Exhibit 8.12 Determining Whether Organization Has Too Little Liquidity
8. Chapter 9
   1. Exhibit 9.3 Financial Model Assumptions – Service Business Example
   2. Exhibit 9.7 Distribution of Target Liquidity Level Outcomes Using Hypothetical Example
   3. Exhibit 9.10 Dual Bottom-Line Matrix Portfolio Analysis
   4. Exhibit 9.13 Perfect Offset for Two Organizations' Cash Flows Over Time
   5. Exhibit 9.14 Partial Offset for Two Organizations' Cash Flows Over Time
   6. Exhibit 9B.2 Financial Return and Financial Coverage Matrix
9. Chapter 11
   1. Exhibit 11.1 Nonprofit Chief Financial Officers' Difficult Job Tasks
   2. Exhibit 11.2 Comprehensive Cash Flow Management
   3. Exhibit 11.8 Same-Day and Real-Time Payments in the United States
10. Chapter 12
    1. Exhibit 12.1 Segmenting Your Cash into Buckets by When You Will Need It
    2. Exhibit 12.2 Example of Asset Allocation
    3. Exhibit 12.7 Managing Your Investment Committee
11. Chapter 13
    1. Exhibit 13.1 Organizational Structure of IT in Nonprofits
    2. Exhibit 13.5 Outsourced Disbursements
    3. Exhibit 13.11 Needs Assessment Flowchart
    4. Exhibit 13.14 Organizational Spending on IT by Size of Organization
12. Chapter 14
    1. Exhibit 14.1 Growth-Related Risk Management Challenges
    2. Exhibit 14.5 Financial Problems and Effects on Mission Achievement
    3. Exhibit 14.7 Motivation Factors
    4. Exhibit 14.8 Major Human Resources Issues Faced by NYC Nonprofits
    5. Exhibit 14.9 Five-Year Price Changes Experienced by NYC Nonprofits
    6. Exhibit 14.12 Fraud in Nonprofit Finance Departments
    7. Exhibit 14A.1 Interest Rate Swap Example
13. Chapter 15
    1. Exhibit 15.1 Decision Correctness Scale
    2. Exhibit 15.4 Effective Leadership
    3. Exhibit 15.7 Finance and Audit Committee Evaluation