Financial Management for Human Service Administrators

by Martin, Lawrence L.

• ISBN13: 9780321049490
• ISBN10: 0321049497
• Edition: 1st
• Format: Paperback
• Copyright: 2000-08-22
• Publisher: Pearson

Summary

This comprehensive financial management book is designed to help future or current human services or social work administrators manage programs and agencies more effectively.The book includes information on various budgeting systems (line-item, performance, and program) and other financial management tools, including program structures and responsibility centers; financial accounting and the interpretation and analysis of financial statements; the forecasting of revenues, expenses, and caseloads; service costing and the linking of costs to performance (output, quality, and outcome) measures; fee setting; government contracts, and more.For anyone interested in financial management for human services, social work, or nonprofit organizations.

Table of Contents

Preface	xv
The Importance of Financial Management	1	(9)
What Is Financial Management?	1	(1)
Why Financial Management Is Important Today	2	(5)
The Maturation of the Human Services	2	(1)
Societal Productivity and Economic Growth	2	(1)
The Accountability Movement	3	(1)
Competition	3	(1)
The Contract Environment	4	(1)
Managed Care	5	(1)
Maintaining Stakeholder Trust and Confidence	5	(1)
The Nature of Nonprofit Organizations	6	(1)
The Nature of Service Organizations	6	(1)
Advances in Computers and Information Technology	7	(1)
Adopting a Financial Management Perspective	7	(1)
Financial Management Concepts, Principles, and Tools	8	(1)
Summary	9	(1)
Programs, Program Structures, Program Managers, and Responsibility Centers	10	(9)
The Identification of Programs	11	(1)
What Is a Program?	11	(1)
The Creation of a Program Structure	12	(1)
The Assignment of Program Managers	12	(1)
The Designation of Responsibility Centers	13	(3)
Expense Centers	14	(1)
Revenue Centers	14	(1)
Profit Centers	15	(1)
Investment Centers	15	(1)
Multiple-Responsibility Centers	16	(1)
Summary	16	(1)
Exercise	16	(3)
Understanding Financial Statements	19	(18)
Generally Accepted Accounting Principles (GAAP)	19	(1)
Internal Revenue Service (IRS) Status	20	(1)
Financial Statements	21	(1)
Types of Financial Statements	22	(1)
Phoenix Specialized Transportation Services (STS)	22	(1)
The Statement of Activities	22	(6)
Assets	24	(1)
Liabilities	24	(1)
Net Assets	24	(1)
Revenues	24	(1)
Expenses and Expenditures	25	(1)
Accounts Receivable	25	(1)
Accounts Payable	25	(1)
Cash and Accrual Accounting	26	(1)
Permanently Restricted	27	(1)
Temporarily Restricted	27	(1)
Unrestricted	27	(1)
The Statement of Financial Position	28	(2)
The Basic Accounting Formula	28	(2)
Current and Noncurrent Assets and Liabilities	30	(1)
The Statement of Cash Flows	30	(2)
The Statement of Functional Expenses	32	(1)
The Internal Revenue Service (IRS) Form 990	33	(3)
Summary	36	(1)
The Basics of Accounting	37	(18)
Some Basic Accounting Terms	37	(2)
The Portland After School Program	39	(13)
Computing the Trial Balance	45	(1)
Closing the Revenue and Expense Accounts	45	(2)
Preparing the Financial Statements	47	(5)
Summary	52	(1)
Exercises	52	(3)
Financial Analysis	55	(10)
Financial Analysis Ratios	55	(4)
The Current Ratio	56	(1)
The Long-Term Solvency Ratio	56	(1)
The Contribution Ratio	57	(1)
The Programs/Expense Ratio	57	(1)
The General and Management/Expense Ratio	58	(1)
The Fund-Raising/Expense Ratio	58	(1)
The Revenue/Expense Ratio	59	(1)
Monitoring Ratios over Time	59	(2)
Summary	61	(1)
Exercises	61	(4)
Performance Measures	65	(11)
Performance Measurement Defined	66	(1)
The Major Performance Measurement Initiatives	67	(3)
The Government Performance and Results Act (GPRA)	67	(2)
Service Efforts and Accomplishments (SEA) Reporting	69	(1)
U.S. General Accounting Office (GAO)	70	(1)
Output, Quality, and Outcome Performance Measures	70	(2)
Output Performance Measures	70	(1)
Quality Performance Measures	71	(1)
Outcome Performance Measures	72	(1)
Characteristics of Good Performance Measures	72	(2)
The Use of Performance Measures in Financial Management	74	(1)
The Houston Home Care Agency	74	(1)
Summary	75	(1)
Budgeting and Budget Systems	76	(16)
Major Budgeting Systems and The Systems Model	76	(2)
Line-Item Budgeting Systems	78	(7)
Developing a Line-Item Budget	80	(1)
Balancing an Unbalanced Line-Item Budget	80	(3)
Major Advantages and Disadvantages of Line-Item Budgeting	83	(1)
Monitoring a Line-Item Budgeting System	83	(2)
Performance Budgeting Systems	85	(2)
Advantages and Disadvantages of Performance Budgeting Systems	86	(1)
Program Budgeting Systems	87	(2)
Advantages and Disadvantages of Program Budgeting Systems	88	(1)
Monitoring Performance and Program Budgeting Systems	89	(1)
A Comprehensive Budgeting System	89	(2)
Summary	91	(1)
Cost Analysis	92	(26)
Prerequisites for Using Cost Analysis	92	(1)
The Cost Analysis Process	92	(1)
Identifying Direct and Indirect Costs	93	(3)
Assigning Direct Costs to Programs and Indirect Costs to the Indirect Cost Pool	96	(2)
Allocating Indirect Costs to Programs	98	(1)
Cost Allocation Using Total Direct Costs	98	(1)
Determining the Total Cost of Each Program	99	(2)
Computing Cost Per Output (Unit of Service) and Cost Per Outcome	101	(2)
Allocating Indirect Costs Using Salaries and Wages	103	(4)
Allocating Indirect Costs Using Direct Labor Hours	107	(2)
Which Cost Allocation Method Is Best?	109	(3)
Prospective Cost Analysis Versus Retrospective Cost Analysis	112	(1)
Program Line-Item Budgets	113	(1)
Summary	113	(2)
Exercises	115	(3)
Forecasting	118	(14)
Some Basic Forecasting Rules of Thumb	119	(1)
Simple Moving Averages	120	(2)
Weighted Moving Averages	122	(1)
Exponential Smoothing	123	(1)
Time Series Regression	124	(5)
When to Use Which Forecasting Technique	129	(1)
Summary	130	(1)
Exercises	130	(2)
Differential Cost Analysis	132	(17)
Some Concepts and Definitions	132	(1)
Fixed Costs and Variable Costs	132	(3)
Step Costs	134	(1)
Maximum Efficiency and Surplus Capacity	135	(1)
Break-Even Analysis	135	(1)
New River Community Council Case Example	136	(3)
Profitability Analysis and Marginal Pricing	138	(1)
Westchester Home-Delivered Meals (WHDM) Program	139	(3)
Decrease/Discontinue Decisions	142	(3)
Summary	145	(1)
Exercises	145	(4)
Setting Fees	149	(12)
Some Major Fee Setting Issues	149	(5)
Direct and Indirect Costs	150	(1)
Depreciation and Use Allowance	151	(1)
Unallowable Costs	151	(1)
Profit Margins	152	(1)
Fixed and Variable Costs	152	(1)
Break-Even Points	153	(1)
Market Prices	154	(1)
Variable Fee and Sliding Fee Schedules	154	(1)
Government Benefits Seminar Case Example	154	(4)
Summary	158	(1)
Exercises	158	(3)
Government Contracts and Grants	161	(13)
Contracts, Grants, and Cooperative Agreements	161	(2)
Sources of Information about Government Contracts, Grants, and Cooperative Agreements	163	(3)
Types of Procurements	166	(4)
The Request for Proposals (RFP)	167	(1)
The Invitation for Bids (IFB)	168	(2)
Types of Contracts	170	(3)
Cost Reimbursement Contracts	170	(1)
Performance Contracts	170	(2)
Capitated (Managed Care) Contracts	172	(1)
Summary	173	(1)
Fund Development	174	(13)
Foundation Grants	174	(1)
Types of Foundations	175	(3)
Family Foundations	175	(1)
Corporate (Business) Foundations	176	(1)
General Interest Foundations	176	(1)
Special Interest Foundations	176	(1)
Community Foundations	176	(2)
Finding Out about Foundations	178	(1)
United Way of America Membership	178	(2)
Other Traditional Fund Development Approaches	180	(2)
Annual Campaigns	180	(1)
Special Events	180	(2)
Client Donations	182	(1)
Entrepreneurial Fund Development Approaches	182	(4)
Affinity Marketing	182	(1)
Bequest Programs	183	(1)
Life Income Programs	184	(1)
Commercial Ventures	184	(2)
For-Profit Corporate Subsidiaries	186	(1)
Summary	186	(1)
Risk Management	187	(11)
What Is Risk Management?	187	(2)
Major Risk Management Issues Areas	189	(8)
Insurance Issues	189	(1)
Governing Board Issues	190	(1)
Human Resource Management Issues	191	(2)
Basic Internal Financial Control Issues	193	(2)
Workplace Hazard Issues	195	(1)
Volunteer Liability Issues	195	(1)
Records Management Issues	196	(1)
Summary	197	(1)
Auditing	198	(11)
Sources of Auditing Standards, Cost Policies, and Financial Management Requirements	198	(3)
American Institute of Certified Public Accountants	199	(1)
Comptroller General of the United States (General Accounting Office)	200	(1)
Office of Management and Budget (OMB)	200	(1)
Code of Federal Regulations	200	(1)
Types of Auditors	201	(1)
Types of Audits	202	(5)
Pre-Audits	203	(1)
Financial Audits	203	(2)
Program-Specific Audits	205	(1)
Grant and Contract Audits	205	(1)
Performance Audits	206	(1)
Single Audits	206	(1)
Selecting an External Auditor	207	(1)
Summary	208	(1)
Appendix Sources of Financial Management Information on the World Wide Web(WWW)	209	(3)
References	212	(4)
Index	216