Streetsmart Financial Basics for Nonprofit Managers

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  • Edition: 3rd
  • Format: Paperback
  • Copyright: 2009-04-06
  • Publisher: Wiley
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This resource for nonprofit managers and board members simplifies accounting concepts and provides practical advice that can help nonprofits achieve a higher degree of accountability. Clearly written, concise, and insightful, the Second Edition of the popular resource explains in plain English how to read, interpret, and implement financial data from bookkeepers and accountants to make management decisions that ensure an organization's long-term financial viability.Thomas A. McLaughlin has over 25 years of nonprofit experience as a nonprofit manager, trade association executive, and consultant. He is nationally recognized as an expert in nonprofit mergers and alliances, financial management, and strategic planning.

Author Biography

Thomas A. McLaughlin is Director of Consulting Services, Nonprofit Finance Fund, and member of the faculty at the Heller School for Social Policy and Management at Brandeis University. He is also the author of Nonprofit Strategic Positioning: Decide Where to Be, Plan What to Do and Nonprofit Mergers and Alliances, both published by Wiley. His email address is tommclaughlin@aol.com.

Table of Contents

Prefacep. xi
Acknowledgmentsp. xv
Note to Readerp. xvii
Analysisp. 1
Organizational Structure: Programs and Corporationsp. 3
Types of Nonprofit Organizationsp. 3
Structure of Nonprofit Organizationsp. 8
Loss of Tax-Exempt Status - The Monster Withinp. 16
Mission: Managing Your Two Bottom Linesp. 19
The Role of a Value Systemp. 20
The Nonprofit's Dilemma and How to Solve Itp. 22
Accounting as a Second Language-A Nine-Point Programp. 25
The Entity Principlep. 25
Money Measurementp. 26
Conservatism Principlep. 26
The Cost Concpetp. 28
The Materiality Principlep. 30
Going Concernp. 32
Dual Aspectp. 33
Realization Principlep. 34
Matching Principlep. 35
Assets Are for Boards, Activities Are for Managersp. 37
Concepts versus Detailsp. 38
Boards Invest, Managers Spendp. 39
If It Has to Be Decided Today, It's Probably the Wrong Questionp. 40
Boards Own the Controls, Managers Implement Themp. 40
Balance Sheets: How They Get That Wayp. 41
Current Assetsp. 42
Noncurrent Assetsp. 45
Current Liabilitiesp. 47
Noncurrent Liabilitiesp. 47
Making the Balance Sheet Dancep. 50
Transparency, Thy Name Is IRS Form 990p. 53
Sweeping Changep. 54
What to Dop. 55
Financial Analysis: A Few Diagnostic Toolsp. 67
Financial Statement Analysis for Math Phobicsp. 68
Current Ratiop. 75
Days' Cashp. 76
Days' Receivablesp. 78
Cash Flow to Total Debtp. 80
Debt to Net Assetsp. 81
Total Marginp. 83
Operating Marginp. 84
Accounting Age of Plant/Equipment (or Land, Buildings, and Equipment)p. 85
A Footnotep. 86
Accountingp. 89
Nonprofit Accounting: Acknowledging the Strings Attachedp. 91
Net Asset Categoriesp. 92
Other Provisionsp. 93
What It All Meansp. 93
Cost Accounting: How Much Does It Cost?p. 99
A Form of Management Accountingp. 100
Indirect Costsp. 102
Certain Support Costs Get Assigned to Other Support Costsp. 102
Breakeven Analysis-Another Use for Cost Datap. 106
Cost Accounting versus Cost Reportingp. 109
Auditing: Choosing and Using an Auditorp. 111
Audit, Review, and Compilationp. 113
The Auditor Marketp. 115
Getting Value from the Auditp. 118
Conclusionp. 120
Operationsp. 121
Cash Flow Management: Why Cash Is Kingp. 123
Up the Balance Sheetp. 124
How Much Cash Is Enough?p. 134
Conclusionp. 139
Capital: Why Capital Is Not a Four-Letter Wordp. 141
The Mechanics of Capital Financingp. 142
The Present Value of Moneyp. 148
Sources of Capitalp. 149
The Great Divide among Nonprofitsp. 151
Future Access to Captial Marketsp. 153
The Role of Net Assetsp. 155
Strategic Capital Managementp. 155
Budgeting: Taming the Budget Beastp. 157
Playing Revenues Like a Symphonyp. 159
Expensesp. 160
Indirect (General and Administrative) Costsp. 169
Conclusionp. 170
Indirect Costs and Other Despised Itemsp. 171
Still, It's Low That Countsp. 172
Secret of the Indirect Cost Gamep. 174
Pricing: How Much Should It Cost?p. 179
Pricing Methodologiesp. 182
Going the Other Way-Contractual Adjustments and Subsidiesp. 186
Pricing Strategiesp. 187
How to Pricep. 189
Profit: Why and
Profit Definedp. 193
Uses of Profitp. 194
Profit-How to Get Itp. 202
What Can Be Donep. 204
To Raise More Money, Think Cowsp. 205
Donationsp. 206
Bequests-Cow to Charityp. 206
Charitable Remainder Trusts-Milk to Beneficiaries, Cow to Charityp. 206
Pooled Income Funds-Donors Put Their Cows in a Herd, Keep Rights to Milkp. 208
Controlp. 211
Insurance: The Maddeningly Complicated Art of Covering Your Assetsp. 213
To Insure or Self-Insure?p. 215
Risk Managementp. 216
Internal Controls for External Goalsp. 219
The Elements of Internal Controlp. 221
How to Monitor the Systemp. 233
Maintaining the Systemp. 235
Conclusionp. 237
Enron Spawnp. 239
Some Predictionsp. 242
The New Industry of Charity Watchingp. 244
Management Controls: Toward Accountability for Performancep. 249
Management Controls Circa 1980p. 250
Beyond Management Controls in the Twenty-First Century: How to Do Itp. 250
Messagesp. 251
How to Prepare-The CFO of the Futurep. 252
A Financial Management Cultural Primerp. 257
Budget Bloopersp. 263
Using the Web Sitep. 267
Indexp. 273
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