This chapter focuses on the asset-based approach to community development. It provides the different types of assets that create opportunities for a nonprofit organization, describes the asset-mapping process, and explains the relationship between asset mapping and financial sustainability. The chapter introduces the theories, concepts, and approaches of asset mapping as a strategy to help nonprofit organizations identify obvious and hidden assets within their communities, and mobilize them to connect issues and needs with assets, and foster the financial sustainability of a nonprofit organization. It examines the community context of nonprofit organizations in relation to community groups, neighborhoods, and larger social systems that influence quality of life. The chapter includes the concept and theory of community capacity, models of asset-based development for building community capacity, empowering individuals and groups, generating funding from new sources, and creating additional paths toward financial sustainability.
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This chapter defines the term “budget” and explains the importance of the budget for a nonprofit organization. It describes the different types of budgets and provides the most common budget approaches. The most common types of budgets are an operating budget, a cash budget, and a capital budget. The chapter also describes the process of developing a budget in a nonprofit organization and presents the relationship between the budget and financial sustainability in nonprofit organizations. Budget techniques are central to the successful operation of all organizations. A budget enables organizations to allocate scarce resources, control operations, and manage performance. A budget is the translation of an organization’s plans and priorities. The chapter helps the readers to learn the basic concepts and practices of budgeting in nonprofit organizations. It also explains the essential role played by budget approaches and techniques in the successful and sustainable operations of a nonprofit organization.
This chapter defines the terms community relations, outreach, and partnership in relationship to nonprofit organizations. Community relations combine an organization policy and process used to develop and implement community outreach and awareness about programs and activities in order to promote the organizational vision and mission in a community-oriented manner. As a policy, community-relations programs and activities are intentional. The chapter also defines the terms advocacy and public relations. Public relations involve the communication of intentional messages to the public in order to influence the opinion or perception of an organization by the public at large. Public relations are a key communication practice for organizations, including nonprofit organizations. The chapter describes the different facets of community relations and discusses community outreach, partnership, advocacy, and public relations as facets of community relations. It explains the relationship between community relations and financial sustainability.
This chapter defines the concept of financial management and establishes the relationship between financial management and nonprofit financial managers. A nonprofit perspective on financial management includes financial planning, financial monitoring, financial decisions, and financial accountability in order to ensure that an organization can sustain its financial resources to fulfill its vision and mission through the achievement of organizational goals and objectives. The chapter discusses the various facets of nonprofit corporate finance and accounting and lists the most common funding sources of nonprofit organizations. It examines the financial and accounting principles and procedures related to the management of a nonprofit organization. The chapter addresses basic accounting principles that leaders of a nonprofit organization should be aware of, and the conditions surrounding the financial situation of a nonprofit organization. It describes a financial management system and explains the relationship between financial management and the financial sustainability of nonprofit organizations.
This chapter defines the concept of financial statement and introduces the generic structures or formats of three main financial statements: the income statement, the balance sheet, and the statement of cash flow. The income statement includes three major sections: The income or revenues, the expenses or expenditures, and the balance or summary. The balance sheet of a nonprofit organization includes three main sections: Assets, liabilities, and fund balance. The chapter establishes the differences between an income statement and balance sheet. It explains the sections of Internal Revenue Service (IRS) Form 990 related to the income statement and the balance sheet. The chapter explores the principles and procedures used to develop various financial statements and link them to the legal financial reporting requirements for a nonprofit organization. It helps the reader to gain experience with the basic terminology and tools to read nonprofit and public financial statements.
This chapter explores the dimensions of financial sustainability as well as the principles needed to manage a nonprofit organization that can generate continuous funding through diverse sources in order to support its vision and mission in a way that is socially and environmentally sustainable. Sustainability is the ability of a business, an organization, or a project to fulfill its vision and mission, meet its goals, and serve its stakeholders over time. The chapter discusses the inherent, collateral, and environmental factors of financial sustainability in nonprofit organizations. Inherent factors of financial sustainability include: Financial management, budget, financial statement analysis, financial sustainability plan, social enterprise, fund-raising, grant seeking, investment, and risk management. Collateral factors of financial sustainability include: Governance, leadership, and strategic planning. The chapter describes key indicators that can reveal whether an organization is financially sustainable or is on the path for financial sustainability.
This chapter introduces the concept of financial sustainability in relation to the use of financial statements. It also introduces selected financial ratios to assess the profitability, liquidity, solvency, efficiency, and effectiveness of a nonprofit organization. Profitability is the surplus of revenue over expenses. Profitability used to be a forbidden word in the nonprofit world. Many nonprofit organizations are faced with the challenge of undercapitalization and do not have enough cash or liquidity to pay their regular bills. The liquidity of an organization can be measured by the current ratio, the net working capital, and the acid test or quick ratio or liquidity ratio. Solvency is different from liquidity because it deals with the long-term ability of an organization to continue to exist and expand. The debt ratio and the debt-to-equity ratio are two common measures of organizational solvency.
This book provides leaders and managers of nonprofit organizations with theoretical and conceptual frameworks, approaches, and strategies that will enable them to manage organizations that are financially sustainable. The book aims to equip students and nonprofit leaders with the information and conceptual frameworks needed to do financial analyses, manage budgets, and conduct various operations for organizational and financial sustainability. People have a tendency to think of financial sustainability almost exclusively in financial terms. The book argues that financial sustainability involves both financial and nonfinancial facets. To that end it provides a systemic conceptual framework. The chapters are articulated around four sections. The first part introduces the concepts of nonprofit organizations and financial sustainability. The second part is about key aspects of organization and planning for sustainability in a nonprofit organization. The third part discusses issues that are vital to the financial sustainability of a nonprofit organization. The last part emphasizes the contributions of management and leadership practices to the financial sustainability of nonprofit organizations. The book may serve as an introductory textbook for future leaders of nonprofit organizations, as well as students in schools or programs of nonprofit leadership, human service leadership, social work, public and community health, organization management, public administration, education, and other similar fields.
This chapter describes a financial sustainability plan and explains the importance of a financial sustainability plan for nonprofit organizations. It discusses the elements of a financial sustainability plan. A financial sustainability plan should include an executive summary, financial sustainability analysis, financial ratios analysis, strategic goals and objectives, action plan, benchmark and outcomes, continuing quality improvement strategies, and budget. Many nonprofit organizations are faced with a constant challenge to match financial sustainability with their vision and mission statements. Some of the challenge may have to do with how much money they can successfully raise. This aspect can be manipulated by greater fund-raising efficiency and effectiveness. The chapter suggests approaches and best practices in developing a financial sustainability plan for a nonprofit organization. It includes a step-by-step process to use to develop a financial sustainability plan.
The term “fund-raising” can be used for any activity whose primary purpose is to raise money to support the activity of a nonprofit organization. The meaning of the term “fund-raising” can change based on approaches used by a particular nonprofit organization. This chapter discusses why people donate to nonprofit organizations. The literature suggests that people donate to nonprofit organizations based on compassion, altruism, values, tax deductibility, corporate social responsibility, stewardship, and solicitation. The chapter identifies some common effective fund-raising strategies used by nonprofit organizations in the United States and describes the items in a fund-raising proposal. An effective fund-raising proposal requires effective planning. The planning of fund-raising activities should start with a fund-raising proposal that sets clear justification, goals, objectives, and overall approaches and strategies. Finally, the chapter provides conceptual frameworks and approaches to organize fund-raising activities that can generate alternative funding for financial sustainability.