Ultimately, budgeting is critical to success -- in your personal life or as the manager of an organization. The larger the organization, the more variables you must manage in creating and monitoring a budget. Ultimately, the numbers, while important, are not as important as the thought process and the logic that goes on behind it. Ultimately, however, the point is sustainability. What does this linked file tell you about balancing mission to sustainable processes?
Analysis and financial management frameworks (laws and regulations) are more complicated. One interesting resource is: http://managementhelp.org/nonprofitfinances/index.htm
There have been significant changes in this arena post-Enron (it affected the nonprofit sector as well as the for-profit). Read more about the SARBANES-OXLEY bill. Non-Profit specifics are particularly related to board ethics (as we've discussed lightly in class). Additionally, the recent ACORN scandal further presents the issues of 'why' financial management and accountability are important.
From Sarbanes Oxley to ACORN, what are your thoughts on financial accountability and management?
From looking at the first page of charts, I gained the understanding that every activity and decision an organization makes impacts the mission impact and financial profitability. It is a two way street and both must even out accordingly. If one end is too low, the other is probably going to be too high, and vice versa. The organization should find a happy medium when balancing these two, so that no one side is heavier than the other.
ReplyDeleteAs for the information and laws presented in Sarbanes-Oxley, I was shocked to find out that none of these laws had been in full effect until after the Enron scandal in late 2001.
Andrew -- there is a lot to still be done . . . in all sorts of areas (post-recession, etc) . . .:-)
ReplyDeleteFYI All -- Here is Glenda's post which is just not posting for whatever reason:
Glenda Wooden has left a new comment on your post "Budgets, Financial Management and National Scandal...":
Brett...you're comment about budgeting being critical to success in your personal and professional life is worth it's weight in gold! Yet so often we don't take the time to think through financial goals in terms of sustainability and before you know it...another one bites the dust!
The article makes it clear that every action by the organization affects the mission and the budget. Therefore, it is crucial that each action should be mapped visually to see where and how it falls on the matrix. Generally, organizations’ executive leadership set the strategic planning and vision and looks at each area of the organization to set the goals for the fiscal year. However what this article points out is that organizations should look at the impact that an activity has on both the mission and budget and categorizes it as one of the four: high mission impact/low profitability; high mission impact/high profitability; low mission impact/low profitability; low mission impact/high profitability. The visual helps to identify weaknesses in planning. For example, if the majority of an organization’s undertakings fall within the low mission impact/low profitability then there is a high probability that the organization cannot sustain itself as it is neither making an impact/connection with the community nor yielding revenue to support its mission.
The Sarbanes-Oxley Act is a step in the right direction to demand financial accountability and practices from corporations. By establishing internal controls and requirements for financial reporting and criminal penalties corporate officers who fail to certify financial reports, corporations can now no longer just remove debts off-balance, which basically means that they manipulate the financials in order to look more appealing to its investors. This type of business practice in my opinion is unethical and is not a financial sustainable practice obviously as we have seen in recent months with the fall of Enron and Lehman Brothers to name a few. With the Sarbanes-Oxley, full disclosure of on and off sheet balances is reported.
The following quote is taken from the Financials tab of the Fox Cities Performing Arts Center.
“The Fox Cities Performing Arts Center takes very seriously our responsibility to be good stewards of the money many in the community have so generously given to support our mission to serve as a gathering place for the community to engage in educational opportunities and enhance understanding and enjoyment of life through the creation and presentation of the arts. Operating with transparency, accountability and excellence is of the utmost importance to Center board of directors and staff.”
Here is the link to their page that also outlines their commitment to stewardship and a substantiation letter from a public accounting firm to the organization’s spending.
http://www.foxcitiespac.com/about_us/financial-accountability
Much like a stakeholder in corporations, individuals invest in non-profit organizations, with the expectation of a return on their investment such member benefits and/or supporting a mission or program that they believe in. When individuals give, their money must be stewarded in such a way that is fiscally responsible and true to the mission of the organization. Non-profit organizations are required by law to disclose its financials (IRS Form 990) to the public and in doing so presents a clear and accurate financial picture to the community. By not adhering to this, a non-profit runs the risk of losing the single most valuable asset-it’s members. Without the support of it members and donors, an organizations cannot sustain itself.
To be honest, I CRINGE at the thought of FINANCES! The one thing I do understand, like you mentioned above, is the contribution of members and donors. At Americans for the Arts, there are donors ranging from $5 all the way to donations in the millions. I understand the importance of being fiscally responsible when you have members and donors on the line. Obviously people do not want to give an organization money that has a history of not being financially responsible.
ReplyDeleteHopefully our lecture in class will help me overcome my fear of finances!
I agree with Nicki, finances is definitely my weak spot.As far as the file above, I was a little confused so im going to try and interpret it the best I can. From my understanding their are two components that differ a non-profit buisness with a for profit buisness which is mission impact and financial profitabiltiy. The map shows us a organizations buisness model and how every activity and decision has a huge impact on an organization. There are two maps one that defines the quadrants and one that shows the strategic imperatives.With the first map you can see the mission impact and profabiltiy and the second map explains the strategic plan if im correct. Again I was a little confused so please agree to disargee with me (:
ReplyDeleteI agree with everyone above "fiances" is a weak spot for me as well. After looking at the charts, I was able to understand the impacts on financial profitability. It was interesting to see the balance that organizations have to make. I found the laws that were presented by Sarnaes Oxley, very interesting, I was unaware of theses.
ReplyDeleteThe matrix is a god send for anyone that wants to teach economics simply; especially perhaps a business manager to the rest of the company, telling them what marketing strategies and products are affective, profitable, and which ones are beyond recovery. As we see in this non profit example, only the quit smoking classes are ones that should not be continued or cut back. The ESL classes, Annual Street Festival, and U.S. Citizen classes may not be profitable right now, however, have a big impact. One should think about finding ways to cut back on some costs or re-examine the marketing stratagies to bring in more people that would want to take that class. For instance, for the U.S. citizenship classes, I examine that it is well received. Where is it most well received? What cities? Who does it most appeal to? Which demographic? This could help in the marketing department. The annual campaign may bring in a profit, but has little income. This is where it should bring in the most attention and have the biggest income. I would look at marketing and where it’s being held again.
ReplyDeleteThe basic overview of non-profit management again is much like corporations. One must always keep good accounts of records, all money spent, and always prepare to be audited. While managementhelp.org comments that “Your record keeping system will be based on a manual system (where you make entries and total them by hand) or a computer system. You might even choose to outsource your record keeping system to another business that manages your bookkeeping activities” one should always be keeping a record as a form of housekeeping. It’s a no brainer.
As for Enron, they completely ignored the financial saying to not “get into the boat unless [one] can afford to sink.” With all the loopholes in auditing, the lies in the record keeping; Enron was sure to sink at the first iceberg it hit. It was not prepared for catastrophe, only triumph. The employees and many investers got screwed by these reckless tacktics. They were supposed to be management’s #1 priority. However, this mixup of priorities is what led to the downfall and the biggest bankruptcy that America had ever seen.
I cannot with good faith comment on acron in any way but discoust. In my opinion, this article is highly bias and filled with vicious attacks rather than answering the quest ion about management fully. Acorn has management problems. It is admitted to in the article, but one mans opinion over the accusations of illegal activity are just what it is, one mans opinion. Acording to Prosikauer.com This mans record is riddled with cases, defending the public sector and against “Big business.” I understand that this is not a place to rant, however, I cannot trust an article that viciously attacks its opponents more than concentrates on the issue.
Anyway, I am looking forward to this class. This seems very straight forward to me. Good book keeping and an understanding over what works and what doesn’t in an organization.
Financing and budgeting has always been quite a struggle to me in my personal life; trying to figure out how to save money, what are the more important things to put my money towards. If it is a difficult concept to budget a single person I couldn’t imagine doing financing for an entire company.
ReplyDeleteAfter reading the link, I slightly have a better understand of how budgeting are done within a company and I can see that there are more than one ways of doing this. The link states what organizations are doing, and what they should be doing to have a better outcome. Most organizations plan for the entire year looking at finance, impact, missions etc. from the previous years but sometimes this can be a negative thing because as years goes by things change. Therefore, organization should try a different approach of planning for the currents year and having a step by step plan or maybe broken down into two (6 months at a time). If they do this they can see what their weakness was in the first half of the year with the planning and make some changed to the mission and then budget accordingly.
“The Sarbanes-Oxley Act created new standards for corporate accountability as well as new penalties for acts of wrongdoing. It changes how corporate boards and executives must interact with each other and with corporate auditors.” This means everyone (all parties) is fully aware of the finical statement and it is on record therefore everyone is held accountable for the statement and the data will most likeky be accurate becaome of this ACT.