Review of Financial Management for Public, Health, and Not-for-Profit Organizations, 4th Edition

Financial capacity and sustainability of ordinary nonprofits

“…This formula is similar to Operating Margin found in nonprofit finance texts (McLaughlin, 2002, p. 64;Finkler, 2005, p. 534) but Operating Margin ordinarily does not include depreciation and its denominator is revenue instead of spending. Dividing by revenue is problematic because nonprofits have "inaccessible" revenues such as restricted gifts and endowment returns.…”

“…It features "if-then" propositions such as, "If managers want to maintain their capital stock at replacement cost, their annual surpluses must be greater than X." It is more closely related to the families of diagnostic equations (ratios) such as found in nonprofit finance texts (Konrad and Novak, 2000;McLaughlin, 2002;Anthony and Young, 2003;Finkler, 2005;Zietlow, Hankin, and Seidner, 2007). 5 This model represents the first comprehensive alternative in twenty years to the Tuckman-Chang model.…”

“…Long-term sustainability requires total assets to grow at a rate no less than the longrun rate of inflation (Anthony and Young, 2005;Finkler, 2005 replacement cost over the long term while also maintaining financial resources available short term. Capacity in either period is a management choice.…”

“…The model's focus is on long term. A new sustainability principle requires consistency between short-term sustainability, as measured in terms of annual surpluses, and long-term sustainability, as measured by asset growth, which must stay ahead of the long-run rate of inflation (Anthony and Young, 2005;Finkler, 2005).…”

In Other Words, the Budgets Are Fake: Why One Funder Eliminated Grantee Budgets to Improve Financial Due Diligence

“…While financial statements are a vast improvement over budgets prepared as part of the application process, they are still limited to the financial picture at a specific time and only report the past results of an organization's operations (Finkler, 2001). What they do not tell us is how an organization develops its financial plans, who is involved, what assumptions went into the process of projecting both revenue and expense, how well an organization will be able to deliver on the proposed project, the comfort level of the senior leadership of an organization with financial management, the long-term stability of the organization or the proposed project, or the trends in an organization's overall financial health.…”