Financial Management in Non-Profit Organizations

Financial Management in Non-Profit Organizations

Financial Management within a non-profit organization is extremely critical to the success of the business. Basic skills include cash management, bookkeeping, as well as generating financial statements. This essay would concentrate on other aspects of financial management, such as investment ideas and collaborations.

Carlucci and Schneider explained in their article, a financing alternative available to non-profits. According to them, the “secret” is the use of low-cost, often tax-exempt bonds issued by state, country, or city economic or industrial development agencies. What are bonds? A bond is a debt security in which the authorized issuer owes the holders a debt and is obliged to repay the principal and interest at a later date (Wikepedia). Bonds enable the issuer to finance long-term investments with external funds.

There are approximate 16 different bonds available. Zero coupon bonds pay no interest. In other words, on the redemption date the bond holder receives the full principle amount. A municipal bond is issued by a state, U.S. Territory , city , local government, or their agencies. The interest is often exempted from the federal income tax and state in which they are issued. Another type of boind is a subordinated bond. It has a lower priority than any other bonds of the issuer in case of liquidation.

Within the article, “The Secret to Financing Your Capital Project: Save Time and Money with This Low-Cost Financing Option,” they provided an excellent example of how bonds can be used to finance projects. The Jacob Burns Film Centerm established several years ago, is a cultural center devoted to the art of film. It was estimated that the renovations would be in the millions. In order to fund this project, they used a tax-exempt bond. The county of Westchester Industrial Development Agency (IDA) issued a 30-year, $4.5 million tax-exempt, variable rate bond.

There are many...