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Budgeting & Financial Mgmt. for Nonprofit Orgs. by Weikart, Chen, Sermier

Sasha Elliott Animal Welfare CAWA English 120 cards

Cards in this deck (120)

  1. 1Accounting CostThe amt. of money needed to buy,
    do, or make something
  2. 2Accounting EquationAssets = Liabilities + Net Assets
    Equation that defines the relationship between assets, liabilities and net assets:
    The foundation of double-entry bookkeeping
  3. 3Accounting PrinciplesBasic accounting guidelines that serve a general rule for the accounting system
  4. 4Accounts ReceivableMoney that other orgs. or individuals owe the nonprofit
  5. 5Accrual AccountingAccounting system that recognizes income when it is earned and expenses when they are incurred in the same reporting period, rather than when income is received or expenses are paid
  6. 6Accrued Salary ExpenseMoney the nonprofit owes at the end of an accounting period
  7. 7Adopted BudgetBudget that the nonprofit's board of directors has approved
  8. 8AllocationDesignation of funds for a particular purpose
  9. 9AnnuityFixed sum of money distributed on a regular basis, whether monthly, quarterly, yearly, or at some other regular interval
  10. 10AssetsThings that have value, can be measured, and are owned or controlled by the nonprofit
  11. 11AuditProcedure in which a nonprofit's financial accts. are verified by a professional accountant
  12. 12Average CostTotal cost of all items divided by the number of items
  13. 13Balance SheetStatement of financial position that summarizes an org.'s financial situation at one point
  14. 14Benefit Corporation (B Corp.)Corporation that seeks to have a positive impact on society & the environment.
    B corps. redefine fiduciary responsibility to include non-financial interests when making decisions & report their impacts on society & the environment using 3rd party standards.
  15. 15Benefit-Cost Ratio (BCR)A measure of program efficiency; the ratio of the benefits of a project relative to its costs, all expressed in monetary terms
    Also known as cost-benefit ratio
  16. 16Benefit TheoryClassifies the benefits that n/p orgs. generate into 4 broad categories based on goods and services they provide:
    Private / Group / Public / Trade
    Np should seek support from beneficiaries and/or those who value the benefits
  17. 17BondsDebt securities that are essentially long-term contracts between issuers (borrowers) and investors (lenders)
    Borrowed money + agreed-upon amt. of interest is paid back within a certain period of time
  18. 18Break-Even AnalysisMethod of determining at what point
    total costs = total revenue
  19. 19Capital AssetsLong-lasting and big-ticket items of value held by a nonprofit, typically including land, facilities, and equipment
  20. 20Capital BudgetingPlanning process used for the purchase of fixed assets, such as purchasing or renovating a building. The capital budget has close links to the operating budget.
  21. 21Cash BudgetMonth-by-month management plan for
    the most important part of the fiscal health of a nonprofit -
    the expected revenues & expenses and the difference for each month of the fiscal year
  22. 22Cash FlowCash receipts and cash disbursements over a given period
  23. 23Cash-Flow BudgetA projection of cash receipts and cash disbursements over a given period.
    Also known as cash-flow forecast
  24. 24Cash-Flow GapsPeriods when cash outflows exceed cash inflows
  25. 25Cash-flow ManagementThe process of forecasting, monitoring, analyzing, and adjusting cash flows so that an organization stays within a liquidity range
  26. 26Cash-flow Management ReportAn internal document created to inform a nonprofit's leadership about times the nonprofit may run short of cash even with a balanced annual budget.
    Also known as cash management report
  27. 27CostAmount paid or required for something often referred to as cost objective
  28. 28Cost-Benefit Analysis (CBA)A method of determining whether or not a certain project should be done. CBA involves finding and qualifying all the positive factors (benefits) and all the negative factors (costs) of a proposed action and determining the difference between them (the net) to decide whether or not the action is advisable
  29. 29Cost-Benefit RatioThe measure of program efficiency; the ratio of the benefits of a project relative to its costs, all expressed in monetary terms. Also known as benefit-cost ratio
  30. 30Coupon RateAnnual interest rate payable to a bondholder as printed on the bond
  31. 31Current AssetsThose assets that are cash or can be turned into cash within a short period of time
  32. 32Current LiabilitiesDebts to be paid within a short period
    of time.
    Also known as payables
  33. 33Default RiskThe risk that investors may lose part or all of their security-invested principal and interest because of a lack of financial soundness on the part of the security or the company that issued the security
  34. 34DepreciationThe assigning of a value to the useful life
    of a capitalized fixed asset and then expending those assets over its
    economic life
  35. 35Direct CostsCosts that can be tracked to a product, program or a cost center
  36. 36Discount RateThe interest rate used to discount future cash flows to determine the present value of an investment
  37. 37DiversificationThe balancing of revenue sources across entities with the aim of achieving greater financial security
  38. 38EffectivenessAchievement of a program's or a nonprofit's long-term targets/outcomes
  39. 39EfficiencyThe ratio of useful output to the total input used to create the output
  40. 40Endowment DrawThe annual amount taken from an endowment that is to be used for general operating purposes each fiscal year
  41. 41Endowment FundsRestricted funds in which the principal is invested in perpetuity and its income is used to support the operation of the nonprofit for its designated programs
  42. 42Expense BudgetA budget that tells how much will be spent for a given period, usually a fiscal year
  43. 43FiduciaryAn individual or organization holding assets for another party
  44. 44Financial AccountingThe preparation of financial statements of an organization's past revenues and expenses. These financial statements are used primarily by parties outside the organization who might have a particular interest in the organization.
  45. 45Financial Accounting Standards Board (FASB)The designated organization in the private sector for establishing the financial accounting standards that govern the preparation of financial reports by nongovernmental entities
  46. 46Financial StatementsWritten reports of an organization's financial activities. Nonprofits typically produce 4 financial statements:
    Statement of
    Financial position, activities, cash flow and functional expenses
  47. 47Fiscal Year (FY)Any period of 12 months chosen by an organization as its budget year, the period within which revenues and expenses are estimated and tracked
  48. 48Fixed CostsExpenses that do not vary with volume
  49. 49Form 990A form that most nonprofits must file annually with the IRS. The information in Form 990s, generally available to the public, allows easy comparison of one nonprofit to another
  50. 50Fund AccountingAccounting system used by nonprofits that emphasizes accountability rather than profit. Fund accounting allows nonprofits to keep separate set of funds, both revenue and expense, for particular programs.
  51. 51Future ValueThe value of cash or another type of asset at a future date that is equivalent in value to a specified sum now
  52. 52General Obligation Bonds (GO Bonds)Debt instrument issued by a state or local government to finance projects for the general public's benefit, such as libraries and schools. GO obligation bonds are secured by the "full faith and credit" of the issuing gov't.
  53. 53General Support RevenueRevenue available that is not specifically designated for use for a particular purpose.
    Also known as Unrestricted Revenue
  54. 54GAAP Generally Accepted Accounting PrinciplesWidely accepted set of rules and procedures for the recording and reporting of financial info; created by the Financial Accounting Standards Board
  55. 55Indirect CostsExpenses for the nonprofit as an org. that cannot be directly attributable to particular programs
  56. 56InputsThe resources used in a performance measuring system, such as staffing, supplies, and money
  57. 57Interest RateThe % rate at which interest is charged on a loan for a period
  58. 58Intergenerational EquityA value concept based on the belief that future generations have rights to resources that the current generation must respect
  59. 59Internal ControlsRules put in place within an org. to achieve efficiency and effectiveness of operations, reliability of financial reporting and compliance with laws and regulations
  60. 60Internal Rate of Return (IRR)A measurement of the return on an investment. The IRR is the discount rate at which a project's net present value equals zero
  61. 61LadderingA method of structuring security terms so that a certain proportion of the investment matures every year over a few yrs. Laddering can reduce market risk, if used properly.
  62. 62LeverageThe degree to which an org. is using debt to finance its activities
  63. 63LiabilitiesSources of capital used to finance assets. Liabilities are debts the org. owes to 3rd parties and must be paid.
  64. 64Life-Cycle Costing (LCC)A method of determining all the costs of an asset over its lifetime (including maintenance and disposal costs, not just the purchasing price)
  65. 65Line-Item BudgetA budget that lists individual costs of all budgeted items, such as personnel, supplies, and equipment
  66. 66LiquidityThe extent to which an asset can be converted into cash without incurring extraordinary costs
  67. 67Long-Term AssetsAssets such as property, buildings, and equipment that cannot easily be changed into cash in a short period of time
  68. 68Long-Term LiabilitiesDebts, such as mortgages, that are to be paid off over multiple years
  69. 69L3C (Low-Profit Limited-Liability Co.)A legal entity that facilitates investments in socially beneficial, for-profit ventures while complying with IRS rules concerning program-related investments
  70. 70Management AccountingA method of accounting that focuses on using an org.'s internal financial data to think through how the org. can be more efficient in its delivery of services or more effective in its accomplishment of program outcomes
  71. 71Marginal CostsAdditional costs incurred to add one more unit of service or produce one more unit of goods
  72. 72Market RiskThe risk that investors may lose part or all of their market-invested principal and interest because of changes in the marketplace in general, rather than problems with individual instruments or the orgs that issue them
  73. 73Marketable SecuritiesMonies invested on a short-term basis
    (less than 1 yr) such as certificates of deposits and stocks
  74. 74MissionThe purpose for which a nonprofit is formed
  75. 75Modern Portfolio Theory (MPT)Investment theory that provides the foundation for assets selection in a portfolio; the aim is to maximize expected return for a given amount of portfolio risk or to minimize risk for a given level of expected return
  76. 76Municipal BondsBonds issued by a city or state gov't or its agency to finance capital projects.
    Also known as munis
  77. 77Net AssetsThe difference b/w the assets and liabilities of an org.
    the accumulation of the difference b/w the cumulative revenues and cumulative expenses over the life of an org.
  78. 78Net Present Value (NPV)The difference b/w cash inflow and cash outflow, both discounted to their present values
  79. 79Nonprofit CorporationA legal entity incorporated in 1 of the 50 states and operating for educational, charitable, social, religious or civic purposes. Unlike a for-profit org. a nonprofit corp has a board or directors and officers but no shareholders
  80. 80Nonsystematic RiskThe default risk of a specific corp or institution
  81. 81Operating BudgetAn org.'s adopted budget for the fiscal year that is amended and lists both revenue and expenses
  82. 82Operating ReserveA fund for unexpected events
    Often known as a rainy-day fund
  83. 83OutputsThe results or products of the program activities in the nonprofit
  84. 84Pay-as-you-go FinancingCash financing: the saving up of funds to purchase particular assets
  85. 85Permanently Restricted FundsFunds that must be spent only for those purposes designated by the donor
  86. 86Permanently Restricted Net AssetsGifts received in a fiscal year for a nonprofit's endowment that may never be spent
  87. 87PledgesPromise made by donors to give cash, property, or other assets to an org.
    in the future
  88. 88Prepaid ExpensesCurrent assets that have been paid by the nonprofit before they are incurred
  89. 89Present ValueThe value of cash or another type of asset on a given date of a future payment or series of future payments discounted to reflect the time value of money
  90. 90Private FoundationsNonprofit corporations that make grants mostly to nonprofits and usually raise those revenues from a single source
  91. 91Private GoodsGoods and services of a private nature that are rival and excludable.
    (Ex. day-care service is a private good, benefiting the child and the child's family)
  92. 92Program BudgetRevenues and expenses categorized by programs
  93. 93Program-related Investments (PRIs)Investments made by private foundations in for-profit ventures to support charitable activities
  94. 94Proposed BudgetA budget that has been drafted but not yet been adopted by an organization's board of directors
  95. 95Prudent Investor RuleA revision to the prudent man rule that enlarges trustees' immunity for the loss of investments to include the entire portfolio
  96. 96Prudent Man RuleLegal principle that holds that the trustees or board of directors of an org. cannot be held responsible for a loss of investments by the org. as long as they were prudent in their decision making
  97. 97Public CharitiesNonprofit corps. classified as 501(c)(3)s, that raise revenue from many sources to provide education, scientific, or social services
  98. 98Public GoodsGoods and services that are characterized by a lack of rivalry and excludability and are provided without profit to all members of society
  99. 99ReceivablesRevenue earned from prior fiscal years' contracts but still not collected in cash
  100. 100Revenue BondsDebt securities issued for facilities that generate revenue by which the bondholders will be repaid, such as airports and tollroads
  101. 101Revenue BudgetsBudgets that tell how much revenue will be raised to support particular programs or nonprofits
  102. 102RevenuesThe monies collected by a nonprofit.
    Revenues come from many different sources, including contributions (gifts), grants and contracts, fees, interest income and dividends, investment gains, donated services, donated materials, and securities
  103. 103Sarbanes-Oxley ActThe 2002 federal law that requires publicly traded corps to adhere to governance standards that include a broad role for corporate boards in corporations' finances and auditing procedures
  104. 104Separation of DutiesA fraud prevention measure that involves requiring more than one person to complete a given financial task within an org.
  105. 105Serial BondsBonds of issues that feature maturities every year over a period of years
  106. 106Social EnterprisesOrgs. or ventures that achieve their primary social or environmental missions using business methods
  107. 107Social EntrepreneursIndividuals or orgs. that pursue innovative solutions to society's most pressing and social problems
  108. 108SolvencyThe state of having enough assets to cover all debts
  109. 109Spending BaselineAn est. of how much it will cost to continue the current year's programs with the same labor and materials next year with next year's costs
  110. 110Step CostsCosts that are constant for a given level of activity but increase or decrease, often significantly, once a threshold is crossed
  111. 111Systematic RisksMarket risks wherein the prices of all securities decrease or increase simultaneously. Systematic risk is the result of the general ebb and flow of the market as a whole.
  112. 112Temporarily Restricted Net AssetsRevenues restricted by time & action, often in the form of gifts received in a fiscal yr. for use in a specific future fiscal yr. Nonprofits are required to report any revenue that they cannot currently spend but can spend in the future or can spend only for restricted purposes
  113. 113Term BondsBonds of an issue that feature a large block of bonds maturing in an single yr.
  114. 1143rd SectorThe nonprofit sector
    The economy in general can be divided into 3 sectors:
    Government, Business & NPs
  115. 115Time Value of Money (TVM)The concept that $ available now is worth more than the same amt. in the future because of its potential earning capacity.
    This core principal of finance holds that, provided $ can earn interest, any amt. of $ is worth more the sooner it is received.
  116. 116Total RevenueTotal Revenue =
    Income + Capital Appreciation
    Income is interest paid by fixed-income investments & dividends by equity securities. Capitol Appreciation represents increase in the market price of the equity investment.
  117. 117Unrestricted Net AssetsRevenues that are not restricted in their use; these include gifts received in a fiscal year for use in the fiscal year
  118. 118Variable CostsExpenses that change in proportion to volume
  119. 119Variance ReportsRegular reports, monthly or weekly, that list revenue and expense budgets and actual expenses to date. Such reports allow nonprofit E.D.s to understand which revenues are slow to come in and whether or not any particular line items are over or underspent
  120. 120Venture PhilanthropyVenture capitalism used for philanthropic goals. Funding on a multiyear basis; focus on capacity building rather than programs, high involvement by donors (who often join the board) and focus on measurable results

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Description
Glossary of terms found in the book "Budgeting & Financial Mgmt. for Nonprofit Orgs." by Weikart, Chen, Sermier
Created by
Sasha Elliott
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