Nonprofit organizations are created to address an ongoing need in society (Blackbaud, 2011). Often their mission is based upon what they hope to contribute to the community or correcting a deficiency. There is often a tension between a nonprofits mission and financial results (Allsion & Kaye, n.d.). This is because the bottom line, which influences many strategic decisions, does not always work in the best interest of stakeholders (Allison & Kaye). A nonprofit organization stakeholder is a benefactor. Some benefactors may include funders, donors and the community.
It has been stated by Allison and Kaye (n.d.) that “passion for mission is a great source of strength for nonprofit organizations. The institutionalized impulse to "change the world" has brought about important advancement in American society. As a strength, the passion for mission taps incredible creativity, energy and dedication for the work of an organization. However, zeal for the mission can lead staff, board and volunteers to discount "business" realities…”
A nonprofit's single-minded, mission driven nature, can result in financial neglect, especially during periods of growth (Wilson, 2011). In order to balance both mission and financial stability, a nonprofit should place equal emphasis on financial viability using solid reporting mechanisms and the pursuit of its mission (Wilson).
Nonprofit boards of directors have authority over organizations they govern and have the responsibility of making it a success (Allison & Kaye, n.d.). They operate similar to for-profit board of directors. Some of the roles of the board include setting the nonprofits agenda and direction, making sure it has adequate financial resources, set strategies, monitor management and provide oversight (BoardSource, 2010).
A nonprofit organization generally lacks the financial flexibility of a for-profit because it depends on resource providers that are not engaged in a commercial transaction (Blackbaud, 2011). Since...
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Blackbaud, Inc. Financial Management of Not-for-Profit Organizations (2011, October). Retrieved from http://www.blackbaud.com/files/resources/downloads/WhitePaper_FinancialManagementForNPO.pdf
Finkenstaedt, R.L. (2009, December). Organizational Capital: A New Approach to Lending in
Nonprofit Affordable Housing, NeighborWorks America
Foster, W.L., Kim, P. & Christiansen, B. (2009). Ten nonprofit funding models. Stanford Social Innovation Review. Retrieved from http://opportunitycollaboration.net/userimages/file/Fellowship%20Ten%20Nonprofit%20Funding%20Models.pdf
Parrino, R., Kidwell, D. (2009). Fundamentals of Corporate Finance. John Wiley & Sons, Inc. New Jersey.
Payne, G., Benson, G. and Finegold, D. (2009, Spring). Corporate board attributes, team effectiveness and financial performance, Journal of Management Studies 46: 704-731.
Wilson,M. (2011). Organizational sustainability: A self help housing corporation’s recipe for success. Real Estate Review. 40.
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