Finance Essay

2691 WordsOct 19, 201411 Pages
Nonprofits vs. For-Profits: A Comparison Nonprofits vs. For-Profits A Comparison Executive Summary Non-profit organizations are not only an important part of society; the non-profit sector is also an important part of the United States economy. According to Blackwood, Roeger, and Pettijohn (2012), between 2000 and 10 the number of non-profit organizations increased by 24 percent, with approximately 2.3 million in the United States, added $804 billion to the United States economy, and “public charities, the largest component of the non-profit sector, reported $1.51 trillion in revenue, $1.45 trillion in expenses, and $2.71 trillion in assets” (p.1). No different than for-profit organizations, financial management is important in the non-profit sector and especially true for medium to large non-profits because of their financial complexity. With so much money at stake and failure to achieve their missions, non-profits, just as for-profits, must be sustainable, competitive, and able to manage financial risk. All organizations risk bankruptcy, for-profits and non-profits alike, but the uncertainty of funds from year to year and sometimes no way to increase funds during lean times, makes financial management, program oversight and monitoring, and budgeting essential to the life lines of not-for-profit organizations. Though non-profits are similar to organizations in the private sector, non-profits must meet certain requirements set by the Internal Revenue Service (IRS) to qualify as a non-profit organization; important differences exist between financial statements, fiduciary duties of board members, and how and/or why non-financial performance is evaluated. Regardless of the type of organization, growth, financial stability, and the ability to measure the organizations performance will always be key factors that contribute to survival. Because both

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