Effective Financial Management in Public and Nonprofit Agencies

785 Pages·2015·9.95 MB·English

by  Jerome B. McKinney

Effective Financial Management
in Public and Nonprofit Agencies
Effective Financial Management
in Public and Nonprofit Agencies
Fourth Edition
Jerome B. McKinney
Contents
About the Fourth Edition
1 Understanding Financial Management
2 Accounting’s Role in Financial Management
3 Internal Control Management
4 Revenue Management
5 Purchasing and Inventory Management
6 Cash Management
7 Risk Management
8 Borrowing and Debt Management
9 The Budgeting Function
10 Expenditure Forecasting
11 Budgeting as a Management Tool
12 Capital Budgeting
13 Line Item and Performance Budgeting
14 The Planning, Programming, Budgeting System
15 Zero-Base Budgeting and Total Quality Management
16 Information Needs and Financial Management
17 Auditing
18 Reporting
19 Evaluating Fiscal Health
20 Fraud, Waste, and Abuse
21 Financial Advising Functions
Index
About the Fourth Edition
Public and other nonprofit financial management systems have been going
through profound change during the past two decades. We are passing through a
period in which the public is demanding more and better services while
demonstrating an unwillingness to pay higher taxes or fees. Access to
government and nonprofit sources of funding have been made more difficult
since the Great Recession of 2008–09. Accordingly, public and private officials
hold the view that public and other nonprofit agencies can and must find new
ways to cut costs while improving efficiency, effectiveness, transparency, and
accountability. This edition is an important means to achieve these goals.
Even more so than in the past, effective management of financial resources is
critical to the success and survival of public and other nonprofit agencies. While
the nonfinancial manager will not be expected to be an accountant/bookkeeper
or an auditor, any lack of familiarity with the concepts of accounting and other
financial processes will limit the manager’s ability to ask the critical questions
and to effectively monitor and evaluate fiscal activities. This text is written to be
understandable to those who are not “experts” but to those who are or may
become managers.
Every chapter of this fourth edition is updated with the most recent
developments, maintaining simplicity and practicality. Special emphasis is
focused on sustainability as a unifying means to address a wide array of public
and nonprofit fiscal management issues, especially the demand for greater
transparency and accountability and the pursuit of the “sweet spot” in the triple
bottom line (TBL) approach to sustainability. Attention is given to the Treadway
Commission, or Committee on Sponsoring Organization (COSO), study on
internal control, including its widely accepted recommendations aimed at
maximizing the achievement of an organization’s mission and goals. Next,
recent developments to minimize organizations’ vulnerability to fraud, waste,
and abuse (FWA), including the triangle versus the diamond approaches and
cloud computing are examined.
Other important areas on which this new edition focuses attention include (1)
the recent research on and changing approach to risk management; (2) the
government performance and Results Act of 1993, discussion of which has been
comprehensively rewritten in 2010, focusing attention on tighter congressional
oversight and on greater public transparency and accountability; (3) break-even
analysis, introducing a new approach for calculating the result and articulating
its linkage and importance to margin of safety, allowing managers to better
manage their budgets and resources; (4) ties together the fiscal side (budgeting,
financing, and controlling) and the substantive management side (planning,
programming, and evaluating) to facilitate the unimpeded flow of required
information to the appropriate responsibility centers’ decision points in public
and nonprofit agencies; (5) it shows how to think about resource needs and
translate them into effective budgets; (6) it shows how to obtain and use
financial advisory services; and (7) it incorporates the massive changes brought
about the Governmental Accounting Standards Board (GASB) in statement
number 34.
The author thanks students and practitioners who exchanged ideas and
examples. Thanks go to Mary McKinney and my daughter Katie for their
continued encouragement and to the memory of Melissian and Octavious
McKinney. I also owe thanks to Anita Marchese for typing and editing and the
Graduate School of Public and International Affairs of the University of
Pittsburgh.
Copyright © 2015 by Jerome B. McKinney All rights reserved. No part of this publication may be
reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise, except for the inclusion of brief quotations in a review,
without prior permission in writing from the publisher.
Library of Congress Cataloging-in-Publication Data McKinney, Jerome B.
Effective financial management in public and nonprofit agencies / Jerome B. McKinney. — Fourth
edition.
pages cm
Revised edition of the author’s Effective financial management in public and nonprofit agencies, 3rd ed.,
published in 2004.
Includes bibliographical references.
ISBN 978-1-4408-3122-5 (hardback) — ISBN 978-1-4408-3123-2 (e-book) 1. Finance, Public. 2.
Nonprofit organizations—Finance. I. Title.
HJ197.M35 2015
658.15—dc23 2014040021
ISBN: 978-1-4408-3122-5
EISBN: 978-1-4408-3123-2
19 18 17 16 15 1 2 3 4 5
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