Solution Manual for Financial Management for Public Health, and Not-for-Profit Organizations 7th Edition by Finkler, Calabrese & Smith Verified Chapters 1 - 15, Complete

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SOLUTIONS MANUAL for Financial Management for Public
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Health, and Not-for-Profit Organizations 7th Edition by Steven
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Finkler, Thad Calabrese, (Complete 15 Chapters)
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,Chapter yey3: y e y Additional y ey Budgeting 3-2
yey Concepts


INTRODUCTION
Chapter 1 yey

TO
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NAGEMENT
Questions for Discussion yey yey




1-1. Financial management is the subset of
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information that can improve decisions.
yey ye yey yey yey yey The decisions are oriented toward achieving the
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various goals of the organization while
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management encompassesthe broad areas
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1-2. In proprietary, or for-profit, organizations, an underlying goal is to maximize the wealth of the
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owners of the organization.
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1-3. In public service organizations, decisions are oriented toward achieving the various goals of the
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organization while maintaining a satisfactory financial situation.
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1-4. Accounting is a system for keeping track of the financial status of an organization and the
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financial results of its activities. It has often been referred to as the language of business.
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The vocabulary used by accounting is the language of nonbusiness organizations as well.
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1-5. Accounting is subdivided into two major areas: managerial accounting and financial accounting.
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Managerial accounting relates to generating any financial information that managers can use
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to improve the future results of the organization. This includes techniques designed to
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generate any financial data that might help managers make more effective decisions. Major
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aspects of managerial accounting relate to making financial plans for the organization,
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implementing those plans, and then working to ensure that the plans are achieved. Some
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examples of managerial accounting include preparing annual operating budgets, generating
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information for use in making major investment decisions, and providing the data needed to
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decide whether to buy or lease a major piece of equipment. Financial accounting provides
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retrospective information. As events that have financial implications occur they are recorded by
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the financial accounting system. From time to time (usually monthly, quarterly, or annually), the
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recorded data are summarized and reported to interested users. The users include both
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internal managers and people outside the organization. Those outsiders include those who
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have lent or might lend money to the organization (creditors), those who might sell things
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to the organization (called suppliers or vendors), and other interested parties. These interested
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parties may include those with a particular interest in public service organizations, such
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as regulators, legislators, and citizens. Financial reports provide information on the financial
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status of the organization at a specific point in time, as well as reporting the past results of
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the organization‘s operations (i.e., how well it has done from a financial viewpoint).
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, Instructor’s yeyManual yeyfor yeyFinancial yeyManagement yey for yeyPublic, yeyHealth, yeyand yeyNot-for-Profit
yey Organizations1
,
1-6. Finance focuses on the alternative sources and uses of the organization‘s financial resources.
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Obtaining funds when needed from appropriate sources and the deployment of resources
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within the organization fall under this heading. In addition, finance involves the financial
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markets (such as stock and bond markets) that provide a means to generating funds for
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organizations.
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1-7. Yes. Achieving the goals of the organization requires financial planning. Financial management
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provides information for managers to use in making their decisions. It helps managers by
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providing information on the likely financial impact of each proposed alternative. It also
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provides information about financial stability, efficiency, and effectiveness.
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1-8. Clearly, we might expect some public service organizations that are proprietary, such as some
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hospitals, to earn profits. But what about other public service organizations such as charities?
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They should make a profit as well. Profits provide a safety margin against unexpected costs,
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provide resources to replace buildings and equipment, and to expand and improve services.
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1-9. y e y Federal government (see text Figure 1-1)
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 Individual income taxes yey yey


 Social insurance taxes yey yey


 Corporate income tax yey yey




State and local government (see text Figure 1-4)
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 Sales and gross receipts tax yey yey yey yey


 Federal government yey


 Property taxes yey


 Individual income taxes yey yey




Health sector (see text Figure 1-6)
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 Private insurance yey


 Medicare
 Medicaid
 Other government programs yey yey




Not-for-profit sector (see text) yey yey yey


 Private payments for goods and services yey yey yey yey yey


 Government payments for goods and services yey yey yey yey yey


 Donations

1-10. Federal government spending exceeded $6 trillion in 2020 and state and local government
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spending was more than $3 trillion in 2018. In contrast, the GDP was $21 trillion in 2020.
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For more up to date information, examine the statistical tables of the most recent Economic
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Report of the President, which is available online.
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1-11. The reported surplus includes both on and off budget items. Social security taxes represent
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an off budget
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social security payments.
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,Chapter yey3: y e y Additional y ey Budgeting 3-4
yey Concepts



The surplus in this area offset other government losses, and even resulted in an overall
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surplus for the federal government. This is no longer the case, and, over time, trust fund
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resources will be usedup to provide benefits. As the federal government will not have access
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to the excess resources from social security, it will have to borrow and increase the total
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level of federal debt, unless revenues orspending are changed.
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1-12. Sometimes gifts come with strings attached. If the conditions of the gift create a burden that
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the organization does not want to accept, or somehow requires the organization to work in
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opposition to its mission, it might turn down the gift.
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1-13. The World Bank has defined NGOs as "private organizations that pursue activities to relieve
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suffering, promote the interests of the poor, protect the environment, provide basic social
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services, or undertake community development" (World Bank Operational Directive 14.70).
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NGOs are quite similar to the not-for-profit organizations. They are primarily mission-focused
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rather than profit- focused.
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and international.
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PLANNING
Chapter 2 yey

FOR
SUCCESS:BU ye




DGETING
Questions for Discussion yey yey




2-1. Planning helps the organization by causing its employees to think ahead and anticipate
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change. This is done by establishing specific goals and objectives, communicating those
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objectives to the individuals who must achieve them, forecasting future events, developing
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alternatives, selecting from among alternatives, and coordinating activities. The activities are
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summarized in a document called a budget. The budget describes what we hope to achieve
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and the resources that will be usedto carry out the organization‘s activities.
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2-2. The organization‘s mission represents its reason for existence. For public, health, and not-for-
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profit organizations, finances often become a means to an end, rather than the end itself.
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This mission cannot solely be making profits. Financial management must help balance the
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focus on profit with the public service elements of the organization‘s mission.
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2-3. Strategic plans translate the mission of the organization into an approach or set of
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approaches that will be used to accomplish the mission, and a broad set of goals that
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need to be attained to achieve the mission. Strategic plans set the organization‘s long-
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term direction. They often do not
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, Finkler, yeyFinancial yeyManagement yeyfor yeyPublic, yeyHealth, yeyand yeyNot-for-Profit
yeyOrganizations yey7e

© yeyCQ yeyPress, yey2023
have specific financial targets. However, they set the stage for the specific, detailed
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budgets thatwill be established to achieve the organization‘s goals.
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2-4. Whereas the strategic plan establishes goals, the long-range plan considers how to achieve
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those goals. Long-range plans establish the major activities that will have to be carried out
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in the coming three to five years. This process links the strategic plan to the day-to-day
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activities of the organization. Organizations that do not prepare a long-range plan are often
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condemned to only sustain current activities, at best.
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2-5. Budgets establish the amount of resources that are available for specific activities. However,
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budgets do not merely limit the resources that can be spent. They represent the detailed
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plan that supports the organization‘s efforts to achieve its mission, and help the organization
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determine and achieve its goals and objectives. The budgeting process is one of exploring
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possibilities. Organizations determine what things they can and cannot do. They examine
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alternatives and choose those that are likely to yield the best results. They become
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attuned to possible problems and can work to find solutions. Budgeting forces managers to
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think ahead, to have clear expectations against which to measure performance, and to
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coordinate the activities of the organization so that everyone is working toward a common
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purpose.
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Budgets are also used to control results. That is, budgets not only create plans, but
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they are also used to help accomplish those plans. This is done by comparing actual
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results to the budget. Looking at results, we can assess what needs to be corrected. How
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good a job did the organization‘s management do? How well did the organization itself
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do? In order to evaluate performance, one must have a standard or benchmark to
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compare with actual results. The budget establishes the organization‘s expectations.
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2-6. An organization may consider undertaking an activity that was not planned for when the
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annual budget was prepared. At any time an organization can prepare a special budget for
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a specific purpose. Appropriate approval should be obtained before implementing the
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budget.yey




2-7. An organization‘s budgets are often organized into a strategic plan, long-range plan, master
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budget, and special purpose budgets.
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2-8. y e y Budgets present specific, measurable goals. An individual is much more likely to work
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efficientlyif there is a target to shoot for, assuming that the target is not unrealistic.
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2-9. Most employees would prefer salaries that are substantially larger than the amounts they are
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currently receiving. Organizations lack the revenues to pay for those raises. Most managers
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wouldlike more office space with new furniture and remodeled facilities. They would certainly like
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morestaff to carry out existing functions. Organizations must make choices concerning how to
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spend their limited resources.
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2-10. Depending on the specific organization, the volume of services provided may have plunged
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or soared. This would have resulted in substantially more or less revenues than expected.
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If revenues plunged, then we would have had more staff than needed, without the
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resources to pay
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, Chapter yey3: y e y Additional y ey Budgeting 3-4
yey Concepts



that staff. We may have found ourselves unexpectly unable to pay rent on our facilities.
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Even if revenues were up, we may have been faced with soaring costs for items in short
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supply. A budgetis a very important tool. However, we should never assume that it tells
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us exactly what will happen. Managers need to be flexible, observe events that may cause
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actual events to differ fromthe budget, and be prepared to act quickly to take mitigating
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actions.
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2-11. It is very tempting for a manager to see significant variations from the budget, and want to
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revisethe budget. Generally once a budget has been approved by the governing body of
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the organization we do not go back and revise the official budget, even if we see significant
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yeyvariationsfrom the budget. However, as a manager starts to see that something has
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happened which will make results very different from budgeted expectations, the manager
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has to act to minimize the negative impacts of the changes on the organization. For
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example, if you manage a museum, andthe number of customers to your museum café
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has plunged, you have to make adjustments to staffing and food purchases to minimize the
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losses that you will incur. If revenues are insufficient to pay rent, you have to negotiate with
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your landlord for a moratorium on rent payments. If you see that there is no way you
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can cover even severely reduced costs given your drop in customer volume, you need to
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quickly gear up fund-raising activities to bring in more donations to offset losses in sales.
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yeyThe budget is still a valuable tool, because by comparing your original expectations to the
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actuality you can determine things such as how much additional donations youwill need to
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yeykeep the organization afloat.
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2-12. The manager should make sure that it is in the staff‘s best interests to do the things that
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are in theorganization‘s best interests. The key is to establish a means of making the
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normally divergent desires of the organization and its employees become convergent, or
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congruent. Organizations often achieve congruence by setting up a system of incentives.
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2-13. Financial incentives include retaining one‘s job and receiving good raises and bonuses.
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Bonus systems have a variety of problems. Some bonus systems reward all employees if
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spending is reduced. This is good unless workers can restrict volume, thus reducing the
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number of units of service provided in order to save money. Such behavior would likely
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reduce revenues by a greater amount than it would save costs. Also, if everyone gets a
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bonus, then no one feels that individual actions have much impact, and each individual may
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feel that she or he does not have towork particularly hard to reap the benefits of the
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bonus. If bonuses are given only to some employees, it may create jealousy and
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discontent. It is also possible that it may create a competitive environment in a situation
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in which teamwork is needed to provide quality care.
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There are incentive alternatives to bonuses; for example, a letter from supervisor to
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subordinate.In the real world, praise is both cheap and, in many cases, effective. On the
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other hand, criticism,especially in writing, can have a stinging effect that managers will
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work hard to avoid in the future.
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