Instructor’s Manual for Financial Management for Public, Health, and Not-for-Profit
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Organizations1,
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SOLUTIONS MANUAL for Financial Management for Public
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Health, and Not-for-Profit Organizations 7th Edition bySteven
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Finkler, ThadCalabrese, (Complete 15 Chapters)
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,Chapter 3: Additional Budgeting
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Concepts
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INTRODUCTION
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TO
FINANCIAL
MANAGEMEN gy
T
Questions for Discussion gy gy
1 -1. Financial management is the subset of management that focuses on generating financial
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information that can improve decisions. The decisions are oriented toward achieving the
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various goals of the organization while maintaining a satisfactory financial situation. Financial
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management encompasses the broad areas ofaccounting and finance.
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1 -2. In proprietary, or for-profit, organizations, an underlying goal is to maximize the wealth of
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the owners ofthe organization.
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1 -3. In public service organizations, decisions are oriented toward achieving the various goals of
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the 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 ofnonbusiness organizations as well.
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1 -5. Accounting is subdivided into two major areas: managerial accounting and financial
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accounting. Managerial accounting relates to generating any financial information that
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managers can use to improve the future results of the organization. This includes techniques
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designed to generate any financial data that might help managers make more effective
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decisions. Major aspects ofmanagerial accounting relate to making financial plans for the
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organization, implementing those plans, and then working to ensure that the plans are
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achieved. Some examples of managerial accounting include preparing annual operating
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budgets, generating information for use in making major investment decisions, and
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providing the data needed to decide whether to buy or lease a major piece of equipment.
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Financial accounting provides retrospective information. As events that have financial
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implications occur they are recorded by the financial accounting system. From time to time
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(usually monthly, quarterly, or annually), the recorded data are summarized and reported to
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interested users. The users include both internal managers and people outside the
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organization. Those outsiders include those who have lent or might lend money to the
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organization (creditors), those who might sell things to the organization (called suppliers or
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vendors), and other interested parties. These interested parties may include those with a
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particular interest in public service organizations, such as regulators, legislators, and citizens.
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Financial reports provide information on the financial status of the organization at a specific
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point in time, as well as reporting the past results ofthe organization‘s operations (i.e., how well
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it has done froma financial viewpoint).
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, Instructor’s Manual for Financial Management for Public, Health, and Not-for-Profit
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Organizations1,
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1-6. Finance focuses on the alternative sources and uses of the organization‘s financial
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resources. Obtaining funds when needed from appropriate sources and the deployment
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ofresources within the organization fall under this heading. In addition, finance involves the
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financial markets (such as stock and bond markets) that provide a means to generating funds
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for organizations.
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1-7. Yes. Achieving the goals of the organization requires financial planning. Financial
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management provides information for managers to use in making their decisions. It
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helps managers by providing information on the likely financial impact of each proposed
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alternative. It also 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
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some hospitals, to earn profits. But what about other public service organizations such as
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charities? They should make a profit as well. Profits provide a safety margin against
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unexpected costs, provide resources to replace buildings and equipment, and to expand and
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improve services.
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1-9. Federal government (see text Figure 1-1)
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M Individual income taxes gy gy
Mgy Social insurance taxes gy gy
M
gy Corporate income tax gy gy
State and local government (see text Figure 1-4)
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M Sales and gross receipts tax gy gy gy gy
M Federal government gy
M Property taxes gy
M Individual income taxes gy gy
Health sector (see text Figure 1-6)
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M Private insurance gy
M Medicare
M Medicaid
M Other government programs gy gy
Not-for-profit sector (see text) gy gy gy
M Private payments for goods and services gy gy gy gy gy
M Government payments for goods and services gy gy gy gy gy
M 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. For
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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 an
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off budget item that until recently raised more revenue than was spent on social security
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payments.
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, Chapter 3: Additional Budgeting
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Concepts
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The surplus in this area offset other government losses, and even resulted in an overall surplus
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for the federal government. This is no longer the case, and, over time, trust fund resources will
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be used up to provide benefits. As the federal government will not have access to the excess
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resources from social security, it will have to borrow and increase the total level of federal debt,
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unless revenues or spending 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
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relieve suffering, promote the interests ofthe poor, protect the environment, provide basic
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social services, or undertake community development" (World Bank Operational Directive
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14.70). NGOs are quite similar to the not-for-profit organizations. They are primarily mission-
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focused rather than profit-focused. NGOs fall into three main categories: community-based,
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national, and international.
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PLANNING
Chapter2 gy
FOR
SUCCESS: gy
BUDGETIN
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Questions for Discussion gy gy
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 used to 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-
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for-profit organizations, finances often become a means to an end, rather than the end
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itself. This mission cannot solely be making profits. Financial management must help
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balance the focus on profit with the public service elements ofthe organization‘s mission.
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2-3. Strategic plans translate the mission ofthe organization into an approach or set ofapproaches
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that will be used to accomplish the mission, and a broad set of goals that need to be
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attained to achieve the mission. Strategic plans set the organization‘s long-term direction.
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They often do not
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Organizations1,
gy
SOLUTIONS MANUAL for Financial Management for Public
gy gy gy gy gy gygy
Health, and Not-for-Profit Organizations 7th Edition bySteven
gy gy gy gy gy gy gygy gy
Finkler, ThadCalabrese, (Complete 15 Chapters)
gy gy gy gy gy gy
,Chapter 3: Additional Budgeting
gy gy gy 3-2
Concepts
gy
INTRODUCTION
Chapter1 gy
TO
FINANCIAL
MANAGEMEN gy
T
Questions for Discussion gy gy
1 -1. Financial management is the subset of management that focuses on generating financial
gy gy gy gy gy gy gy gy gy gy gy gy gy
information that can improve decisions. The decisions are oriented toward achieving the
gy gy gy gy gy gy gy gy gy gy gy gy
various goals of the organization while maintaining a satisfactory financial situation. Financial
gy gy gy gy gy gy gy gy gy gy gy gy
management encompasses the broad areas ofaccounting and finance.
gy gy gy gy gy gy gy gy
1 -2. In proprietary, or for-profit, organizations, an underlying goal is to maximize the wealth of
gy gy gy gy gy gy gy gy gy gy gy gy gy gy gy
the owners ofthe organization.
gy gy gy gy
1 -3. In public service organizations, decisions are oriented toward achieving the various goals of
gy gy gy gy gy gy gy gy gy gy gy gy gy gy
the organization while maintaining a satisfactory financial situation.
gy gy gy gy gy gy gy gy
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.
gy gy gy gy gy gy gy gy gy gy gy gy gy gy gy gy
The vocabulary used by accounting is the language ofnonbusiness organizations as well.
gy gy gy gy gy gy gy gy gy gy gy gy
1 -5. Accounting is subdivided into two major areas: managerial accounting and financial
gy gy gy gy gy gy gy gy gy gy gy gy
accounting. Managerial accounting relates to generating any financial information that
gy gy gy gy gy gy gy gy gy gy
managers can use to improve the future results of the organization. This includes techniques
gy gy gy gy gy gy gy gy gy gy gy gy gy gy
designed to generate any financial data that might help managers make more effective
gy gy gy gy gy gy gy gy gy gy gy gy gy
decisions. Major aspects ofmanagerial accounting relate to making financial plans for the
gy gy gy gy gy gy gy gy gy gy gy gy
organization, implementing those plans, and then working to ensure that the plans are
gy gy gy gy gy gy gy gy gy gy gy gy gy
achieved. Some examples of managerial accounting include preparing annual operating
gy gy gy gy gy gy gy gy gy gy
budgets, generating information for use in making major investment decisions, and
gy gy gy gy gy gy gy gy gy gy gy
providing the data needed to decide whether to buy or lease a major piece of equipment.
gy gy gy gy gy gy gy gy gy gy gy gy gy gy gy gy
Financial accounting provides retrospective information. As events that have financial
gy gy gy gy gy gy gy gy gy gy
implications occur they are recorded by the financial accounting system. From time to time
gy gy gy gy gy gy gy gy gy gy g y gy gy gy
(usually monthly, quarterly, or annually), the recorded data are summarized and reported to
gy gy gy gy gy gy gy gy gy gy gy gy gy
interested users. The users include both internal managers and people outside the
gy gy gy gy gy gy gy gy gy gy gy gy
organization. Those outsiders include those who have lent or might lend money to the
gy gy gy gy gy gy gy gy gy gy gy gy gy gy
organization (creditors), those who might sell things to the organization (called suppliers or
gy gy gy gy gy gy gy gy gy gy gy gy gy
vendors), and other interested parties. These interested parties may include those with a
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particular interest in public service organizations, such as regulators, legislators, and citizens.
gy gy gy gy gy gy gy gy gy gy gy gy
Financial reports provide information on the financial status of the organization at a specific
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point in time, as well as reporting the past results ofthe organization‘s operations (i.e., how well
gy gy gy gy gy gy gy gy gy gy gy gy gy gy gy gy
it has done froma financial viewpoint).
gy gy gy gy gy gy gy
, Instructor’s Manual for Financial Management for Public, Health, and Not-for-Profit
gy gy gy gy gy gy gy gy gy
Organizations1,
gy
1-6. Finance focuses on the alternative sources and uses of the organization‘s financial
gy gy gy gy gy gy gy gy gy gy gy gy
resources. Obtaining funds when needed from appropriate sources and the deployment
gy gy gy gy gy gy gy gy gy gy gy
ofresources within the organization fall under this heading. In addition, finance involves the
gy gy gy gy gy gy gy gy gy gy gy gy gy
financial markets (such as stock and bond markets) that provide a means to generating funds
gy gy gy gy gy gy gy gy gy gy gy gy gy gy gy
for organizations.
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1-7. Yes. Achieving the goals of the organization requires financial planning. Financial
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management provides information for managers to use in making their decisions. It
gy gy gy gy gy gy gy gy gy gy gy gy
helps managers by providing information on the likely financial impact of each proposed
gy gy gy gy gy gy gy gy gy gy gy gy gy
alternative. It also provides information about financial stability, efficiency, and effectiveness.
gy gy gy gy gy gy gy gy gy gy gy
1-8. Clearly, we might expect some public service organizations that are proprietary, such as
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some hospitals, to earn profits. But what about other public service organizations such as
gy gy gy gy gy gy gy gy gy gy gy gy gy gy
charities? They should make a profit as well. Profits provide a safety margin against
gy gy gy gy gy gy gy gy gy gy gy gy gy gy
unexpected costs, provide resources to replace buildings and equipment, and to expand and
gy gy gy gy gy gy gy gy gy gy gy gy gy
improve services.
gy gy
1-9. Federal government (see text Figure 1-1)
g y gy gy gy gy gy
M Individual income taxes gy gy
Mgy Social insurance taxes gy gy
M
gy Corporate income tax gy gy
State and local government (see text Figure 1-4)
gy gy gy gy gy gy gy
M Sales and gross receipts tax gy gy gy gy
M Federal government gy
M Property taxes gy
M Individual income taxes gy gy
Health sector (see text Figure 1-6)
gy gy gy gy gy
M Private insurance gy
M Medicare
M Medicaid
M Other government programs gy gy
Not-for-profit sector (see text) gy gy gy
M Private payments for goods and services gy gy gy gy gy
M Government payments for goods and services gy gy gy gy gy
M Donations
1-10. Federal government spending exceeded $6 trillion in 2020 and state and local government
gy gy gy gy gy gy gy gy gy gy gy gy gy
spending was more than $3 trillion in 2018. In contrast, the GDP was $21 trillion in 2020. For
gy gy gy gy gy gy gy gy gy gy gy gy gy gy gy gy gy gy
more up to date information, examine the statistical tables of the most recent Economic
gy gy gy gy gy gy gy gy gy gy gy gy gy gy
Report of the President, which is available online.
gy gy gy gy gy gy gy gy
1-11. The reported surplus includes both on and off budget items. Social security taxes represent an
gy gy gy gy gy gy gy gy gy gy gy gy gy gy gy
off budget item that until recently raised more revenue than was spent on social security
gy gy gy gy gy gy gy gy gy gy gy gy gy gy gy
payments.
gy
, Chapter 3: Additional Budgeting
gy gy gy 3-4
Concepts
gy
The surplus in this area offset other government losses, and even resulted in an overall surplus
gy gy gy gy gy gy gy gy gy gy gy gy gy gy gy
for the federal government. This is no longer the case, and, over time, trust fund resources will
gy gy gy gy gy gy gy gy gy gy gy gy gy gy gy gy gy
be used up to provide benefits. As the federal government will not have access to the excess
gy gy gy gy gy gy gy gy gy gy gy gy gy gy gy gy gy
resources from social security, it will have to borrow and increase the total level of federal debt,
gy gy gy gy gy gy gy gy gy gy gy gy gy gy gy gy gy
unless revenues or spending are changed.
gy gy gy gy gy gy
1 -12. Sometimes gifts come with strings attached. If the conditions of the gift create a burden that
gy gy gy gy gy gy gy gy gy gy gy gy gy gy gy gy gy
the organization does not want to accept, or somehow requires the organization to work in
gy gy gy gy gy gy gy gy gy gy gy gy gy gy gy
opposition to its mission, it might turn down the gift.
gy gy gy gy gy gy gy gy gy gy
1 -13. The World Bank has defined NGOs as "private organizations that pursue activities to
gy gy gy gy gy gy gy gy gy gy gy gy gy gy
relieve suffering, promote the interests ofthe poor, protect the environment, provide basic
gy gy gy gy gy gy gy gy gy gy gy gy
social services, or undertake community development" (World Bank Operational Directive
gy gy gy gy gy gy gy gy gy gy
14.70). NGOs are quite similar to the not-for-profit organizations. They are primarily mission-
gy gy gy gy gy gy gy gy gy gy gy gy gy
focused rather than profit-focused. NGOs fall into three main categories: community-based,
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national, and international.
gy gy gy
PLANNING
Chapter2 gy
FOR
SUCCESS: gy
BUDGETIN
gy
G
Questions for Discussion gy gy
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
gy gy gy gy gy gy gy gy gy gy gy gy
objectives to the individuals who must achieve them, forecasting future events, developing
gy gy gy gy gy gy gy gy gy gy gy gy
alternatives, selecting from among alternatives, and coordinating activities. The activities are
gy gy gy gy gy gy gy gy gy gy gy
summarized in a document called a budget. The budget describes what we hope to achieve
gy gy gy gy gy gy gy gy gy gy gy gy gy gy gy
and the resources that will be used to carry out the organization‘s activities.
gy gy gy gy gy gy gy gy gy gy gy gy gy
2-2. The organization‘s mission represents its reason for existence. For public, health, and not-
gy gy gy gy gy gy gy gy gy gy gy gy gy
for-profit organizations, finances often become a means to an end, rather than the end
gy gy gy gy gy gy gy gy gy gy gy gy gy
itself. This mission cannot solely be making profits. Financial management must help
gy gy gy gy gy gy gy gy gy gy gy gy
balance the focus on profit with the public service elements ofthe organization‘s mission.
gy gy gy gy gy gy gy gy gy gy gy gy gy
2-3. Strategic plans translate the mission ofthe organization into an approach or set ofapproaches
gy gy gy gy gy gy gy gy gy gy gy gy gy
that will be used to accomplish the mission, and a broad set of goals that need to be
gy gy gy gy gy gy gy gy gy gy gy gy gy gy gy gy gy gy
attained to achieve the mission. Strategic plans set the organization‘s long-term direction.
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They often do not
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