The revenue and expenditures of a not-for-profit organization may easily involve millions of dollars. Accountants are needed to maintain appropriate records and prepare financial statements for the organization's contributors, directors, and executives, and for the government agencies that regulate them. Most not-for-profit organizations have special accounting standards tailored to meet their objectives, the nature of their resources and programs, and their methods of operation. Their financial statements are designed to identify the principal programs and their related costs.
The not-for-profit organizations discussed in this chapter are:
- Public school systems.
- Colleges and universities.
- Hospitals and health-care facilities.
- Voluntary health and welfare organizations.
PUBLIC SCHOOL SYSTEMS
A public school system is a group of interrelated elements administered by agencies of a county or city government. This is the broad definition. A public school district is an independent government unit. A district is narrower than a school system. However, these terms are often used interchangeably.
Public schools expend money for a variety of programs other than regular instruction, programs such as classes designed specifically for the mentally retarded, for the gifted and talented, for those interested in a vocation, for adults with special interests, and for professional people wishing to continue their education. Expenditures are classified by function: instruction, guidance services, health services, general administration, plant maintenance, and student transportation.
Revenue for these services comes from the taxpayer through income and property taxes. Both the taxpayers and the government units disbursing this revenue to the school districts are interested in how the funds are spent and expect accountability for it in the form of accurate financial statements.
Private and independent school systems, like public school systems, have operating budgets involving revenue and disbursements in the millions of dollars.
Financial Director School systems normally have a financial director who may be called the director of business affairs. In a large school system the positions of financial director and treasurer are separated, while in a small school system the two positions are often combined.
Education
Until recently, the financial director held bachelor's and master's degrees in education and often progressed from teacher to principal to financial director for the school system. Recently, financial directors are being hired with backgrounds in business administration and/or accounting.
The financial director has both administrative responsibilities and financial responsibilities.
Administrative Responsibilities
The administrative responsibilities may include managing the general operation of the school system under the direction of the superintendent of schools. The financial director must supply the public with information when it is requested. He or she must meet with the teaching and custodial staffs and with the unions. He or she is responsible for supervising the buildings and grounds and for complying with local, state, and federal laws and regulations.
Financial Responsibilities
Financial responsibilities include preparation of budgets, financing of capital projects, and meeting interest and principal payments on long-term debt. The financial director continuously monitors the flow of cash. A school system often needs to borrow against tax monies, which are received only twice a year. Excess cash is invested in short-term securities until needed.
The financial director is normally responsible for the accounting of the school system's revenue and expenditures. Federal and state grants must be accounted for in separate funds and not intermingled with general tax revenue. The financial records of special activities, such as food service, bookstores, athletic programs, and transportation, must be kept separate from the general operations. And tax forms must be filed even though the school system has a tax-exempt status.
The position requires someone with an accounting background and expertise and knowledge in specialized areas. The responsibilities of the financial director have become increasingly oriented toward finance and accounting.
Salaries
Accountants involved in financial planning typically earn from $50,000 to $75,000 a year, depending upon the size of the school system. The position is full time with the usual fringe benefits of holidays, two- to four-weeks' vacation, medical and life insurance, and a state pension upon retirement.
As administrator of the school's resources, the financial director reports to the superintendent of schools. The director must provide school officials with information as requested and full and accurate financial reporting.
Treasurer Previously, the school board treasurer was referred to as clerk of the board of education. Only bookkeeping and clerical skills were required of the clerk.
The requirements for the treasurer's position have changed, however. The board of education in the state of Ohio, for example, like other state boards, has imposed new standards elevating the treasurer's position to an attractive career choice of which few accounting students may be aware. Each state has its own standards as established by its own board of education.
Even in smaller communities the school system is a large employer and therefore has a sizable budget. The budget appropriations for a small rural school district can run well over $1.5 million, compared with $100 million for a metropolitan school district. Much larger school districts, such as those of New York City, Chicago, and Los Angeles, may have billion-dollar budgets. The large dollar inflows and outflows of school districts require qualified accountants to budget and manage the funds. State boards of education also have an interest in more accurate and sophisticated reporting, because much of a school system's revenue is provided by the state.
Educational and Experience Standards
Many state boards of education are adopting minimum educational and experience standards for their philanthropists has decreased. Hospital boards are becoming cost conscious and want to know the costs involved in providing various medical services.
Hospitals may be government units, such as the veterans' hospitals; many are affiliated with churches and universities; some are operated by other nonprofit organizations. The American Hospital Association, the Healthcare Financial Management Association, and the AICPA have developed and improved financial accounting and reporting procedures. Audited financial statements are now necessary to support requests for borrowing and for reporting to the state and to other agencies. Certified public accountants are currently exerting greater influence on the reporting practices of hospitals.
The growth of health-care services like Blue Cross and Medicare has been a major influence on hospital accounting. Their payment plans contribute a substantial portion of most hospital revenues. Consequently, these third-party payment plans increase the record keeping and auditing required of hospitals and health-care facilities.
Accountants
Hospitals hire bookkeepers and accountants for the same purposes as private industry and provide job classifications comparable with industry as to responsibilities and salaries. A junior accountant in industry, public accounting, or hospital accounting, performing general and cost accounting functions, earned from $26,000 to $36,500 in 1996, according to Robert Half. A senior accountant, working in the same areas as the junior accountant mentioned above, earned from $37,000 to $42,500.' A patient ac-counts manager can earn $39,600 to $77,300, according to HFMA.
Vice-President of Fiscal Affair
The vice-president of fiscal affairs is responsible for the financial and managerial department of a hospital. It is an executive position. The vice-president will maintain and supervise an accounting department that accounts for routine activities of the hospital; property, plant, and equipment; bequests and endowments; investments; long-term debt; and restricted funds designed for special use by the hospital governing board.
The vice-president should have a bachelor's degree in accounting, a master's degree in accounting or business administration, and be a certified public accountant.
Salary depends upon the size of the institution and the revenue available to work with. Salaries are comparable to those for the same position with an industrial corporation of the same size. Chief financial officers earned from $71,000 to $169,600, HFMA noted in its 1995 survey.
Budget Director
The budget director is responsible for the entire budgetary process and works directly with the department directors in forecasting revenue and in reviewing each line item of expense. The director compiles all departmental budgets into a master budget and supports it with monitors the flow of cash. A school system often needs to borrow against tax monies, which are received only twice a year. Excess cash is invested in short-term securities until needed.
The financial director is normally responsible for the accounting of the school system's revenue and expenditures. Federal and state grants must be accounted for in separate funds and not intermingled with general tax revenue. The financial records of special activities, such as food service, bookstores, athletic programs, and transportation, must be kept separate from the general operations. And tax forms must be filed even though the school system has a tax-exempt status.
The position requires someone with an accounting background and expertise and knowledge in specialized areas. The responsibilities of the financial director have become increasingly oriented toward finance and accounting.
Salaries
Accountants involved in financial planning typically earn from $50,000 to $75,000 a year, depending upon the size of the school system. The position is full time with the usual fringe benefits of holidays, two- to four-weeks' vacation, medical and life insurance, and a state pension upon retirement.
As administrator of the school's resources, the financial director reports to the superintendent of schools. The director must provide school officials with information as requested and full and accurate financial reporting.
Treasurer
Previously, the school board treasurer was referred to as clerk of the board of education. Only bookkeeping and clerical skills were required of the clerk.
The requirements for the treasurer's position have changed, however. The board of education in the state of Ohio, for example, like other state boards, has imposed new standards elevating the treasurer's position to an attractive career choice of which few accounting students may be aware. Each state has its own standards as established by its own board of education.
Even in smaller communities the school system is a large employer and therefore has a sizable budget. The budget appropriations for a small rural school district can run well over $1.5 million, compared with $100 million for a metropolitan school district. Much larger school districts, such as those of New York City, Chicago, and Los Angeles, may have billion-dollar budgets. The large dollar inflows and outflows of school districts require qualified accountants to budget and manage the funds. State boards of education also have an interest in more accurate and sophisticated reporting, because much of a school system's revenue is provided by the state.
Educational and Experience Standards
Many state boards of education are adopting minimum educational and experience standards for their school board treasurers. To be employed as a treasurer, a person probably will have to meet one of several qualifications:
- A bachelor's degree in accounting with training in government accounting, financial report preparation, budgeting, and laws relating to school district budgeting and financing.
- An associate degree in accounting with related training.
- A bachelor's degree in a field other than accounting, provided at least 6 quarter hours are completed in accounting, 3 quarter hours in date processing, and 18 quarter hours in government accounting and other financial and legal areas.
- A high school diploma with three years' experience as a school treasurer or fiscal officer in a government entity. The candidate must have completed 6 quarter hours in accounting, and 3 quarter hours in data processing, along with course work in other business and finance courses.
Responsibilities
The responsibilities of a school board treasurer are equivalent to those of a chief fiscal officer in industry. Varied and challenging duties often include:
- Depositing all monies of the district.
- Keeping a record of case receipts.
- Reporting current cash balances to the board of education.
- Preparing and distributing invoices.
- Signing purchase orders and contracts.
- Signing checks to disburse money.
- Keeping a record of all expenditures.
- Maintaining the payroll function and payroll records.
- Preparing and supervising the bidding process for repairs and capital improvement.
- Assisting in developing school bond issues and operating levies.
- Investing excess funds on a short- and long-term basis.
- Assisting the superintendent or financial director in developing the annual budget.
- Preparing the resolution for annual legal authorization to spend funds subject to board approval.
- Submitting monthly and annual financial statements to the board.
- Submitting the required financial reports to the county auditor, state auditor and state department of education.
- Supervising all personnel in the treasurer's office.
Salaries of school district treasurers nationwide can have a wide range depending upon the size of the school system. Table 4.1 indicates the range of salaries.
A school board treasurer can advance from a small system to a larger school system. Also, an accountant with supervisory experience may transfer from industry to the position of treasurer. The position of school board treasurer is emerging as a new and challenging position for accountants.
COLLEGES AND UNIVERSITIES
By industry standards, many colleges and universities rank as "big business" because of the number of persons employed, revenue received and total economic impact upon the community. For example, a state university in northwestern Ohio, with a student enrollment of approximately 24,000 students, had a budget totaling over $100 million in 1990. This university employs over 1,300 faculty and staff and offers over 140 programs in seven colleges.
Treasurer, Controller
Colleges and universities with a sizable enrollment usually have a treasurer, controller and a bursar. The treasurer, as chief financial officer, supervises the financial affairs of the institution. The responsibilities are numerous and complex and of a planning and decision-making nature. The treasurer will delegate the function of handling receipts and disbursements of monies to the bursar and the function of recording these receipts and disbursements to the controller. The controller is the chief internal accountant. Figure 4.1 shows the organizational structure and responsibility relationships of the accounting and financial positions within a university. Smaller institutions may combine the three positions into one using one of the three titles, or they may have two positions: treasurer or bursar and controller.
Responsibilities
The responsibilities and duties of a college or university treasurer, controller, and bursar are similar to those of the controller in industry and those of the school board treasurer. They are responsible for the financial health of the academic institution.
Some of the treasurer's major duties include:
- Determining and advising the board of trustees regarding short- and long-term financing needs.
- Preparing reports for the board of trustees.
- Delegating authority for receiving and disbursing funds.
- Forecasting the future financial position.
- Investment of excess funds.
- Responsibility for the accounting function of the university, residence halls, athletics, bookstores, libraries, cafeterias, general instruction, and so forth.
- Separate accountability for all funds which are restricted: endowments for scholarships, donations and bequests, and student loans.
- Establishment of the annual budget and its incorporation into the accounting system.
- Preparing the financial statements of the institution.
A controller and/or treasurer normally holds a bachelor's degree in accounting, is a certified public accountant or a certified management accountant, and has prior experience in public accounting or with another academic institution.
Most colleges and universities require an audit of their annual financial statements. It is natural for an individual who has served as auditor of the institution's records to step from the ranks of public accountant to controller.
Salary
The larger the institution, the higher the salaries may be. The salaries of controllers, treasurers, and bursars in state colleges and universities are affected by state funds available for higher education. They also tend to be comparable with salaries of controllers and treasurers in industry.
The treasurer, controller, and bursar will enjoy the same fringe benefits as the faculty and staff. Medical, dental and life insurance coverage is provided plus a pension under the state requirement system. A 40-hour workweek is normal and a two- to four-week vacation is provided.
Budget Officer
Fiscal Universities also employ budget officers, fiscal officers, as well as account Officer and Accountant.
Responsibilities
The budget officer is responsible for formulating an annual budget which may be required by law. Budgets are essential for good management and often are recorded in the accounting systems as legal limitations on expenditures.
A fiscal officer is charged with collecting, managing, and disbursing the institution's funds or revenue.
Accountants perform the routine accounting duties. Their positions are comparable to those of the junior and senior general accountant with industry.
An internal auditor performs a continuous review of the accounting system and assesses the reliability of the financial records. Recommendations are made for improvements to the system.
Salaries
Annual salaries range from the low $20,000s for an inexperienced staff accountant in a small institution to $60,000 for an experienced executive in a large institution.
Fringe benefits include a 40-hour workweek, holidays, vacations, insurance coverage, and a retirement pension similar to those granted other staff members.
Figure 4.1 shows the separation of functions of money handling and record keeping, as well as the hierarchy of accounting positions.
HOSPITALS AND HEALTH-CARE FACILITIES
In recent years, dramatic changes have taken place in hospital accounting.
Hospitals have increased the volume and range of their services. Hospital costs have increased at the same time that support by local governments and philanthropists has decreased. Hospital boards are becoming cost conscious and want to know the costs involved in providing various medical services.
Hospitals may be government units, such as the veterans' hospitals; many are affiliated with churches and universities; some are operated by other nonprofit organizations. The American Hospital Association, the Healthcare Financial Management Association, and the AICPA have developed and improved financial accounting and reporting procedures. Audited financial statements are now necessary to support requests for borrowing and for reporting to the state and to other agencies. Certified public accountants are currently exerting greater influence on the reporting practices of hospitals.
The growth of health-care services like Blue Cross and Medicare has been a major influence on hospital accounting. Their payment plans contribute a substantial portion of most hospital revenues. Consequently, these third-party payment plans increase the record keeping and auditing required of hospitals and health-care facilities.
Accountants
Hospitals hire bookkeepers and accountants for the same purposes as private industry and provide job classifications comparable with industry as to responsibilities and salaries. A junior accountant in industry, public accounting, or hospital accounting, performing general and cost accounting functions, earned from $26,000 to $36,500 in 1996, according to Robert Half. A senior accountant, working in the same areas as the junior accountant mentioned above, earned from $37,000 to $42,500.' A patient accounts manager can earn $39,600 to $77,300, according to HFMA.
Vice-President of Fiscal Affairs
The vice-president of fiscal affairs is responsible for the financial and managerial department of a hospital. It is an executive position. The vice-president will maintain and supervise an accounting department that accounts for routine activities of the hospital; property, plant, and equipment; bequests and endowments; investments; long-term debt; and restricted funds designed for special use by the hospital governing board.
The vice-president should have a bachelor's degree in accounting, a master's degree in accounting or business administration and be a certified public accountant.
Salary depends upon the size of the institution and the revenue available to work with. Salaries are comparable to those for the same position with an industrial corporation of the same size. Chief financial officers earned from $71,000 to $169,600, HFMA noted in its 1995 survey.
Budget Director
The budget director is responsible for the entire budgetary process and works directly with the department directors in forecasting revenue and in reviewing each line item of expense. The director compiles all departmental budgets into a master budget and supports it with statistical and cost reports. Each month, the budget director prepares a report comparing the budgeted amounts with the actual costs incurred.
The budget director should have a bachelor's degree in accounting, with a specialization in hospital and management accounting. The director might be either a certified public accountant or a certified management accountant.
The budget director may earn from $56,000 to $85,000 a year, depending upon the size of the company or hospital.
Health-Care Provider Auditor
The health-care industry has given rise to a position called provider auditor. Blue Cross-Blue Shield hires auditors to review the cost data submitted by providers of health-care services; that is, hospitals and nursing homes. These provider auditors do the field audits necessary to render an opinion that cost data submitted by the hospital are in accordance with the regulations established by Medicare and Medicaid.
The provider auditor must have a degree in accounting plus two to three years' audit experience. Salaries range from $28,000 to $35,000.3
Job Outlook
The job outlook for accountants in the health-care field appears to be very good for the 1990s. Because of the population growth, and the growth of medical services to the elderly, jobs are available in hospitals, nursing homes, clinics, and special-treatment centers. Starting salaries with full benefits at the larger facilities range from $25,750 to $28,750. Fringe benefits include medical and life insurance, paid vacations, and the major paid holidays.
New job opportunities come from a growing number of managed-care organizations. All need strong business managers to support their clinical staffs: outpatient clinics, HMOs, and the growing number of health networks. Table 4.2 shows average salaries for health-care CFOs.
VOLUNTARY HEALTH AND WELFARE ORGANIZATIONS
Voluntary health and welfare organizations (VHWOs) are nonprofit organizations that receive their support primarily from public contributions. They provide various kinds of health, welfare, and community services. Organized for the public benefit, these organizations have a tax-exempt status.
A local VHWO may be affiliated with a national organization that shares the same objectives. The United Way is the most widely known VWHO in the United States. Some of the agencies that are included under the United Way are:
- American Cancer Society (on a contractual basis)
- American Heart Association
- American Red Cross
- Arthritis Foundation
- Boy Scouts of America
- Cystic Fibrosis Foundation
- Girl Scouts of America
- Kidney Foundation
- Salvation Army
- Young Men's Christian Association (YMCA)
- Young Women's Christian Association (YWCA)
The United Way goal for northwestern Ohio, for example, is annually in the millions of dollars. Seventy human-care service agencies exist in the four counties in northwestern Ohio. Fourteen of these agencies are located in the Community Services Building in Toledo, Ohio, and employ over 500 persons. This is an average of 30 employees per agency.
These agencies have extensive accounting systems designed by The United Way of America. Their income is derived from public support in the form of contributions and special events, fees and grants from government agencies, and other sources. Their accounting systems must differentiate between sources of revenue. They must also account for land, building and equipment, endowment funds for gifts and bequests, and endowment fund investments. This revenue is designated for the various programs and functions of the agency. Budgets are incorporated into these agency accounting systems because of concern with the use of future resources. Agency financial statements are provided for contributors, the organization's trustees or directors, the executives of the VHWO, and for the governments that regulate it.
Fiscal Officer
Each of these agencies has an officer responsible for its fiscal operations.
That person usually carries the title of fiscal officer, although sometimes it is accounting manager, controller, or financial administrator.
Qualifications
The fiscal officer usually holds a graduate degree, a master's in business administration, or a master's in public administration that is accounting oriented or combined with a bachelor's degree in accounting. The fiscal officer often has had employment experience with a corporation and/or a health-care facility. The individual must be bondable and often is a certified public accountant.
Responsibilities
The accounting responsibilities of the financial (fiscal) officer are:
- To maintain daily control of receivables and cash.
- To prepare monthly financial statements for the board of trustees, the United Way, an outside auditor, and/or any other interested parties.
- To prepare operating budgets and to compare them monthly with expenditures.
- To use a cost system to determine hourly costs of programs provided.
- To maintain internal control and meet all auditing requirements.
- To comply with policies established by the board of trustees and with all legal requirements that may affect the agency's operation.
- Supervising all fiscal staff members.
- Conducting finance and investment committee meetings.
- Attending board meetings and all other committee meetings.
- Reviewing and updating manuals as needed.
- Reviewing personnel data and reporting results of the salary survey to committee.
Salaries range from $35,000 on up depending upon experience, whether the fiscal officer is a certified public accountant, and length of service. All benefits are fully paid, including insurance, hospitalization, and retirement benefits. The agencies are liberal in granting vacations and provide the usual paid holidays.
Only in recent years have VHWOs begun hiring accountants to handle their financial needs and systems. The United Way and the AICPA have upgraded and prescribed specialized accounting systems for VHWOs. As accounting literature has become specialized in the nonprofit sector, many new positions have become available for accountants. Not-for-profit organizations need and hire accountants to maintain accurate accounting records, to prepare financial statements, and to file tax reports. As a result, the growth of the nonprofit sector nationwide has created many positions for accountants.
Other Not-for-Profit organizations
Other types of not-for-profit organizations are:
- cemetery organizations
- civic organizations
- country clubs
- fraternal organizations
- labor unions
- libraries
- museums
- performing arts organizations
- political parties
- religious organizations
