Claremont Graduate University
Peter F. Drucker and Masatoshi Ito Graduate School of Management
MGT 328: Finance & Accounting for Non-Profits
Spring 2010
Faculty: Faith Raiguel
Contact Information:
Phones: Home 323-662-5722; LA Opera 213-972-3676
E-mail: fairai@yahoo.com
Objectives of the Course:
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Expand awareness of the similarities and differences between financial management of
profit-seeking firms and not-for profit firms.
Understand the scope and importance of financial management responsibilities within an
arts organization.
Understand the techniques of day-to-day financial management, with particular emphasis
on budgeting, financial statements, internal controls and decision making.
Develop a thorough understanding of funds accounting and of financial analysis.
Provide a useful set of tools for an emerging arts manager, regardless of art form or
professional specialty.
Texts:
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“Not-for-Profit Accounting Made Easy,” Ruppel, John Riley & Sons (Abbreviation
“NFP”)
“Good to Great and the Social Sectors,” Collins, Jim Collins
(Abbreviation “Good to Great”)
“Sarbanes-Oxley for Nonprofits,” Jackson and Fogarty, John Riley & Sons
(Abbreviation “SOX”)
Additional materials/activities:
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Case Studies in arts or arts related fields.
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Guest speakers in budgeting, planning, artistic decision making, bond financing, audit
function, governance, among others.
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Internet research in arts and government websites.
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ArtsOrg Project
• Additional readings and assignments TBD
ArtsOrg Project
1
Drucker School - Syllabus, Spring 2010 - Arts Management- Accounting & Finance 328
You will be asked to select an arts organization, anywhere in the country that is of interest to
you. Pick a back-up organization. Throughout the course, you will be asked to analyze, discuss
or otherwise use materials provided by your organization as they relate to other class materials
and exercises.
1. Visit their website. Find their mission statement on the website. Be prepared to discuss it
in class and analyze it.
2. Establish contact with their CFO or Business Manager
a. Conduct an interview to collect and discuss items below
3. Obtain - Materials
a. Most recent audited statement, last three years
b. Monthly Financial Statement – any one will do, even without numbers
i. Refer to it for its structure (sometimes they will not share)
c. Current Annual Budget (usually they will provide)
d. Most recent 990 (available on Guidestar)
e. Current promotional material
f. Organization chart (if possible)
g. Other material TBD – if possible
i. Articles of incorporation
ii. Bylaws
iii. Tax exemption letter
4. Articulate
a. Product array
i. Be able to articulate what they sell
ii. Detailed list of “other earned revenue sources”
b. External Environment, their stakeholders
c. Internal Environment, organization structure
d. SWOT Analysis, 1-2 items in each category
e. Comparative financial statements, 3 years
i. Income statements
ii. Balance sheets
f. Ratio analysis and discussion of key ratios.
g. Largest Challenge they face in the next five years
i. What steps are they taking to address it?
ii. Are they using a Strategic (Long Range) Planning process?
iii. Is there a Strategic Plan in place?
h. Your assessment of fiscal health and two or three key aspects of the organization
that resonate with you on a fiscal basis.
5. Organize
a. All your material in a 3 ring binder
b. Prepare Executive Summary – style of “4. Articulate” above
c. Prepare a 5-6 page Highlights, Power point presentation
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Management 328
F. Raiguel
GRADING
Second Semester
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HOMEWORK
40%
Grading will be weighted for
o EFFORT
o CLARITY
o IMAGINATION
o COMPLETENESS
o TIMELINESS
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CLASS PARTICIPATION
30%
o Including preparation and involvement
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ARTSORG PROJECT
15%
o This will be the foundation for homework as well.
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FINAL EXAM
15%
While each segment does not carry equal weight, it is expected that each student will complete
each segment satisfactorily for full credit in the course.
3
Drucker School - Syllabus, Spring 2009 - Arts Management- Accounting & Finance
Speakers:
The following speakers are among those to be integrated into the course, subject to final
scheduling and availability. It is expected that students will research these individuals and their
affiliated organizations prior to their appearances to enhance dialogue.
Tom Clough, Horizon Partners, Economist/Consultant
Long Range Planning, challenges of the current environment.
Richard Jones, Partner, Nixon Peabody, Attorneys at Law
Bond Financing, role and requirements in financing activity in non-profit organizations.
www.nixonpeabody.com
Christopher Koelsch, Vice President for Artistic Planning, LAOpera
Balancing Artistic Vision with Fiscal Reality
www.laopera.com
Bill Lowman, President, Idyllwild Arts Foundation 2/18, 2/25
Budgeting, reporting and the pitfalls of internal controls
www.idyllwildarts.org
Nancy Shelmon, Partner, PriceWaterhouse, Co-Author, ”Financial and Accounting Guide for
Not-For-Profit Organizations”
Organizational Accountability: auditing, 990, SOX, internal controls
www.pwc.com
Ed Rada, President, Music Center Foundation
Endowments, investment and distribution policies
Christopher Walker, Chair, Finance Committee, LAOpera; Trustee, LA County Museum of Art;
Trustee, KCET.
Governance: the Role of the Finance Committee, Stewarding an Organization’s Resources
www.laopera.com
www.kcet.org
www.lacma.org
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Drucker School - Syllabus, Spring 2009 - Arts Management- Accounting & Finance
Faith Raiguel
14-session course outline
Session
& Date
1
Jan. 20
SESSION THEME, CONTENT AND PREPARATION
Introductions and Orientation to the Field
PREPARATION
Read: “Good to Great”
Prepare for class: Articulate for discussion in class three points of
particular interest in “Good to Great”, agree or disagree with the thesis.
Elements of Financial Management system
• Organization’s Annual “Life Cycle”
• Principles, Systems, People
• Complete Books and Records
Role of the Finance Office
Discuss ArtsOrg Project
2
Jan. 27
Complete Books And Records #1
Elements of “The Books”
• Journals, record of transactions
• General Ledger, closing “the books”
• Financial Statements, month-end reporting
ANNUAL OPERATING BUDGET
PREPARATION.
Read: “NFP” Ch 2 portion on Statement of Activities pp 46-56
“SOX” Appendix A
“Governance & Artistic Product” Opera America Article, Winter 2008
Prepare: Contact information for Arts Org Project
Prepare brief answers to the following questions on The Operating Budget:
• What is a budget?
• Why budget?
• Who cares?
• Who is involved?
• When do you do it?
• How do you use it?
In Class Exercise: Budget Poker
5
3
Feb. 3
Budgeting and Introduction to Cash Flow
GUEST, Christopher Koelsch, LA Opera, VP of Artistic Planning
PREPARATION
Prepare: CASE #1 Cool Theater
The role of financial planning in artistic decision making.
Using the Operating Budget as keystone for other tools:
• Planning for Cash Flow
• Planning for the Future
Key concepts: Fixed & Variable Costs
4
Feb 10
CASH FLOW
FUNDS ACCOUNTING & FINANCIAL STATEMENTS #1
GUEST: Bill Lowman, Idyllwild Arts, President
PREPARATION
Read: NFP Chapters, 1,2
Prepare: CASE #2 Shoreline Symphony Part 1
Key Concepts – It’s ACCRUAL World.
Accrual Accounting
• “Cash Basis Bookkeeping”
• “Simplified Accrual Basis Bookkeeping”
• “Full Accrual-Basis Bookkeeping”
Basic Financial Statements
• STATEMENT OF FINANCIAL POSITION: Balance Sheet
• STATEMENT OF ACTIVITIES: Income Statement
• STATEMENT OF CHANGES IN NET ASSETS: Statement of Changes of
Financial Position
• STATEMENT OF CASH FLOWS
• NOTES TO FINANCIAL STATEMENTS
5
Feb.17
FUNDS ACCOUNTING & FINANCIAL STATEMENTS #2
STRATEGIC PLANNING AND FINANCIAL MODELING
GUEST: Tom Clough, Horizon Associates
PREPARATION
Read: NFP Chapters 3,5,7
Prepare: CASE #2 Shoreline Symphony Part 2
EFFECTIVE COMMUNICATION: Board Brief, Executive Summary
UNDERSTANDING THE BALANCE SHEET
Key Concepts: Liquidity, Short Term, Long Term, P’s & Q’s
6
6
Feb. 24
FINANCING A NON-PROFIT: LEVERAGING RESOURCES
PREPARATION
• Create Executive Summary for West Northridge Academy (2-3 pages max)
• Create Board Brief for Case of your choice (1 page)
Read NFP Chapters 4, 6, 8, 9, 10, enough to provide “write-up” below"
Write-up FOR EACH CHAPTER ABOVE IN NFP:
• Define the concept in each chapter
• Is it an asset or liability
• Does it generate income or expense
• Comment on why it is important.
7
Mar. 3
Leveraging Resources:
1.Operations: Creating Revenue Opportunities
• Earned, programmatic, pricing issues
• Earned, ancillary, Role of UBI
• Contributed, realistic goals and strategies
2,Endowments
3.Debt
EVALUATION TOOLS + EFFECTIVE COMMUNICATION
FINANCING CAPITAL PROJECTS: Role of Bond Financing
GUEST: Rick Jones, Nixon Peabody
PREPARATION
Read: NFP Chapter 11; SOX Chapter 3
Prepare (one copy to turn in): Set up 3 years of Balance Sheets &
Income Statements of your ArtsOrg
REVIEW OF THE BALANCE SHEET…again
Ratio analysis, introduction and overview
INTRODUCTION TO BOOKKEEPING
JOURNALS, GENERAL LEDGER, TRIAL BALANCES, JOURNAL ENTRIES
Key concept: DEBITS AND CREDITS
8
Mar. 10
THE BASICS, BOOKKEEPING
Prepare: DEBIT AND CREDIT EXERCISE
CASE #2 Shoreline Symphony Part 3 - bookkeeping
REVIEW DEBIT AND CREDIT EXERCIZE for work over the break.
Mar 17
SPRING BREAK
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9
Mar. 24
OPERATING STANDARDS & ROLE OF ENDOWMENTS
GUEST: Ed Rada, Music Center Foundation, President
PREPARATION
Calculate 3 years of ratios for your ArtsOrg
DEBIT AND CREDIT EXERCISE, write up journal entries
Read: NFP Chapter 6; SOX Chapter 1
Endowments reading maerials
10
Mar. 31
Key Concept: BALANCE SHEET RATIOS
POWER OF DEBITS & CREDITS
AUDIT ENVIRONMENT AND GOVERNMENT REPORTING
GUEST: Nancy E. Shelmon, Partner, Price Waterhouse
PREPARATION
Read: NFP 12; SOX 2, 4, 5
Download: California Nonprofit Integrity Act
not just the legislation but a discussion
Download: New Form 990
Bring Form 990 from your ArtsOrg
Prepare: Inquiry of ArtsOrg on Compliance with SOX & Cal Integrity Act
DEBIT AND CREDIT EXERCISE, prepare trial balance & financial statements
11
Ap.7
The increasing demand for accountability.
The changing oversight landscape.
The Audit function
INTERNAL CONTROLS + INTRODUCTION TO GOVERNANCE
Guest, Christopher V. Walker, Chair, Finance Committee, LA Opera
Trustee, LA County Museum of Art, KCET
PREPARATION
Read: SOX Chapter 6,7, 8
Read: LATimes “Bigger, Bolder + Poorer”
E-mail to me three questions for Chris Walker by Saturday night, April 3
The changing economic climate.
Organizational stewardship and governance issues.
Key Roles, Challenges and Rewards.
Complete Books and Records, again
• What to keep and what to throw away.
Key Internal Controls
• People
• Systems & Reports
• Physical tools
Effective Communication
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12
Ap. 14
13
Ap. 21
14
Ap. 28
GOVERNANCE & INTERNAL CONTROLS CONTINUED
REVIEW – Semester recap
PREPARATION
Read: SOX 9,10 Appendices: E, F, G
FINAL MEETING
Presentation of Class Projects
FINAL EXAM
9