exec-gp. 2141 financial decision making and ... decision making and management - fall 2016 5...

FinancialDecisionMakingandManagement-Fall2016

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NEWYORKUNIVERSITY|ROBERTF.WAGNER

GRADUATESCHOOLOFPUBLICSERVICE

EXEC-GP.2141

FINANCIALDECISIONMAKINGANDMANAGEMENT

FALL2016as of September 17, 2016

COURSEINFORMATIONBobstLibraryLL-138

2:30pm–6:00pmsevenSaturdaysfromSeptember17throughDecember17

INSTRUCTORSInstructor Email OfficeHoursWARNERFITE [email protected] EmailforAppointment

TeachingAssistant/Tutor

NINALAURO [email protected] EmailforAppointment

COURSEDESCRIPTIONThegoalof thiscourse to ishelpstudents learn financial tools toapply todecision-makingwithinmission-

driven and governmental organizations. Designed for the experienced mid-career general manager of a

nonprofit, governmental, or healthcare organization, the course is intended tomeet these leaderswhere

they are by guiding them in developing a range of financial analysis skills through a combination of class

discussionsandanalysesofcasestudiesofspecificorganizations.Thegoalistoplacefinancialanalysisand

decision-making in the context of the complete range of tools used by social sector: this work will

demonstrate especially the complex relationships between finance, impact, strategy, and governance.

Whereappropriate,wewill also integratebestpractice tools fromotherdisciplines includingperformance

measurementandthealignmentoffinancialandsocialreturns.

LEARNINGOBJECTIVESANDCOURSESTRUCTUREThis course aims to provide nonprofit leaders with the tools necessary to understand how to evaluate

financialdatainorganizationaldecision-making.Theemphasisisonanalyzing–notcreating–financialdata.

To this end, we will focus on eight specific “tools” that are central to the decision-making process:

accounting fundamentals, budgeting, costing, time value ofmoney and capital investments, financing and

liquiditymanagement,financialstatementanalysis,benchmarking,anddoublebottomlinemetrics.


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Itisimportantforstudentstobesurethattheyhavecompletedthecourse“pre-requisites”beforethefirst

class,asnecessary.TheseareintendedassurethattheclasshasasimilarbaselevelofaccountingandExcel

knowledge.Inthecourse’sfirstweek,wewillestablishthecommonlanguageoffinancialstatementformats

and accounting conventions. In subsequent course sessions, we will explore the other tools through a

combination of homework assignments, lectures / discussions, case studies, and in-class exercises. It is

importanttokeepupwiththeworkinthiscourse–thematerialiscumulativeanditcanbedifficulttocatch

up.NinaLauro,thecourseTeachingAssistant,isavailableforacademicsupportandtutoringthroughoutthe

semester.

Thecoursemakesextensiveuseof thecasemethod through theuseof10studiesoforganizationswitha

publicor socialmission. The casemethod is intended to immerse students into realistic situationsand to

provide the reality of decision-making — which includes incomplete information, time constraints, and

conflictinggoals—asstudentslearnhowtoapplytoolstosituationsfacedbyactualnonprofitorganizations,

socialenterprises,andgovernmentalagencies.

Whilemostof thecases require financial calculations, students shouldkeep inmind that the focus should

alwaysbethinkingaboutthedecision-makingframeworkandhowtheissuesfitintothelargerquestionsof

anorganization’sstrategy–whatistheevidence?howdowedecide?howdoweknowifwe’reright?what

informationis important?–ratherthanthemechanicsofthecalculations. Inmanycases,Exceltemplates

areprovidedtoallowstudentstofocusonanalysisratherthanspreadsheetbuilding.

Inadditiontoongoing individualassignmentsandcasestudypreparation,therewillbean individual“take-

home”midtermexercisedueinNovemberaswellastwoprojectstobeundertakeninteamsofthreetofour

people(tobeassignedafterthefirstclass):eachteamwill(1)introduceoneofthecasestudiesfortheclass

and (2) undertake a final team project due at the completion of the course in December. The final team

projectwillbeadashboardandfinancialanalysisforanonprofitorgovernmentalorganizationoftheteam’s

choosingandanaccompanyingclasspresentation.

Accouning

fundamentals

Budgeing,

projecing,and

varianceanalysis

Cosingandcost

allocaions

Timevalueofmoney

andcapital

investments

Financingand

liquidity

Financialstatement

andtrendanalysisBenchmarking

DoubleBojomLine

Metrics


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COURSEREADINGSANDMATERIALSThereadings,casesandothermaterialforthecoursewillcomefromthefollowingsources:

1. Textbook–requiredFinkler,StevenA.,DanielL.Smith,ThadD.CalabreseandRobertM.Purtell.FinancialManagementforPublic,Health,andNot-for-ProfitOrganizations. (FifthEdition). Sage/CQ,2016.This isoneofthe standard texts in nonprofit financial management and contains a great deal of detailed

informationaswellaspracticalexamples.ThetextisavailableattheNYUBookstoreandfromonline

sources such as Amazon. If you have the Fourth Edition, please do not panic. While the page

numbersmaybedifferent, thecontent in theFourthEdition isessentially thesameexcept for the

sections on government accounting (Chapters 12, 13, and 15) where the Fifth Edition includes

accountingstandardsthathavebeenupdatedsincetheFourthEdition.

2. Textbook-requiredBerman,CarolandJoeKnight.FinancialIntelligence,RevisedEdition:AManager'sGuidetoKnowingWhat theNumbersReallyMean. HarvardBusinessReviewPress,2013.This inexpensivebook isausefulplain-languageguideto financeandfinancialmanagement. It iswrittenforaprivatesector

manager, but the themes and guidance it provides are applicable to the social and governmental

sectorsaswell.BermanandKnightprovidelesstechnicalexplanationsofmanyofthecoursetopics

thantheonesfoundintheFinklertextandtheirworkshouldbeavaluableparalleltothelargertext.

Itisrecommendedthatwhereparallelreadingsaregiven,studentsreadtheBermantextbeforethe

corresponding sections in the Finkler text. The Berman and Knight text is available at the NYU

BookstoreandfromonlinesourcessuchasAmazon.

3. CourseCasePacket(HarvardBusinessPublishing)-required

The cases thatwewill use in this course are contained in a coursepack available in digital format

from Harvard Business Publishing. The coursepack can be found, purchased, and downloaded at

http://cb.hbsp.harvard.edu/cbmp/access/51133067.Itwillbenecessarytoregisterthefirsttimeyou

usethissite.

ThecoursepackalsoincludestheoptionalIntroductiontoFinancialAccountingonlinecoursenoted

inthePrerequisitesandCoursePreparationsection.

4. NYUClassesNYU Classes will be used to post readings and the Excel spreadsheet templates that support a

number of the individual assignments and case studies. Assignments will also be found on NYU

Classesthroughoutthesemesterandshouldbesubmittedthereaswell.Studentsareencouragedto

checkNYUClassesfrequentlyforcourseupdatesandExceltemplates.

5. FinancialCalculator-optionalStudents should download one of the free smartphone apps that duplicate the functions of a

financial calculator (suchas theHP-12, theHP-10Bii and theTI-BAII+) forassignmentsand in-class

exercises. Ifyoudodecidetogetacalculator,themostcommononesaretheHP-12CandtheHP-

10BIIfromHewlett-PackardandtheTI-BAII+fromTexasInstruments.


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COURSEREQUIREMENTSANDGRADINGFinalgradeswillbedeterminedbythefollowingcoursecomponents.Completedassignmentsshouldbesubmitted

throughtheAssignmentssectionofthecoursesiteonNYUClassesandalwaysincludeboth(a)solutions/reports

inpdfformat and(b)anyapplicableExcelworkbooks. Filenamesshouldalwaysincludethestudent’sname(or

theteamnumber)aswellastheassignmentnameornumber.

o IndividualClassParticipation (10%) includespresence,promptness,preparation,andengagement. Because

thiscourseisbasedonthecasemethod,whatyoubringtoitwillbethelargestdeterminantofwhatyoutake

fromit. Studentsareexpectedtoattendallclassesandtobeontime;attendanceandtardiness issueswill

affect your class participation grade. The use of electronic devices other than for taking notes is strongly

discouraged:itpreventsyoufrombeingfullypresentandcanbeverydistractingtoyourcolleagues.

o IndividualAssignments(30%)willbedueonanalternatingproblemset/casememocycle;thisistosaythat

betweenanytwobi-weeklyclasses,bothaproblemsetandcasememoswillbedue.

Problem Sets (10%) include individual assignments built around specific financial analysis tools. These

assignmentswillgradedonacredit/nocreditbasistoencouragestudentstobecomefamiliarwithtoolsthat

arepotentiallynewtothemwithoutconcernregardingaspecificgrade.Studentneedonlycompletefourof

thefiveIndividualAssignmentsoverthecourseofthesemester.

CasePreparationMemos(20%)willbedueoneachweek’stwocasestudiespriortotheirbeingdiscussedinclass(thememosaredueonThursdaynightbeforetheSaturdayclass).Memosshouldbenomorethantwo

pages,double-spaced,plusattachments(memoswillmostoftenincludeoneormoreshortfinancialanalyses

basedonthe information inthecase). Questionpromptswillbeposted intheAssignmentssectionofNYU

Classesforeachmemo,andpleasesubmitmemosthere.Memoswillbegradedona10-pointscale.

o TeamCasePresentation(10%)Eachteamwillbeaskedpreparein-depthforandintroduceoneofthein-classcasestudies.Thisintroduction

shouldlastnomorethan10minutesandcanbeapresentationoranyothermethodofthegroup’schoosing.

Teamswillbeassignedafterthefirstclasssession.Casestudypreparationisaboutsettingthefoundationfor

the group’s learning by identifying the major issues in the case, providing a framework for analysis and

decision-making, and setting up the discussion. The case presentation is not about any particular group of

“correct”answers.

o IndividualMidterm (25%) will integratematerials from the first parts of the course. Themidtermwill be

postedtoNYUClassesafterourOctober15classandwillbedueonNovember22.Studentsareexpectedto

workaloneonthisassignment.

o Individual Government Accounting Online Quiz (extra credit) will be based on the readings and lecturematerialandwillbeavailablefromDecember3throughDecember27.

o Final Team Presentation and Dashboard (25%) will be a financial performance and financial / impact

dashboardforanonprofitorganizationofeachteam’schoosing,preferablywithannualrevenuesinexcessof

$10million.Thefinalprojectreport,nolongerthansevendoublespacedpages(notincludingtheone-page

dashboardoranyattachedexhibits)willincludeabriefsummaryoftheorganizationanditsintendedimpact,

discussion of the financial metrics that the team finds most relevant to that organization, analysis of the

organization’sfinancialandimpactperformance(strengthsandweaknesses),andotherstrategiestoimprove

financial sustainability andmission impact. Each teamwill also prepare a brief class presentation (nomore

than 10minutes) summarizing their dashboard design and organizational findings / recommendations. The

assignment will be distributed on October 15 and teams should submit their organization choices by

November10.

Assignmentdeadlinesshouldbetakenasfirmexceptinthecaseofunavoidableandunanticipatedcircumstances.

Becauseofthevolumeofassignmentstobesubmittedbytheclassasawhole,itisimportantforassignmentsto

be submitted as well organized, well-formatted pdf files (printing to a pdf from Word and Excel is a fairly

straightforwardprocess)aswellasinExcelformfortroubleshootingasnecessarybytheprofessorandTA.


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PREREQUISITESANDCOURSEPREPARATIONWhilethiscoursedoesnothaveanymandatoryprerequisites,studentswhoareunsureoftheirExcelskillsor

whodonothaveanybackground in financialaccountingmayfindthatsomeadvancepreparation inthose

areas iswellworththeeffortandwillpayoffthroughoutthesemester. (Studentsdonotneedtobecome

accountants or Excel experts before or after the course begins!) Some easily accessible resources for this

preparationcanbefoundbelow.

MicrosoftExcel

Excel is a universal tool for financial and quantitative analysis and will be part of the coursework and

assignments.YoudonothavetobeaseasonedExcelmasterbyanymeanstodowellinthiscourse,butyou

willfindprobablyfindyourselfmostcomfortableifyouareableto:

o Use Excel to organize data intowell-formatted tables andother reports, and to analyze that data

using Excel’s basic calculation functions. In the investment analysis sections, we will be using a

numberof financial functions, such as =NPVand=IRR, butwewill review their use aspart of the

coursework.

o Create meaningful and informative charts and graphs with strong visual depictions of data and

relationshipsbetweenfinancialvariables.

Students who are unsure of their Excel knowledge or would just like a refresher will find it helpful to

completeanumberoftutorialsonLynda.com.Lynda.comcanbeaccessedfreethroughyourNYUloginsas

follows:

(1) gotoLynda.comandclicking“LogIn”intheupperright-handcorner,

(2) choosetheleft-sideoptionof“Loginthroughyourorganizationorschool,”(3) Loginthroughnyu.edu.ThiswillbringupthegeneralNYUlogin(unlessyouarealready logged

in)and logging in to theNYUsystemshould takeyouautomatically to thespecifiedcourseon

Lynda.com.

Thesetutorialsarelikelytobethemosthelpful:

o DependingonyourExcelversion

§ UpandRunningwithExcel2010

§ ExcelforMac2016EssentialTraining

§ Excel2016EssentialTraining



§ ExcelforMac2011EssentialTraining

o REQUIRED(dependingonyourExcelversion)

§ ExcelforMac2016:ChartsinDepth

§ Excel2016:ChartsinDepth

§ Excel2013:ChartsinDepth

o REQUIRED(dependingonyourExcelversion)

§ Excel2016:AdvancedFormulasandFunctions



o LEARNMOREAndmanymore

Another resource for tables and charts is the followingeBook,which isalsoa resource for theDashboard

portionofthecourse(Session5).ForbasicExcelknowledge,pleaserefertoChapters2,5,6,and7.

o Alexander,Michael,andJohnWalkenbach.ExcelDashboardsandReports,2ndEdition.JohnWiley&

Sons,2013.Books24x7.Availableathttps://getit.library.nyu.edu/go/9348015


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AccountingandFinancialStatements

Accountingisthelanguageoffinanceandafamiliaritywiththebasictenetsofaccountingwillbenecessary

forthecourse.Itissuggestedthatstudentswithoutanybackgroundinaccountingundertakeaindependent

general introduction to (for-profit) financial accounting before the course begins. We will cover the

differencesbetweengeneral(for-profit)accountingandnonprofitaccountinginthecourse.

o TheCourseCasePacket (available throughHarvardBusinessPublishing, see the sectiononCourse

Readings andMaterials) includes anoptional online course. This course runs from8 to10hours,

containsself-testsandisaverystraightforwardwaytogainthisintroduction.

o Lynda.comalsohasaccountingcourses(availablefreethroughtheNYUlogin).

o Parts2 through4 (pages43to156)of theBermanandKnight text featureastrong,non-technical

explanationofthestructureoffinancialstatementsandChapters9and10ofthemainFinklertext

(pages315to407)containmaterialthatissimilartothatintheBermantext.Thesearepartofthe

firstweek’sassignments.

o The U.S. Small Business Association has a very basic online introduction to financial accounting at

https://www.sba.gov/tools/learning-center-view-course/364071

StudentswhoareunsureoftheirExceloraccountingfoundationsshouldfeelfreetocontracttheinstructor

beforethecourse.

BriefOnlineSurvey

There isabriefonlinesurveytobetakenbeforethe firstclasssession (pleasecompete itbyno later than

September9).Thesurveycanbefoundathttps://nyu.qualtrics.com/SE/?SID=SV_3VqEFzpCYSso1Standcan

bedonefromeitheryourcomputerorsmartphone.Thesurveyshouldtakenomorethan10minutes.

WAGNERBESTTHINKINGANDBESTPRACTICESAnumberofthetopicscoveredinthiscourseintersectotherelementsoftheWagnercurriculumandsocial

sector practice areas, including deeper dives into financial and impact assessment andmanagement, the

organization and depiction of data and dashboards, the analysis of social aswell as financial returns, and

governance and controls.Deeper explorations of these topics canbe found in PerformanceMeasurement

andManagement(PADM-GP.2174),ManagingFinancialandSocialReturnsoftheSocialEnterprise(PADM-

GP. 2312), Financial Management for Global Nonprofit Organizations (PADM-GP. 2142), Social Impact

Investment(PADM-GP.2311),DataVisualizationandPresentation(PADM-GP.4419),NonprofitGovernance

(PADM-GP.4135),andToolsforManagingNonprofits:Compliance,InternalControls,andEthics(PADM-GP.

4142).

TIMECOMMITMENTANDEXPECTATIONS

Thematerialinthiscourseiscumulativesoitisimportanttonotfallbehind.Thegoalisfortheout-of-class

workrequiredforFinancialDecisionMakingandManagementtoaverageapproximately10to15hoursfor

eachbi-weeklycycleformoststudents.ThisisconsistentwithWagnernorms.

Readings 2-4hours

Problemsets(Individualassignments) 2-3

CaseMemos 3-5

Midterm(averageover7cycles): 1

Finalgroupproject(averageover7cycles) 2-3

Ifyoufindyourselfspendingmoretimeontheassignmentsandcasememosthanindicated,youmaywantto

seek out the professor or the course Teaching Assistant, Nina Lauro, who are available as resources to

students.


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COURSECALENDARClass Date ClassTopics/Cases AssignmentsDue

9/8 Onlinepre-coursesurvey https://nyu.qualtrics.com/SE/?SID=SV_3VqEFzpCYSso1St

9/17 CompleteExcelandaccountingreviews/prerequisites

1 9/17

A. CourseIntroduction

B. IntroductiontoFinancialandManagerialAccounting

C. FinancialStatementOrganization

D. IntroductiontoBudgeting;Cashvs.AccrualAccounting

9/20 TeamsAssignedforCasesandFinalProject

9/24 Individualassignment#1

9/29 Casememos–TextbooksforChange&CityofSomerville

2 10/1

A. TheCashFlowStatement

B. BreakevenAnalysisandFlexBudgets

C. IntroductiontoCosting(TextbooksforChange)D. Activity-BasedCosting(CityofSomerville)


10/13 Casememos–TolizaMuseumofArt&SustainableRetrofitting

3 10/15

A. VarianceAnalysis(TolizaArtMuseum–introducedbyTeam2)B. NonprofitAccountingConventions

C. TimeValueofMoneyandCapitalInvestments(SustainableRetrofitting–introducedbyTeam3) Midtermpostedafterclass

FinalTeamprojectpostedafterclass


10/27 Casememos–Aspire,Inc.&GoneRural

4 10/29A. Long-termFinancing(Aspire,Inc.–introducedbyTeam4)B. WorkingCapitalManagement(GoneRural–introducedbyTeam5)C. IntroductiontoFinancialStatementAnalysis


11/10 CaseMemos–UniversityofTrent&CarletonFireDepartment

FinalTeamProjectOrganizationChoices

5 11/12A. FinancialStatementAnalysis(UniversityofTrent–introducedbyTeam6)B. Benchmarking(CarletonFireDepartment–introducedbyTeam7)C. DashboardsandDataVisualizations


11/29 IndividualMidtermAssignment

12/1 CaseMemos–DePaul&Asian-AmericansforCommunityInvolvement

6 12/3A. FinancialAnalysisandStrategy(DePaulIndustries–introducedbyTeam8)B. DoubleBottomLine(Asian-AmericansforCommunityInvolvement–introducedbyTeam9) GovernmentAccountingQuizavailable(afterclass)

12/14 FinalTeamPresentationSlides

7 12/17

A. GovernmentAccountingandFinancialConditionAnalysis

B. FinancialOrganizationsandAccountability

C. FinalTeamPresentations

D. Wrap-Up

12/27 LastDayforOptionalGovernmentAccountingOnlineQuiz

12/28 TeamFinancialAnalysisandDashboard

TeamPeerReviews


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SESSION1 SEPTEMBER17Pre-coursesurvey DueSeptember8–thisshouldtakeabout10minutes

Athttps://nyu.qualtrics.com/SE/?SID=SV_3VqEFzpCYSso1St-youcanuseyourcomputerorsmartphone

PleasebesurethatyouhavecompletedyourExcelandaccountingprerequisites.

Thisweek’spreparationcontainsbyfarmorereadingthananyothersessioninthecourse(buttherearenoassignments

orcasestobeprepared).

A. COURSEINTRODUCTIONStudentsandtheprofessorwillshareexpectationsandgoalsandreviewthesyllabus/overviewofthecourse.

B. INTRODUCTIONTOFINANCIALANDMANAGERIALACCOUNTINGWewill discuss the role of financial analysis and accountabilitywithin social sector organizations and the differences

betweenmanagerialandfinancialaccounting.

PREPARATION• [NYU Classes]. Herzinger, Regina M. “Managing the Finances of Nonprofit Organizations.” California

ManagementReviewXXI(3),Spring1979.

• [NYU Classes -Optional]. Ebrahim, Alnoor (2010). “TheMany Faces ofNonprofit Accountability.” HarvardBusinessSchoolWorkingPaper,2010.

• [NYU Classes - Optional]. Wacht, Richard F. (1984). “A Financial Management Theory of the Nonprofit

Organization.”TheJournalofFinancialResearchVII(1),Spring1984.

C. FINANCIAL STATEMENT ORGANIZATION: THE ACTIVITY (INCOME) STATEMENT AND THE STATEMENT OFFINANCIALPOSITION(BALANCESHEET)

Therewill be a lecture and discussion covering the structure and interrelation of financial statements. The basics of

accounting, the common language of financial analysis, are a fundamental part of the toolkit for financial decision-

making. WewillfirstdiscusstheActivityStatement(alsoknownastheIncomeStatement)andthentheStatementof

Financial Position (Balance Sheet). The Activity Statement tells an organization what it has done; the Statement of

FinancialPositionsummarizeswhereitis.

PREPARATION• BermanandKnight,Chapters5to14(pages43to121).Itisrecommendedthatstudentsconsistentlyreadthe

BermanandKnightdiscussionsbeforedelvingintotheFinklerchapters,whicharemoretechnical.

• Finkleretal,Chapter9(pages315-348)aswellasAppendices9-Aand9-BandChapter10(pages357-391)aswellasAppendices10-Aand10-D.

• [NYU Classes] Etsy, Inc. 2015 Audited Financial Statements. Etsy is presently the only publicly traded B-

Corporation. Studentsonlyneed to familiarize themselveswithEtsy’smain financial statements; there isno

needatthispointinthecoursetodelveintothenotestothefinancialstatements.

The Finkler text (and Wagner’s core Financial Management course for non-Executive students) uses transaction

worksheets.Ourcoursedoesnotusethem,butstudentsshouldpracticeconstructingatleastoneworksheetduringthe

first several weeks of the course. This can be a useful way to integrating the elements of financial statement

construction.Pages381to389oftheFinklertextshowaworkedexample;ChapterQuestions10-14to10-17and10-18

arepracticeworksheets(solutionsareavailableonrequestfromtheprofessorortheTA).

D. INTRODUCTIONTOBUDGETING;CASHVS.ACCRUALACCOUNTINGIn its simplest form,budgets indicate anorganization’sobjectives and the resources that it intends touse to achieve

thoseobjectives.Wewillexplorethevarioustypesofbudgets(specialpurpose,operating,cash,andcapital)andtouch

uponthedifferencesbetweencashandaccrualaccountingastheyaffectthebudgetprocess. Wewillalsodiscussthe

differences between cash and accrual accounting and how, while cash accounting is useful for budgeting, accrual

accountingisinmostsituationsmoreusefulandlesseasilydistorted.

PREPARATION• Finkleretal,Chapter2

• [NYUClasses–Optional].CorporationforSupportiveHousing.“FinancialManagementforNonprofits,”2001.


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SESSION2 OCTOBER1IndividualAssignment#1 DueSeptember24by11:55pmviaNYUClasses

CaseMemos–TextbooksforChange&

CityofSomerville DueSeptember28by11:55pmviaNYUClasses

A. THECASHFLOWSTATEMENTThe Cash Flow Statement brings together the Activity Statement and the Statement of Financial Position and is an

essentialtoolinassessingthefinancialhealthanddecision-makingofanyorganization.TheCashFlowStatementdraws

frominformationcontainedintheActivitiesStatementandtheStatementofFinancialPositionanddemonstrateshow

anorganizationhasgeneratedandusedcashduringaspecificperiodoftime.

PREPARATION• BermanandKnight,Chapters15to19(pages125to154).• ReviewFinkleretal,Chapter10(pages357to392).

B. BREAKEVENANALYSISANDFLEXBUDGETSBreakevenanalysisandflexiblebudgetingaresimpleyetverypowerfultoolsforprojectingandunderstandingfinancial

outcomesundervariouscircumstances. Forthisreason,theyarekeytools inmanagingforuncertainty.Textbooksfor

Change,acasefromtheIveySchoolatWesternUniversityinLondon(Ontario),exploresbreakevenandbudgetingfrom

theperspectiveofastartupsocialenterprise.

PREPARATION• Finkleretal,Chapter3(pages79to124).

• [Coursepack]Article–Young,DavidW.“NoteonBudgetFormulationinNonprofitOrganizations.”

• [Coursepack]CaseStudy–“TextbooksforChange”

C. COSTING–DIRECTANDINDIRECTCOSTALLOCATIONS In order to determine the true economics of their operations, organizations need to allocate a range of direct and

indirect costs to the services they provide. Our introduction to costingwill focus on direct versus indirect costs, the

distinctionbetweencostandactivitycenters,andonusingthestep-downmethodofcostallocation.


D. ACTIVITYBASEDCOSTING

Ourwork on activity based costing – the process of allocating costs based on the activities that go into providing a

service–willfocusonCityofSomerville,aHarvardKennedySchoolcase,whichdiscussesSomerville’seffortstomanage

road safety and traffic enforcement in a cost-effective way by understanding the activities that go into traffic

enforcement–andtheircosts. ThiscasewillrequireananalysisofcostdriversthatcanbebasedontheExceltemplate

thatisincludedinthecoursepackandthatcanalsobefoundintheResourcessectionofNYUClasses.

PREPARATION• Finkleretal,Chapter4

• [Coursepack]CaseStudy–“CityofSomerville:UsingActivity-BasedBudgetingtoImprovePerformanceinthe

SomervilleTrafficUnit.”


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SESSION3 OCTOBER15IndividualAssignment#2 DueOctober8by11:55pmviaNYUClasses

CaseMemos–TolizaArtMuseum&

SustainableRetrofitting DueOctober13by11:55pmviaNYUClasses

A. VARIANCESOnceabudget(orpriorperiod’sperformance)hasbeenestablished,assessinganorganization’sperformanceagainstthe

budgetisafundamentalcontrolandmanagementtool.Inthissegment,studentslearntobreakperformancevariances

intotheircomponentelements,providingvisibilityintotheirrootcauses.TheTolizaMuseumofArtcaseexploresboth

varianceanalysisandstep-downcostaccountinginthecontextofdecision-makinginanartsorganization.


• [Coursepack]CaseStudy–“TolizaMuseumofArt”(tobeintroducedbyTeam2).

B. ACCOUNTINGRULESFORNONPROFITORGANIZATIONSThere are a number of special purpose accounting rules that apply specifically to nonprofit organizations, including

particular approaches to revenue recognition and recognizing the oft-restricted nature of the contributions that they

receive.


• [NYU Classes] Keating, Elizabeth and Peter Frumkin. “How to Analyze Nonprofit Financial Performance.”

NationalAssemblyofStatesArtsOrganizations,2008.Pages28to46only.• [NYUClasses]McCambridge,Ruth.“WhattheNewFASBAccountingStandardswillMeanforYourNonprofit.”

NonprofitQuarterly.September2016.

• [NYUClasses–Optional/Resource,reviewintroductorysectionsonly]FinancialAccountingStandardsBoard.

“AccountingStandardsUpdate2016-4:PresentationofFinancialStatementsofNotforProfitEntities.”August

2016

C. TIMEVALUEOFMONEYANDCAPITALINVESTMENTSAttheheartofmuchfinance istheconceptof“timevalueofmoney,”simplyputthatadollar inhandtoday isworth

morethanadollarinhandtomorrow.Wewillworkthroughtimevalueofmoney,determininghowtocalculatetheNet

PresentValueofaninvestmentaswellasitsReturnonInvestment(ROI)andInternalRateofReturn(IRR).In“Financial

and Environmental Impact Analysis of Sustainable Retrofitting,” a Northwestern Kellogg School case, students will

determinethefinancialandenvironmentalreturnsfromavarietyofpotentialgreenupgradestoamultifamilyhousing

project.

PREPARATION• BermanandKnight,Chapters26and27andPartSixToolbox(pages197-222).• Finkler et al, Chapter 5 including Appendices 5-A and 5-B (pages 174-218). The appendices contain a walk

throughofinvestmentcalculationsinExcelandonafinancialcalculatorandareworththetimeinvestment.

• [Coursepack] Case Study – “Financial and Environmental Impact Analysis of Sustainable Retrofitting” (to be

introducedbyTeam3).


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SESSION4 OCTOBER29IndividualAssignment#3 DueOctober22by11:55pmviaNYUClasses

CaseMemos–Aspire,Inc.&GoneRural DueOctober27by11:55pmviaNYUClasses

A. LONG-TERMFINANCINGLong-term financing provides funding for capital (long-lived) assets and long-term program investments. Borrowings

(eitherfrombanksorthebondmarket)orretainedcapitalarethemajorsourcesoflong-termfundingformostnonprofit

organizations.WewillusetheAspire,Inc.casetoinvestigatethefactorsthataffectnonprofits’financialalternatives.

PREPARATION• Finkleretal,Chapter6(pages219-236). • [NYUClasses]Bowman,Woods.“ThePriceofNonprofitDebt.”NonprofitQuarterly.Summer2015.

• [NYU Classes] Strom, Stephanie. “Nonprofits Paying Price for Gamble on Finances.” The New York TimesSeptember23,2009.

• [Coursepack]CaseStudy–“Aspire,Inc.:FinancingOptionsforHealthierNonprofits”(tobeintroducedbyTeam

4). • [NYU Classes – Optional] Calabrese, Thad D. “Testing Competing Capital Structure Theories of Nonprofit

Organizations.”PublicBudgeting&Finance(2011).

B. WORKINGCAPITALMANAGEMENTANDTHECASHCONVERSIONCYCLEWorkingcapitalmanagementandtheprocessofconvertinganorganization’sservicesintofinancialresources(i.e.,cash)

is an important part of the financialmanagement of any enterprise. In theGone Rural case,wewill study the cash

conversioncycleforaruralhandicraftsnetworkinSwaziland.

PREPARATION• BermanandKnight,Chapters28,29,and30andPartSevenToolbox(pages226-239).• Finkleretal,Chapter7(pages239-264) • [NYU Classes] Cagle, Corey S., Sharon N. Campbell and Keith T. Jones. “Analyzing Liquidity Using the Cash

ConversionCycle.”JournalofAccountancy.May2013. • [NYUClasses–Optional]Richards,VerlynD. andEugene J. Laughlin. “ACashConversionCycleApproach to

LiquidityAnalysis.”FinancialManagement1980. • [Coursepack]CaseStudy–“GoneRural”(tobeintroducedbyTeam5).

C. INTRODUCTIONTOFINANCIALSTATEMENTANALYSISFinancialaccountingcommunicatesanorganization’sresultsandfinancialposition.Financialanalysisisusedbyleaders

to make mission-based decisions, by funders to determine whether to support an organization, and by lenders to

determinetheprospectsforloanrepayment.Inthissession,studentswillgetanintroductiontothemajorcategoriesof

financialstatementratioanalysis.

PREPARATION• Finkleretal,Chapter14(pages509-558)

• [NYUClasses]Abraham,Anne.“FinancialManagementintheNonprofitSector:AMission-BasedApproachto

RatioAnalysisinMembershipOrganizations.”TheJournalofAmericanAcademyofBusiness,10(1),September

2006.


12

SESSION5 NOVEMBER12IndividualAssignment#4 DueNovember5by11:55pmviaNYUClasses

CaseMemos–UniversityofTrent&

CarletonFireDepartment DueNovember10by11:55pmviaNYUClasses

A. MOREONFINANCIALSTATEMENTANALYSISThissessionbuildsontheprevioussession’sworkandincludesawalkthroughofanauditedfinancialstatement.

PREPARATION• [NYUClasses,ResourcesforClass3]Keating,ElizabethandPeterFrumkin.“HowtoAnalyzeNonprofitFinancial

Performance.”NationalAssemblyofStatesArtsOrganizations,2008.Pages47to56only.• [NYU Classes}. The AmericanMuseum of Natural History Consolidated Financial Statements TogetherWith

ReportofIndependentAuditorsfortheYearsEndedJune30,2015and2014.

• [Coursepack]Case–“UniversityofTrent”(tobeintroducedbyTeam6).

B. BENCHMARKINGBenchmarkinganorganization’sperformance–financialaswellasnon-financial– isan importantpartofassessingan

organization’sperformance.

PREPARATION• [NYUClasses]Buckmaster,Natalie.“BenchmarkingasaLearningTool inVoluntaryNon-ProfitOrganizations.”

PublicManagement:AnInternationalJournalofResearchandTheory,1(4)2006• [NYUClasses]Letts,ChristineW.,WilliamP.RyanandAllenGrossman. “Benchmarking: Hownonprofitsare

adaptingabusinessplanningtoolforenhancedperformance.”1999 • [NYU Classes] Sawhill, John and David Williamson. “Measuring What Matters in Nonprofits.” McKinsey

Quarterly.2001(2). • [NYUClasses] Roberts, Dylan,GeorgeMorris, JohnMacIntosh andDanielMillenson. “RiskManagement for

Nonprofits.”OliverWyman&SeaChangeCapitalPartners,March2016.

• [Coursepack]Case–“CarletonFireDepartment”(tobeintroducedbyTeam7).

• [NYU Classes – Optional] Brockmeier, Diane. “Benchmarking in Nonprofit Organizations.” Mid-America

TransplantServices,2012.

• [NYUClasses–Optional]Suarez,Virginia,Cheryll Lesneski,andDwightDenison. “Making theCase forUsing

FinancialIndicatorsinLocalPublicHealthAgencies.”AmericanJournalofPublicHealth,101(3),March2011.

• [NYU Classes – Optional] Ritchie, William J. Kolodinsky. “Nonprofit Organizational Financial Performance

Measurement: An Evaluation of New and Existing Financial Performance Measures.” National Journal ofManagement&Leadership.13(4)Summer2003.

C. DASHBOARDSANDDATAVISUALIZATIONDashboardsanddatavisualizationsconvey insight into financialandothermetrics (includingKPIs)andareapowerful

toolindecision-making.Whereverpossible,socialsectordashboardsshouldincludeimpact(doublebottomline)metrics.

PREPARATION• [NYUClasses]Privett,Natalie.“Webinar:HowtoEffectivelyCommunicateData.”NYUStream.

• [NYUClasses]Privett,Natalie.“HowtoEffectivelyCommunicateData.”ThisisthepresentationthatProfessor

Privettusedinherwebinar.

• [NYUClasses]Polanco,HildaS.andSarahWalker.“ModelsandComponentsofaGreatNonprofitDashboard.”

NonprofitQuarterly.May2016.

• [NYUClasses] In theResources sectionofNYUClasses isa folder titled“DashboardResources” thatcontains

general backgroundmaterial on the creation and use of dashboards. Students should review and become

familiar with some of these examples prior to class and can use these resources as a starting point for

conceptualizingthefinancialandimpactdashboardtobeincludedintheFinalTeamProject.

IndividualMidterm DueNovember29by11:55pmviaNYUClasses


13

SESSION6 DECEMBER3IndividualAssignment#5 DueNovember21by11:55pmviaNYUClasses

IndividualMidterm DueNovember29by11:55pmviaNYUClasses

CaseMemos–DePaulIndustries&

Asian-AmericansforCommunityInvolvement DueDecember1by11:55pmviaNYUClasses

A. FINANCIALANALYSISANDSTRATEGYUsingtheDePaulIndustriescase,wewillexploretheintersectionofstrategyandfinanceforasocialenterpriseandthe

interplaybetweenprogrampositioningrelativetotheenvironment(externalandwellasinternal)andsustainability.In

the case, students will explore how financial measurement and analysis, which reflects operational performance, is

essentialtostrategicanalysis.

PREPARATION

• [Coursepack]CaseStudy–“DePaulIndustriesin2012:FinancialGrowthinaSocialVenture”(tobeintroduced

byTeam8).

• [NYUClasses]Porter,MichaelE.“TheFiveCompetitiveForcesthatShapeStrategy.”HarvardBusinessReviewJanuary2008.

• [NYU Classes] Barney, J.B. “Looking Inside for Competitive Advantage.” The Academy of ManagementExecutive, 9(4), 1995. This article presents the VRI(O)model of strategy analysis – Value, Rarity, Imitability,

Organization.

B. DOUBLEBOTTOMLINEANDBLENDEDIMPACTTheAsian-AmericansforCommunityInvolvementCasefromBerkeley’sHaasSchool introducestheconceptof“double

bottomline,”thatistosaytheinterplaybetweenfinancialandsocialimpact.Thisframeworkiswidelyusedinthesocial

sectorandthe“dualbottomlinematrix”(missionalignmentrelativetofinancialimpact)isanimportantdecision-making

tool.

PREPARATION

• [NYUClasses]Miller,Clara. “TheLooking-GlassWorldofNonprofitMoney: Managing inFor-Profits’Shadow

Universe.”TheNonprofitQuarterly,12(1),Spring2005. • [NYU Classes] Gregory, Ann Goggins and Dan Howard. “The Nonprofit Starvation Cycle,” Stanford Social

InnovationReview,Fall2009. • [NYU Classes] Eckhart-Queenan, Jeri, Michael Etzel and Sridhar Prasad. “Pay-What-It-Takes Philanthropy,”

StanfordSocialInnovationReview,Summer2016. • [NYU Classes] Emerson, Jed. “The Blended Value Proposition: Integrating Social and Financial Returns.”

CaliforniaManagementReview45(4),Summer2003. • [Coursepack]CaseStudy–“Asian-AmericansforCommunityInvolvement(AACI)–AStrategicInflectionPoint”

(tobeintroducedbyTeam9). • [NYUClasses–Optional]Sharma,SuchiandJohnanaMair.“SocialImpactMeasurement.”IESE(Universityof

Navarra)TechnicalNote.2010. • [NYUClasses–Optional]Lecy,JesseD,andElizabethA.M.Searing.“AnatomyoftheNonprofitStarvationCycle:

AnAnalysisofFallingOverheadRatiosintheNonprofitSector,”NonprofitandVoluntarySectorQuarterly,Vol.44(3),2015.

• [NYUClasses–Optional]Blank,Steve.“WhytheLeanStartupChangesEverything.”HarvardBusinessReview.May2013.

Optional Government Accounting Quiz (due no later than December 27) becomes available after the

December3session.


14

SESSION7 DECEMBER17FinalTeamPresentationSlides SlidesdueDecember14by11:55pmviaNYUClasses

A. GOVERNMENTACCOUNTINGANDFINANCIALCONDITIONANALYSISGovernment organizations follow a modified set of accounting conventions. We will cover an overview of these

accountingregulationsandengageina“mini-case”discussionofthelargestmunicipalbankruptcyinthenation’shistory.

StudentswillbeabletotakeanonlinequizontheGovernmentAccountingtopicsforextracredit.

PREPARATION• Finkleretal,Chapters12,(pages444–461),13(pages468-508),and15(pages559-587) • [NYU Classes] Genito, Michael. “Back to Basics: An Overview of Governmental Accounting and Financial

Reporting.”GovernmentFinanceReview,February2013. • [NYUClasses–skimonly].CityofNewYorkComprehensiveAnnualFinancialReport(CAFR)oftheComptroller

for the Fiscal Year ended June 30, 2015. Students should becomegenerally familiarwith the format of the

financialstatementsandthecontentuptopage41. • [NYUClasses]McDonald,JohnF.“WhathappenedtoandinDetroit?”UrbanStudies.51(16)2014. • [NYUClasses]Eisenger,Peter.“IsDetroitDead?”JournalofUrbanAffairs.00(0)2013. • [NYUClasses]Dolan,Matthew“InDetroitBankruptcy,ArtWasKeytotheDeal;‘GrandBargain’InvolvingCity-

OwnedCollectionPavedWayforExitFromCourt.”TheWallStreetJournal.November7,2014.

• [NYU Classes] Dolan, Matthew, Susan Tompor and John Gallagher. “Detroit Rising: Life after bankruptcy.”

DetroitFreePress.November8,2015. • [NYU Classes – Optional] Government Accounting Standards Board. “Why Governmental Accounting and

Financial Reporting is – and should be –Different.” Government Accounting Standards BoardWhite Paper,

April2013. • [NYUClasses–Optional]Chung,Christine.“Zombieland/TheDetroitBankruptcy:WhyDebtsAssociatedwith

Pensions, Benefits, and Municipal Securities Never Die . . . and How They Are Killing Cities Like Detroit.”

FordhamUrbanLawJournalXLI(2014).

B. ORGANIZATIONOFFINANCIALFUNCTIONSANDACCOUNTABILITYFinancialcontrolsystemsandperformancemeasurementareattheheartofaccountability.Thissectionwillcoverthe

elementsofcontrol,theorganizationoffinancialfunctionswithinorganizations,andtheconsequencesofshortcomings

infinancialmanagement.

PREPARATION• ReviewFinkleretal,Chapter8(onlypages272to281and299to310). • [NYUClasses]Prakesh,Nidhi.“BankruptcyfilingsdetailFEGSdescent.”Politico.March18,2015. • [NYU Classes] Human Services Council. “New YorkNonprofits in the Aftermath of FEGS: A Call to Action.”

2016. • [NYU Classes] Smith, Pamela C. and Kelly A. Richmond. “Call for Greater Accountability within the U.S.

NonprofitSector.”AcademyofAccountingandFinanceStudiesJournal.11(2),2007. • [NYUClasses-Optional]Gibelman,MargaretandSheldonR.Gelman.“VeryPublicScandals:Nongovernmental

Organizations inTrouble.” Voluntas: International JournalofVoluntaryandNonprofitOrganizations. 12 (1),2001.

• [NYUClasses–Optional]AmericanInstituteofPhilanthropy.“CharityWatchHallofShame.”2016.

• [NYU Classes –Optional] Nonprofit Coordinating Committee ofNew York. “How to read the new IRS Form

990.”(2011)

C. FINALTEAMPRESENTATIONSEachteamwillmakeapresentationofnomorethan10minutes,followedbyuptofiveminutesofQ&Afromoneother

team(tobedesignated).

D. WRAPUPTimepermitting,wewillsummarizethecourseandtheapplicationoflearningfromthecoursetostudents’professional

rolesandcareergoals.

GovernmentAccountingQuiz DueDecember27by11:55pm

TeamDashboardandFinancialReport DueDecember28by11:55pmviaNYUClasses

FinalTeamPeerReview DueDecember28by11:55pm

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