Intro To Nonprofit
Paper details:
Analysis of Form 990
After studying the materials for week 10, please answer the questions listed below. Use 12 point font, Times New Roman, double space.
you first need to calculate the financial indicators correctly by carefully following the following instruction.
Second, to provide valuable and tangible interpretation of the financial indicators. To do so, you will need to reflect , what you learn from the slide, textbook, and materials I posted.
Do not answer the questions using bullet points. All answers must provide clear explanations and rationales.
Please use your own words to answer. Be aware that you do not copy and paste. Finally, be aware of the word limitation.
Form 990 is the tax form every 501(c)3 nonprofit needs to report to the IRS; it also provides crucial information for stakeholders to evaluate a nonprofit’s financial health. Through the following exercise, you will learn how to read three of the important indicators to evaluate a nonprofit’s financial health.
Human Rights Watch is one of the biggest nonprofit organizations in the United States. In this assignment, we are going to use Human Rights Watch as an example to learn how to calculate and evaluate a nonprofit’s financial health. You can download Human Rights Watch’s Form 990 from Canvas.
Section 1: % of Unrestricted Assets
The % of unrestricted net assets may tell a more valuable story than the absolute figures, as it helps us understand how much of the organization’s revenue (income) is unrestricted. For example, a very low % of unrestricted assets shows that the organization may not have too much flexibility to cover operating expenses.
1. What is Human Rights Watch’s % of Unrestricted Assets in 2018?
Please calculate Human Rights Watch’s % of Unrestricted Assets using the following equation. You can find its Unrestricted Assets from its Form 990 (Part X, column (B), line 27) and total asset from its Form 990 (Part X, column (B), line 16).
% of unrestricted assets = unrestricted assets/total asset
2. Based on your calculation, do you think Human Rights Watch has enough flexibility to use their asset? Why or why not? (word limit: 100-200)
Section 2: % of Program Service Expense
In this week’s slide, you have learned about a nonprofit’s “Statement of functional expenses.” In general, there are three main categories in a nonprofit’s expense:
1) Program service expenses—activities that further the organization’s exempt purposes (Form 990à Part IX, column (B), line 25);
2) Management and general expenses—relate to the organization’s overall operations, such as salaries, committee meetings, legal services, liability insurance (Form 990à Part IX, column (C), line 25) ;
3) Fundraising expenses — expenses incurred in soliciting cash and non-cash contributions, gifts and grants (Form 990à Part IX, column (D), line 25).
The sum of these three types of expenses is called Total Expenses (Form 990à Part IX, column (A), line 25).
When donors donate their money to a nonprofit organization, they want their money to go to the clients the nonprofit promises to serve. In other words, donors want their money to go to “program and service expenses” rather than “management and general expenses.”
1. What is the % of Human Rights Watch’s Program Service Expenses in 2018? You can calculate it using the following equation.
% of program service expense = program service expense/total expense
1. If you were a donor for Human Rights Watch, is the % of program service expense acceptable to you? Why or why not? (word limit: 100-200)
Section 3: Assets to Liabilities Ratio
The Assets to Liabilities Ratio indicates a nonprofit’s financial stability.
If the Ratio < 1 means Liabilities (Form 990à Part X, column (B), line 26) are greater than Assets (Form 990à Part X, column (B), line 16), indicating a short-term liquidity issue. To put it another way: If the current ratio is 1.8, that would mean for every $1 the organization owes, it has $1.80 to pay it.
(note: part X is on page 11)
1. What is Human Right Watch’s Assets to Liabilities Ratio in 2018? You can calculate the ratio by using the following equation.
Assets to liabilities ratio = total assets/total liabilities
2. You have learned the meaning of assets and liabilities from this week’s slides. Do you think this ratio would be a concern for the organizatiocgon? Why or why not? (word limit: 100-200)
