A not for profit organization is a corporation or an association that conducts business for the benefit of the general public without shareholders and without a profit motive (Legal, 2013).” There are immense community benefits as a not-for-profit generally accepts everyone regardless of ability to pay. Nonprofit organizations are granted tax-exempt status which helps them to provide services to the public and are expected to be effective managers of their finances as well as being efficient (Financial Management, 2010). In doing so, they can gain exemptions from federal and state incomes taxes and have the ability to solicit tax-deductible contributions (Financial Management, 2010). Organization must follow legal financial requirements and always adhere to sound accounting principles that produce reliable financial information (Financial Management, 2010).
There are several types of not-for-profit organizations including charitable hospitals, research institutions, educational hospitals, and public health programs. Charitable hospitals provide basic, extensive and emergency health care, but are exempt from federal, state and local taxes, and raise money from the charitable contributions of donors (Litten, et al, 2010). Financial assistance policy needs to be clear and concise and charges should be limited as the majority of the people will be poor and needy. Billing and collection policies should include ‘reasonable efforts’ to determine assistance eligibility (Litten, et al, 2010). Educational hospitals provide clinical education and training to student doctors, nurses and other health care professionals, as well as traditional basic and emergency care and testing and lab services (Medical Dictionary, 2013). These facilities are generally associated with a medical school or university. They are
committed to research and are also searching for innovative services and methods of delivery. They are generally funded by the government, endowments, grants and donations (Medical Dictionary, 2013). Research institutions which are endowed to do medical research and to acquire new knowledge to help prevent, detect, diagnose, and treat disease and disability, from the rarest genetic disorder to the common cold while gaining new knowledge that will lead to better health for everyone (NIH, 2013). They are usually funded by the government, endowments, grants and donations (Medical Dictionary, 2013). Public health programs are wide and varied and can be local, state or federal. They are generally government funding, but also get grants, and endowments (What is Public Health, 2013).
Financially healthy nonprofits use income-based, rather than budget-based spending which allows them to have income projections that are realistic and helps to determine realistic costs (Zietlow, Seidner, 2014). The most successful nonprofit should have an operating reserve to finance shortfalls and hopefully allows...