John T. Zietlow, D.B.A., CTP, teaches nonprofit financial management as an associate faculty member at Indiana University-Purdue University at Indianapolis (IUPUI) and Indiana University (Bloomington). He was permanently certified through the Treasury Management Association as a certified cash manager (CCM) and is certified through the Association for Financial Professionals as a Certified Treasury Professional (CTP). He has done training and consulting in the areas of cash management, treasury management, and investment management and portfolio performance evaluation. He has co-authored Cash and Investment Management for Nonprofit Organizations (2007) and Short-Term Financial Management (2017). John is also a professor of finance at Southwest Baptist University, where he teaches nonprofit financial management and strategic consulting practice in the doctoral program in educational leadership, as well as corporate finance, investments, derivatives, personal finance, and managerial economics in the business school. He previously taught at Oral Roberts University, Malone University, Lee University, Mount Vernon Nazarene University, and Indiana State University. While at Indiana State University, he received a multi-year grant from the Lilly Endowment to do research on application of corporate finance to nonprofit organizations. In that field research the primary financial objective of target liquidity which forms a unifying framework for nonprofit financial management was revealed. He holds membership in the Financial Management Association, Association for Research on Nonprofit Organizations and Voluntary Action (ARNOVA; also part of the Social Entrepreneurship/Enterprise Section and the Nonprofit Finance and Financial Management Common Interest Group), Christian Finance Faculty Association, and Christian Business Faculty Association. He may be reached via e-mail at: jzietlow@outlook.com or jzietlow@iupui.edu.

Jo Ann Hankin is a nationally recognized consultant in the field of fundraising, and financial/administrative management for nonprofits.

Alan G. Seidner was the founder of Seidner & Company of Pasadena, CA, an investment management and consulting firm whose roster included high net worth investors, healthcare organizations, major corporations, nonprofit institutions, and municipalities. In 1998, Seidner & Company ceased operation as its clients were invited to become clients of Fiduciary Trust International of California (FTIC). From 1998 until 2002, Seidner was an independent consultant and a Senior Consultant to FTIC and its parent, Fiduciary Trust International, which later merged with Franklin Resources, parent of Franklin Templeton. From 2005 thru 2007, Seidner was a Senior Vice President at Denver Investment Advisors. Currently he is a Senior Consultant for Client Development with the Pyatt Broadmark Real Estate Lending Funds. He holds Series 7 and Series 63 FINRA registrations.

Seidner was the author of many financial reference works, and was a frequent speaker on investment techniques and strategies. He has served as a speaker on investment techniques and strategies at numerous financial conferences, such as those of The American Institute of Certified Public Accountants and the Graduate Schools of Business of Duke University, Ohio State University, the University of California (Berkeley), the University of North Carolina and the University of Southern California. He has also provided testimony before federal government agencies on the performance of pension fund investments.

Tim O'Brien, PhD serves as a practitioner faculty at North Park University, School of Business and Nonprofit Management where he specializes in Nonprofit Financial Management. He also teaches financial accounting, managerial accounting and strategic management for nonprofit organizations. He also teaches at The Spertus Institute. He previously taught at JFK University in Northern California. He also serves as Senior Consultant for Lumity, a nonprofit organization that provides financial consulting services to nonprofits in the Chicago area. He has also served as an international workshop leader, controller, CFO and Director of Finance and Administration in a variety of nonprofit organizations. In addition, he serves as Treasurer for St. Luke's Episcopal Church in Evanston, Il and on the Advisory Board of the Axelson Center at North Park University. Dr. O'Brien holds a BA in Accounting from Queens College, Flushing, NY, an MA in Management from JFK University in Pleasant Hill, CA and a PhD in Interdisciplinary Studies from The Union Institute & University, Cincinnati, OH.

Financial Management for Nonprofits is a book written for use by those presently responsible for or in training for financial management in a nonprofit organization. There are many titles used to identify persons assigned these responsibilities including, but not limited to, the director of finance, chief financial officer, treasurer, controller, chief accountant, director of operations, vice-president of business affairs, business administrator, and financial secretary. Actually, the title of the position is not important; the responsibility is extremely important. Board members are also in view here, especially those serving on the executive committee, finance committee, investment committee, risk management committee, or audit committee.

Our book is written from a managerial decision-making perspective for those in leadership and day-to-day management positions who have oversight responsibility for financial functions or are members of the Board. These leaders and managers may, or may not, be experienced financial managers. Most of the subjects and issues that confront those responsible for financial management and related functions in the small- to medium-sized nonprofit organization are not determined by size, but rather by the mix of assets and strategies employed to accomplish the organization's mission.

Another important focus of this book is to demonstrate that financial management functions are expanding – and when done well, these strategies will make a real difference in the organization's ability to achieve its mission. Effective and responsible financial management contributes toward accomplishing the mission in a number of significant ways, including:

• Financial stewardship and policy setting
• Governance
• Financial reporting and accountability
• Establishing liquidity policy and guiding decisions to maintain that liquidity or rebuild it when depleted
• Strategic planning
• Evaluation of existing and proposed business model
• Evaluation of existing and new programs
• Fundraising evaluation
• Cash planning
• Budgeting and long-range financial planning
• Debt and other liability management
• Operational expertise and strategic internal business consulting
• Empowerment through the sharing of information and harnessing of technology
• Catalyst for cultural change in the organization
• Preservation of investment assets and increase in investment income
• Fraud prevention, detection, and control

Depending on your nonprofit organization's size and scope of activities, the nature and complexity of its financial functions will range from simple to highly sophisticated and complex. In any case, the financial systems used must be designed to provide the information necessary to meet management, fiduciary, and legal requirements. This book is unique among the books available on nonprofit accounting and finance in developing a basis for liquidity targeting as the primary financial objective of the nonprofit – especially noncommercial nonprofit organizations. It then ties other financial decision areas to this liquidity target throughout the book. We include coverage of five major topical categories in order to emphasize the positive contributions of the financial and business functions to the organization and its mission:

• Managing your organization's financial resources
• Establishing and revising financial policies
• Accounting, budgets, and financial reports
• Investing for the short and long term
• Controlling and managing risk, including liquidity risk, cyber risk, interest rate risk, and exchange-rate risk

In this updated and revised third edition, we have added new material on policies, practices, governance, business models, financing vehicles, setting reserve levels, risk management topics, and the revised financial statement format embedded in ASU 2016-14. We have particularly focused on information that is not limited to primarily academic interest, but is state-of-the-art and represents “best practices.” We have tapped many new resources to ensure we are including the “best of the best,” and we are most grateful for the many researchers, consultants, accounting and auditing firms, risk experts, and other authors whose material has deeply enriched this book. We are also gratified to see that the primary financial objective that was discovered in our grounded field studies, funded by the Lilly Endowment, is now becoming mainstream in the practitioner world. In fact, Mark Jones, an executive at a nonprofit financial institution, renamed our primary financial objective to be an “appropriate liquidity target,” a convention we have adopted in this new edition.

Working for a nonprofit organization is an exciting and meaningful opportunity. There are many similarities and differences between nonprofit and for-profit organizations, and it is important to recognize and understand how they are similar as well as dissimilar. By virtue of their mission, nonprofit organizations benefit society by improving the public good.

Close to two million nonprofit organizations of all sizes exist in the United States today, employing many people. Many more nongovernmental organizations exist internationally. Each nonprofit organization has a responsibility to its mission, its constituents, its donors and other funders, its employees, and its volunteers. The proficient financial management of the organization's resources is absolutely critical to enable it to succeed in fulfilling its mission and goals.

As you can see from the material covered in this book, those involved in managing the finances of the organization have a great deal of responsibility. In the process of carrying out these responsibilities, some members of the organization may feel disliked or undervalued by those they serve on a regular basis. Under these circumstances, it is critical for the responsible financial manager to be fair, to understand the interplay between facts and people, and to understand that accountability is not always popular with those being held accountable.

This book is intended to provide current and soon-to-be nonprofit managers, particularly those involved with financial management, with a clear sense of the technical expertise and skills needed to manage this function well for their organization. It will also reinforce the fact that anyone with a financial role is part of a larger group in the nonprofit community who fulfill the same set of major responsibilities and uphold the same ethics and values. The authors hope that the information contained in this book will enable readers to better manage the financial resources of the nonprofit organizations they serve and enhance their overall financial health and viability.

Finally, this book serves as a textbook for certificate programs, undergraduate courses, and graduate courses in nonprofit financial management (particularly in MPA, MBA, MNPM, and MNO programs). Two of us have taught and trained managers and students in nonprofit financial management for roughly 20 years. We believe that the private nonprofit sector is sufficiently dissimilar to business and public sector organizations to merit special focus for students in this fascinating arena. This book has been used at the undergraduate, masters', and doctoral levels. It has also been used as a course manual for nonprofit executive training, in both in-person and online venues. It has helped students gain an appreciation and understanding of educational, healthcare, faith-based, arts, human services, youth services, community development, environmental, and other charitable organizations' financial decision-making. There is a dedicated course support website for students and faculty members at www.wiley.com/go/zietlow. Adopting faculty members are invited to contact John (jzietlow@indiana.edu) or Tim (tobrien@northpark.edu) for guidance on how best to use the book in academic courses or executive training.

John Zietlow acknowledges and is deeply grateful for the contributions of the following individuals whose expertise greatly enhanced specific areas of the book: Gregg Capin, Sue Budak, Dennis Gogarty, Linda Szipo, Thomas McLaughlin, Mary Fischer, Melanie Lockwood Herman, Amy Sample Ward, Lisa Schneider, Dave Meldrum-Green, Dan Busby, Nick Wallace, Bill Hopkins, Steve Dawson, Carolyn King, Wayne Kissinger, Georgette Cipolla, William Michels, John Webb, Darryl Smith, Darryl Deardorff, Jerry Trecek, Bob Reynhout, Dave McFee, Phillip Purcell, Rob Licht, David Holt, and Eric Lane. He especially thanks three individuals at Southwest Baptist University: Bailey Harman, student assistant, Donna Young, librarian, and Chris Keller, MBA Coordinator/COBACS Secretary, for their invaluable clerical and research assistance on this edition.

The genesis of this book was a major field-based research project funded by Lilly Endowment, Inc. This study initiated the insights reported here regarding the practice of financial management of faith-based organizations by providing grant money to Indiana State University. The individuals responsible for evaluating and guiding the grant process were Fred Hofheinz and Jim Hudnut-Beumler. Members of the advisory panel assembled as part of that grant project were so helpful in shaping the research project that underlies some of the significant findings presented in this book. They believed, as we do, that proficient financial management can greatly aid in the accomplishment of charitable missions. A particular thanks goes to the 288 financial managers who took part in the exhaustive survey covering financial management practices employed by their organizations. We also appreciate the research input and critiques provided by Dr. Raj Aggarwal and Dr. Kathleen Eisenhardt.

We are particularly grateful to our editors at John Wiley & Sons, Brian Neill, associate editor, and Pete Gaughan, project editor, who were instrumental in directing the project from inception to publication. We are very appreciative as well to Sharmila Srinivasan, our production editor, for steering this project to completion.

Graduate students at Indiana University–Purdue University at Indianapolis (IUPUI) and Indiana University–Bloomington have enriched and helped shaped this book as they learned from and commented on content in the previous editions of this guide as part of the graduate nonprofit financial management class taught each year since 1999.

Finally, I wish to thank my dear wife, Kathy, for her prayers and for bearing with me in the time-consuming process of putting this guide together. My contribution is dedicated to my parents, Harold and Miriam Zietlow, for their continual encouragement, support, and prayers.

Jo Ann Hankin thanks Clariza Mullins, former Treasurer and Investment Officer, Pepperdine University, for her important contribution to Chapter 11 on Cash Management and Banking Relations. Clariza's technical expertise, hands-on experience, and communication style are part of what make this chapter an extremely useful one.

Alan Seidner wishes to thank his wife, Carrie, for all her support and help in the completion of this publication.

Tim O'Brien wishes to thank the students and faculty at North Park University for their support and guidance. Thanks are also due to John Zietlow for his support and mentorship, and to my wife Karen for her support and editing skills, as well as her patience and loving kindness. I dedicate my part of this work to my dear departed daughter, Vanessa.