Tax-Exempt Status and Shortfall of the Budget of a Non-Profit Organization UNL - Assignment Example

The paper “Tax-Exempt Status and Shortfall of the Budget of a Non-Profit Organization UNL " is a meaningful example of an assignment on finance & accounting. The financial status of an organization, regardless of whether non-profit or not, acts as the basis for determining the success of the given subject in its operation. In this case, UNL being a non-profit organization is explored as an example to explore the implication of financial status within any organization. In order to run its operation, UNL requires to achieve a financial status that can meet the needs therein; otherwise, it is likely to go bankrupt. Consequently, this case also looks into the possibility of the company filing a bankruptcy and the consequences therein on the company’s operation. Most important of all is the UNL budget, which gives an overview of the company’s financial status.

Question 1
As a non-profit organization, UNL enjoys tax-exempt status since it is an educational organization. This implies that their financial status is not affected by the tax.  However, there some legal concerns which are likely to affect their financial status, such as a case of paying for lobbying and unrelated business tax. In paying for lobbying, the organization will be regarded as trying to influence legislation because of the associated urge. As a result of this may end up jeopardizing their status of tax-exempt according to section A 501(c)(3). Further, by carrying out unrelated business activities, the organization will be a subject of corporate income taxes as provided by the federal corporate tax rules (Buchbinder, 2009). In which case, the company involves activities of generating profit but their nature is not in any way related to non-profit purposes. Even though the organization may still be tax-exempt, which contributes positively to their financial status, the above legal concerns make it liable for payment of tax.

Question 2
The non-profit nature of UNL does not prohibit it from filing bankruptcy. Even though it runs on lower budgets than profit-companies, the company can end up taking out debt with the aim of improving the quality or quantity of its services (Nalepka et al, 2012). In addition, UNL may also experience trouble with settling the arising bills. The inability to further meet its debts or bills will ultimately make it file for bankruptcy. In which case, bankruptcy refers to the status imposed by legislation on an individual or organization unable to repay its debts to creditors. It allows the organization, is the subject to discard or strategize on how to repay the debts. In the case of UNL, they can file for bankruptcy to discard or avoid paying some of the bills associated with the athletic department.

Question 3
The budget of the company indicates a shortfall as shown with the presence of a  deficit. The budget shows that the company’s potential revenue is lagging behind its current expenditure. The costs have been on the rise, especially on those expenditures associated with new building operations and the addition of technology (Fried et al, 2013). The best remedy for this situation is to embrace a process of making the current budget to balance through applying a budget cut. Consequently, a recommendation of a 10% reduction in allocation, especially on new buildings and technology, will serve well in solving the imbalance. This will assure the company of achieving a 10% cost reduction in its budget.

Conclusion
In conclusion, the non-profit nature of UNL does not exempt it from the implication of financial status in its operation. Its status allows it to enjoy tax-exempt status but involvement in paying for lobbying and unrelated business tax acts as legal concerns which may affect its financial status. Through these, the company is liable to corporate rules of paying income tax. Further, without administering well to its financial status the company may end up unable to settle its debts and bills thereby making it bankrupt. To this course, they can file for bankruptcy to discard or avoid paying some of the debts and bills associated with the athletic department. From evaluating the budget, it shows that there is a deficit with the potential revenue being lower than the current expenditure. This calls for the need of the company to apply the 10% reduction in allocation in some of the areas to ensure the balance is achieved within the budget.