The Financial Position of the Organization and the IRS 990 Tax Return - Essay Example

? MANAGEMENT Part II: A Short Answer: A non-profit making organization Refers to an organization that uses surplus revenue to expand and give social services to the people (Gary 2006). These social services may include provision of healthcare, education, environmental conservation and even food (Worth 2011). It must be noted that the revenues generated by these non profit making organization are retained in the organization for self preservation or even for expansion (Worth 2011). In most countries, nonprofit making organizations are exempted from taxation. The Nonprofit making organizations employs many people and offers services to the masses freely. It is in this regard, that the Government pardons them and exempts them from the compulsory tax (Gary 2006). An example of a nonprofit making organization is the Nature Conservancy. It is a charitable association based in the United States of America that works to preserve animals, plants and the natural communities which represent Earth’s diversity. They do this by protecting the environment. The organization has helped plant over a billion trees all over the world and it intends to plant 2 billion trees by the year 2015. It has an effort to reclaim 2,500,000 acres and make the place habitable for animals. It selects areas it seeks to preserve by analyzing what is needed in those areas and what can be done to ensure that the preservation of local ecosystems is done. A nonprofit making organization should work with almost all sectors of society in order to achieve its goals (Worth 2011). This includes businesses, partner organizations, government agencies and individuals. The company has also embraced Debt swaps. This is a tool which is used to encourage third world countries to set land aside for conservation in exchange for forgiveness of foreign debt. In the past, nonprofit organizations have relied on donor giving and public funding as their main source of revenue (Hartigan 2006). However, after the 1970’s the many of the nonprofit making organizations have become increasingly involved in the selling of services and many other commercial activities (Worth 2011). This trend has been referred to by many as the commercialization of nonprofit organizations. This trend of commercialization has resulted into a fierce debate which up to now remains unsolved (Gary 2006). There are those who support commercialization and there are those who reject it. Those who are in favor of commercialization argue that, commercialization has allowed the nonprofit organizations to be more self sufficient at this time when government funding for nonprofit organizations has been drastically reducing (Worth 2011). On the other hand, those against commercialization have argued that with commercialization, nonprofit organizations will focus on making more money and thus deviate from their original goal which was to offer services to the masses (Hartigan 2006). The risks associated with having a nonprofit enterprise are many. For example, due to the tax exemption the managers of nonprofit making organization can fraudulently steal money from the association as the organizations are not audited by the IRS (Gary 2006). On the other hand, the societies can also lose sight of their mission by engaging too much in business. The benefits of having a nonprofit organization are also many for example, the organizations can sufficiently run their own activities without the need for donor funding (Alvarado 2000). It becomes hard for nonprofit organizations to sufficiently plan for certain activities because donor funding is not constant. However, with sales they can predict the patterns and thus sufficiently plan for the future (Hartigan 2006). Part III: Long Essay Question In this study we are going to review the nonprofit organization Nature conservancy. The organization had an income of approximately $925,817,441. The organization used approximately $525,789,657. The fundraising costs thus seemed balanced. The expenses used in fundraising should not be more than the income. The administration costs are still part of the $525,789,657 and thus, the organization has strived to keep its operating costs at a minimum. Worth suggests that a company should have minimum operations cost and the operations costs should not exceed the donor funds. The Nature conservancy thus, has adequately balanced the fundraising costs versus the funds raised. This is the intention of every nonprofit making organization. The organization is transparent because it offers a range of financial documents. This documents range from annual financial reports to IRS Form 990. The financial reports are put together by independent financial auditors to ensure credibility and efficiency. One can tell from the documents what type of services and products the organization deals with, these can be seen from the expenses. For example, buying of land and seedlings Cleary indicate that the organization deals with a forestation and reforestation. on the other hand, one cannot know what the organization deals with by only looking at the IRS 990 tax return, this is because only the revenue has been quantified and the services and products are not mentioned. The company has diverse methods of generating revenue, some of these methods include donor funding, selling of land, government grants and operating restaurants and fast food joints. The company also invests in Government securities (Stephen 1992). Donor funds make the bulk of the revenue. They stand at$531,882,088. The organization has managed to advertise itself and therefore, has attracted a lot of donors. The organization has a system where it recruits members and the members make contributions monthly. These contributions assure the organization of direct revenue every month; this has been one of the biggest strategies in Natural Conservancy. Apart from donor funds, the company has also invested heavily in real estate and bought a lot of idle land. The idle land brought a lot of revenue, this is after the organization has reclaimed the idle land and made it appealing. These real estate investments give the conservation organization approximately $53,288,950. Government grants have also enabled the organization to generate extra revenue (Stephen 1992). Its efficiency has been one of its pillars, with its proper management it has been able to convince the Government to increase its grants towards it and thus expand its capital base. The Government buys land from the nature conservation organization and therefore bags in money from that. It can therefore be seen that the Nature conservation nonprofit organization has a lot of diverse ways of making money. The organization has tangible assets and has been classified as one of the richest nonprofit organizations in America. It has total assets $5,636,393,924; it has been described as Nature’s real estate (Birchard 2005). It operates and manages the world’s largest preserve system. It has 1340 preserves and owns 10.5 million acres of land in the United States. Apart from land it also owns machinery and equipment approximated to be about $1,989,456. The organization thus, can be seen as very rich organization that has a lot of assets. The organization has permanently restricted assets, these assets include 1.7 million acres of land, which cannot be sold or be transferred to any part. These assets are restricted so as to make the organization relevant to its mission. The 1.7 million acres ensures that the organization still has some financial muscle and it can still conserve the environment (Birchard 2005). By reviewing the IRS 990 tax returns, I can donate to the nature conservation organization. This is because the organization is reputable and its financial statements are available and one can trace the cash flow. The salaries of senior employees are also available so as to ensure transparency. However, I can only donate money and not land. This is because most of the land the organization acquires it sells it to the government. Most of the people who donated land to the organization thought the land will remain in private hands; however the organization sold the land to the Government. However, the documents presented by the organization are not sufficient tool in evaluating and monitoring the board members and staff. This is because the organization gives grants to other small conservation organizations and therefore, tracing the grants is difficult (David 1990). Also the one wonders why the organization sells land to the Government instead of giving for free. The nature conservation organization being a public charity should be able to donate the land for free (David 1990). In addition, the expenses can be fabricated because the organization is exempted from tax. They might fabricate the expenses, overprice or under price a certain property for their own advantage. For that reason, it is very difficult, using the IRS 990 tax return alone to monitor the organization. The financial position of the organization is healthy, this is because the company has assets and income revenues that are able to pay expenses and also pay the liabilities of the organization (Worth 2011). The ownership of many acres of land is particularly interesting; this is because land is known to appreciate daily (Birchard 2005). This investment therefore, is very helpful to the organization because it ensures that the financial position of the business is never compromised. The investment that the organization has taken in Government securities is very wise, this is because government securities are a safe choice and are like safer banks. Thus, from the organizations assets and income it can be concluded that the organization has a healthy financial health. By reviewing the IRS 990 tax return form, I was surprised to find out that the organization has invested its money in Government securities. The money raised by these securities is used to develop industries or sponsor mining explorations. This is in paradox to the mission of the organization. The organization aims to help in conservation, but in this case it can be argued that the organization goes for what it primarily refuses. It is thus paradoxical for the company to invest in mining industries and companies that degrade the environment. The concern raised from reading the IRS 990 tax returns is whether the organization had a right to sell trusted land to the Government. By selling the land to Government the organization was in violation to what it was originally formed to. The organization was formed to protect the environment but by selling the land to the Government, the government may build factories on it and thus, the organization may just be a real estate agent between the public and the Government. References Gary R., (2006) Nonprofits: On the Brink: How Nonprofits have lost their way and some essentials to bring them back. SAGE: New York. P. Hartigan, (2006), 'It's about people, not profits', Business Strategy Review. Alvarado, Elliott I.: "Nonprofit or Not-for-profit -- Which Are You?", page 6-7. Nonprofit World, Volume 18, Number 6, Stephen J. (1992), Preserving Eden: The Nature Conservancy New York: Harry N. Abrams, Inc., David E. (1990), Good Dirt: Confessions of a Conservationist Chester, CT: The Globe Pequot Press, Birchard B., (2005), "Nature's Keepers" Jossey-Bass, A Wiley Imprint, San Francisco, CA, Worth J., (2011) Nonprofit Management Principles and Practice Second Edition. SAGE: New York. Read More