1. Why do not-for-profit organizations need to provide financial statements? Who would be interested in the accounting information contained in the financial statements of Goodwill?
2. What are some similarities between the type of accounting performed at Goodwill compared to accounting at for-profit companies?
3. What are some differences between the type of accounting performed at Goodwill compared to accounting at for-profit companies?
4. How can Goodwill use ratio analysis to improve its operations? What three specific ratios do you suggest that Goodwill use in its analysis to help improve its operations. Why do you suggest the use of these three ratios?
    

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Goodwill Industries International Inc. consists of a network of 164 independent, community- based organizations located throughout the United States and Canada. The mission of this nonprofit is to enhance the lives of individuals, families, and communities "through learning and the power of work." Local Goodwill stores sell donated goods and then donate the proceeds to fund job training programs, placement services, education, and more. Despite its nonprofit status, Goodwill establishments are in many ways run similar to for-profit businesses. One of these similarities involves the accounting function. Like for-profit firms, nonprofit organizations like Goodwill must provide detailed information about how they are using the donations that are provided to them. Indeed, fraud can occur just as easily at a nonprofit organization as for a for-profit company, making it necessary for nonprofits to reassure stakeholders that they are using their funds legitimately. Additionally, donors want to know how much of their donations are going toward activities such as job creation and how much is going toward operational and administrative expenses. It sometimes rises people that nonprofits use part of the funds they receive for operational costs. Yet such a perspective fails to see that nonprofits must also pay for electricity, rent, wages, and other services. "We have revenue and support for the revenue pieces, and then we have direct and indirect expenses for our program services, and then we have G and A, general administrative services. And we have what's called the bottom line, or other people call net profit. We have what's called net change in assets. The concept is pretty much the same as far as accounting," says Jeff McCaw, CFO of Goodwill. Goodwill creates the equivalent of a balance sheet and income statement. Yet because Goodwill is a nonprofit entity, its financials are known by the names statement of financial position and statement of activities. These financials have some differences compared to financial statements of for-profit companies. For instance, Goodwill's statement of financial position does not have shareholder's equity but instead has net assets. The organization's financials are audited, and stakeholders can find the firm's information in form 990 through Goodwill's public website (form 990 is the IRS form for nonprofits). Goodwill Industries International Inc. consists of a network of 164 independent, community- based organizations located throughout the United States and Canada. The mission of this nonprofit is to enhance the lives of individuals, families, and communities "through learning and the power of work." Local Goodwill stores sell donated goods and then donate the proceeds to fund job training programs, placement services, education, and more. Despite its nonprofit status, Goodwill establishments are in many ways run similar to for-profit businesses. One of these similarities involves the accounting function. Like for-profit firms, nonprofit organizations like Goodwill must provide detailed information about how they are using the donations that are provided to them. Indeed, fraud can occur just as easily at a nonprofit organization as for a for-profit company, making it necessary for nonprofits to reassure stakeholders that they are using their funds legitimately. Additionally, donors want to know how much of their donations are going toward activities such as job creation and how much is going toward operational and administrative expenses. It sometimes rises people that nonprofits use part of the funds they receive for operational costs. Yet such a perspective fails to see that nonprofits must also pay for electricity, rent, wages, and other services. "We have revenue and support for the revenue pieces, and then we have direct and indirect expenses for our program services, and then we have G and A, general administrative services. And we have what's called the bottom line, or other people call net profit. We have what's called net change in assets. The concept is pretty much the same as far as accounting," says Jeff McCaw, CFO of Goodwill. Goodwill creates the equivalent of a balance sheet and income statement. Yet because Goodwill is a nonprofit entity, its financials are known by the names statement of financial position and statement of activities. These financials have some differences compared to financial statements of for-profit companies. For instance, Goodwill's statement of financial position does not have shareholder's equity but instead has net assets. The organization's financials are audited, and stakeholders can find the firm's information in form 990 through Goodwill's public website (form 990 is the IRS form for nonprofits).

Answer rating: 100% (QA)

1The accounting information contained in financial statements is critical to notforprofit organizations Notforprofit organizations need to provide financial statements to their governing boards and to ... View the full answer