Tri-county Social Service Agency is a not-for-profit organization in the Midwest. Use the following information to complete the cash budget for the year ending December 31, 2010.

• The Board of Trustees requires that Tri-county maintain a minimum cash balance of $8,000.

• If cash is short, the agency may borrow from an endowment fund enough to maintain the $8,000 minimum. Repayment must be made as soon as possible. No interest is charged.

• It is anticipated that the year 2010 will begin with an $11,000 cash balance.

• Contract revenue is received evenly during the year.

• Mental health income is expected to grow by $5,000 in the second and third quarters, but not change in the fourth quarter.

Required

1. Within the context of a not-for-profit organization, what is an endowment fund?

2. Complete the cash budget for 2010, for each quarter and the year as a whole, using the template that follows.

3. Determine the amount that the agency will owe the endowment fund at year end.

4. Does the borrowing indicate a problem? What options would the agency have to increase revenues?

5. Do you think that a requirement to pay interest on the borrowings would have a positive impact on the agency's activities? Why or whynot?