To Accrue, or Not to Accrue?

In my blog post Dream Big I wrote about my greatest dream which is to open and run a house for young women coming out of troubled times. This business would be operated as program that helps them overcome obstacles and become self-sufficient. It would also be a ministry, giving them hope that no matter where they come from they have a great future ahead of them. Most ministries are operated as non-profits and that is exactly how I want this to be.

For my accounting class we are required to do a financial statement analysis of two nonreligious nonprofit businesses. My instructor would often come to class and discuss exactly what we should be looking for by showing us examples of nonprofit financial statements. To my disappointment (and I’m sure many of my classmates’) I learned that many ‘nonprofits’ actually had very high profits that they had accrued throughout the years. One of them was for a foundation that helped parents of transplant patients with expenses. The best question my professor asked was, “Do you think that they helped every child to get the transplant they needed, or at least helped with every transplant patient’s family expenses?” They obvious answer was no.

In my opinion this type of nonprofit should have funds constantly going out until they have exhausted every appropriate avenue for assisting transplant patients. After all that is their goal, is it not? Like this institution, The Red Cross had high accrued revenues. The difference in these two programs is that the second is a disaster relief program. They do not know when a disaster will arise and they have to have funds readily available when it inevitably does. So, The Red Cross seems to have a rational explanation for their accrued funds.

The goal of a nonprofit is to help people, to put others first. If I ever get to live out my ‘big’ dream, I hope I do not forget that.


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