Financial Management and Ethical Considerations
Financial Management and Ethical Considerations
Only not for profit organizations that are performing according to their mission statements are likely to survive in the long term. Poorly managed organizations that struggle to attain their mission and create real change are likely to be cast by the side in favor of well managed and efficient ones. Thus, the ability to evaluate an organization’s performance is essential to its long term growth and sustainability. In 2018, the Ronald McDonald House Charities provided more than 2 million overstays to families of injured and sick children receiving care in leading hospitals around the world (RMHC, 2018a), signifying its growth over the years since its inception. Most importantly, Ronald McDonald House Charities can only realize its mission and survive in the long term by having ethical financial management practices Financial Management and Ethical Considerations
Financial Management
Budgetary Resources, Structures, and Responsibility
From the resources perspective, Ronald McDonald Houses Charities has adequate financial resources, to finance its operating activities. An examination of the organization’s annual report indicates that its total revenues increased from $60.948 million in 2017 to $144.805 million in 2018 (RMHC, 2018a), representing an increase of more than 127 percent in total revenue. The organization also has a strong budget structure and budgetary team. Concerning budget structure, Ronald McDonald Houses Charities prepares its budget using accrual basis specifying sources or revenue and type of expenses. Regarding budget responsibility, Ronald McDonald Houses Charities has a board finance committee comprising of a board chair, treasurer, organizational leaders, and finance managers that oversees its budgetary needs (RMHC, 2018b).
However, an analysis of the organization’s financial management practices shows that there is some conflict of interest. In as much as the organization requires members to sign conflict of interest (RMHC, 2018b), it is not clear what constitutes conflict of interest. The other weakness is that contributions account for more than 60 percent of total revenue. In 2017, contributions accounted for nearly 65 percent of total revenue, with the value increasing to 99.5 percent in 2018. In light of this, the organization has an opportunity to increase its total revenue by diversifying into other sources such as organizing special events and investment activities. Nonetheless, changes in federal and state regulations can greatly affect the organization’s financial resources. Financial Management and Ethical Considerations
Fundraising Campaigns, Grant Possibilities, and Planned Giving Opportunities
Ronald McDonald Houses Charities can attribute its strong revenues to its fundraising campaigns, grant possibilities, and giving opportunities. For instance, McDonalds, AbbVie, Coca Cola Company, RBC, La-Z-Boy, Southwest Airline, and Thrivent contributed more than $39.59 million and more than $143.8 million of the total revenues in 2017 and 2018, respectively. The organization also has massive grant possibilities from in kind partners such as Alpha Delta Pi, AT&T, Cargill, Keystone Foods, and Medela, who have provided in kind support to Ronald McDonald Houses Charities local chapters (RMHC, 2018a). The organization can attribute its strong partnership with other organizations to its planned giving opportunities. In 2018, the organization provided at least 2.5 million accommodations which saved families more than $930 million in meals and accommodation (RMHC, 2018a).
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Ronald McDonald Houses Charities can still increase the number of partners by organizing clubby dinners and encouraging creativity among employees. The organization would experience significant revenue growth by doing so. Nonetheless, changes in economic performance can greatly impact the organization’s financial resources. An economic slump can negatively affect McDonald’s and other partner’s financial performance, thereby reducing the organization’s total revenue. Financial Management and Ethical Considerations
Financial Management
The organization’s strong revenue base courtesy of its partners means that board members can plan, organize, direct, and control financial activities such as procurement and funds utilization in an effective manner. Ronald MacDonald Houses Charities would, for instance, strive at ensuring that program services account for bigger percentage of its total budget. In addition, the organization’s board finance committee would strive at ensuring that the company applies appropriate accounting policies such as accrual budgeting and adheres to the United States Generally Acceptable Accounting Principles and other regulations.
Ethical Issues
Budget and Fundraising Transparency
From the ethical perspective, Ronald McDonald Houses Charities has a financial management standards and guidelines resource to guide its chapters in financial practices. The document promotes financial stewardship, integrity, compliance, and accountability and transparency. Board members must comply with numerous standards provided in the document for realization of the aforementioned principles (RMHC, 2018b). The organization also publishes its audited annual reports in its website, which is a clear demonstration that it operates in an open and honest way. It also demonstrates the organization’s commitment to accurately report how it uses its financial resources in compliance to the standards for charity accountability by the Better Business Bureau. Financial Management and Ethical Considerations
Ethical Consideration
Although management and administration accounts for only 2 percent of Ronald McDonald House Charities’ annual operating ratios (RMHC, 2018a), increasing management and administration costs to a considerable percentage of total revenue would raise ethical concern. McDonald has been using the organization’s name as a branding device, which creates conflict of interest. Horovits (2013) indicates that this is despite the fact that McDonald contributing only 20 percent of the charity branded benefit. Inappropriate utilization of resources is another ethical issue that may affect the organization’s long term survival. Inability to keep track of contributions by partners can also affect the organization’s brand image. Nonetheless, the organization can adopt latest practices such as use of information technology to enhance its financial utilization and brand image. In addition to its financial management standards and guidelines, the organization can enhance ethical practices by developing a code of ethics for its staff. Financial Management and Ethical Considerations
Public Image
Ronald McDonald House Charities can attribute its good brand image to its ethical practices. In fact, the organization has managed to attract a large pool of contributors and volunteers because of its ethical practices and behavior. In 2018, the organization received help from more than 500,000 volunteers who supported its mission. This is due to the fact that 96 cents of each dollar spent by the organization supported its numerous programs.
Conclusion
Properly managed not for profit organizations that have no problem attaining their mission and creating real change are likely to survive in the long run. Ronald McDonald House Charities has managed to remain in operations because of its effective financial management and ethical practices. The organization has adequate budgetary resources to manage its operations. It also adheres to United States Generally Acceptable Accounting Principles when preparing a budget and has a board of finance committee that oversees budget preparations. The organization also encourages transparency in preparation of its annual reports and budgets. Financial Management and Ethical Considerations
References
Horovitz, B. (2013, October 29). McDonald’s slammed over Ronald McDonald House giving. U.S. Today. Retrieved from https://www.usatoday.com/story/money/business/2013/10/29/mcdonalds-ronald- mcdonald-house/3189709/
Ronald McDonald House Charities. (2018a). 2018 annual report. Chicago, IL: Author
Ronald McDonald House Charities. (2018b). RMHC financial management standards and guidelines. Chicago, IL: Author Financial Management and Ethical Considerations
