non profit organization

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non profit organization

Category: Research Paper

Subcategory: Accounting

Level: College

Pages: 4

Words: 1100

EPWORTH VILLAGE RETIREMENT COMMUNITY
Name
Instructor
Institution
Date
Introduction
Epworth Village Retirement Community is a non-profit organization based in Hialeah, Florida. The organization has different centers where professional nursing and assisted living is provided such as their branch at Susanna Wesley Health Centre. Residents of the village are assured of progressive care even after retiring and getting old. It provides the best life for over 200 people from various faiths, interest and background who have opted for Epworth Village as a favorite place for retiring. The village provides a casual, relaxed, home style culture of life that offers autonomous seniors more value for their retirement money through liberty of choice.
Financial analysis of Epworth Village Accounts
Epworth Village Retirement community is a non-profit organization and, therefore, it is not after gaining profit from the public. The organization relies on income and revenue from well-wishers, donors, grants and materials derived from the programs it gets involved in. From its financial statements of 2012, the organization received support from local churches, national support, annual conference, fundraisings, program fees and other miscellaneous sources. As per the reports, the national support contributed a total of 178838.90 dollars, local churches contributed 30082 dollars while the total amount of the annual conference was almost $ 10000. Regrading percentages, the program fees contributed to 92% of the total incomes, fundraising to 4%, local churches 3% and 1% from miscellaneous sources. The total non-support amounted to over $6000000. The major resources were derived from special events, individuals, fund raisings, private program fees, investment income, and sales of their brands to the public, planned gifts, fees and grants from the government (James, 2013).
The total expenses amounted to over $ 7.1 million. The expenses exceeded the total income by over $ 40000. The figures indicated a net decrease in funds over the year 2011 which was at $ 32593. The employee’s benefits and salaries accounted for 25% of the total expenses. Payroll taxes, professional fees, offices supplies and equipment, telephone, program supply and equipment, occupancy, postage and shipping, traveling, conferences, printing and publication, depreciation and membership due also contributed to the expenses. Regarding percentages, direct care amounted to 82%, maintenance to 7%, administration 6% and miscellaneous accounted for 2% (James, 2013).
Epworth Village accounting system is designed to take into account economic and social activities of the organization and its financial position. The financial statements are prepared based on the Accounting Equation
Assets=Liabilities Net Assets.
The equation states that Epworth’s properties are equal to its outstanding debts regarding finances it has to part with in offering assisted care. Epworth’s net assets are from the programs it participates in. The source of net assets is from fees derived from events and programs the organization participates. An example of the events includes;communalgames and selling off its brands during such activities such as branded t-shirts and capes with Epworth’s logo. The equation is the basis for preparing the organization’s balance sheet. The 2012, financialstatements does not depict how the income and expenses have changed over the course of the year. However, a comparison with the 2011 or 2013 financial statements can give insightinto the changes in expenses and income.
Epworth’s net assets increase with increase in sources of income, and it obeys the following equation.
Revenues-Expenses=Change in Net Assets
For Epworth Village, a positive change in net assets indicates surplus income that are used to run the organization’s charity activities in the following year. A negative change indicates a deficit in sources of income that has to be improved to help in running the organization’s activities. Whichever the way, Epworth focuses on achieving its mission of providing assisted family living and offering professional care for the retired. Epworth also prepares a statement of functional expenses to show hot it spends the resources by distributing it into three functional areas. The three principal functional areas include administrative expenses, fundraising expenses, and program expenses. The distribution of income on these functional areas is a reflection of Epworth’s values, success, mission and accounting practices (Elizabeth, 2008). Therefore;
Total Expenses=Administrative Expenses+ Fundraising Expenses +Program Expenses.
Epworth adopts both cash and accrual accounting method in maintaining their accounting records. Under the cash method, Epworth record incomes, and revenue when received from donors and expenses when incurred in the course of providing assisted family living and offering professional care to the retirees. However, the method is not extensively used by Epworth as it does not reflect the organization’s economic conditions accurately. For instance, they can incur debts in running the organization’s programs before paying the bills. To supplement cash method, the organization makes use of the accrual method. Epworth prefers accrual method as incomes are recorded when received and expenses recorded when incurred. For simplicity purposes, Epworth maintains the cash accounting method during its operation and then converts them to accrual basis at the end of the year.
The fixed assets of Epworth represents equipment, plants, and property that are stated at a cost less accrued depreciation. The organization calculates the depreciation on equipment, property and equipment to write off the cost of organization’s equipment. The organization’s provision for equipment, fixtures, and furniture is 15%.
Epworth Financial Summary in 2013
Statement of Functional Expenses (30 December 2013) Dollar
Program Service Revenue 208645
Total Contributions 4500
Investment Income 49
Total Revenue 213 194
Statement of Functional Expenses (30 December 2013) Dollar
Advertising and Promotion 3012
Accounting Fees 1900
Occupancy 121 464
Interest 32474
Office Expenses
Depreciation and Depletion
Insurance
Other Expenses 3700
131598
8309
28105
Total equity 330 562
(James, 2013)
The statement of expenses and revenues can be compared to the 2012 statements for analysis. Compared to 2012, income rose by a 13% margin. The rise can be attributed to the increased program activities for deriving the revenue for the organization. The contributions increased by 17.9%. However, the growth in expenses was lower by a margin of only 6%. On the other hand, the Epworth’s liquidity ratio as at the end of 2013 was 0.03 which suggested that they could not pay their obligations if they were due immediately. The Days Cash on Hand was 20 days, implying that if they stop receiving income from donors and revenue programs they could foot they bills for only 20 days. The organizations leverage stood at 1.29. The leverage is the measure of how much funds and asset of the organization is funded by other people’s money (Fabozzi & Peterson, 2013).
Conclusion
Epworth Village retirement community properly manages their finances to achieve its mission to the Florida and Greater United States’ community. The implementation of accrual accounting system is effective in ensuring a balance between expenses and revenues. The balance of income and expenses is what has made Epworth one of the most stable charity organizations in the United States.

References
Epworth Website, (2015). Epworth Village Retirement Community.
Elizabeth, K. (2008). How to Assess Non-Profit Financial Performance. Retrieved from
http://www.nasaa-arts.org/Learning-Services/Past-Meetings/Reading-5-Understanding-Financial-Statements.pdf on December 10, 2015.
Fabozzi, F. J., & Peterson, P. P. (2013). Analysis of Financial Statements. Wiley.
James, L. (2013). Epworth Financial Summary. Retrieved from
http://nonprofits.findthecompany.com/l/739806/Epworth on December 10, 2015.