Introduction
The economic sector has three major types of institutions; government-based human services, for-profit, and nonprofit organizations. These organizations are often affected by political, social, and economic trends. These trends often impact the future planning of the organization’s budgets. For instance, changes in political regulations will significantly affect the projections in the budget when the institutions are affected by budget cuts in terms of funding sources for some subsidized items in the economic sector. There are also theories, such as ambiguity theory and social construct theory, that affect the financial practice of institutions. This paper will provide future analysis and planning for for-profit, nonprofit, and government-based human service organizations with specific applications to Meal on Wheels organization.
Application of Theory to Financial Analysis
The ambiguity theory thrives in the assumption that uncertainty and turbulence are some of the characteristics of institutions. In this case, institutions can be considered for-profit, nonprofit, and government-based human service organizations. On the other hand, social construct theory asserts that human interactions shape social reality. These theories have a role to play practically in the financial analysis of organizations (Ghan, 2019). For instance, money can be perceived as a social construct in all the above organizations. This is because all the parties act in mutual faith concerning the value of money. Therefore, for-profit, nonprofit, and government-based human service organizations all act on the assumption that to operate; there needs to be an expenditure, a factor that results in the creation of financial budgets.
The budgeting process during the financial analysis of an appropriate budget for the current fiscal year incorporates the theory of ambiguity in various instances. For instance, most budgets often incorporate currency inflation and miscellaneous expenditures. These elements within the budget are aimed at countering uncertainties such that respective organizations are cushioned against the adverse effects of uncertainty. The concept of the value of money also enables organizations to compare their performance in terms of revenue obtained, which informs profitable and non-profitable organizations (Shan et al.,2019). For Meals on Wheel, the concept of the value of money is initiated when the organizations aim at minimizing expenditure in their budgetary process. The main objective is to offer subsidized meals to people described as aged, disabled, or economically challenged.
Similarities and Differences in the Budget Planning Cycle
The budget planning cycle for nonprofit, for-profit, and government-based human service organizations has similar yet different processes. For instance, one similarity is that all three institutions have to define their budgeting activities. The importance of defining budgeting activities is it will enable the organization to forecast or project costs. These activities often align with the organization’s visions or missions. The vision and mission of each institution vary, which is a point of difference. However, the budgeting activities portray similar concepts; for example, all the institutions have programs. These programs have similar timelines for all institutions (Buy et al., 2019). The timelines vary because, for government human service organizations and for-profit organizations such as health institutions, the timelines revolve around the fiscal year because of the accounting concept. The not-for-profit organizations have a fiscal year that ends on June 30 but are not mandated to follow the set guideline. Similarly, the fiscal year for government-based human service and for-profit organization incorporates or reflect a 12-month period that ends between January 1 and October first. In America, the federal budget begins on October 1, and countries such as Canada have no specified date, but the fiscal year lies between April 1 and 31st March (Kennedy, 2019).
Unique Aspects of Accounting for Nonprofit, For-Profit, and Government-based Organizations
One unique aspect of accounting for nonprofit, for-profit, and government organizations is that the accounting is often done at the end of the fiscal year. The benefit of having a fiscal year in the accounting process is that it helps accurately measure revenue for a particular financial period. A factor is essential for a company’s financial analysis and external parties such as investors. As described above, the fiscal year for the three institutions often varies but incorporates 12 months. The other unique aspect of accounting for the three institutions revolves around Form 990. Form 990 is a legal document issued by the Internal Revenue Service (Bonagurio et al., 2022).
The form complies with section 501 of the tax laws, whereby nonprofit organizations are eligible for tax exemption. The form initiates a tax-exempt status for nonprofit organizations (Buy et al., 2019). Therefore the profits earned by such institutions are not taxed. For-profit organizations are subject to taxation because they are not classified as nonprofit organizations based on the nature of their activities. Tax exempts for-profit organizations occur when they comply with statutes or federal laws; an example is Federal institutions are tax exempt, according to section 115 of the IRS. That is, the gross income from federal institutions is tax-exempt. An example of a government-based human service organization is the American Red Cross. The donations received by such institutions are subjected to tax.
Identify Similarities and Differences
The government-based human service, for-profit, and nonprofit organizations are similar in various aspects. For instance, they all offer services to a particular clientele. Government-based services are offered to members of the public. At the same time, the nonprofit organization targets specific groups identified as vulnerable, and for-profit organizations target ready buyers who are patients willing to pay for private healthcare services (Ghan, 2019). The other similarity is that all three agencies often have visions and missions. The missions and visions often guide the activities and programs initiated by the institutions. The point of difference occurs in the differentiations seen in the missions and visions of the three agencies. For instance, the primary objective of nonprofit organizations often revolves around improving the quality of life of a specific target market, which is described as vulnerable. The government seeks to make accessible public goods to members of the public because their contributions inform taxes. For-profit organizations center their mission and vision statements around sustainability to increase revenue streams, remain competitive, and minimize the risk of becoming obsolete.
Budget Sources
The budgeting process incorporates a myriad of processes. One of the processes is identifying the sources of the budget. Some budget sources might be similar for the three agencies, while others might vary. Sources of budget for government-based human services originate from the various programs undertaken by the government, including their partnership with various federal institutions. Sources of budget for government institutions such as the American Red Cross are programs such as first aid, babysitting, lifeguarding, and swimming and water safety (Shan et al.,2019). Such programs require resources such as trainers and equipment that are sources of budget. For for-profit organizations such as hospitals, the sources of budgets would be the salaries and remuneration of healthcare workers. The other sources of the budget would revolve around operational expenditure. Nonprofit organizations’ sources of budget stem from their programs. Well, examples of these programs are the transportation of raw materials such as food and containers.
Relationship with Funding Sources and Type of Calendar
Funding sources are sources of revenue in terms of monies used to finance the agencies’ activities. The sources of funding often have a relationship with the budget calendar. For instance, funding sources such as donations are registered per calendar year the donation was made (Stecker, 2014). An indication that the amount will be taxed according to the fiscal year the donation was made. For instance, according to the IRS standards of the calendar year 2020, organizations were taxed 25% of their taxable income. An indication that amounts exceeding 25% were carried forward to the next fiscal year (Bonagurio et al., 2022). This policy for the calendar year 2020 aimed to provide tax relief for institutions for taxable income made during the calendar year 2020. The fiscal year reports reflect relief obtained from taxable income obtained in the calendar year 2020. The cash contributions subjected to such exemptions will be indicated in the fiscal year it was contributed. Any amount will be carried forward to the next fiscal year even when the amount was contributed in the same calendar year. The impact of such forms of relief will be that the funding sources will increase because such forms of relief are enjoyed due to donations being made in a particular calendar year.
Social, Political and Economic Trends
One of the similarities between for-profit, nonprofit, and government human service organizations in terms of political trends is that the three agencies are affected by government regulations. Government regulations often change depending on the current government’s political ideologies, affecting future budget planning for the three institutions. For instance, increased and reduced government funding can change tax remittance strategies and costs (Bonagurio et al., 2022). The difference will be seen in the applicability because all three entities will be treated differently because of the different nature of their activities. For example, government entities might get items at a subsidized cost compared to for-profit organizations. The similarity in the social trend is that the budget programs will reflect society’s current needs.
The contemporary needs in most societies center around sustainability and equity, and the social justice problems being addressed by the three institutions are similar. The difference would be seen in the target market; nonprofit organizations will target vulnerable groups such as older people while governments will target the general public, and for-profit organizations will target clients with economic muscle to purchase their products; their products would be customized to reflect the needs of the current society for the particular demography (Searing et al.,2021). All the differences will be reflected in the budgets. The economic trend similar in the three agencies would be programmatic spending. This will affect future budget planning as the programs would depend on contemporary society’s contributions, priorities, and needs. The differences would be experienced when the expenditure aims and objectives differ for all three organizations. The impact is different activities in the future budgets for each institution.
Financial Health of Meal on Wheels
Meals on Wheels is a nonprofit organization whose main aim is to offer subsidized meals to the elderly population, persons above the age of 60 who are classified as vulnerable. The current financial year, which is the year 2022 as per the financial records, can be termed as promising. This is because the year experienced the highest funding in the company’s history. The estimated value of the fund was $1.3 billion associated with the Older American Act nutrition program, solving challenges associated with under-resourced programs (Dickinson & Wills, 2022) .3% of the organization’s funding sources are linked to the federal government. The effect of federal funding is associated with the guarantee. The total revenues for 2022 stood at approximately $19013989 million, and the expenses were approximated at $16849610 million, indicating that the revenues exceeded the expenditure for the fiscal year 2022. The company’s net assets stood at $40834252 for 2022, indicating that liabilities were less than assets(Meals on Wheels 2023).
Strengths and Challenges of Financial Practices for Meals on Wheels
One of the financial practices for Meals on Wheels revolves around its fiscal year. The fiscal year begins on 1 January and ends on 31 December. The benefit of this might coincide with the calendar year of specific programs, an example being the 2020 tax reduction programs for cash donations initiated by the IRS (McMullin & Raggo, 2020). The other benefit is that the fiscal year coincided with the government budget cycle between 1 October and 30 September. This is considering the government is one of the sources of funding for the institutions making projections more accurate (Schumaker & Kelly, 2013). The disadvantage of this policy is that it makes projections difficult because it does not factor in changes in economic and political situations, such as budget cuts and inflation.
Achievement of Obligations
The main objective of Meals on Wheels revolved around offering subsidized meals to an aging population. The objective has been partially achieved because of the challenges of an aging volunteering population. This indicates that the organization needs to be more staffed and able to meet its obligations to deliver subsidized meals to the target group. The other challenge is seen in funding sources whereby the organization’s funds are inadequate because of economic recession and inflation that increase the costs of goods and services and reduce the number of donations received because of the negative impact of economic recessions. Currently, the organization serves 250 people less than it served four years ago; the rate is based on daily meals(Meals on Wheels 2023). Fundraisers often supplement the shortages in sources of funding.
Impact of Social, Political, and Economic Trends on Future Planning for Meals on Wheels
The major social trend that impacts the organization’s future planning revolves around current needs. Currently, the challenge is centered on improving the quality of life for the elderly population. In the future contemporary needs might change, and the change in activities will be reflected in the budget cycle or budget of the organizations. Change in leadership in the political realm will affect the future planning for the organization. Currently, 3% of the organization’s source of funding comes from the federal government (Moldavanova & Wright, 2020). In the future, such might change depending on the political ideologies of the current government; hence new regulations will affect projections. For instance, in 2018, the 17.9% budget cuts issued during trumps administration for the organization affected the organization’s revenue base impacting service delivery (Meals on Wheels 2023). The significant economic trend revolves around programmatic trends in the future. The programs and funds allocated will be influenced by the economic situation of the current society; this will also impact projections depending on the currency’s value at that particular time.
Conclusion
Economic, political, and social trends affect For-profit, nonprofit, and government-based human service organizations. One of the major social trends is formulating programs that reflect the current needs of society. This is a similar aspect across the three agencies. This affects future planning as it influences the activities and programs undertaken by the various agencies. Political trends revolve around complying with government legislations of the current government, an example being complying with tax policies and federal budgets for government organizations and NGOs depending on government funding (Buys et al.,2019). The economic trends are programmatic and often address contemporary issues. The finances often project the economic situation of the current economy and are often impacted by inflation and economic recessions. Social constructs and ambiguity theory also help organizations address uncertainties and meet societal perceptions of the value of money that informs expenditure.
The fiscal year and calendar year also affect funding sources because they determine the taxable items in the financial statement. The tax exemption in the calendar year 2020 was used to identify tax exemptions issued by IRS for the 2020 calendar year (Shamsutdinova et al., 2020). Organizations are to be taxed 25% of all cash donations received in 2020. Amounts exceeding 25% would be carried forward to the next fiscal year. Meals on Wheels was also unable to meet some of its objectives because of challenges associated with funding and a shortage in staff because of an aging population. In this regard, for future projections to be accurate, the items in the budget have to reflect the political, social, and political trends for sustainability.
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