Non-Profit Financial Management

Non-ProfitFinancial Management

Non-ProfitFinancial Management

MEMORANDUM

TO:The Board

FROM:Executive Director (Orange Town United for Full Employment)

September 14, 2016

SUBJECT:OUFE`s Proposed Program Financial self-sufficiency Report

Afterundertaking a critical research and analysis of the proposed OUFE`sskills training project, I have come up with the following results.An incremental analysis done on the project`s revenues and costsindicates that it will be self-sufficient according to the figuresobtained.

OUFE`s Program Financial Self-Sufficiency Analysis

EXPENSES

Cost

Period (Months)

Total Cost

Building Upgrade

250000

1

250000

Maintenance and Utilities

2000

72

144000

Building Insurance policy

10000pa

72

60000

Two Trainers Salaries

1500

72

108000

Social security and Medicare Taxes

114.75

72

8262

Transport of Equipment to OUFE

40000

1

40000

Return shipment of equipment

45000

1

45000

Expenses of Project

655262

Less Discount rate 6%Pa

39315.72

Total Expenses of Project

615946.28

INCREMENTAL REVENUE

INCOME

Period (12 terms)

Total Income

Federal department of Labor grant

630000

1

630000

Local foundation one-time grant

30000

1

30000

Total Revenue

660000

Surplus from project

44053.72

Accordingto the calculations undertaken based on materials provided, afterduration of six years, the net positive return will be $44053.72after factoring in the incremental revenues of $1500 per studentreceived after the maximum number of 35 learners enrolled graduate.The total number of students considered is 35*12=420. Themathematical computation gives us a figure of $630000. OUFE alsoexpects $30000 grant offered after three years of operation, whichwill add up to $660000 when we factor in the grants received from theFederal Department of Labor. The discount rate of Orange Town used is$6pa, which is crucial in the computation of the costs that includethe upgrading of environmental and security systems at an upfrontcost of $250000 with the city agreeing to fund $500 per month for thebuilding utilities and maintenance that places OUFE`s monthmaintenance costs like $2000. When we factor in labor, insurance, andtransport costs, the figure totals to $615946. The incrementalcharges are a challenge since OUFE must take credit to cater for someof the expenses such as upgrading and yearly upfront insurancepayment.

Giventhe complex nature of these financial decisions, OUFE must adopt acalculated problem-solving approach. The decisions will majorlyrevolve around the proper allocation and management of the existingworking capital while allocating the funds required for the variousprojects. In addition to this, the management of expenses provesprudent given the tight budget OUFE is currently facing. Theincremental analysis carried proves crucial since it offers anopportunity cost of the either adopting or declining the project overthe course of its life. One way to boost the revenue would be tointroduce a subsidized service charge to the employees. Even thoughOUFE is a non-profit organization, the employees will benefit fromthis project by obtaining the relevant skills that will furtherenhance their marketability in the job market. The service charge canbe charged at $250 for the entire training program. This will injectan extra $8750 per running term that will, in the long term, boostthe financial position of the project overall. In addition to this,the commercial space in the upgraded building can be leased outduring times of training non-activity, which will raise the incomederived. The leasing figure can be obtained after meetings with theprincipal stakeholders. In that respect, my wish is that you willjoin hands with us and build on the corporate social responsibilitiesof the company while assisting the local community.