Cash Budgeting: Not-for-Profit (NFP) Context (contributed by Helen M. Savage) Tri-County Social Service Agency is a not-for-profit organization in the Midwest. Use the following information to complete the cash budget for the year ending December 31: ∙ The Board of Trustees requires that Tri-County maintain a minimum cash balance of $8,000. ∙ If cash is short, the agency may borrow from an endowment fund the amount required to maintain the $8,000 minimum. ∙ It is anticipated that the year will begin with an $11,000 cash balance. ∙ Contract revenue is received evenly during the year. ∙ Mental health income is expected to grow by $5,000 in the second and third quarters; no change is expected in the fourth quarter.
Required 1. Within the context of a not-for-profit organization, what is an endowment fund? 2. Complete the cash budget for each quarter and the year as a whole, using the template that follows. 3. Determine the amount that the agency will owe the endowment fund at year-end. 4. Does the borrowing indicate a problem? What options would the agency have to increase revenues? 5. Do you think that a requirement to pay interest on the borrowings would have a positive impact on the agency’s activities? Why or why not?
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