Financial Management Practices
Running head: AMERICAN RED CROSS ORGANIZATION 1
AMERICAN RED CROSS ORGANIZATION 2
AMERICAN RED CROSS ORGANIZATION
Ashley Cook
HMSV8408
November 14, 2018
Abstract
This report gives an analysis of the American Red Cross Organization. All the financial statements and the donation funds are included. The financial health of the American Red Cross Organization is determined considering all the financial status of the organization. Also, all the accounting processes used by the organization are included giving clear details about the organization at large.
Accounting processes used by American Red Cross Organization
a) The basis of reporting and conventions. The financial report of the American Red Cross Organization is on basis of accruals and all the historical costs. This is usually modified by use of selected assets, liabilities and non-current assets. The costs used are based on the consideration of the fair values of liabilities and assets. Also, the assumptions and estimates made are on the basis of the experiences over the past history. Other factors are also considered applicable.
b) The consolidation basis, where the financial statements are usually prepared by putting the financial statements that include entities and controlled by the organization (Williams, 2018). Reliable policies of accounting are organized by preparing the financial statements. The liabilities and assets are usually measured at the acquisition date and at a fair value. If the net available assets are more than the acquisition cost, then the difference seen is to be credited in the loss and profit acquisition period.
c) The plant, equipment, and property which is usually stated at a lower cost by the value impairment and depreciation accumulation. The costs usually include the expenditure which is attributable to the items. The depreciation is always calculated on the basis of the straight line. The residue values and the estimated life in use are usually reviewed at the end of the period.
Types of funds and financial reports used by American Red Cross Organization
The American Red Cross obtains donations from a lot of sources. These are known as blood donors, financial donors and all kind of donations. The organization does not usually track the expenses of management and fundraising for each kind of donation made (Milne, 2018). However, considering the many services available since it is only one organization, then the organization is classified to be the only charitable organization by the Internal Revenue Service.
There is also the global funds and IFRC that fights AIDS, malaria, and Tuberculosis. They work together so as to provide world treatment for tuberculosis. There is a very new grant provided for the global funds for an amount worth 10 million.
The American Red Cross financial reports
There are three financial reports used by American Red Cross Organization. These are the consolidated statement of comprehensive income, statement of financial position and finally the cash flow statements. These reports give the financial information of the organization.
Financial statements used by American Red Cross Organization
· The statement of expenses of different functions for the current year. This is a requirement for the American Red Cross. From this statement, the program ratio can be determined to all the total expenses for the current year. The ratio of the expenses to that of total expenses is found to be 90%. This ratio is seen to be better off than the 60% which is recommended by the bureau.
· The statement of recognition of revenue. In this particular statement, the contributions are considered to be revenues received and promised. On this statement, those current assets reported on temporally restricted contributions should be added on the non-current assets.
· The contributions receivable note which discloses the present value of the pledges which are long term.
· The consolidated activities statements for the current year. On this particular statement, the amount of all the net assets are reported and also removed from all the restrictions.
· The statement of the functional expenses for the most current or present year (Hutchinson, 2018). In the other years, the highest cost was seen in the biomedical record for all the benefits of employees in terms of wages and salaries.
· The statement of the organization note and presentation basis. The temporal net assets which are restricted as usually imposed by the restrictions of donations.
· The statement on the note of the contributed materials and services. In this statement, the amount of all the contributed service was reported in the most present year.
· The statement on the note of all the receivable contributions. The Red Cross usually reports the whole amount of all the contributions at the end of the financial year (Forsythe, 2018). These contributions are not always reported due to the main conditions not being met.
· The statement on the recognition revenue. In this statement, it is reported that in case of an expiration of the donor's restriction, this is mostly found where a timed restriction ends or when the main purpose is fulfilled. Then all the net assets are classified and released to the net assets which are not restricted in the activity consolidated statement.
· The statement on the recognition of revenue. In this particular statement, it states all the contributions of the restricted donors are usually reported on all the net assets restricted. Even though it is expected, all these restrictions will be attained at the end of the reporting year.
· The statement on the services and materials contributed. In this particular statement, it is stated that in case there are no donor restrictions, then all the gifts or the long term assets will be reported as those of the unrestricted revenue.
The fiscal health of the American Red Cross Organization
By performing a fundraising event for at least a period of 16 years, the revenue of blood-bank of the organization recognized a deficit of $159 million in the last financial year. The financial statements audited in the year 2015 reports a donation of $604 million from the previous years. Also, the Red Cross has made a great move on a series of cutting costs in the most recent years. This is seen in closing or shrinking the merging offices (Ayer, 2018). The fundraising can vary from one year to the other dependent on cases where there are main disasters happening. Finally, there was a comment made by the spokesman of Red Cross on the results obtained in the year 2015. He said that the fundraising projects had risen by a very high percentage of 14 since the year 2008 after taking control of the office.
Ways of communicating the findings
The very first step to take when talking or communicating about the findings is by speaking to the whole community before anything else or handling anything else. Also by engaging the appropriate stakeholders as soon as possible. Prior to starting an assessment, the plans should be discussed closely and fully with the community at large and also give an explanation of who and what you do. The most important thing is to always ask for proper guidance from the leaders of the community so as to share all the questionnaires as soon as possible. This will be of great help since they will feel the ownership of all the findings and processes.
References
Forsythe, D. P. (2018). The International Red Cross: Decentralization and its Effects. Human Rights Quarterly, 40(1), 61-90.
Hutchinson, J. (2018). Champions of charity: war and the rise of the Red Cross. Routledge.
Milne, R. J., & Robinson, A. G. (2018). Introduction: 2017 Franz Edelman Award for Achievement in Operations Research and the Management Sciences.
Williams, B. D., Valero, J. N., & Kim, K. (2018). Social media, trust, and disaster: Does trust in public and nonprofit organizations explain social media use during a disaster?. Quality & Quantity, 52(2), 537-550.