NYU Wagner

Steven A. Finkler, Ph.D., CPA

Professor of Public and Health Administration, Accounting, and Financial Management

Robert F. Wagner Graduate School of Public Service
295 Lafayette Street, Room 3010
New York, NY 10012
Phone: (212) 998-7463
Email: steven.finkler@nyu.edu

Financial Management for Public, Health, and Not-for-Profit Organizations, First Edition, 2001, by Steven A. Finkler, Ph.D., CPA

General Introduction
Errata for Text, Instructor's Manual, and Class Notes

General Introduction

At the Robert F. Wagner Graduate School of Public Service, our student body consists primarily of future managers and policy makers for the government or public, health care, and not-for-profit sectors. We had great difficulty finding one text that could provide an adequate, and relevant, foundation in accounting and finance for this group. After many years of searching for an adequate solution, the finance faculty of the school finally decided we needed to develop our own text, and somehow I was elected to write it.

It turns out that the need for a solid, clearly written text for the public sector was not limited to the Wagner School. Although the text has not yet been published and has not been advertised, based on word of mouth the text has already been adopted and/or used in draft form at the following universities: Brigham Young, George Washington, Georgia, Georgia State, Indiana, John Jay College (CUNY), Kent State, Minnesota, New School, Oklahoma, Omaha, Oregon, SUNY Albany, Syracuse (The Maxwell School), and Wisconsin - Milwaukee.

The text is scheduled for publication in October 2000, for use in classes beginning with the Spring 2001 semester. In addition to the text, instructors receive an Instructor's Manual with solutions to all homework problems. Together with the manual, instructors will receive a CD. The CD contains lecture class notes in both Power Point and Lotus Freelance Graphics formats. The instructor's manual itself, will also be on the CD. This should facilitate distribution of class notes and solutions to students at the discretion of the instructor. The class notes may be modified by the instructor to meet their particular needs.

Errata for Text, Instructor's Manual, and Class Notes

Text

1. Page 145. In the footnote at the bottom of the page, there is a set of parentheses missing from the first formula. The text currently says that "The present value of an annuity of $1 equals {1 - [1/(1+i)N]/i}." However, the formula should be "{ ( 1- (1/(1+i)N) ) / i }" . Note that N is a power. My thanks go to Krishna Nattu who found this error.

2. Page 327. Transaction 9 at the top of the page. The short paragraph describing the transaction is correct. However, the two headings "Accounts Receivable" and "Cash" have been erroneously reversed. "Cash" should be above the "+$40,000" and "Accounts Receivable" should be above the "-$40,000". Thanks go to Prof. Ross Rubenstein at Georgia State who picked up this error.

3. Page 354. Exhibit 10-5. Under "Cash Flow from Operating Activities", "Other Adjustments" there is a line "Add increase in notes payable 1,000". Delete that line. Notes payable are a financing item rather than an operating item. In the "Cash Flows from Financing Activities" section further down in that exhibit, add a line that says, "Increase in notes payable 1,000". This also requires the total for the "Net cash used for operating activities" line to change from "$(9,000)" to "$(10,000)", and the total for the "Net cash from financing activities" line to change from "$2,000" to "$3,000". Thanks go to Prof. Bernard Jump, Jr. of the Maxwell School for picking up this error.

Instructor’s Manual Solutions

1. Pages 114. Part I. Governmentwide Statement of Net Assets. Next to last line. "Unrestricted" Net Assets in both columns show as 84,000 but should be 79,000. The "Total Net Assets" of $105,000 is correct as shown.

2. Page 115. Governmentwide Statement of Activities. Last two lines in the statement. "Net asset – beginning" of 133,000 in both columns should be "Net assets – beginning" in the amount of 122,000 in both columns. Net assets – ending of 116,000 in both columns should be 105,000 in both columns.

3. Page 34. Problem 4-18 Part b. The word "hours" in the line "Overhead applied to Mr. Robbins = Direct labor hours x rate" should be "dollars". The line should read: "Overhead applied to Mr. Robbins = Direct labor dollars x rate". Please note. Part "a" of the solution is correct. This change only affects part "b".

4. Page 51. Problem 5-26. In the "Net" column, the total should be ($15,000) rather than $15,000.

5. Page 54. Problem 5-32. In the box at the bottom of page 54, the 20000 should be above the PV box and the 510,953 should be below the FV box.

Class Notes

Substantive Changes
1. Chapter 5. Slide 21. Annuities in Advance. On the time-line, between time periods 0 and 1, the interest rate should be "1%" rather than "12%" as shown.

2. Chapter 5. Slide 25. Finding the PV of the Mixed Cash Flows. Third bullet. Last line. Change "in year 5" to "in year 0".

3. Chapter 8. Slide 35. Transactions Work Sheet. In the cash column, next to last row, "(12,000)" should be "12,000". Remove parentheses. Receipt of payment increases cash.

4. Chapter 9. Slide 12. FIFO and LIFO Examples. In the "Consumption (Inventory Expense)" column of the table at the bottom of the page, remove the first dollar sign in both rows. The number of units consumed are shown as dollars rather than units. "$3,000 x $15 = $45,000" should be "3,000 x $15 = $45,000", and "$2,000 x $10 + 1,000 x $15 = $35,000" should be "2,000 x $10 + 1,000 x $15 = $35,000"

5. Chapter 9. Slide 20. The Statement of Cash Flows. Other Adjustments section. Remove the line that says, "Add Increase in Notes Payable 1,000 3,000". Notes payable belong in the financing section rather than the operating section. Change the last line on the slide from "Net Cash Used for Operating Activities $ (2,000) $(6,000)" to "Net Cash Used for Operating Activities $ (3,000) $(9,000)"; slide 21. The Statement of Cash Flows, continued. Change the line "Increase in Mortgages $25,000" to "Increase in Mortgages and Notes Payable $1,000 $28,000". Change the line "Net Cash from Financing Activities $(5,000) $21,000" to "Net Cash from Financing Activities $(4,000) $24,000".

6. Chapter 10. Slide 11. Second bullet on when to record donated services as both support and expense. It appears there are three required conditions. Actually there are two separate elements. The second has three required conditions. The middle bullet should be restated as:
Personal Services are recorded as both support and an expense if:

• they create or enhance nonfinancial assets (e.g. equipment), or
the services require specialized skill, are provided by individuals with those skills, and they would typically need to be purchased if they were not donated.

7. Chapter 12. Slide 23. Middle of slide. Change the word "total" to "fixed" in the line: "How much revenue does each dollar of total assets support" to "How much revenue does each dollar of fixed assets support"

Minor Changes
1. Chapter 5. Slide 40. Bond Characteristics. Second line, change "the amount borrowed" to "the amount to be repaid". This change is required because the bond may be initially issued at a discount or premium. In such instances the maturity or face value will not be the amount borrowed. Also, on the same line, insert "par, principal," before "stated", so that "the amount to be repaid, called the stated, face, or maturity value of the bond," becomes "the amount to be repaid, called the par, principal, stated, face, or maturity value of the bond."

2. Chapter 6. Slide 3. Short-Term Resources. Middle Bullet: Accounts Receivable. Insert the word "have" after "but" so that it reads: "bills that have been sent out by the organization but have not yet been collected."

3. Chapter 8. Slide 19. Liabilities. Under second bullet. Insert the words "short-term" in front of "notes payable", so that it reads "short-term notes payable – i.e., short-term loans, and"; slide 21. Long-Term Liabilities. Under "Long-Term Debt" bullet, change "Long-Term Unsecured Loans" to Long-Term Unsecured Loans, Long-Term Notes Payable". This is to correct the erroneous impression from the original slide 19, that notes payable are always short-term.

4. Chapter 9. Slide 3. Meals for the Homeless Activity Statement. In the Revenues and Support section, "Mail Solicitation" should be indented. It is a sub-heading under "Fundraising", and should be indented the same as "Telephone Solicitation" on the line above it.