Q: How should a not-for-profit senior living community objectively segment the financials of charitable mission initiatives from the basic senior living business operations?
A: This is a three-step process.
1) Create an income statement and sheet that includes only your senior living business operation (revenue, operating expenses, profit, debt service, cash flow, etc.). If necessary, show any cash from the business operation that is needed to fund charitable initiatives as a separate financial burden below the operating profit and net cash flow line entries. The expected outcome is the execution of sound business practices while meeting industry benchmarks for financial performance.
2) Prepare another financial statement that shows other sources of cash such as charitable donations, fundraising and restricted cash used to fund your defined charitable mission, which instead might be used for reducing monthly service fees and subsidizing operating expenses to provide affordability for certain residents. The objective is executing the Charitable Mission within defined available mission resources and spending guidelines.
3) Then (and only then) prepare the more traditional consolidated financial statement.
Jim Moore runs a national senior housing and healthcare consulting firm based in Fort Worth, TX. He has written several books about assisted living and senior housing, including Assisted -Living Strategies for Changing Markets.