Magnolia Therapeutic Case Study

Magnolia Therapeutic Case Study
Magnolia Therapeutic Solutions, a well-known nonprofit organization in New York City, provides psychotherapy for clients who have been through a traumatic experience and are diagnosed with Post Traumatic Syndrome Disorder (PTSD). Because of the high demand for the services, and the generous amounts of grant money the organization grew quickly. When the tragedy of 911 happened the city of New York requested Magnolia to deliver services to the victims of the tragedy and in return a large one-year grant was provided to the organization. While preparing the budget for 2002 the founder of the organization, Mary Stewart, believed the grant received from the city of New York in 2001 would be renewed. Mary also expected the development department to raise more grant money than previous years. In the end the organization was $500,000 short in the 2002 budget resulting in the necessary layoff of one-third of the staff. The organization ultimately became stagnant over the few years following the shortfall and layoff of the staff.
My Decision versus the Boards Decision
The board of directors for the organization decided to approve the budget. The decision was based on the financials and budget from 2001. I would have decided to do the complete opposite. I would have come to the decision to reject the budget Mary was anticipating money she was not promised or even sure would materialize. Mary just took for granted that the city of New York was going to renew the 2001 grant, and this did not happen. It would have been more feasible for Mary to create a budget not to include the grant money from the city that was given in 2001 because the money had not already been granted.
Causes of the Problem
One cause of the problem is that Mary created the budget to include the money that was granted to the organization from the city in 2001. However, that money was granted for one year so Magnolia could meet capacity issues that resulted in increased demand for services after the 911 terrorist attacks in NYC. Because it was granted for only one year it should not have been automatically assumed that the city would renew it.
Another problem is the growing demand for psychotherapy for individuals with PTSD. The population diagnosed with PTSD is growing and the treatment for this particular diagnosis can be lengthy. The 911 terrorist attacks left many people depressed, sad, and in shock. These are symptoms of PTSD and issues hard to deal with. Unfortunately, this is not a problem that can be handled differently. It is not a problem that could have been predicted nor can it be predicted if it will ever happen again.
Differences between a Nonprofit and a For-Profit Organization?s Inability to Thrive
Nonprofit and for-profit organizations acquire revenue differently in that nonprofit organizations rely on grants and donations. For-profit organizations rely on income generated for services rendered therefore they tend to charge steeper prices for services. Nonprofit organizations accrue expenses with the understanding that the revenue made from grants and donations is the only funding available to settle the expenses. For-profit organizations accrue expenses knowing the revenue generated from service income is the funding available to settle expenses and if higher expenses are generated, prices for services can be increased to generate more income. Often times, however, increasing the prices causes clients to venture elsewhere for services causing and inability for the for-profit to thrive.
Magnolia?s Deficit in Terms of Risk Management
?Risk management is concerned with protecting the financial, human, and other resources of a human service agency and providing products and services in a responsible fashion? (Martin, 2001, p. 187). In creating a budget for 2002 using the expectation that NYC was going to renew the grant given in 2001 showed Magnolia with a deficit in protecting the financial resources as well as the human resources. The shortfall the organization suffered because of the grant from the city not being renewed, ?Mary was forced to lay off one third of the staff? (University of Phoenix, para. 5). If the budget had been created realistically without the expectation of the grant they could have prepared for the monetary difference and adjusted accordingly preparing for possible layoffs.
In conclusion if Mary had created a budget not anticipating the grant renewal the organization would not have suffered such a shortfall. Also had there not