Question

Better Days Ahead, a charitable organization, has a standing agreement with First National Bank. The agreement allows Better Days Ahead to overdraw its cash balance at the bank when donations are running low. In the past, Better Days Ahead managed funds wisely and rarely used this privilege. Jacob Henson has recently become the president of Better Days Ahead. To expand operations, Henson acquired office equipment and spent large amounts on fundraising. During Henson’s presidency, Better Days Ahead has maintained a negative bank balance of approximately $10,000.

What is the ethical issue in this situation, if any? State why you approve or disapprove of Henson’s management of Better Days Ahead’s funds.

Answer 1

According to the agreement with First National Bank, the charitable organisation can overdraw it's cash balance. Assuming Henson acquired office equipment and spent amounts on fundraising thereby overdrawing the cash balance because of low donations does not contribute to be an ethical issue as the agreement clearly allows for this transaction. As clearly stated in the question, Henson acquired equipment and spent amounts to expand operations. However the question also states that this situation was rare in the past because of wise management of funds. So, even though it is not unethical on Henson's behalf, it would be unwise to manage funds in this manner. Henson's management of funds is disapproved as funds could have been managed better by spending small amounts or adopting other cost effective methods for fundraising. A negative balance of $10,000 is a high negative balance that would affect the balance sheet by increasing its liabilities. Usually donations recieved are used for these purposes. Better Days Ahead's funds could have been managed better by Jacob Henson.