Nonprofit Finance Disasters. Why did FEGS close down?

NONPROFIT FINANCE DISASTERS
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1 Why did FEGS close down?
The primary reason FEGS shut down was because the organization's accounting firm realized that FEGS was $19.4 million dollars short in its operating budget. It cold also not sustain continue sustaining its operations especially after losing two of its main contracts. The $19.4 million was a cumulative effect of the poor financial planning and cumulated debt obligations that ultimately made the organization to have very little cash on hand, which gave it little ability to maneuver if it encountered unexpected setbacks.
The issues that finally brought the organization down had cropped up earlier but the management had kept them in wraps. It was revealed that the company had been injecting operating capital into nonperforming subsidiaries which were supposed to be for-profit entities. It was also revealed that the CEO had been earning six times the industry standards and the company had been keeping assets which it no longer needed or used. For example, it had rented out space which it was not needing and or using.
Other issues that could have complicated chances of acquisition or merging with another organization it was the way it was running its operations. First, it was doing a consolidated audit which shadowed its nonperforming entities which were burdening the organization with financial woes. One of the organizations, All Sector signed financing agreements with at least five different creditors, dating back to 2009, using the company’s equipment as collateral CITATION Lau15 \l 1033 (Nahmias, Goldberg, & Prakash, 2015). All along, FEGS was borrowing to cover up its losses until the debt became insurmountable.
1 What specific financial issues were there?
1 FEGS was compensating its executives higher than industry standards. The CEO Gail Magaliff who resigned few months before the organization closed down was earning six ties the average rates of other ceos heading not-for-profit organizations.
2 According to CITATION Jam152 \l 1033 (Ford, 2015), the organization was paying for real estate property it was not using and it does not need.
3 The organization was also writing-off accrued program revenue. Writing off revenue is not a good accounting standard and the terms ought to have been revisited to ensure the organization does not lose revenue.
4 Investments in unsuccessful mission-related ventures – the parent organization kept bailing out undeforming subsidiaries a strategy that deepened its financial woes
5 Poor performance of some contracts such that they did not yield expected revenue.
3) Should its executives receive the compensation that they did?
No. If the average salary of executives in other non-profit organizations do not as much, then it is wrong to compensate them that much. In the spirit of maintaining the administrative cost of the organization below 25%, then the executives should have been earning lower salaries. The CEO salaries is six times that of his/her peers and that burdens the organization with a huge payroll. In the case of FEGS, if the CEO earned the average salary as with other non-profit organizations, she would have saved the organi...