| NAC Subgroup 1 Meeting NFP Industry Review
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Transcript of | NAC Subgroup 1 Meeting NFP Industry Review
|NAC Subgroup 1 Meeting
NFP Industry ReviewTeresa Gordon
Land conservancyPublic broadcasting
Advocacy
Land ConservancyNature Conservancy
Conservation FundTrust for Public Land
Connecticut Audubon Society?
Review of Land Conservancy EntitiesNature
ConservancyConservation
FundTrust for
Public LandContributions & Public Support as Percentage of Operating or Unrestricted Revenues 67% 52% 37%*Land Sales (generally to public entities for preservation) 16% 41% 53%*Transfers of land to public entities included as program expense Four-column format for Stmt of Activities Operating or other subtotal on Stmt of Activities PRNA includes revolving loan capital for financing land acquisitions (Is this different from true endowment?) ? True endowment (other than revolving capital fund) Quasi-endowment Split-interest agreements TRNA ?** TRNA
Some land holdings included in PRNA *** Trust Assets Held by Others in PRNA Underwater endowments (current or prior year) Mission related joint venture HC
Land Conservation Operating
Income Change in
URNA Difference Nature Conservancy 190,188 216,938 26,750
Undistributed investment return on quasi-endowments 16,317
206,505 216,938 10,433
Nature Conservancy
.The $10K difference includes one items on SCNA:
Change in underwater endowment
Public BroadcastingOregon Public Broadcasting
National Public Radio
Northwest Public Radio (GASB)
Review of Public Broadcasting Entities
Oregon Public
Broadcasting NPRNWPR (GASB)
Contributions & Public Support as Percentage of Operating or Unrestricted Revenues 94% 33% 98%
Four-column format for Stmt of Activities Operating or other subtotal on Stmt of Activities True endowment Quasi-endowment Split-interest agreements All classes Trust Assets Held by Others in PRNA Underwater endowments (current or prior year) Mission related joint venture Equity Mtd Impairment of intangibles treated outside of functional expense categories n/a n/a
Net assets released from restrictions included capital expenditures n/a n/a
Oregon Public Broadcasting
The $1.7M difference includes three items on SCNA:Gain on charitable remainder trustChange in underwater endowmentMatured annuities and other transfers
Public Broadcasting Operating
Income Change in
URNA Difference Oregon Public Broadcasting 3,571,710 5,907,044 2,335,334
Contributions for equipment 1,075,425 Undistributed investment return on quasi-endowments 683,113
4,254,823 5,907,044 1,652,221
AdvocacyHard to find those with audited financial statements available!
American Humane Assn.Chicago Coalition for the Homeless
Friends of the EarthConnecticut Audubon Society
Review of Advocacy EntitiesAmerican
Humane Assn
Chicago Coalition for
the Homeless
Connecticut Audubon Society
Friends of the Earth
Contributions & Public Support as Percentage of Operating or Unrestricted Revenues
46% 99% 40% 95%
Advocacy programs as a percent of total expense
73% 83% 8% 56%
Four-column format for Stmt of Activities Operating or other subtotal on Stmt of Activities* True endowment ?**
Quasi-endowment ?**
Split-interest agreements URNA n/aURNA &
TRNAURNA
Trust Assets Held by Others in PRNA *** n/a ? ?**Underwater endowments (current or prior year) n/a ?**
Advocacy Agencies
The difference reported on SCNA for AHA was release of restrictions due to decrease in underwater endowments
The old and new methods produce essentially identical results of CCH since there were no endowment assets
Advocacy Operating
Income Change in
URNA Difference Chicago Coalition for Homeless 258,420 258,420 -
American Humane Assn. (5,611,479) (5,487,771) 123,708
Notice something?All of the entities I looked at were pretty
much as the “charity” end of the scale with most support from contributions and
investments
I went looking for hybrids probably not covered by other group membersMuseums with “live” exhibits
Monterey Bay Aquarium Admissions and program fees were about half of revenues
Arizona-Sonora Desert Museum Admission fees were about a third of revenues
Performing ArtsSeattle Repertory Theatre
Earned revenues were 55% of revenues, the rest coming from contributions and grants
Hybrid Missions
Seattle Repertory Theatre
Monterey Bay
Aquarium
Arizona Sonora Desert Musem
Contributions & Public Support as Percentage of Operating or Unrestricted Revenues
45% 11% 18%
Earned revenue percent 55% 50% 33%
Four-column format for Stmt of Activities* Operating or other subtotal on Stmt of Activities** True endowment Quasi-endowment
Split-interest agreements n/aPRNA &
other NAn/a
Trust Assets Held by Others in PRNA Underwater endowments (current or prior year) ***
Performing Arts Operating
Income Change in
URNA Difference Seattle Repertory Theatre (745,188) 505,590 1,250,778 Undistributed investment returns 1,250,778
505,590 505,590 -
Biological exhibits (zoos, aquariums)
Operating Income
Change in URNA Difference
Monterey Bay Aquarium 12,983 32,173 19,190 Undistributed investment return on quasi-endowments 19,190
32,173 32,173 -
Issues Raised by My AnalysisPRNA that is not “endowment”
Geography for quasi-endowmentsSplit Interest Agreements
Other
PRNA – it is more than endowments!Land held for conservation endowmentPerpetual trusts held by others – cannot be
managed as endowment by the beneficiary (no control)New “restricted” category makes more sense than new
“endowment” category
Quasi-Endowment GeographyShould the new “endowment” category include only
“true” donor-restricted endowments? Could it also include board-designated endowments
“Quasi-endowments”“Funds functioning as endowment”
Either method could work.Portion of investment return allocated to operations
would appear in revenue on the income statement
Pros & Cons: Quasi-endowmentsLeave them in “unrestricted”
Report undistributed investment returns in “non-operating” on income statement
FS users would be aware that additional resources are expendable
Reporting only in Stmt of Changes in NA less desirable because it is less transparent
Put them in “endowment”Separately report
undistributed investment returns the stmt of change in endowment net assets
Expendable nature of undistributed portion of returns would not be apparent to users that concentrate on the income statement
Split-interest AgreementsCharitable remainder trusts, gift annuities, life-
income funds, etc.Since balance sheets rarely have NA columns, it
was hard to determine whether the split-interest liabilities and related assets were reported in URNA, TRNA or PRNA .
Also hard because change in values might not be material and therefore not separately labelled on statement of activitiesI found them in PRNA, TRNA and URNA
Split-interest AgreementsUnder current GAAP, temporarily restricted “makes
sense” since the NFP generally has a “remainder interest” when the donor dies.
What about the new “restricted” NA class?To me, “restricted” makes better sense than
“endowment” even though one might manage the assets in a pool. In one case, I found some of the total gift annuity
liability and assets rolled into what was labeled the endowment fund.
Other issuesMission-related joint ventures and other
arrangementsFound one in revenue (equity method)Found another at historical cost with share of earnings
reported in revenueIf clearly and closely related to the entity’s mission,
would a “partial consolidation” make the most sense?% share of revenues reported as revenue% share of expenses reported as expense
Other issuesUnderwater endowments – I found lots!
At first, I thought about moving the underwater balances to “endowment” assuming there was TRNA investment returns sufficient to cover shortfalls.
However, I found more than one entity with ZERO in TRNA due to the “depth” of the water they were under!
Where to show the loss/recovery?Non-operating item on income statement?Statement of changes in unrestricted net assets only?
Other issues:Preserving functional expensesImpairment of intangibles was reported by one entity
as “non-operating” We are directed by ASU to exclude gain/loss related
to defined benefit plans from functional expense categories
What other issues should we consider that would identify “other” items that would distort the meaning of the functional expense categories?
“New format” FS and Audited FSAvailable at my website:http://www.cbe.uidaho.edu/tgordon and go to the
Presentations page. Alternatively, click this link: http://www.cbe.uidaho.edu/tgordon/presentations%20n%20comltrs.htm