McGraw-Hill/ Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 19-1...

19-19-11

McGraw-Hill/ Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Not-For-Profit Entities 19

Electronic Presentation by Douglas Cloud

Pepperdine University

Baker / Lembke / KingBaker / Lembke / King

19-19-22


Special-Purpose Government EntitiesSpecial-Purpose Government Entities

GASB 33 established specific reporting requirements for each of the following types of special-purpose governments:a. Engaged in more than one governmental program

or that have both governmental and business-type activities.

b. Engaged in a single government program (such as a cemetery district).

c. Engaged in only business-type activities (such as a public university).

d. Engaged in only fiduciary-type activities.

19-19-33


Financial Reporting: Private NFP EntitiesFinancial Reporting: Private NFP Entities

C. Alt donated $40,000 to a not-for-profit organization to be used specifically for a research program.

C. Alt donated $40,000 to a not-for-profit organization to be used specifically for a research program.

Cash 40,000Contributions 40,000

When the research expenditures were made in the unrestricted net asset class, a reclassification entry

would be made in the temporarily restricted net asset class to record the completion of the specific use.

When the research expenditures were made in the unrestricted net asset class, a reclassification entry

would be made in the temporarily restricted net asset class to record the completion of the specific use.

Reclassification--Satisfaction of Program Restriction 40,000

Cash 40,000

19-19-44


Entries are required in the unrestricted net asset class.Entries are required in the unrestricted net asset class.

Cash 40,000Reclassification--Satisfaction of Programs

Restriction 40,000

Financial Reporting: Private NFP EntitiesFinancial Reporting: Private NFP Entities

Expense--Research Program 40,000Cash 40,000

19-19-55


Colleges and Universities--Special ConventionsColleges and Universities--Special Conventions

In cases of university-sponsored scholarships, revenue is credited at the

full standard rate for tuition. The scholarship is then

recorded as an expenditure.

In cases of university-sponsored scholarships, revenue is credited at the

full standard rate for tuition. The scholarship is then

recorded as an expenditure.

Revenue and Expenditure RecognitionRevenue and Expenditure Recognition

Tuition and fees are primary revenue sources

for the unrestricted current fund.

Tuition and fees are primary revenue sources

for the unrestricted current fund.

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If a student withdraws and receives a partial reimbursement of tuition

and fees, debit revenues from tuition and fees, and credit cash or

accounts payable.

If a student withdraws and receives a partial reimbursement of tuition

and fees, debit revenues from tuition and fees, and credit cash or

accounts payable.


19-19-77


When an academic term begins in one academic term and ends in

another, revenue is recognized in the fiscal year in which the term is

predominantly conducted.

When an academic term begins in one academic term and ends in

another, revenue is recognized in the fiscal year in which the term is

predominantly conducted.



19-19-88


Transfers and Board-Designated FundsTransfers and Board-Designated Funds

Mandatory transfers are transfers out of the current funds group to other funds resulting from binding legal agreements on financing or renewals and replacements

of education plants, and from grant agreements with agencies of the federal government, donors, and others.

Mandatory transfers are transfers out of the current funds group to other funds resulting from binding legal agreements on financing or renewals and replacements

of education plants, and from grant agreements with agencies of the federal government, donors, and others.

Nonmandatory transfers are discretionary transfers specified by the governing board for a variety of purposes. Nonmandatory transfers may also be made from the loan,

endowment, or annuity funds to the current funds.

Nonmandatory transfers are discretionary transfers specified by the governing board for a variety of purposes. Nonmandatory transfers may also be made from the loan,

endowment, or annuity funds to the current funds.

19-19-99


Public Colleges and UniversitiesPublic Colleges and Universities

The GASB has specified that public colleges and universities must

follow the accounting and financial reporting standards as used for other

governmental entities.

The GASB has specified that public colleges and universities must

follow the accounting and financial reporting standards as used for other

governmental entities.

19-19-1010


The three financial statements required by the FASB for private, not-for-profit colleges and universities are:

The three financial statements required by the FASB for private, not-for-profit colleges and universities are:

(1) Statement of financial position

(2) Statement of activities

(3) Statement of cash flows

Private Colleges and UniversitiesPrivate Colleges and Universities

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• General• Specific purpose• Time Restricted• Plant replacement and expansion• Endowment

Hospital AccountingHospital Accounting

Fund Groups

Restricted

Uses accrual accounting

19-19-1212


Overview of Hospital Accounting/Reporting Overview of Hospital Accounting/Reporting

Specific Purpose FundsSpecific Purpose Funds

Contributions, transfers, and other changes are recorded directly in the fund. Resources are held until transferred to general fund for expenditures.

Resources restricted for specific operating purposes.

Accounting basis

Distinguishing features

Financial statements

Balance SheetStatement of OperationsStatement of Changes in Net AssetsStatement of Cash Flows

19-19-1313


Time Restricted FundsTime Restricted Funds


Resources not available until date specified by donor.


Accounting basis




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Plant Replacement and Plant Replacement and Expansion FundsExpansion Funds


Resources restricted for addition to plant assets.



Accounting basis



19-19-1515


Endowment FundsEndowment Funds


Principal must be preserved.



Accounting basis



19-19-1616


amounts due from patients third-party payorsother insurers of health carepledges or grants interfund transactions

amounts due from patients third-party payorsother insurers of health carepledges or grants interfund transactions

Balance SheetBalance Sheet

Receivables may include--

Receivables should be reported at the anticipated

realizable amount.

Receivables should be reported at the anticipated

realizable amount.

19-19-1717



Investments are initially recorded at cost if purchased, or at fair value at the date of receipt

if received as a gift.

Investments are initially recorded at cost if purchased, or at fair value at the date of receipt

if received as a gift.

19-19-1818



Property, plant, and equipment is reported,

together with any accumulated depreciation. Depreciation is recorded in

the general fund.

Property, plant, and equipment is reported,

together with any accumulated depreciation. Depreciation is recorded in

the general fund.

Separate disclosure should be made for assets that have

restrictions placed on their use by the donor or have been

designated by the board of directors for special use.

Separate disclosure should be made for assets that have

restrictions placed on their use by the donor or have been

designated by the board of directors for special use.

19-19-1919



Long-term debt is shown in the balance sheet. This differs from most governmental

entities in which a separate debt service fund is established to

service debt.

Long-term debt is shown in the balance sheet. This differs from most governmental

entities in which a separate debt service fund is established to

service debt.

The net asset are segregated between those which are unrestricted, temporarily

restricted, and permanently restricted.

The net asset are segregated between those which are unrestricted, temporarily

restricted, and permanently restricted.

19-19-2020


• Net patient service revenue– Revenue from inpatient and outpatient care.

• Contractual adjustments– A deduction from revenue based on contracts with third-party payors in the medical

reimbursement process.• Income from ancillary programs

– Income from television rentals, cafeteria sales, sales in the gift shop, parking fees, and educational program’s tuition.

• Interfund transfers– Release of restricted funds to unrestricted status when the stipulations set by the

donor have been met.• General fund expenses

– Expenditures for nursing and other professional services, depreciation, bad debts, and administrative costs.

Statement of OperationsStatement of Operations

19-19-2121


create or enhance nonfinancial assets, or

require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation.

DonationsDonations

FASB 116 requires donated services to be recognized if the services received --

19-19-2222


Donated assets are reported as contributions in the statement of operations, if unrestricted.

Restricted donated assets are reported as contributions to the temporarily restricted funds in the period received.

Donated assets are reported at fair market value at the date of contribution:

When the restriction no longer applies, the net

assets released are reported in the

unrestricted fund.

When the restriction no longer applies, the net

assets released are reported in the

unrestricted fund.

Donations

19-19-2323


General FundGeneral Fund

The hospital provides patient services of $2,600,000 measured at standard rates.

The hospital provides patient services of $2,600,000 measured at standard rates.

Accounts Receivable 2,600,000Patient Services Revenue 2,600,000

Gross charges at standard rate.

From this amount, $240,000 is deducted for contractual adjustments with third-party payors.

From this amount, $240,000 is deducted for contractual adjustments with third-party payors.

Contractual Adjustments 240,000Accounts Receivable 240,000

Deductions from gross revenue for contractual adjustments.

19-19-2424



The hospital receives income in 20X2 from providing nonpatient services that include

operating a cafeteria and gift shop and from vending machine commissions.

The hospital receives income in 20X2 from providing nonpatient services that include

operating a cafeteria and gift shop and from vending machine commissions.

Cash 30,000Revenue from Cafeteria Sales 20,000Revenue from Gift Shop Sales 4,000Revenue from Vending Machine

Commissions 6,000Income from ancillary services.

19-19-2525


The hospital incurs $2,600,000 in operating expenses. Cash payments are made of $2,125,000.

The hospital incurs $2,600,000 in operating expenses. Cash payments are made of $2,125,000.

Nursing Services Expense 800,000Other Professional Services Expense 620,000General Services Expense 700,000Fiscal Services Expense 100,000Administrative Service Expense 80,000Medical Malpractice Costs 30,000Bad Debts Expense 60,000Depreciation Expense 200,000

Cash 2,125,000Allowance for Uncollectibles 60,000Inventories 90,000Prepaid Expenses 5,000Accumulated Depreciation 200,000Accounts Payable 50,000Accrued Expenses 30,000Estimated Medical Malpractice Costs Payable 30,000


19-19-2626



The hospital receives donated services valued at $10,000.The hospital receives donated services valued at $10,000.

Other Professional Services Expense 10,000Donated Services Revenue 10,000

Receive donated services.

During 20X2, the hospital received unrestricted cash gifts in the amount of $63,000 and donated medicines and

medical supplies with a market value of $30,000.

During 20X2, the hospital received unrestricted cash gifts in the amount of $63,000 and donated medicines and

medical supplies with a market value of $30,000.

Cash 63,000Contributions--Unrestricted 63,000

Unrestricted contributions received.Inventory 30,000

Contributions--Unrestricted 30,000Donated supplies received.

19-19-2727



During 20X2, income of $10,000 was earned in the unrestricted fund on resources designated by the

governing board for purposes of future plant expansion.

During 20X2, income of $10,000 was earned in the unrestricted fund on resources designated by the

governing board for purposes of future plant expansion.

Board Designated Funds for Expansion of Facilities--Cash 10,000

Investment Income--Board Designated Funds 10,000Earnings resources reserved by hospital’sgoverning board for purchase of fixedassets.

19-19-2828


Equipment costing $100,000, with a book value $50,000, was sold for $55,000.

Equipment costing $100,000, with a book value $50,000, was sold for $55,000.

Cash 55,000Accumulated Depreciation 50,000

Property, Plant, and Equipment 100,000Gain on Disposal of Equipment 5,000

Sale of hospital equipment. The cashwill be used in the operations of thehospital.


19-19-2929



Funds are received from a specific-purpose fund totaling $120,000, for

education and research.

Funds are received from a specific-purpose fund totaling $120,000, for

education and research.

Cash 120,000Net Assets Released from Program Use

Restrictions 120,000Record payment for reimbursement of operating expenditures made in accordance with restricted gift.

19-19-3030


The remaining transactions during the 20X2 fiscal year affect only balance sheet accounts. Typical of these transactions are collections of

receivables and acquiring inventory.

The remaining transactions during the 20X2 fiscal year affect only balance sheet accounts. Typical of these transactions are collections of

receivables and acquiring inventory. Cash 2,250,000Allowance for Uncollectibles 50,000

Accounts Receivable 2,300,000Collect some receivables and write-off$50,000 as uncollectible.


Collected $2,250,000 on receivables and wrote off $50,000 in accounts as uncollectible. Also,

acquired inventory that cost $50,000.

Collected $2,250,000 on receivables and wrote off $50,000 in accounts as uncollectible. Also,

acquired inventory that cost $50,000.

Inventories 50,000Cash 50,000

Acquire inventories.

19-19-3131


Plant and Expansion FundPlant and Expansion Fund

During the year, equipment with a fair value of $25,000 was donated to the hospital.

During the year, equipment with a fair value of $25,000 was donated to the hospital.

Property, Plant, and Equipment 25,000Contributions--Plant 25,000

Received donated equipment with a fairvalue of $25,000.

A $60,000 cash donation was received for the purpose of acquiring additional equipment.

A $60,000 cash donation was received for the purpose of acquiring additional equipment.

Cash 60,000Contributions--Plant 60,000

Received restricted gifts for use to acquire equipment.

19-19-3232


Endowment FundEndowment Fund

A total of $415,000 in new permanent endowments is received and $400,000 is used to

acquire additional investments.

A total of $415,000 in new permanent endowments is received and $400,000 is used to

acquire additional investments.

Cash 415,000Contributions--Permanent Endowment 415,000

Receive additional endowments.

Investments 400,000Cash 400,000

Acquire additional investments.

19-19-3333


• Statement of financial position

• Statement of activities

• Statement of cash flows

• Statement of functional expenses

• Statement of financial position

• Statement of activities

• Statement of cash flows

• Statement of functional expenses

Voluntary Health and Welfare OrganizationsVoluntary Health and Welfare Organizations

Financial statements for a VHWO:

19-19-3434


Cemeteries Civic organizations Fraternal organizations Labor unions Libraries Museums Other cultural institutions Performing arts

organizations Political parties



Other Not-for-Profit EntitiesOther Not-for-Profit Entities

19-19-3535






Other Not-for-Profit EntitiesOther Not-for-Profit Entities

Private and community foundations

Private elementary and secondary schools

Professional associations Public broadcasting

stations Religious organizations Social and country clubs Trade associations

Private and community foundations

Private elementary and secondary schools

Professional associations Public broadcasting

stations Religious organizations Social and country clubs Trade associations

19-19-3636


Chapter NineteenChapter Nineteen

The The EndEnd

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