U NIQUE A SPECTS OF N ONPROFIT A CCOUNTING March 2, 2010.
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Transcript of U NIQUE A SPECTS OF N ONPROFIT A CCOUNTING March 2, 2010.
QUESTIONS:
What are the differences in financial statements between for-profits and nonprofits?How are assets classified and accounted for?What is fund accounting?What guidelines govern nonprofit accounting and financial reporting?
REVIEW OF FINANCIAL STATEMENTS
Statement of Financial PositionStatement of ActivitiesStatement of Cash FlowStatement of Functional Expenses
STATEMENT OF FINANCIAL POSITION
Nonprofits do not have to segregate assets and liabilities in current and long term, insteadShow assets in order of declining liquidity;
orDisclose liquidity in the notes to financial
statementsAssets must also be segregated by donor-
imposed restrictionso Net assets must be divided into categories
of restrictions
STATEMENT OF ACTIVITIES
Revenues and support are shown as increases in unrestricted net assets unless there are donor-imposed restrictions
Expenses are decreases in unrestricted net assets. Expenses are reported separately from revenues. It is not generally permissible to show net income/loss in line item
Investment gains and losses are reported as changes in unrestricted net assets
FUND ACCOUNTING
Organization is separated into distinct entities called and labeled fund. This distinction is not usually used for reporting except in statement of functional expenses.
DONATED GOODS AND SERVICES
Contributions, gifts, and donations are recorded at fair market value
Donor receipts follow the same guidelines
Personal services are recorded as both revenue and expense if they create or improve nonfinancial assets, or would typically be purchased if not donated
ACCOUNTING FOR FUNDRAISING
Material from reading- publicizing and conducting fund-raising
campaigns maintaining donor mailing lists conducting special fund-raising events preparing and distributing fund-raising
manuals, instructions, and other materials conducting other activities involved with
soliciting contributions from individuals, foundations, government agencies, and others
FEDERAL INCOME TAXES
Generally exempt from income taxes
Must pay tax on unrelated business income and on income from profits for goods or services that compete with for-profit organizations. (i.e. outpatient pharmacy profits)
ACCOUNTING FOR CONTRIBUTIONS
FASB 116: contributions not exchange transactions (grants, fees for service, etc.)
Requires that all unconditional promises be recognized in the year the notification of the pledge is received and may cause significant variations in net assets from year to year
Donor imposed restrictions: Permanent - all contributions not expendable Temporary – by purpose or time
INTERFUND TRANSACTIONS
Reflect the separation of fund accounting Refer to loans between programs (i.e.
operations borrows from indirect) Also may refer to the exchange of goods or
services Interfund sales use accounts payable and
receivable as opposed to “due to/from” (i.e. Hospital contracts with its nursing program for continuing education for staff.)
BASICS OF NONPROFITS
• What makes nonprofits different from for-profit businesses?• What are financial issues currently facing
nonprofits?• How should these be addressed?• How much of US Economy is comprised of
nonprofits?• What is the largest nonprofit employment
sector?• Who gives the least and the most?
BUDGETING BASICS
What is a budget? What is the financial management process? What are the elements of planning and
where does budgeting fit in? What are the components of a budget? How is a budget developed? What are the types of budgets? What kinds of accounting do nonprofits use? What are the different budgeting formats?
ACCOUNTABILITY
What role do ethics play in fiscal management and budgeting?
What is the definition of accountability? What values tie mission to accountability? What are the elements of a management
control system? How did SOX affect nonprofits? What other factors affect organizational
accountability?
FINANCIAL REPORTING
• Who uses nonprofit financial statements?
• What are the types of financial statements and formulas for each?
• What elements are in each type of financial statement?
• What accounting periods are used in nonprofits?
• What do the notes to financial statements contain?