other nfp - 1 other nfp entities. other nfp - 2 not-for-profit organizations general...
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Other NFP - 2
Not-for-Profit Organizations
General Characteristics– Contributed resources from providers without a return of
equal financial value– Operating purpose that is other than providing goods
and services for profit– They do not have ownership interests as do for- profits
They may be governmental or private Great variety
– Charitable– Educational– Civic organizations– Political parties– Trade organizations– Fraternal associations
(In 2007, approximately 2.8 million not-for-profits existed just in the United States)
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Contributions to Various Not-for-Profits in 2004
Religious $ 88.30 BillionEducation 33.84 BillionFoundations 24.00 BillionHealth 20.89 BillionArts and culture 13.99 Billion
Environmental 7.61 billion
Source: AAFRC Trust for Philanthropy website, http://www.aafrc.org (2005)
““That’s a lottaThat’s a lottaDough!!Dough!!
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Large Nonprofits
2005 Revenues
YMCA of the USA $5,130,851,000Salvation Army $4,559,292,000American Red Cross $3,888,172,726Catholic Charities USA $3,286,072,070Goodwill Industries $3,022,623,000
(Source: The Nonprofit Times, November 1, 2006)
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Two basic ideas form the FASB’s framework for not-for-profit standards:
Two basic ideas form the FASB’s framework for not-for-profit standards:
Financial Reporting
The financial The financial statements should statements should focus on the entity focus on the entity
as a whole.as a whole.
The financial The financial statements should statements should focus on the entity focus on the entity
as a whole.as a whole.
Reporting Reporting requirements for not-requirements for not-for-profits should be for-profits should be similar to business similar to business
entities, unless there entities, unless there are critical are critical
differences in the differences in the needs of users.needs of users.
Reporting Reporting requirements for not-requirements for not-for-profits should be for-profits should be similar to business similar to business
entities, unless there entities, unless there are critical are critical
differences in the differences in the needs of users.needs of users.
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PRIVATE, NFP ENTITIES
Reporting subject to FASB
Classification of “Net Assets”– Unrestricted– Temporarily restricted– Permanently restricted
SFAS Nos. 93, 116, 117, 124, 136
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A Little History….
Prior to 1993, there was a confusing variety of private not-for-profit accounting practices
In that year, FASB tried to standardize this reporting by issuing– SFAS 116, “Accounting for Contributions
Received and Contributions Made” – SFAS 117, “Financial Statements of Not-
for-Profit Organizations”
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FASB No. 117 requires three
financial statements.
FASB No. 117 requires three
financial statements.
Financial Reporting
Statement of Financial Position– Uses “Net Assets” instead of
owners’ equity or fund balance. Statement of Activities and Changes in
Net Assets Statement of Cash Flows Statement of Functional Expense
(required only for voluntary health and welfare organizations).
Statement of Financial Position– Uses “Net Assets” instead of
owners’ equity or fund balance. Statement of Activities and Changes in
Net Assets Statement of Cash Flows Statement of Functional Expense
(required only for voluntary health and welfare organizations).
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Report assets, liabilities, and
net assets.
Report assets, liabilities, and
net assets.
Net assets are presented in 3 categories:Unrestricted
Temporarily RestrictedPermanently Restricted
Net assets are presented in 3 categories:Unrestricted
Temporarily RestrictedPermanently Restricted
Use the term “Net assets” rather than
owners’ equity or fund balance.
Use the term “Net assets” rather than
owners’ equity or fund balance.
Statement of Financial Position
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Statement of Financial Position
Restrictions must be imposed by outside donors before an asset is classified as “restricted”– For financial statement purposes, board-designated
or internally restricted assets continue to be classified as “unrestricted”
Temporarily restricted– For a particular purpose OR– For use in a future time period
Permanently restricted– Expected to remain restricted for as long as the
organization exists
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Per FASB No. 116, donors’ unconditional promises to
give are recognized as both a revenue and a
receivable in the period of promise.
Per FASB No. 116, donors’ unconditional promises to
give are recognized as both a revenue and a
receivable in the period of promise.
Change in net assets is reported instead of net
income.
Change in net assets is reported instead of net
income.
Revenues & expenses are
measured on the accrual basis.
Revenues & expenses are
measured on the accrual basis.
Statement of Activities and Changes in Net Assets
Change in net assets = difference between
revenues and expenses
Change in net assets = difference between
revenues and expenses
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General Specific purpose Time Restricted Plant replacement and
expansion Endowment
Hospital AccountingHospital Accounting
Fund Groups
Restricted
Uses accrual accounting
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Overview of Hospital Accounting/ReportingOverview 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
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Time Restricted FundsTime Restricted Funds
Contributions, transfers, and other changes are recorded directly in the fund. Resources are held until transferred to general fund for expenditures.
Resources not available until date specified by donor.
Distinguishing features
Accounting basis
Financial statements
Balance SheetStatement of OperationsStatement of Changes in Net AssetsStatement of Cash Flows
Overview of Hospital Accounting/Reporting Overview of Hospital Accounting/Reporting
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Plant Replacement and Plant Replacement and Expansion FundsExpansion 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 addition to plant assets.
Overview of Hospital Accounting/ReportingOverview of Hospital Accounting/Reporting
Distinguishing features
Accounting basis
Financial statements
Balance SheetStatement of OperationsStatement of Changes in Net AssetsStatement of Cash Flows
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Endowment FundsEndowment Funds
Contributions, transfers, and other changes are recorded directly in the fund. Resources are held until transferred to general fund for expenditures.
Principal must be preserved.
Overview of Hospital Accounting/ReportingOverview of Hospital Accounting/Reporting
Distinguishing features
Accounting basis
Financial statements
Balance SheetStatement of OperationsStatement of Changes in Net AssetsStatement of Cash Flows
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amounts due from patients third-party payors other insurers of health
care pledges or grants interfund transactions
amounts due from patients third-party payors other insurers of health
care pledges or grants interfund transactions
Balance Sheet - HospitalsBalance Sheet - Hospitals
Receivables may include--
Receivables should be reported at the anticipated
realizable amount.
Receivables should be reported at the anticipated
realizable amount.
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Balance Sheet - HospitalsBalance Sheet - Hospitals
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.
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Balance Sheet - HospitalsBalance Sheet - Hospitals
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.
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Balance Sheet - HospitalsBalance Sheet - Hospitals
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.
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Net patient service revenue– Revenue from inpatient and outpatient care (excluding charity care
and contractual adjustments).
– 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 Operations - HospitalsStatement of Operations - Hospitals
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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.
Donations - HospitalsDonations - Hospitals
FASB 116 requires donated services to be recognized if the services received --
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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
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Public Colleges and Universities
Public colleges and Public colleges and universities must follow universities must follow the same guidelines as the same guidelines as
state and local state and local governments. (GASB governments. (GASB
retains primary retains primary reporting authority)reporting authority)
Their statements will Their statements will differ from those of differ from those of
private colleges and private colleges and universities.universities.
Public colleges and Public colleges and universities must follow universities must follow the same guidelines as the same guidelines as
state and local state and local governments. (GASB governments. (GASB
retains primary retains primary reporting authority)reporting authority)
Their statements will Their statements will differ from those of differ from those of
private colleges and private colleges and universities.universities.
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Other NFP - 26Colleges and Universities--Special ConventionsColleges and Universities--Special Conventions
•For university-sponsored scholarships, revenue is credited at full standard rate for tuition.
•Scholarships recorded as contra revenue (no service required) or expenditure (service required)
•For university-sponsored scholarships, revenue is credited at full standard rate for tuition.
•Scholarships recorded as contra revenue (no service required) or expenditure (service required)
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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Revenue and Expenditure RecognitionRevenue and Expenditure Recognition
If a student withdraws and receives a partial reimbursement
of tuition and fees, record as contra revenue
If a student withdraws and receives a partial reimbursement
of tuition and fees, record as contra revenue
Colleges and Universities--Special ConventionsColleges and Universities--Special Conventions
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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.
Revenue and Expenditure RecognitionRevenue and Expenditure Recognition
Colleges and Universities--Special ConventionsColleges and Universities--Special Conventions
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Mandatory transfers = transfers 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 = transfers 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 = 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 = 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.
Colleges and Universities--Special ConventionsColleges and Universities--Special Conventions
Designated funds = internal designation similar to appropriations of retained earnings. These funds
remain unrestricted.
Designated funds = internal designation similar to appropriations of retained earnings. These funds
remain unrestricted.
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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.
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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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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:
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Cemeteries Civic organizations Fraternal
organizations Labor unions Libraries Museums Other cultural
institutions Performing arts
organizations Political parties
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
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Cemeteries Civic organizations Fraternal
organizations Labor unions Libraries Museums Other cultural
institutions Performing arts
organizations Political parties
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
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
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Other Not-for-Profit EntitiesOther Not-for-Profit Entities
Statement of financial position Statement of activities Statement of cash flows Statement of functional
expenses – Not required but often appropriate
Statement of financial position Statement of activities Statement of cash flows Statement of functional
expenses – Not required but often appropriate
Financial statements for a ONPO: