Not-For-Profit Organizations

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Not-For-ProfitOrganizations

• (FAS 116, 117 and
• SOP 98-2)

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FAS 117 Summary

• 6 A complete set of financial statements
  shall include
• Statement of Financial Position
• Statement of Activities
• Statement of Cash Flows
• And additionally for VHW organizations,
• Statement of Functional Expenses (matrix format
  showing functional and natural)

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Other FAS 117 Cites

• 12 Must show information on liquidity
• 13 Must report 3 classes of net assets on the
  statement of financial position
• Unrestricted
• Temporarily Restricted
• Permanently Restricted

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FAS 116
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Accounting Issues

• Contributions received and made
• Contributed services can only be recorded if
• Enhance or create non-financial assets or,
• Require a specialized skill, are provided by
  those possessing those skills, and would
  typically need to be purchased

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Issues (Continued)

• 2) Contributed Collection Items (Art)
• Need not be booked if certain conditions are met
• If booked, are considered PERMANENTLY RESTRICTED
  net assets

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• 3) What is the difference between PERMANENT and
  TEMPORARY restrictions?
• 4) Restrictions are those imposed by donors,
  not by the organization itself

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Accounting Issues

1. Gross vs. Net
2. Support vs. Revenue
3. Revenues vs. Gains
4. Expenses vs. Losses

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TEMPORARILY RESTRICTED NET ASSETS

• There are several ways to temporarily restrict
  net assets
• 1) Time restrictions
• 2) Purpose restrictions
• 3) Capital Assets (a time restriction that
  expires over the useful life of the asset)
• 4) What about receipts of unconditional promises
  to give?

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CONDITIONAL promises

• A condition is different from a restriction
• What are conditions?
• Example I will give 400 if I get a refund on
  my taxes next year.
• These promises are not booked until the condition
  has been met (promise becomes unconditional)

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SOP 98-2

• Accounting for Costs of Activities That Include
• Fund Raising

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• If the criteria of PURPOSE, AUDIENCE, and
  CONTENT are met, the costs of these activities
  can be allocated between fund raising and the
  applicable program (or mgt and general function.)

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SOP 98-2 summary (continued)

• If ANY of the 3 criterion are NOT MET, then all
  costs are reported as fund raising.

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PURPOSE

• The purpose criterion is met is the purpose of
  the activity includes accomplishing program or
  management and general functions.
• To accomplish program functions, the activity
  should call for specific action by the audience
  that will help accomplish the organizations
  mission.
• Asking the audience to make contributions is NOT
  a call for specific action!

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Purpose (continued)

• Educating the audience is NOT a call for specific
  action
• Asking the audience to make contributions is NOT
  a call for specific action
• The purpose criterion is NOT met if a majority of
  compensation or fees is based on contributions
  raised for that activity

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PURPOSE (continued)

• Additional considerations
• Is a similar activity conducted without the fund
  raising component?
• Does the organization measure program results and
  accomplishments of the activity?
• Is a different medium used for the same program
  activity?

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AUDIENCE

• A Rebuttable presumption exists that the
  Audience criterion is NOT met if the audience
  includes prior donors or is otherwise selected
  based on its ability or likelihood to contribute
  to the organization.

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AUDIENCE (continued)

• Basically, whether you meet the Audience
  criterion or not is based on how you selected the
  audience (who to mail to, etc.) The criterion is
  met if you selected the audience based on
• 1) The audiences need to use programs
• 2) The audiences ability to take action
• 3) Org. is required to use a particular audience

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CONTENT

• The content criterion is met if
• 1) The activity calls for specific action by the
  recipient that will help accomplish the
  organizations mission and the needs and benefits
  of the action are clearly evident and,
• 2) The joint activity fulfills one or more of
  the organizations management and general
  responsibilies.