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Not-For-Profit Organizations

Not-For-Profit Organizations. (FAS 116, 117 and SOP 98-2). 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,

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Not-For-Profit Organizations

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  1. Not-For-ProfitOrganizations (FAS 116, 117 and SOP 98-2)

  2. 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)

  3. 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

  4. FAS #116

  5. 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

  6. Issues (Continued) • 2) Contributed Collection Items (Art): • Need not be booked if certain conditions are met • If booked, are considered PERMANENTLYRESTRICTED net assets

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

  8. Accounting Issues • Gross vs. Net • Support vs. Revenue • Revenues vs. Gains • Expenses vs. Losses

  9. 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?

  10. 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)

  11. SOP 98-2: Accounting for Costs of Activities That Include Fund Raising

  12. “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.)

  13. SOP 98-2 summary (continued): • “If ANY of the 3 criterion are NOT MET, then all costs are reported as fund raising.

  14. 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 organization’s mission.” • Asking the audience to make contributions is NOT a call for specific action!

  15. 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

  16. 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?

  17. 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.”

  18. 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 audience’s need to use programs • 2) The audience’s ability to take action • 3) Org. is required to use a particular audience

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

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