19-1
Baker / Lembke / King
Not-For-Profit
Entities
19
Electronic Presentation by
Douglas Cloud
Pepperdine University
McGraw-Hill/ Irwin
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Special-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.
McGraw-Hill/ Irwin
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19-2
Financial Reporting: Private NFP Entities
19-3
C. Alt donated $40,000 to a not-for-profit organization
to be used specifically for a research program.
Cash
Contributions
40,000
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.
Reclassification--Satisfaction of Program
Restriction
Cash
McGraw-Hill/ Irwin
40,000
40,000
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Financial Reporting: Private NFP Entities
19-4
Entries are required in the unrestricted net asset class.
Cash
Reclassification--Satisfaction of Programs
Restriction
Expense--Research Program
Cash
McGraw-Hill/ Irwin
40,000
40,000
40,000
40,000
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Colleges and Universities--Special Conventions
Revenue and Expenditure Recognition
Tuition and fees are
primary revenue sources
In cases of universityfor the unrestricted
sponsored scholarships,
current fund.
revenue is credited at the full
standard rate for tuition. The
scholarship is then recorded
as an expenditure.
McGraw-Hill/ Irwin
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
19-5
Colleges and Universities--Special Conventions
19-6
Revenue and Expenditure Recognition
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.
McGraw-Hill/ Irwin
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Colleges and Universities--Special Conventions
Revenue and Expenditure Recognition
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.
McGraw-Hill/ Irwin
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19-7
Transfers 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.
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.
McGraw-Hill/ Irwin
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
19-8
Public 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.
McGraw-Hill/ Irwin
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
19-9
Private Colleges and Universities
19-10
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
McGraw-Hill/ Irwin
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
19-11
Hospital Accounting
Fund Groups
•
•
•
•
•
Uses accrual accounting
General
Specific purpose
Time Restricted
Restricted
Plant replacement and expansion
Endowment
McGraw-Hill/ Irwin
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Overview of Hospital Accounting/Reporting
19-12
Specific Purpose Funds
Accounting
basis
Contributions, transfers, and other changes are
recorded directly in the fund. Resources are
held until transferred to general fund for
expenditures.
Distinguishing
features
Resources restricted for specific operating
purposes.
Financial
statements
Balance Sheet
Statement of Operations
Statement of Changes in Net Assets
Statement of Cash Flows
McGraw-Hill/ Irwin
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Overview of Hospital Accounting/Reporting
19-13
Time Restricted Funds
Accounting
basis
Contributions, transfers, and other changes are
recorded directly in the fund. Resources are
held until transferred to general fund for
expenditures.
Distinguishing
features
Resources not available until date specified by
donor.
Financial
statements
Balance Sheet
Statement of Operations
Statement of Changes in Net Assets
Statement of Cash Flows
McGraw-Hill/ Irwin
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Overview of Hospital Accounting/Reporting
19-14
Plant Replacement and
Expansion Funds
Accounting
basis
Contributions, transfers, and other changes are
recorded directly in the fund. Resources are
held until transferred to general fund for
expenditures.
Distinguishing
features
Resources restricted for addition to plant assets.
Financial
statements
Balance Sheet
Statement of Operations
Statement of Changes in Net Assets
Statement of Cash Flows
McGraw-Hill/ Irwin
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Overview of Hospital Accounting/Reporting
19-15
Endowment Funds
Accounting
basis
Contributions, transfers, and other changes are
recorded directly in the fund. Resources are
held until transferred to general fund for
expenditures.
Distinguishing
features
Principal must be preserved.
Financial
statements
Balance Sheet
Statement of Operations
Statement of Changes in Net Assets
Statement of Cash Flows
McGraw-Hill/ Irwin
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
19-16
Balance Sheet
Receivables should be
reported at the anticipated
realizable amount.
Receivables may include- amounts due from patients
 third-party payors
 other insurers of health care
 pledges or grants
 interfund transactions
McGraw-Hill/ Irwin
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
19-17
Balance Sheet
Investments are initially recorded
at cost if purchased, or at fair
value at the date of receipt if
received as a gift.
McGraw-Hill/ Irwin
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
19-18
Balance Sheet
Separate
Property,
disclosure
plant,should
and be
made
equipment
for assets
is reported,
that have
restrictions
togetherplaced
with any
on their
use
accumulated
by the donor
depreciation.
or have been
Depreciation
designated byisthe
recorded
board of
in
directors
the general
for special
fund.use.
McGraw-Hill/ Irwin
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
19-19
Balance Sheet
Long-term debt is shown in the
The net asset are segregated
balance sheet. This differs from
between those which are
most governmental entities in
unrestricted, temporarily
which a separate debt service
restricted, and permanently
fund is established to service
restricted.
debt.
McGraw-Hill/ Irwin
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Statement of Operations
19-20
• Net patient service revenue
– Revenue from inpatient and outpatient care.
• Contractual adjustments
– A deduction from revenue based on contracts with thirdparty 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.
McGraw-Hill/ Irwin
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
19-21
Donations
FASB 116 requires donated
services to be recognized if the
services received - 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.
McGraw-Hill/ Irwin
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
19-22
Donations
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.
McGraw-Hill/ Irwin


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.
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
19-23
General Fund
The hospital provides patient services of
$2,600,000 measured at standard rates.
Accounts Receivable
Patient Services Revenue
Gross charges at standard rate.
2,600,000
2,600,000
From this amount, $240,000 is deducted for
contractual adjustments with third-party payors.
Contractual Adjustments
Accounts Receivable
Deductions from gross revenue for
contractual adjustments.
McGraw-Hill/ Irwin
240,000
240,000
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
19-24
General Fund
The hospital receives income in 20X2 from
providing nonpatient services that include
operating a cafeteria and gift shop and from
vending machine commissions.
Cash
Revenue from Cafeteria Sales
Revenue from Gift Shop Sales
Revenue from Vending Machine
Commissions
Income from ancillary services.
McGraw-Hill/ Irwin
30,000
20,000
4,000
6,000
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
General Fund
19-25
The hospital incurs $2,600,000 in operating
expenses. Cash payments are made of $2,125,000.
Nursing Services Expense
800,000
Other Professional Services Expense
620,000
General Services Expense
700,000
Fiscal Services Expense
100,000
Administrative Service Expense
80,000
Medical Malpractice Costs
30,000
Bad Debts Expense
60,000
Depreciation Expense
200,000
Cash
2,125,000
Allowance for Uncollectibles
60,000
Inventories
90,000
Prepaid Expenses
5,000
Accumulated Depreciation
200,000
Accounts Payable
50,000
Accrued Expenses
30,000
Estimated Medical Malpractice Costs
Payable
30,000
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/ Irwin
19-26
General Fund
The hospital receives donated services valued at $10,000.
Other Professional Services Expense
Donated Services Revenue
Receive donated services.
10,000
10,000
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
Contributions--Unrestricted
Unrestricted contributions received.
Inventory
Contributions--Unrestricted
Donated supplies received.
McGraw-Hill/ Irwin
63,000
63,000
30,000
30,000
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
19-27
General Fund
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
Earnings resources reserved by hospital’s
governing board for purchase of fixed
assets.
McGraw-Hill/ Irwin
10,000
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19-28
General Fund
Equipment costing $100,000, with a book
value $50,000, was sold for $55,000.
Cash
Accumulated Depreciation
Property, Plant, and Equipment
Gain on Disposal of Equipment
Sale of hospital equipment. The cash
will be used in the operations of the
hospital.
McGraw-Hill/ Irwin
55,000
50,000
100,000
5,000
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
19-29
General Fund
Funds are received from a specificpurpose fund totaling $120,000, for
education and research.
Cash
120,000
Net Assets Released from Program Use
Restrictions
Record payment for reimbursement of
operating expenditures made in
accordance with restricted gift.
McGraw-Hill/ Irwin
120,000
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19-30
General Fund
Collected
The remaining
$2,250,000
transactions
on receivables
during the
and20X2
wrote
off
fiscal
$50,000
year affect
in accounts
only balance
as uncollectible.
sheet accounts.
Also,
Typical
acquired
of these
inventory
transactions
that cost
are collections
$50,000. of
receivables and acquiring inventory.
Cash
2,250,000
Allowance for Uncollectibles
50,000
Accounts Receivable
2,300,000
Collect some receivables and write-off
$50,000 as uncollectible.
Inventories
50,000
Cash
50,000
Acquire inventories.
McGraw-Hill/ Irwin
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
19-31
Plant and Expansion Fund
During the year, equipment with a fair value
of $25,000 was donated to the hospital.
Property, Plant, and Equipment
Contributions--Plant
Received donated equipment with a fair
value of $25,000.
25,000
25,000
A $60,000 cash donation was received for the
purpose of acquiring additional equipment.
Cash
Contributions--Plant
Received restricted gifts for use to
acquire equipment.
McGraw-Hill/ Irwin
60,000
60,000
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
19-32
Endowment Fund
A total of $415,000 in new permanent
endowments is received and $400,000 is used to
acquire additional investments.
Cash
415,000
Contributions--Permanent Endowment
Receive additional endowments.
Investments
400,000
Cash
Acquire additional investments.
McGraw-Hill/ Irwin
415,000
400,000
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
19-33
Voluntary Health and Welfare Organizations
Financial statements for a VHWO:
•
•
•
•
McGraw-Hill/ Irwin
Statement of financial position
Statement of activities
Statement of cash flows
Statement of functional expenses
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Other Not-for-Profit Entities
19-34
 Cemeteries
 Civic organizations
 Fraternal organizations
 Labor unions
 Libraries
 Museums
 Other cultural institutions
 Performing arts
organizations
 Political parties
McGraw-Hill/ Irwin
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Other Not-for-Profit Entities
 Cemeteries
19-35
 Private and community
foundations
 Civic organizations
 Private elementary and
 Fraternal organizations
secondary schools
 Labor unions
 Professional associations
 Libraries
 Public broadcasting
 Museums
stations
 Other cultural institutions
 Religious organizations
 Performing arts
 Social and country clubs
organizations
 Trade associations
 Political parties
McGraw-Hill/ Irwin
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
19-36
Chapter Nineteen
The
End
McGraw-Hill/ Irwin
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.