Modified accrual accounting: basis revenues are recognized when they are measurable and available (statement of revenues,
expenditures and changes in fund balance) VS. full accrual accounting basis revenues are recognized when earned (statement
of activities)
Cash flow statement prep: direct method (add up all cash inflows, subtract out cash outflows and report totals in OIF
categories) OR indirect method (assumes revenues increase NAs and revenues flow in as cash so change in NA = change in
cash)
Gov’t vs. NPOS: liquidity less important for gov’t b/c gov’t can raise taxes and borrow $; profitability is less important for
gov’t b/c budgets (in theory) keep revenues = spending; solvency is far more important for gov’t b/c gov’t are great at
promising to spend $ later
Calculating annual depreciation = (purchase price – salvage value)/(estimated useful life)
Deferred revenue/unearned revenue = LIABILITY - represents a future claim on org resources (taking payment on a service not
yet delivered)
Financial strategy (mission informed, near-term financial goal): tactics are how we implement strategy (sell capital assets, expand
investments, re-negotiate loan terms) and fill “gaps” in org’s financial position
Cost center allocation–2 main indirect costs (admin and adv.) are NOT allocated to other cost centers (drawback:
underestimate full cost)
Direct allocation – (Direct costs +Allocated costs)/Units  allocate Adv and Admin to the other cost centers using FTEs as
alloc. factor (drawback: some employees make more, some require more funds or focus)
Step down – first allocate service center with highest costs to other service centers AND program costs centers  then
calculate (direct costs + allocated adv costs +allocated admin costs)/units (drawback: service centers may be overlapping or
double counted, assumes program centers use or benefit from service centers equally)
Cost pooling: with step down, allows “load up” all indirect costs they’re “allowed” to bill to state and local gov’t grants;
“unload” admin costs they report on their financials (program expense ratio really high!)
Indirect cost rate (step down): total indirect costs (allocated adv and admin) are a percentage of total direct costs
Activity based costing: attempts to better connect cost drivers to actual activities
Operating margin: Extent to which gov’t relies on taxes, rather than user charges to cover its operating expenses. Ownsource revenue ratio: what percentage of its revenue come from outside sources beyond its control. Coverage 1: gov
debt, Coverage 2: Enterprise fund debt.
10+: “Among the best”. Easily meet immediate spending. More-than-Adequate reserves to mitigate immediate effects of
unexpected events, and capacity to generate adequate resources to cover its longterm spending.
5-9: “Better than most”. Most ratios are better than peer governments, + a few are equal to peers.
1-4: “Average”. Most ratios are equal to, or weaker than peers. -4 – 0: “worse than most”. Most ratios worse than peers. <-5:
“Among the worst”. Major financial problems, may be insolvent.
Profit = px – (a +bx) --- Break-even quantity = a/(p-b) --- Break-even Price = (a/x) + b --- fixed (a); variable (b); price (b), Q (x)
When given a donation or profit desired, add (for profit) and subtract (for donation) the amount from fixed
Budget variance: difference between actual and budgeted results; unfavorable (negative) variance = actual exceeds budgeted 
total variance (budgeted/actual)  volume variance: flexible – original budget; spending: actual – flexible budget  if actual
budget is different than flexible budget, the spending variance will be inaccurate b/c the flexible budget did not predict what
was actually spent
Spending Variance = Actual Volume (Actual Price – Budgeted Price)
Volume Variance = Budgeted Price (Actual Volume – Budgeted Volume)
Profit = pX – (A + BX)
Investments have increased a lot. Purchases of investments went up Mostly government bonds, Unrestricted Net Assets grew
considerably, 33% increase in contribution revenues, $2,000,000 quasi-endowment, a Board-designated amount of unrestricted
net assets, to support organization’s food purchases. Decent amount ($400,000+) of unrealized gains on investments. No bad
debt recorded  no allowance for uncollectible balances has been established; Total debt = long-term debt, no LT debt
Assumptions: the grants are government grants; fundraising revenue = contributions and special events (no in-kind);
Contributed revenue = Contributions line only, does include special events. (does not include in-kind or grants) Note 8: 45%
(2017) and 46% (2016) were from 2