Other NFP - 1
OTHER NFP ENTITIES
Other NFP - 2
18-2
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)
Other NFP - 3
18-3
Contributions to Various Not-forProfits in 2004
Religious
Education
Foundations
Health
Arts and culture
Environmental
$ 88.30 Billion
33.84 Billion
24.00 Billion
20.89 Billion
13.99 Billion
7.61 billion
Source: AAFRC Trust for Philanthropy website,
http://www.aafrc.org (2005)
“That’s a lotta
Dough!!
Other NFP - 4
18-4
Large Nonprofits
2005 Revenues
YMCA of the USA
Salvation Army
American Red Cross
Catholic Charities USA
Goodwill Industries
$5,130,851,000
$4,559,292,000
$3,888,172,726
$3,286,072,070
$3,022,623,000
(Source: The Nonprofit Times, November 1, 2006)
Other NFP - 5
18-5
Authoritative Jurisdiction
Not-For-Profits
Public
Not-For-Profits
Private
Not-For-Profits
GASB has
jurisdiction.
FASB has
jurisdiction.
Other NFP - 6
18-6
Financial Reporting
Two basic ideas form the FASB’s
framework for not-for-profit standards:
The financial
statements should
focus on the entity
as a whole.
Reporting
requirements for notfor-profits should be
similar to business
entities, unless there
are critical
differences in the
needs of users.
Other NFP - 7
PRIVATE, NFP ENTITIES
 Reporting subject to FASB
 Classification of “Net Assets”
– Unrestricted
– Temporarily restricted
– Permanently restricted
 SFAS Nos. 93, 116, 117, 124, 136
Other NFP - 8
18-8
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 Notfor-Profit Organizations”
Other NFP - 9
18-9
Financial Reporting
FASB No. 117
requires three
financial
statements.
 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).
Other NFP - 10
18-10
Statement of Financial Position
Report assets,
liabilities, and
net assets.
Use the term “Net
assets” rather than
owners’ equity or
fund balance.
?
Net assets are presented
in 3 categories:
Unrestricted
Temporarily Restricted
Permanently Restricted
?
Other NFP - 11
18-11
Statement of Financial Position
 Restrictions must be imposed by outside
donors before an asset is classified as
“restricted”
– For financial statement purposes, boarddesignated 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
Other NFP - 12
18-12
Statement of Activities and Changes
in Net Assets
Change in net assets =
difference between
revenues and expenses
Change in net assets is
reported instead of net
income.
Per FASB No. 116, donors’
unconditional promises to
give are recognized as
both a revenue and a
receivable in the period of
promise.
Revenues &
expenses are
measured on the
accrual basis.
Other NFP - 13
Hospital Accounting
Fund Groups
General
Uses accrual accounting
Specific purpose
Time Restricted
Restricted
Plant replacement and
expansion
 Endowment




Overview of Hospital Accounting/Reporting
Other NFP - 14
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
Overview of Hospital Accounting/Reporting
Other NFP - 15
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
Overview of Hospital Accounting/Reporting
Other NFP - 16
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
Overview of Hospital Accounting/Reporting
Other NFP - 17
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
Balance Sheet - Hospitals
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
Other NFP - 18
Balance Sheet - Hospitals
Investments are initially recorded
at cost if purchased, or at fair
value at the date of receipt if
received as a gift.
Other NFP - 19
Balance Sheet - Hospitals
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.
Other NFP - 20
Balance Sheet - Hospitals
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.
Other NFP - 21
Statement of Operations - Hospitals
Other NFP - 22
 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 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.
Donations - Hospitals
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
typically need to
be purchased if not
provided by donation.
would
Other NFP - 23
Other NFP - 24
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.


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.
Other NFP - 25
17-25
Public Colleges and Universities
Public colleges and
universities must follow
the same guidelines as
state and local
governments. (GASB
retains primary
reporting authority)
Their statements will
differ from those of
private colleges and
universities.
Colleges and Universities--Special Conventions
Other NFP - 26
Revenue and Expenditure Recognition
Tuition and fees are
primary revenue sources
for the unrestricted current
fund.
•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)
Colleges and Universities--Special Conventions
Other NFP - 27
Revenue and Expenditure Recognition
If a student withdraws and
receives a partial reimbursement
of tuition and fees, record as
contra revenue
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.
Other NFP - 28
Colleges and Universities--Special Conventions
Other NFP - 29
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.
Designated funds = internal designation similar to
appropriations of retained earnings. These funds
remain unrestricted.
Public Colleges and Universities
Other NFP - 30
The GASB has specified that public
colleges and universities must follow
the accounting and financial reporting
standards as used for other
governmental entities.
Private Colleges and Universities
Other NFP - 31
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
Other NFP - 32
Voluntary Health and Welfare Organizations
Financial statements for a VHWO:




Statement
Statement
Statement
Statement
of
of
of
of
financial position
activities
cash flows
functional expenses
Other Not-for-Profit Entities
 Cemeteries
 Civic organizations
 Fraternal organizations
 Labor unions
 Libraries
 Museums
 Other cultural
institutions
 Performing arts
organizations
 Political parties
Other NFP - 33
Other Not-for-Profit Entities
 Cemeteries








Other NFP - 34
 Private and community
foundations
Civic organizations
 Private elementary and
Fraternal organizations
secondary schools
Labor unions
 Professional
Libraries
associations
Museums
 Public broadcasting
stations
Other cultural
institutions
 Religious organizations
Performing arts
 Social and country clubs
organizations
 Trade associations
Political parties
Other NFP - 35
Other Not-for-Profit Entities
Financial statements for a ONPO:




Statement
Statement
Statement
Statement
of financial position
of activities
of cash flows
of functional expenses
– Not required but often appropriate