GOVERNMENT NFPs PRIVATE NFPs

Voluntary Health & Welfare OrganizationsOther Not-for-Profit Organizations NOT hospitals, colleges, universities

“Accounting for Contributions Received and Contributions Made”. “Financial Statements of NFP organizations”.

Accounting equation:ASSETS = LIABILITIES + NET ASSETS (3) classes UNRESTRICTED NET ASSETS:. TEMPORARILY RESTRICTED: NOT temporarily or permanently restricted DONOR-IMPOSED restriction on the TIMING and/or PURPOSE OF USE of donated resource. PERMANENTLY RESTRICTED: DONOR-IMPOSED restriction that is PERMANENT IN NATURE (restrictions cannot be fulfilled by either passage of time or by actions of the organization). ACCRUAL BASIS

ILLUSTRATION OF CLASSIFICATION OF NET ASSETS A nongovernment VHWO or ONPO has the following resources: Resources restricted for use in future years but not restricted to a specific purpose……………………..$1,300,000 Unrestricted resources designated for plant expansion……………………………………………………. 3,000,000 Undesignated, unrestricted resources…………………. 9,000,000 Resources restricted BY DONORS for: Scholarships………………………. $4,000,000 Research………………………… 10,000,000 Plant Expansion……………….. 5,000,000 Term Endowments…………. 2,000,000 Permanent Endowments….. 50,000,000 Resources invested in fixed assets (net of related accumulated depreciation and debt)…………. 17,000,000 Resources restricted by bond indenture for plant expansion………………………………….. 4,500,000 Additional information provided indicates that land with a recorded value of $1,500,000 must be used for the purposes of the organization in perpetuity.

CLASSIFY as to UNRESTRICTED (U), TEMPORARILY RESTRICTED (TR), OR PERMANENTLY RESTRICTED (PR) A nongovernment VHWO or ONPO has the following resources: Resources restricted for use in future years but not restricted to a specific purpose……………………..$1,300,000 Unrestricted resources designated for plant expansion……………………………………………………. 3,000,000 Undesignated, unrestricted resources…………………. 9,000,000 Resources restricted BY DONORS for: Scholarships………………………. $4,000,000 Research………………………… 10,000,000 Plant Expansion……………….. 5,000,000 Term Endowments…………. 2,000,000 Permanent Endowments….. 50,000,000 Resources invested in fixed assets (net of related accumulated depreciation and debt)…………. 17,000,000 Resources restricted by bond indenture for plant expansion………………………………….. 4,500,000 Additional information provided indicates that land with a recorded value of $1,500,000 must be used for the purposes of the organization in perpetuity.

CLASSIFY as to UNRESTRICTED (U), TEMPORARILY RESTRICTED (TR), OR PERMANENTLY RESTRICTED (PR) A nongovernment VHWO or ONPO has the following resources: Resources restricted for use in future years but not restricted to a specific purpose……………………..$1,300,000 Unrestricted resources designated for plant expansion……………………………………………………. 3,000,000 Undesignated, unrestricted resources…………………. 9,000,000 Resources restricted BY DONORS for: Scholarships………………………. $4,000,000 Research………………………… 10,000,000 Plant Expansion……………….. 5,000,000 Term Endowments…………. 2,000,000 Permanent Endowments….. 50,000,000 Resources invested in fixed assets (net of related accumulated depreciation and debt)…………. 17,000,000 Resources restricted by bond indenture for plant expansion………………………………….. 4,500,000 Additional information provided indicates that land with a recorded value of $1,500,000 must be used for the purposes of the organization in perpetuity. NOTE: This unrestricted resources has aspects of restriction and that is noted with a footnote. DESIGNATED is again an internal designation

CLASSIFY as to UNRESTRICTED (U), TEMPORARILY RESTRICTED (TR), OR PERMANENTLY RESTRICTED (PR) A nongovernment VHWO or ONPO has the following resources: Resources restricted for use in future years but not restricted to a specific purpose……………………..$1,300,000 Unrestricted resources designated for plant expansion……………………………………………………. 3,000,000 Undesignated, unrestricted resources…………………. 9,000,000 Resources restricted BY DONORS for: Scholarships………………………. $4,000,000 Research………………………… 10,000,000 Plant Expansion……………….. 5,000,000 Term Endowments…………. 2,000,000 Permanent Endowments….. 50,000,000 Resources invested in fixed assets (net of related accumulated depreciation and debt)…………. 17,000,000 Resources restricted by bond indenture for plant expansion………………………………….. 4,500,000 Additional information provided indicates that land with a recorded value of $1,500,000 must be used for the purposes of the organization in perpetuity.

CLASSIFY as to UNRESTRICTED (U), TEMPORARILY RESTRICTED (TR), OR PERMANENTLY RESTRICTED (PR) A nongovernment VHWO or ONPO has the following resources: Resources restricted for use in future years but not restricted to a specific purpose……………………..$1,300,000 Unrestricted resources designated for plant expansion……………………………………………………. 3,000,000 Undesignated, unrestricted resources…………………. 9,000,000 Resources restricted BY DONORS for: Scholarships………………………. $4,000,000 Research………………………… 10,000,000 Plant Expansion……………….. 5,000,000 Term Endowments…………. 2,000,000 Permanent Endowments….. 50,000,000 Resources invested in fixed assets (net of related accumulated depreciation and debt)…………. 17,000,000 Resources restricted by bond indenture for plant expansion………………………………….. 4,500,000 Additional information provided indicates that land with a recorded value of $1,500,000 must be used for the purposes of the organization in perpetuity.

CLASSIFY as to UNRESTRICTED (U), TEMPORARILY RESTRICTED (TR), OR PERMANENTLY RESTRICTED (PR) A nongovernment VHWO or ONPO has the following resources: Resources restricted for use in future years but not restricted to a specific purpose……………………..$1,300,000 Unrestricted resources designated for plant expansion……………………………………………………. 3,000,000 Undesignated, unrestricted resources…………………. 9,000,000 Resources restricted BY DONORS for: Scholarships………………………. $4,000,000 Research………………………… 10,000,000 Plant Expansion……………….. 5,000,000 Term Endowments…………. 2,000,000 Permanent Endowments….. 50,000,000 Resources invested in fixed assets (net of related accumulated depreciation and debt)…………. 17,000,000 Resources restricted by bond indenture for plant expansion………………………………….. 4,500,000 Additional information provided indicates that land with a recorded value of $1,500,000 must be used for the purposes of the organization in perpetuity.

CLASSIFY as to UNRESTRICTED (U), TEMPORARILY RESTRICTED (TR), OR PERMANENTLY RESTRICTED (PR) A nongovernment VHWO or ONPO has the following resources: Resources restricted for use in future years but not restricted to a specific purpose……………………..$1,300,000 Unrestricted resources designated for plant expansion……………………………………………………. 3,000,000 Undesignated, unrestricted resources…………………. 9,000,000 Resources restricted BY DONORS for: Scholarships………………………. $4,000,000 Research………………………… 10,000,000 Plant Expansion……………….. 5,000,000 Term Endowments…………. 2,000,000 Permanent Endowments….. 50,000,000 Resources invested in fixed assets (net of related accumulated depreciation and debt)…………. 17,000,000 Resources restricted by bond indenture for plant expansion………………………………….. 4,500,000 Additional information provided indicates that land with a recorded value of $1,500,000 must be used for the purposes of the organization in perpetuity.

CLASSIFY as to UNRESTRICTED (U), TEMPORARILY RESTRICTED (TR), OR PERMANENTLY RESTRICTED (PR) A nongovernment VHWO or ONPO has the following resources: Resources restricted for use in future years but not restricted to a specific purpose……………………..$1,300,000 Unrestricted resources designated for plant expansion……………………………………………………. 3,000,000 Undesignated, unrestricted resources…………………. 9,000,000 Resources restricted BY DONORS for: Scholarships………………………. $4,000,000 Research………………………… 10,000,000 Plant Expansion……………….. 5,000,000 Term Endowments…………. 2,000,000 Permanent Endowments….. 50,000,000 Resources invested in fixed assets (net of related accumulated depreciation and debt)…………. 17,000,000 Resources restricted by bond indenture for plant expansion………………………………….. 4,500,000 Additional information provided indicates that land with a recorded value of $1,500,000 must be used for the purposes of the organization in perpetuity.

CLASSIFY as to UNRESTRICTED (U), TEMPORARILY RESTRICTED (TR), OR PERMANENTLY RESTRICTED (PR) A nongovernment VHWO or ONPO has the following resources: Resources restricted for use in future years but not restricted to a specific purpose……………………..$1,300,000 Unrestricted resources designated for plant expansion……………………………………………………. 3,000,000 Undesignated, unrestricted resources…………………. 9,000,000 Resources restricted BY DONORS for: Scholarships………………………. $4,000,000 Research………………………… 10,000,000 Plant Expansion……………….. 5,000,000 Term Endowments…………. 2,000,000 Permanent Endowments….. 50,000,000 Resources invested in fixed assets (net of related accumulated depreciation and debt)…………. 17,000,000 Resources restricted by bond indenture for plant expansion………………………………….. 4,500,000 Additional information provided indicates that land with a recorded value of $1,500,000 must be used for the purposes of the organization in perpetuity.

CLASSIFY as to UNRESTRICTED (U), TEMPORARILY RESTRICTED (TR), OR PERMANENTLY RESTRICTED (PR) A nongovernment VHWO or ONPO has the following resources: Resources restricted for use in future years but not restricted to a specific purpose……………………..$1,300,000 Unrestricted resources designated for plant expansion……………………………………………………. 3,000,000 Undesignated, unrestricted resources…………………. 9,000,000 Resources restricted BY DONORS for: Scholarships………………………. $4,000,000 Research………………………… 10,000,000 Plant Expansion……………….. 5,000,000 Term Endowments…………. 2,000,000 Permanent Endowments….. 50,000,000 Resources invested in fixed assets (net of related accumulated depreciation and debt)…………. 17,000,000 Resources restricted by bond indenture for plant expansion………………………………….. 4,500,000 Additional information provided indicates that land with a recorded value of $1,500,000 must be used for the purposes of the organization in perpetuity.

CLASSIFY as to UNRESTRICTED (U), TEMPORARILY RESTRICTED (TR), OR PERMANENTLY RESTRICTED (PR) A nongovernment VHWO or ONPO has the following resources: Resources restricted for use in future years but not restricted to a specific purpose……………………..$1,300,000 Unrestricted resources designated for plant expansion……………………………………………………. 3,000,000 Undesignated, unrestricted resources…………………. 9,000,000 Resources restricted BY DONORS for: Scholarships………………………. $4,000,000 Research………………………… 10,000,000 Plant Expansion……………….. 5,000,000 Term Endowments…………. 2,000,000 Permanent Endowments….. 50,000,000 Resources invested in fixed assets (net of related accumulated depreciation and debt)…………. 17,000,000 Resources restricted by bond indenture for plant expansion………………………………….. 4,500,000 Additional information provided indicates that land with a recorded value of $1,500,000 must be used for the purposes of the organization in perpetuity. so net to “U” is 15,500,000

CLASSIFY as to UNRESTRICTED (U), TEMPORARILY RESTRICTED (TR), OR PERMANENTLY RESTRICTED (PR) A nongovernment VHWO or ONPO has the following resources: Resources restricted for use in future years but not restricted to a specific purpose……………………..$1,300,000 Unrestricted resources designated for plant expansion……………………………………………………. 3,000,000 Undesignated, unrestricted resources…………………. 9,000,000 Resources restricted BY DONORS for: Scholarships………………………. $4,000,000 Research………………………… 10,000,000 Plant Expansion……………….. 5,000,000 Term Endowments…………. 2,000,000 Permanent Endowments….. 50,000,000 Resources invested in fixed assets (net of related accumulated depreciation and debt)…………. 17,000,000 Resources restricted by bond indenture for plant expansion………………………………….. 4,500,000 Additional information provided indicates that land with a recorded value of $1,500,000 must be used for the purposes of the organization in perpetuity. so net to “U” is 15,500,000 because its not a donor restriction

CLASSIFY as to UNRESTRICTED (U), TEMPORARILY RESTRICTED (TR), OR PERMANENTLY RESTRICTED (PR) A nongovernment VHWO or ONPO has the following resources: Resources restricted for use in future years but not restricted to a specific purpose……………………..$1,300,000 Unrestricted resources designated for plant expansion……………………………………………………. 3,000,000 Undesignated, unrestricted resources…………………. 9,000,000 Resources restricted BY DONORS for: Scholarships………………………. $4,000,000 Research………………………… 10,000,000 Plant Expansion……………….. 5,000,000 Term Endowments…………. 2,000,000 Permanent Endowments….. 50,000,000 Resources invested in fixed assets (net of related accumulated depreciation and debt)…………. 17,000,000 Resources restricted by bond indenture for plant expansion………………………………….. 4,500,000 Additional information provided indicates that land with a recorded value of $1,500,000 must be used for the purposes of the organization in perpetuity. so net to “U” is 15,500,000 because its not a donor restriction Permanent: $50,000,000 + $1,500,000 = $51,500,000 TEMPORARY: $1,300,000 + $4,000,000 + $10,000,000 + $5,000,000 + $2,000,000 = $22,300,000 UNRESTRICTED: $3,000,000 + $9,000, ,500,000 + $4,500,000 = $32,000,000 TOTAL NET ASSETS…………………….. $105,800,000

1.Statement of Financial Position (Balance Sheet). 2.Statement of Activities. 3.Statement of Cash Flows. 4. Statement of Functional Expenses required for VHWO.

Present aggregated totals of ASSETS, LIABILITIES and NET ASSETS

Present UNRESTRICTED, TEMPORARILY RESTRICTED & PERMANENTLY RESTRICTED.

INVESTMENTS are recorded at COST or FMV if donated. Subsequent FMV accounting Usually UNRESTRICTED NA increase

Receivables = PLEDGES Pledge is UNCONDITIONAL PROMISE TO GIVE. Pledges Receivable $XX.XX Pledge Revenue $XX.XX * Conditional pledges: Are disclosed in notes.

FIXED assets are recorded at COST if purchased; FMV if donated.

LIABILITIES and NET ASSETS also presented

2.Statement of Activities.

REVENUES and GAINS reported by SOURCE

EXPENSES reported by FUNCTION

Changes in each of (3) classes of net assets are reported SEPARATELY

ALL EXPENSES are listed with UNRESTRICTED!!!!

Temporarily restricted NA must be released to Unrestricted NA before they can be spent.

CONTRIBUTIONS recognized as revenue in period unconditionally promised and/or received as either UR, TR or PR.

If contribution given with temporary restriction, however, that restriction is met in the same period that revenues are recognized: (2) ways to recognize: INCREASE TEMPORARILY RESTRICTED satisfy restriction DECREASE TEMPORARILY RESTRICTED INCREASE UNRESTRICTED METHOD 1 METHOD 2 INCREASE UNRESTRICTED CONTRIBUTIONS

CONDITIONAL PLEDGE –> REVENUE WHEN CONDITIONS ARE MET UNCONDITIONAL PLEDGES DUE IN FUTURE YEARS (even if not restricted) are recognized as revenue NOW (but as temporarily restricted). * shown as unrestricted revenue if donor says pledge is for use this year.

MEMBERSHIP DUES are generally unrestricted.

DONATED GOODS & SERVICES are reported at FMV at time of contribution and expense when used or sold. Recognized as revenue only if: -Require specialized skills. -Provided by individuals with those skills. -Would typically have to be purchased if not donated.

EXPENSES shown as PROGRAM SERVICE or SUPPORT SERVICE. -relate directly to PRIMARY MISSION of the NFP. DO NOT relate directly to NPO’s mission (general administration, membership development, fund-raising).

3.Statement of Cash Flows.

OPERATING INVESTING & FINANCING very similar to FAS 95.

ILLUSTRATION OF NON-GOVERNMENT NFP ACCOUNTING 1.Contributions of $3,000,000 (including $250,000 of pledges not collected by year end) were received from donors during the year without restriction. 250K which is without restriction is still reported as restricted because cash is not in (unless donor specifies pledge is for this year-then its unrestricted revenue) Cash……………. $2,750,000 (for simplicity assume pledge is only receivable) Pledges Receiv.. 250,000 Unrestricted Revenue………………….. $2,750,000 Temporarily Restricted Revenue……. $ 250,000 2.Contributions of $1,000,000 restricted for public presentations were received in cash during the year. Cash……….$1,000,000 Temporarily restricted revenue……….$1,000,000 3.The foundation received gifts of $10M to establish a permanent endowment to be used to generate resources for the foundation’s community service programs. Cash……..$10,000,000 Permanent restricted revenue…….. $10,000,000

4.Income restricted for specific community service programs was earned on the permanent endowment, $320,000 (assume cash). Cash………….$320,000 Temporary restricted investment income……..$320,000 5.Computers were purchased from unrestricted resources, $72,000. Computers……………… $72,000 Cash……………………………$72,000 * purchase doesn’t show on Statement of Activity. 6.A fund-raising banquet was held. Revenues (unrestricted) were $290,500 and direct costs of the banquet totaled $97,500. Assume all cash. Cash……….$290,500 Unrestricted special events revenue………$290,500 Unrestricted direct cost of event……$97,500 Cash……………………………………….$97,500

7.Contributions of $1,500,000 were received. These contributions are restricted for building an activity center for the foundation. Cash………..$1,500,000 Temporarily restricted contribution revenue…….$1,500,000 8.Membership dues, for which members receive no benefits total $75,000. Cash……………….$ 75,000 Unrestricted membership dues revenue………..$75,000 9.Unrestricted investment income earned totaled $83,400. Cash………… $83,400 Unrestricted investment income…………… $83,400

10.Expenses incurred for mailings, brochures, and other items for the purpose of soliciting donations totaled $95,000. Assume cash. Supporting service expense (fundraising)..$95,000 Cash……………………………………………..$95, Administrative costs incurred during the year totaled $253,000. Assume cash. Supporting service expense (mgt & gen)…….. $253,000 Cash……………………………………………….$253, Community service program expenses payable from restricted gifts totaled $220,000. Other expenses for community service programs totaled $2,110,000. Expenses for the foundation’s education programs totaled $200,000, and expenses for its public presentations program were $555,000. Unrestricted community service expenses $2,330,000 Unrestricted education expenses…………. 200,000 Unrestricted public presentation expenses.. 555,000 Cash………………………………………………….. $3,085,000 Temporarily Restricted NA- Reclassifications out…$775K Unrestricted NA- Reclassifications In………………….…….$775K Need to rollover $775K of restricted gifts into unrestricted in order to be able to spend them. The other expenses are assumed to already be coming from unrestricted.

13.Costs incurred on the construction of the activity center totaled $922,000. Construction in progress……..$922,000 Cash……………………………..$922, Unrestricted pledges made by contributors in the prior year but collected in the current year totaled $135,000. Cash…………… $135,000 Pledges receivable……….. $135,000 Temporarily restricted net assets- Reclassification Out…………… $135,000 Unrestricted NA- Reclassifications IN………$135, Unrestricted NA, January 1, 20X3, were $1,400,000. Need this to make Statement of Activity.

16.Temporarily restricted net assets, January 1, 20X3 were $303,000. Again, need this to make Statement of Activity. 17.There were no permanent endowments at the BOY. Again, need this to make Statement of Activity. 18.The foundation reports restricted gifts and income as increases in temporarily restricted net assets even if the restriction is satisfied in the year the gifts or income are initially recorded.

NFP Name Statement of Activity For the Year Ended December 31, 20X3 CHANGE IN UNRESTRICTED NET ASSETS Revenues and gains: Contributions………………………………………………………..$2,750,000 Special Events……………………………..$290,500 Less: Direct costs of special events.. (97,500) 193,000 Membership dues………………………………………………….. 75,000 Investment income………………………………………………… 83,400 Total revenue and gains…………………………….$3,101,400 Net assets released from restrictions……………………… 910,000 (total from entries) Increase in unrestricted NA……………………………….$4,011,400 Expenses: Program services: Community service…………………………$2,330,000 Public presentations………………………. 555,000 Education……………………………………. 200,000 Total program services…………………………………$3,085,000 Supporting services: Management & general…………………………………….. 253,000 Fund raising………………………………………………….. 95,000 Total supporting services……………………………….. 348,000 Total expenses……………………………………………..$3,433,000 Net increase in unrestricted net assets……………….$ 578,400

NFP Name Statement of Activity For the Year Ended December 31, 20X3 (continued) CHANGE IN TEMPORARILY RESTRICTED NET ASSETS: Contributions……………………………………………….$2,750,000 Investment income………………………………………… 320,000 Net assets released from restrictions…………………. ( 910,000)(from entries) Increase in temporarily restricted NA……………….... $2,160,000 CHANGES IN PERMANENTLY RESTRICTED NET ASSETS: Contributions………………………………………….$10,000,000 INCREASE IN NET ASSETS………………………………… $12,738,400 Net assets at January 1…………………………………….. $1,703, Temporarily restricted net assets, January 1, 20X3 were $303,000. Again, need this to make Statement of Activity. 15.Unrestricted NA, January 1, 20X3, were $1,400,000. Need this to make Statement of Activity. Net assets at December 31………………………………… $14,441,400