Other NFP - 1 OTHER NFP ENTITIES

Other NFP - 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) 18-2

Other NFP - 3 Contributions to Various Not-for- Profits in 2004 Religious$ Billion Education Billion Foundations Billion Health Billion Arts and culture Billion Environmental 7.61 billion Source: AAFRC Trust for Philanthropy website, (2005) “That’s a lotta Dough!! 18-3

Other NFP - 4 Large Nonprofits 2005 Revenues YMCA of the USA$5,130,851,000 Salvation Army$4,559,292,000 American Red Cross$3,888,172,726 Catholic Charities USA$3,286,072,070 Goodwill Industries$3,022,623,000 (Source: The Nonprofit Times, November 1, 2006) 18-4

Other NFP - 5 Authoritative Jurisdiction 18-5

Other NFP - 6 Two basic ideas form the FASB’s framework for not-for-profit standards: Financial Reporting  The financial statements should focus on the entity as a whole.  Reporting requirements for not- for-profits should be similar to business entities, unless there are critical differences in the needs of users. 18-6

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 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 Not- for-Profit Organizations” 18-8

Other NFP - 9 FASB No. 117 requires three financial statements. Financial Reporting  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).  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). 18-9

Other NFP - 10 ? ? ? ? Report assets, liabilities, and net assets. Net assets are presented in 3 categories: l Unrestricted l Temporarily Restricted l Permanently Restricted Net assets are presented in 3 categories: l Unrestricted l Temporarily Restricted l Permanently Restricted Use the term “Net assets” rather than owners’ equity or fund balance. Statement of Financial Position 18-10

Other NFP - 11 Statement of Financial Position  Restrictions must be imposed by outside donors before an asset is classified as “restricted” –For financial statement purposes, board- designated 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 18-11

Other NFP - 12 Per FASB No. 116, donors’ unconditional promises to give are recognized as both a revenue and a receivable in the period of promise. Change in net assets is reported instead of net income. Revenues & expenses are measured on the accrual basis. Statement of Activities and Changes in Net Assets Change in net assets = difference between revenues and expenses 18-12

Other NFP - 13  General  Specific purpose  Time Restricted  Plant replacement and expansion  Endowment Hospital Accounting Fund Groups Restricted Uses accrual accounting

Other NFP - 14 Overview of Hospital Accounting/Reporting Specific Purpose Funds Contributions, transfers, and other changes are recorded directly in the fund. Resources are held until transferred to general fund for expenditures. Resources restricted for specific operating purposes. Accounting basis Distinguishing features Financial statements Balance Sheet Statement of Operations Statement of Changes in Net Assets Statement of Cash Flows

Other NFP - 15 Time Restricted Funds Contributions, transfers, and other changes are recorded directly in the fund. Resources are held until transferred to general fund for expenditures. Resources not available until date specified by donor. Distinguishing features Accounting basis 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 Contributions, transfers, and other changes are recorded directly in the fund. Resources are held until transferred to general fund for expenditures. Resources restricted for addition to plant assets. Overview of Hospital Accounting/Reporting Distinguishing features Accounting basis Financial statements Balance Sheet Statement of Operations Statement of Changes in Net Assets Statement of Cash Flows

Other NFP - 17 Endowment Funds Contributions, transfers, and other changes are recorded directly in the fund. Resources are held until transferred to general fund for expenditures. Principal must be preserved. Overview of Hospital Accounting/Reporting Distinguishing features Accounting basis Financial statements Balance Sheet Statement of Operations Statement of Changes in Net Assets Statement of Cash Flows

Other NFP - 18 amounts due from patients third-party payors other insurers of health care pledges or grants interfund transactions amounts due from patients third-party payors other insurers of health care pledges or grants interfund transactions Balance Sheet - Hospitals Receivables may include-- Receivables should be reported at the anticipated realizable amount.

Other NFP - 19 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 - 20 Balance Sheet - Hospitals Property, plant, and equipment is reported, together with any accumulated depreciation. Depreciation is recorded in the general fund. Separate disclosure should be made for assets that have restrictions placed on their use by the donor or have been designated by the board of directors for special use.

Other NFP - 21 Balance Sheet - Hospitals Long-term debt is shown in the balance sheet. This differs from most governmental entities in which a separate debt service fund is established to service debt. The net asset are segregated between those which are unrestricted, temporarily restricted, and permanently restricted.

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 third- party 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. Statement of Operations - Hospitals

Other NFP - 23 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. Donations - Hospitals FASB 116 requires donated services to be recognized if the services received --

Other NFP - 24  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. 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. Donations

Other NFP - 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. 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

Other NFP - 26 Colleges and Universities--Special Conventions 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) 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) Revenue and Expenditure Recognition Tuition and fees are primary revenue sources for the unrestricted current fund.

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

Other NFP - 28 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. Revenue and Expenditure Recognition 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. Colleges and Universities--Special Conventions Designated funds = internal designation similar to appropriations of retained earnings. These funds remain unrestricted.

Other NFP - 30 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.

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 Private Colleges and Universities

Other NFP - 32  Statement of financial position  Statement of activities  Statement of cash flows  Statement of functional expenses  Statement of financial position  Statement of activities  Statement of cash flows  Statement of functional expenses Voluntary Health and Welfare Organizations Financial statements for a VHWO:

Other NFP - 33 Cemeteries Civic organizations Fraternal organizations Labor unions Libraries Museums Other cultural institutions Performing arts organizations Political parties Cemeteries Civic organizations Fraternal organizations Labor unions Libraries Museums Other cultural institutions Performing arts organizations Political parties Other Not-for-Profit Entities

Other NFP - 34 Cemeteries Civic organizations Fraternal organizations Labor unions Libraries Museums Other cultural institutions Performing arts organizations Political parties Cemeteries Civic organizations Fraternal organizations Labor unions Libraries Museums Other cultural institutions Performing arts organizations Political parties Other Not-for-Profit Entities Private and community foundations Private elementary and secondary schools Professional associations Public broadcasting stations Religious organizations Social and country clubs Trade associations Private and community foundations Private elementary and secondary schools Professional associations Public broadcasting stations Religious organizations Social and country clubs Trade associations

Other NFP - 35 Other Not-for-Profit Entities  Statement of financial position  Statement of activities  Statement of cash flows  Statement of functional expenses –Not required but often appropriate  Statement of financial position  Statement of activities  Statement of cash flows  Statement of functional expenses –Not required but often appropriate Financial statements for a ONPO: