Nonprofit Management Certificate Course

							Nonprofit Management
  Certificate Course
Financial analysis and reporting
       Overall Objectives

• Differences between commercial and
  nonprofit
• Accounting and reporting concepts for
  nonprofits
• Unique accounting matters
• Basic reporting requirements
• Basic tax considerations
    Fiduciary Responsibility


• Recipients of service
• Contributors
• Revenue sources (i.e. Grantors)
Fiduciary Responsibility
       Benefits to Nonprofits


•   Federal income tax exemption
•   Other tax benefits
•   Ability to attract contributions
•   Employment and excise tax benefits
•   Preferred postal rates
•   Special annuity provisions
      Business Vs. Nonprofit


• Profit motive         • Managerial
• Cost or traditional     responsibility
  accounting            • Fund accounting
• Sales of goods and    • Donated assets
  services              • Financial statement
• Financial statement     users
  users
       Types of Nonprofits


• Voluntary health and welfare
• Nongovernmental
• Colleges and universities
     Financial Statement Users


•   Funding sources       • Governmental units
•   Regulatory agencies   • Creditors
•   Beneficiaries         • Constituent
•   Trustees/ directors     organizations
                          • Employees
Service Efforts and Accomplishments


•   What is the organization’s purpose?
•   Who does the organization serve?
•   What services are offered?
•   How are the services provided?
•   How well are the services delivered?
 Financial Statement Purpose


• Report nature and amount of available
  resources
• Identify principal programs and costs
• Disclose degree of control by donors
  over resource use
    Accrual Basis Reporting


• Goods/services purchased are recorded
  when title passes or services are
  received
• Revenues reported when earned
• Support recognized upon legal
  enforceable right to assets
    Basic Financial Statements


•   Statement of financial position
•   Statement of activities
•   Statement of cash flows
•   Notes to financial statements
•   Statement of functional expenses(vhw)
    Philosophy of Reporting

Where business enterprises and not-for-
 profits are alike, the financial statements
 should be similar because certain
 information is useful to resource providers
 regardless of the type of entity. However,
 when transactions and objectives are
 different, financial reporting should be
 different.
          Key Differences


• Contributions, where resources are
  received without return of value in
  exchange
• Donor-imposed restrictions
• Multiple performance indicators
  necessary
            Basic Resources


•   Unrestricted net assets
•   Designated net assets
•   Temporarily restricted net assets
•   Permanently restricted net assets
       Combined Financial
          Statements

• Look for elements of
  control:
  – Solicitation
  – Resource use
  – Assigned functions
Contributions - FASB No. 116


• Transfers that are
  – Nonreciprocal
  – Made or received voluntarily
  – To or from entities acting other than as
    owners
  – Unconditional
Rules for Recognizing Contributions


• Revenue recognition upon the
  occurrence of the underlying event
• Donor-imposed restrictions do not
  change timing of recognition
Rules for Recognizing Contributions


• Donor-imposed conditions affect the
  timing of the recognition
• Contributions are measured at fair
  value of the assets received
      Footnotes to Statements


•   Basis of accounting
•   Key definitions
•   Use of estimates
•   Additional analysis of financial
    statement numbers
Statement of Financial Position


•   Total assets
•   Total liabilities
•   Total net assets
•   Unrestricted net assets
•   Temporarily restricted net assets
•   Permanently restricted net assets
    Donor Imposed Restrictions


•   Support of particular programs
•   Investment for a specified term
•   Use in a specified future period
•   Acquisition of long-lived assets
Format of Statement
Statement of Activities - Purpose


• Effects of transactions changing net
  assets
• Relationship of those changes to each
  other
• How resources are used in providing
  various programs and services
Statement of Activities - Purpose


• Evaluate performance
• Assess service efforts and ability to
  provide service
• Assess how managers have discharged
  their stewardship
     Statement of Activities


• Change in net assets
• Change in permanently restricted net
  assets
• Change in temporarily restricted net
  assets
• Change in unrestricted net assets
     Statement of Activities


• Revenues - inflows of resources that
  result from an organization’s ongoing
  major and central activities
• Gains
• Contributed services
      Contributed Services


• Must create or enhance nonfinancial
  assets
• Require specialized skills, are provided
  by individuals possessing those skills
  and would typically need to be
  purchased if not donated
                   Expenses

• Always reported as decreases in
  unrestricted net assets
• Functional classification
  – Programs
  – Fund raising
  – Management and general
• Natural classification
  – Salaries, utilities, etc.
         Program Services


Activities that result in goods and services
 being distributed to beneficiaries,
 customers or members that fulfill the
 purposes or mission for which the
 organization exists.
     Management and General


•   Business management
•   General recordkeeping
•   Budgeting
•   Financing and related administrative
    activities
           Fund Raising


• Publicizing and conducting fund-
  raising campaigns
• Maintaining donor mailing lists
• Conducting special fund-raising events
      Functional Reporting

           Program   M&G    Fund
                           Raising
Salaries     xxx     xxx     xxx
Benefits
Travel
Supplies
          Cost Allocation


• Indirect        •   Cost study
• Direct          •   By transaction
• Allocation      •   Time study
                  •   Space utilization
        Reporting Options


• Investment revenues and expenses
• Contributions whose restrictions are
  met in same period
• Contributions of long-lived assets
Cash Flow Statement-purpose

• Ability to generate positive future cash
  flows
• Ability to meet obligations
• Reasons for differences between
  changes in net assets
• Effects of cash and noncash investing
  and financing activities