Accounting and Reporting Practices of Not-for-Profit Organizations

Understand and apply the requirements of FASB and AICPA pronouncements to your not-for-profit clients. Consider real-world financial statements, cases and problems faced by CPAs with not-for-profit clients and by executives of not-for-profit organizations.

Objectives: 

• Understand note disclosures unique to not-for-profits
• Gain knowledge of presentation requirements and choices allowed under GAAP
• Solve problems involving dues, content of financial statements and allocation of costs relating to fundraising

Prerequisite:  Experience in the not-for-profit environment

VALUE AID! Not-for-Profit Organizations AICPA Audit and Accounting Guide and the AICPA’s Checklists and Illustrative Financial Statements for Not-for-Profit Organizations

Case 1 - Sources of GAAP – The Theater

Learning Objectives

To recognize characteristics that separate not-for-profit organizations from businesses.

Also, to help you identify sources of generally accepted accounting principles (GAAP) applicable to not-for-profit organizations.

[Before tackling this case, consider the Audit Guide (Guide) page v, the Preface, and Chapter 1, including Appendix G to Chapter 1. Note. The references used in this course are to the May 1, 2007, Not-for-Profit Organizations Audit and Accounting Guide as this was the Guide in place as the course was written.]

You are a practicing CPA with many business clients but little familiarity with not-for-profit organizations. You have been approached by the treasurer of the local theater, a not-for-profit organization. The treasurer explains that the theater is preparing an application for a state grant. The application calls for financial statements prepared in accordance with generally accepted accounting principles. The statements will be for the year ending June 30, 2008. "Will you help me with these statements?" asks the treasurer.

Assume that you say you will help the treasurer. Where will you turn for information on Generally Accepted Accounting Principles (GAAP) for not-for-profit theater groups?

For self study participants only, the CPE Standards require the inclusion of review questions that provide periodic learning feedback. Please go to the review section at the end of the course to access the review questions for this chapter.

Case 2 - Rotary Luncheon – The Big Picture Learning Objectives

To introduce basic financial statements for not-for-profit organizations. Also, to review the major features of accounting and reporting for not-for-profit organizations. (Before tackling this case, consider Chapter 3 of the Guide.)

The setting is a table during lunch at a local Rotary meeting.

You are the CPA, Jane. Seated at the table with you are Nate, an auto dealer; Ann, owner of a dress shop; and Jack, president of a local bank. A conversation begins. Nate: Jane, what are you up to now that the tax season is over? Jane: Some of the heat is off. But now I'm catching up on my work with my not-for-profit

clients. Some of the rules for accounting for not-for-profits are unique, and some auditing problems are different. Ann: Are the books kept differently? What are the differences?

Jane: Payroll's the same. And they pay bills when due. And the books are not very different. Jack: Well, what's it all about, Jane? We're not familiar with accounting for not-for-profits. What is it like?

Without boring your neighbors at the table, but recognizing that they are fairly sophisticated about finance and business, present a brief answer, based on the information in Chapter 3 of the Guide. Emphasize a few major points.

Case 3 - Practice Concerns

Learning Objective

To alert you to five special concerns when a CPA works on not-for-profit clients' statements.

(Before tackling this case, consider the following paragraphs in the Guide: 3.20, 3.21, 14.04, 14.05, 3.05, 3.10, 3.18, 3.12, 3.13, and 13.41 to 13.55.)

Respond to the following concerns about accounting for not-for-profits.

1. In the financial statements, is it appropriate to present summary comparative figures for the prior year?
2. What exactly is meant by the term "restriction?"
3. Is the Statement of Cash Flows the same for not-for-profits as for businesses?
4. The Statement of Activities leads down to Change in Net Assets. Is it permissible to break out the changes resulting from operations?
5. What accounting treatment should be followed for joint costs that include the costs of a fundraising appeal?

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