Non-Profit and Governmental Accounting Essentials

• Statement of Financial Position (Balance Sheet): Assets – Liabilities = Net Assets
• Statement of Activities (Income Statement)
• Statement of Cash Flows

Net Assets Classification:

1. Without Donor Restriction: Available for general use. Board-designated funds are considered internal and are not donor-restricted.
2. With Donor Restriction: Restricted by purpose or time.
3. Temporary in Nature: Restriction expected to be met by the passage of time (e.g., interest on a scholarship fund).
4. Perpetual (Endowment Fund): Donor requires the principal to be maintained permanently. Earnings may have separate treatment.
5. Refundable Advance: Conditional contributions create a liability until the condition is met, then recognized as revenue.
6. Pledge: A promise to give. If unconditional, revenue is recognized immediately.

Operating Activities

• Cash receipts from contributions without donor restrictions.
• Cash receipts from fees for services, membership dues, and mission-related revenues.
• Cash payments for operating expenses.
• Interest and dividends received (unless restricted for reinvestment).
• Changes in working capital accounts.
• Note: Interest paid is reported as a supplemental disclosure.

Investing Activities

• Purchases and sales of property, plant, and equipment (PPE).
• Purchases and sales of investments (unless restricted for long-term purposes).

Financing Activities (Think: Restricted)

• Contributions restricted for acquiring/constructing long-lived assets.
• Contributions restricted for long-term investment (endowments).
• Borrowings and debt repayments.
• Interest and dividends restricted for reinvestment.

Key Points: Contributions restricted for long-term purposes are financing inflows; when spent on PPE, the outflow is investing.

NFP Disclosure Requirements

• Functional and Natural Expenses: Must disclose the relationship between functional (program vs. support) and natural (salaries, rent, etc.) classifications.
• Net Assets: Disclose restrictions and board-designated amounts.
• Liquidity and Availability: Qualitative and quantitative data on meeting cash needs within one year.
• Significant Accounting Policies: Basis of accounting and revenue recognition.
• Contributions: Nature of promises to give.

NFP Cash Flow & General Disclosures

• Noncash Contributions: Disclose significant donated services, materials, and collection items.
• Cash Flow Disclosures: Classification of flows and supplemental data (e.g., interest paid).
• Subsequent Events: Events occurring after the balance sheet date.
• Related Party Transactions: Disclose all material dealings.
• Contingencies and Commitments: Material obligations.
• Endowments: Policies and interpretation of laws (e.g., UPMIFA).
• Risks and Uncertainties: Concentration of credit risk.