Pages: 7

This chapter provides an easy-to-understand description of what a not-for-profit (NFP) organization is and explains many of their unique characteristics and how NFPs differ from commercial entities. It also provides definitions of many confusing terms that are commonly used or misused in the NFP world.

Pages: 12

Many people have great ideas and want to translate those ideas into action by creating a new NFP but don’t know where to start. This chapter provides step-by-step instructions for creating a new NFP by answering the four basic, what, who, when and how questions. It also explains which forms to complete to apply for income tax exemption with the IRS and with government agencies regulate NFPs.

Pages: 10

NFPs, like any commercial enterprise, must have rules for managing and overseeing the operations of their organization. This chapter discusses the typical hierarchical structure of an NFP, from the role and responsibilities of the Board of Directors or Trustees to the role of management. It also covers the role of the Accounting Department.

Pages: 16

The term, Internal Controls, is thrown around often with many times very little understanding of what the term really means. This chapter discusses the basic principles of internal controls and provides useful examples of many of the important internal controls that every NFP should have, especially when it comes to cash controls and protecting physical assets. It also covers an organization’s accounting system, from the type of software used to the configuration of the system and the chart of accounts.

Pages: 16

The words “accounting rules” and “GAAP” scare most non-financial people (and even some accountants), but not understanding the most basic tenants of accounting makes it very difficult to know how to read required financial statements and reports. This chapter provides easy to understand definitions of important foundational bookkeeping and accounting terms. It demystifies the terms debit and credit and explains why some general ledger accounts are typically debit or credit type accounts. It also covers the difference between cost and fair value accounting, which are important concepts when it comes to recording certain transactions.

Pages: 30

This chapter goes deep into defining different types of assets such as cash, accounts, contributions and loans receivables, prepaid expenses, inventory, investments, property and equipment, security deposits, and operating leases. It provides useful examples of how to record the acquiring of these assets in the accounting records. Very important, it covers the fairly new NFP rules for categorizing and treating different types of receivables such as income derived from contracts with customers and income derived from contributions and grants. It explains and defines the very confusing areas of contributions with conditions and contributions with restrictions and the rules for capitalizing office leases.

Pages: 12

This chapter does a deep dive of defining the most common liability accounts such as accounts payable, accrued expenses, loans and notes payable, deferred revenue, and refundable advances. It provides useful and easy to understand examples for recording these type of transactions. It also covers and explains the different categories of net assets including net assets without donor restrictions and net assets with donor restrictions and how these net asset categories get reported on the financial statements.

Pages: 17

One of the most important areas in operating any organization is generating revenue. This is no less so with NFPs. Although an NFP can earn revenue in a number of ways such as through membership income and the sale of products and services, one of the largest areas for generating revenue for NFPs is through the receipt of contributions and grants. This chapter provides comprehensive information on how to record different types of contributions such as those with conditions or restrictions, as well as donated services. It also covers expense reimbursement grants and how to disclose the receipt of contributed nonfinancial assets.

Pages: 4

Before an NFP can receive tax-deductible contributions it must apply for income tax exemption with the Internal Revenue Service. However, this might not happen for a number of years after an NFP is formed. To fill in the gap many newly formed NFPs will form a relationship with another public charity called a fiscal sponsor to act as an intermediary to receive tax-deductible contributions from donors, and then remit the money to the non-tax-exempt NFP. This chapter discusses fiscal sponsorships and the difference between a fiscal sponsor and a fiscal agent. It also discusses donor-advised funds.

Pages: 19

One of the largest expenses for many, if not for most NFPs are salaries and related payroll costs. However, there is a lot of confusion and misinformation about the correct way to classify service providers. Far too many times, NFPs classify service providers as independent contractors when in fact they should be classified as employees. This chapter explains the proper way to classify service providers and how to record personnel costs in the accounting system, an area that confuses even many bookkeepers and accountants. It also covers recording expense allocations, fundraising activities, joint costs, and pension and retirement plans.

Pages: 16

In order to see how well or poorly an organization is doing one needs to look at their annual financial statements. But what exactly are NFP financial statements, how many are there and what information does each statement present? This chapter provides in-depth detail on the four required financial statements: statement of financial position, statement of activities, statement of cash flows, and statement of expense by function and natural classification. It also covers what Notes to Financial Statements are and what those notes should include.

Pages: 12

This chapter deconstructs and covers a very complicated area of how to record and report investments such as stocks, bonds, and other securities. It covers certain investments setup as Endowments, which are permanently restricted by external donors or quasi-endowments, which are investments whose use is restricted by the Board of Directors. It also discusses investment type agreements called, split-interest agreements where an NFP is a partial recipient of an investment, or income earned on investments.

Pages: 5

Many NFPs have intertwining relationships with other organizations which may or may not be another NFP. The relationship might be a sharing of facilities, personnel or expenses, or involved in a joint program to generate revenue. Although an NFP cannot be owned by any one or more persons or entities, it can own a for-profit entity. The question then is, how are these types of relationships accounted for. This chapter aims to answer that question by discussing interrelated entities and what are consolidated or combined financial statements.

Pages: 10

One of the most common financial reports that most if not all NFPs create are budgets. But what exactly is a budget, are there different types of budgets and how are they prepared? Is there an organized or systematic way to prepare budgets? This chapter provide answers to these questions and provides graphic examples of several different revenue and expense budgets. The examples illustrated use a unique presentation method developed by the author based on over 40 years of the accounting experience.

Pages: 6

If you ask a random group of people to define an NFP, many would say an NFP is a public charity that performs some kind of beneficial or charitable service to the public and doesn’t pay income taxes. Although this is true in many cases, there are many different types of NFPs. This chapter discusses many different types of NFPs and how they differ in the way they generate revenue and support. It covers membership organizations, civic leagues, churches, museums, social clubs, colleges and universities, and other types of NFPs.

Pages: 27

Like public corporations, NFPs are highly regulated. The reason, however, is different. Because NFPs are exempt from paying income taxes and because some NFP classified as public charities receive tax-deductible contributions, the federal and state governments want to protect the general public and donors from possible unscrupulous acts. As such, NFPs are required to report annually very detailed information about their operations, revenue and expenses. This chapter cover the annual reporting on form 990 and explains in detail different sections of that return. It also discusses the difference between a public charity and a private foundation.

Pages: 9

The receipt of support, in the form of contributions and government grants, are unique to NFP organizations. And accounting for contributions and grants are probably one of the least understood area of accounting for public charities and other NFP transactions. Over the last 30 years the accounting rule-making bodies have instituted many new rules for accounting for these non-earned support, with many of the rules instituted only in the last 10 years. This chapter aims to clear up the confusion by going into great detail on how these transactions get reported.

Pages: 9

When most people think of an audit they think of a IRS tax audit. However, there are different kinds of audits, many having to do with the financial records and financial statements of an organization. Because of the need to protect the general public, many states require NFPs of various sizes to have their financial statement audited by an independent certified public accountant. And, in many cases, certain NFPs are audited directly by a state or local government agency. This chapter discusses some of the different types of audits and provides information on the different perspectives of the auditor and the auditee.

Pages: 3

NFP organizations have come a long way from the church run religious groups that existed in colonial times. Today, NFPs perform every type of function imaginable and are an integral part of the fabric of our society. Without the multitude of services that they perform, the United States and the world would be a much different and colder place.