Name: Financial and Accounting Guide for Not-for-Profit Organizations By John H. McCarthy
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Financial and Accounting Guide for Not-for-Profit Organizations Summary

Financial and Accounting Guide for Not-for-Profit Organizations by John H. McCarthy

A completely revised and expanded edition of the nonprofit industry finance and accounting standard Filled with authoritative advice on the financial reporting, accounting, and control situations unique to not-for-profit organizations, Financial and Accounting Guide for Not-for-Profit Organizations, Eighth Edition is recognized by professionals as the industry standard reference on not-for-profit finance and accounting. Prepared by the PricewaterhouseCoopers Not-for-Profit Industry Services Group, the book includes accounting, tax, and reporting guidelines for different types of organizations, step-by-step procedures and forms, and more. A new chapter on public debt has also been added. * Presents the latest updates to regulatory reporting and disclosure changes in recent years * Reflects the totally revamped and revised AICPA accounting and audit guide for not-for-profit organizations * Addresses concerns of all nonprofit organizations, including health and welfare organizations, colleges and universities, churches and other religious organizations, libraries, museums, and other smaller groups * Includes step-by-step procedures and forms, detailed explanations of financial statements, and a how-to section on setting up and keeping the books Financial and Accounting Guide for Not-for-Profit Organizations, Eighth Edition is the completely revised and expanded new edition of the bestselling not-for-profit accounting guide.

About John H. McCarthy

JOHN H. McCARTHY served as the national leader of PricewaterhouseCoopers' Education and Nonprofit Practice before his retirement in 2005. Since then, he has served as the Senior Vice President for Administration and Finance at Northeastern University, an adjunct lecturer at Harvard University's Kennedy School of Government, and on the boards of several educational and nonprofit institutions. NANCY E. SHELMON retired as a senior partner from PricewaterhouseCoopers in 2010 after more than thirty years working with not-for-profit and higher education clients. A frequent speaker at AICPA and state society conferences, she also served as a member of the AICPA's Not-for-Profit Expert Panel for eleven years and has worked with some of the most widely respected not-for-profit organizations in North America. JOHN A. MATTIE serves as PricewaterhouseCoopers' National Education and Nonprofit Practice Leader. He currently serves on the Financial Accounting Standards Board Not-for-Profit Advisory Committee, and is the firm's representative on the AICPA Not-for-Profit Entities Expert Panel and the AICPA Government Audit Quality Control Center.

About the Authors xvii Contributors xix Preface xxi INTRODUCTION Including the FASB Codification 1 CHAPTER 1 Responsibilities for Fiscal Management 5 1.1 Keeping Financial Records for the Organization 6 1.2 Preparing Accurate and Meaningful Financial Statements 6 1.3 Implementing a Budget and Anticipating Financial Problems 7 1.4 Safeguarding Financial Assets and Providing Effective Internal Controls 8 1.5 Complying with Federal and State Reporting and Regulatory Requirements 9 1.6 Communicating Fiscal Information to the Board of Directors and the Audit Committee 9 1.7 Ten Key Points to Consider in Not-for-Profit Fiscal Management 10 1.8 Conclusion 14 PART I KEY FINANCIAL CONCEPTS 15 CHAPTER 2 Accounting Distinctions between Not-for-Profit and Commercial Organizations 17 2.1 Stewardship versus Profitability 17 2.2 Principal Areas of Accounting Differences 18 2.3 Conclusion 22 CHAPTER 3 Cash- versus Accrual-Basis Accounting 23 3.1 Cash and Accrual Statements Illustrated 23 3.2 Combination Cash Accounting and Accrual Statements 27 3.3 Modified Cash Basis 29 3.4 Legal Requirements 30 3.5 Conclusion 30 CHAPTER 4 Fund Accounting and Internal Financial Reporting 31 4.1 Fund Accounting Defined 33 4.2 Categories of Funds 34 4.3 Alternative Fund Groupings 37 4.4 Typical Fund Financial Statements 38 4.5 Transfers between Funds 40 4.6 Elimination of Funds for Reporting Purposes 41 4.7 Conclusion 43 CHAPTER 5 Fixed Assets and Depreciation 45 5.1 General Principles Working Definitions 45 5.2 Property and Equipment Classes and Kinds of Assets 47 5.3 Fixed Assets Where Title May Revert to Grantors 49 5.4 Collections 50 5.5 Fair Value Measurement 51 5.6 Contributions Restricted for Purchase of Fixed Assets 51 5.7 Impairment or Disposal of Long-Lived Assets 52 5.8 Conclusion and Recommendations 55 CHAPTER 6 Investment Income, Gains and Losses, and Endowment Funds 57 6.1 Accounting Principles 58 6.2 Total Return Concept 68 CHAPTER 7 Affiliated Organizations, Pass-Through Transactions, and Mergers 73 7.1 Types of Relationships Often Found 74 7.2 Definition of the Reporting Entity 76 7.3 Mergers of Not-for-Profit Organizations 81 Appendix 7-A Factors to Be Considered in Deciding Whether a Pass-Through Gift Is Truly Revenue and Expense to a Pass-Through Entity 84 Appendix 7-B Transfers of Assets to a Not-for-Profit Organization or Charitable Trust That Raises or Holds Contributions of Others 87 Appendix 7-C Factors Related to Control That May Indicate That an Affiliated Organization (A) Should Be Combined with the Reporting Organization (R), If Other Criteria for Combination Are Met 91 CHAPTER 8 Contributions, Pledges, and Noncash Contributions 93 8.1 Expendable Current Support 94 8.2 Gifts-in-Kind 99 8.3 Support Not Currently Expendable 103 Appendix 8-A: Checklist: Factors to Be Considered in Deciding Whether a Particular Gift (for Operating Purposes) Should Be Classified as Purpose-Restricted or Not 114 Appendix 8-B: Checklist: Factors to Be Considered in Distinguishing Contracts for the Purchase of Goods or Services from Restricted Grants 116 Appendix 8-C: Checklist: Factors to Be Considered in Assessing Whether Contributed Services Are Considered to Require Specialized Skills 118 Appendix 8-D: Checklist: Factors to Be Considered in Determining Whether an Organization Would Typically Need to Purchase Services If Not Provided by Donation 120 Appendix 8-E: Checklist: Factors to Be Considered in Assessing Whether a Donor Has Made a Bona Fide Pledge to a Donee 123 Appendix 8-F: Checklist: Factors to Be Considered in Deciding Whether a Gift or Pledge Subject to Donor Stipulations Is Conditional or Restricted 126 CHAPTER 9 Accounting Issues Relating to Fundraising 129 9.1 Accounting for Gifts 130 9.2 Accounting for Fundraising Expenses 137 9.3 Other Tax Considerations 141 PART II FINANCIAL STATEMENT PRESENTATION 143 CHAPTER 10 Cash-Basis Financial Statements 145 10.1 Simple Cash-Basis Statement 145 10.2 Simple Statement with Last Year s Figures and Budget 147 10.3 Combined Cash-Basis Income Statement and Balance Sheet 147 10.4 Separate Statement of Receipts and Disbursements and Statement of Net Assets 150 10.5 Statement of Income with Certain Cash Transactions Omitted 152 10.6 Modified Cash-Basis Statements 154 10.7 Conclusion 155 CHAPTER 11 Accrual-Basis Financial Statements 157 11.1 Simple Accrual-Basis Statements 157 11.2 Accrual-Basis Statements Fundraising Organization 160 11.3 Accrual-Basis Statements International Organization 163 11.4 Conclusion 166 CHAPTER 12 Multiclass Financial Statements 167 12.1 FASB Accounting Standards Codification 958, Not-for-Profit Entities 168 12.2 Preparation of Statement of Cash Flows 171 12.3 Class Financial Statements Explained 182 12.4 Columnar Format Presentation 191 12.5 A Complicated Set of Class Financial Statements 193 12.6 Summary or Condensed Statements 204 12.7 Conclusion 205 Appendix 12-A Financial Statements of Not-for-Profit Organizations Review Points 206 PART III ACCOUNTING AND REPORTING GUIDELINES 211 CHAPTER 13 Voluntary Health and Welfare Entities 213 13.1 Accounting Principles 215 13.2 Accounting for Contributions 215 13.3 Accounting for Other Income 218 13.4 Accounting for Expenses 218 13.5 Accounting for Assets 218 13.6 Net Assets 219 13.7 Financial Statements 220 Appendix 13-A Checklist: Factors to Be Considered in Deciding Whether Allocation of Joint Costs of Multipurpose Activities (under ASC 958-720-55) Is Appropriate 235 Appendix 13-B Checklist: Consideration of Whether Items Might Be Reported as Operating or Nonoperating (within the Context of ASC 958-225-45) 238 CHAPTER 14 Colleges and Universities 241 14.1 Authoritative Pronouncements 242 14.2 The Principal Financial Statements 242 14.3 Accounting Principles 246 CHAPTER 15 The External Financial Statement Reporting Model for Organizations Reporting under GASB Standards 251 15.1 Introduction 252 15.2 Definition of a Government 252 15.3 Generally Accepted Accounting Principles 253 15.4 External Financial Reporting Model 254 15.5 Basic Financial Statements 255 15.6 The Reporting Entity 262 15.7 Assets, Liabilities, and Deferred Inflows/Outflows 264 15.8 Revenues and Expenses 272 15.9 Other Reporting Matters 277 CHAPTER 16 Health Care Organizations 281 16.1 Introduction 282 16.2 Accounting Guidance 282 16.3 Financial Statements 285 16.4 Accounting Principles 289 CHAPTER 17 Accounting Standards for Other Not-for-Profit Organizations 313 17.1 Accounting Principles 313 17.2 Financial Statements 317 17.3 Combined Financial Statements 317 17.4 Appendix 17-A:Checklist: Factors to Be Considered in Deciding Whether a Payment Described as Membership Dues Is Properly Recorded by the Recipient as Dues or as a Contribution 319 CHAPTER 18 Special Accounting Issues for Specific Organizations 323 18.1 Associations and Professional Societies 324 18.2 Churches 326 18.3 Clubs 327 18.4 Libraries 329 18.5 Museums 329 18.6 Performing Arts Organizations 330 18.7 Private Foundations 332 18.8 Religious Organizations Other Than Churches 334 18.9 Research and Scientific Organizations 335 18.10 Private Elementary and Secondary Schools 336 18.11 Public Broadcasting Stations 337 CHAPTER 19 The Financial Accounting Standards Board and Future Trends in Not-for-Profit Accounting 339 19.1 Financial Accounting Standards Board 340 19.2 Trends in Not-for-Profit Accounting 348 19.3 New FASB Statements of Financial Accounting Standards That Affect Not-For-Profit Organizations 353 19.4 Other FASB Pronouncements and Projects 359 19.5 Conclusion 362 PART IV CONTROLLING THE NOT-FOR-PROFIT ORGANIZATION 363 CHAPTER 20 The Importance of Budgeting 365 20.1 The Budget: A Plan of Action 365 20.2 Monthly and Quarterly Budgets 370 20.3 Timely Interim Statements 373 20.4 A Five-Year Master Plan 380 20.5 Conclusion 384 CHAPTER 21 Small Organizations Obtaining the Right Accountant 385 21.1 Level of Accounting Services Needed 386 21.2 Personality Characteristics 388 21.3 Alternatives to Accountants 388 21.4 Timing in Hiring a Replacement 390 21.5 Conclusion 390 CHAPTER 22 Small Organizations Providing Internal Control 391 22.1 Reasons for Internal Control 392 22.2 Fundamentals of Internal Control 393 22.3 Some Basic Controls 394 22.4 Fidelity Insurance 398 22.5 Conclusion 399 CHAPTER 23 Effective Internal Accounting Control for Not-for-Profit Organizations 401 23.1 Introduction to Internal Accounting Control 402 23.2 Elements of an Effective Internal Accounting Control System 406 23.3 Basic Internal Accounting Control System 411 23.4 Specific Nonprofit Internal Accounting Controls 419 CHAPTER 24 Independent Audits 427 24.1 Functions and Limitations 427 24.2 Benefits of an Independent Audit 432 24.3 Selecting a Certified Public Accountant 434 24.4 Public Accountants 435 24.5 Audit Committees 436 24.6 Conclusion 438 Appendix 24-A Checklist: Criteria for Selection of a CPA 440 Appendix 24-B Changing Role for the Audit Committee 443 Appendix 24-C Basic Template for an Audit Committee Charter 446 CHAPTER 25 Investments 453 25.1 Types of Investments 454 25.2 Valuation of Investments 456 25.3 Key Considerations When Investing in Alternative Investment Funds 458 25.4 Pooling versus Individual Investments 460 25.5 Calculating Share Values in Pooled Investments 463 25.6 Allocation of Pooled Income 466 25.7 Conclusion 467 PART V PRINCIPAL FEDERAL TAX AND COMPLIANCE REQUIREMENTS 469 CHAPTER 26 E-Business for Not-for-Profit Organizations: How Can Not-for-Profits Manage the Risks to Maximize E-Business Opportunities? 471 26.1 Whether You Call It E-Business or Technology-Enabled Business, It Still Matters 472 26.2 Ask Yourself These Questions 474 26.3 Objectives 475 26.4 How Did We Get to the Internet Economy? 475 26.5 Where Are We Today? 477 26.6 What Is Risk Management? 478 26.7 How Are Not-for-Profit Organizations Using E-Business Today? 490 26.8 How Are Academic Institutions Using E-Business? 491 26.9 What Is the Path to E-Business Success? 493 26.10 What E-Business Models Exist? 494 26.11 Cloud Computing 496 CHAPTER 27 Principal Tax Requirements 497 27.1 Organizations Exempt from Tax 499 27.2 Charitable Organizations 500 27.3 Tax Status of Charitable Organizations: Public Charity or Private Foundation 502 27.4 Other Concerns for Charities 505 27.5 Private Foundations 517 27.6 Private Operating Foundations 521 27.7 Noncharitable Exempt Organizations 522 27.8 Recognition of Exemption and Annual Reporting to IRS 527 27.9 Federal Information and Tax Return Filing Requirements 530 27.10 State Information and Tax Reporting Issues 546 27.11 Donor-Advised Funds 548 27.12 Restrictions on Supporting Organizations 550 27.13 Federal Employment Taxes 551 27.14 IRS Audits and Compliance Programs 551 CHAPTER 28 Audits of Federally Funded Programs 553 28.1 Basic Requirements 553 28.2 Requirements and Definitions 555 28.3 Responsibilities of the Receiving Organization 558 28.4 What to Expect from the Audit 562 28.5 American Recovery and Reinvestment Act of 2009 565 28.6 Conclusion 566 PART VI SETTING UP AND KEEPING THE BOOKS 567 CHAPTER 29 Cash-Basis Bookkeeping 569 29.1 Three Steps in a Bookkeeping System 569 29.2 Checkbook System 570 29.3 Cash-Basis System 575 29.4 Conclusion 584 CHAPTER 30 Simplified Accrual-Basis Bookkeeping 585 30.1 Books and Records 586 30.2 Chart of Accounts 587 30.3 Monthly Accrual Entries 588 30.4 Payroll Taxes 594 30.5 Fixed-Asset Register and Depreciation Schedule 596 30.6 Investment Ledger 600 30.7 Conclusion 602 CHAPTER 31 Full Accrual-Basis Bookkeeping 603 31.1 Books and Records 603 31.2 Chart of Accounts and Coding 605 31.3 Sales Register 607 31.4 Accounts Receivable Subsidiary Ledger 610 31.5 Cash Receipts Book 612 31.6 Accounts Payable Register 612 31.7 Cash Disbursements Book 614 31.8 Monthly Accrual Entries 616 31.9 Conclusion 618 CHAPTER 32 Fund Accounting Bookkeeping 619 32.1 Chart of Accounts 620 32.2 Books and Records 622 32.3 Interfund Transactions 624 32.4 Trial Balance 629 32.5 Conclusion 629 CHAPTER 33 Automating the Accounting Records 631 33.1 When to Consider Automating or Upgrading 631 33.2 What to Automate 632 33.3 Selecting the Right Software 636 33.4 Implementing the New System 639 33.5 Common Pitfalls to Successful Automation 640 33.6 Conclusion 642 CHAPTER 34 Tax-Exempt Debt 643 34.1 Characteristics 643 34.2 Accounting and Reporting 644 34.3 The SEC s Role and Authority 648 34.4 Proposed Municipal Market Reforms 653 Appendix A Code of Conduct 655 Appendix B The Future of U.S. Standard Setting 665 Appendix C Keeping Current 671 Appendix D Alternative Investments Audit Considerations 688 Index 709

Additional information

Sku

CIN1118083660G

ISBN 13

9781118083666

ISBN 10

1118083660

Title

Financial and Accounting Guide for Not-for-Profit Organizations by John H. McCarthy

Author

John H. McCarthy

Series

Wiley Nonprofit Authority

Condition

Used - Good

Binding type

Hardback

Publisher

John Wiley & Sons Inc

Year published

2012-03-06

Number of pages

736

Prizes

N/A

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Book picture is for illustrative purposes only, actual binding, cover or edition may vary.

Note

This is a used book - there is no escaping the fact it has been read by someone else and it will show signs of wear and previous use. Overall we expect it to be in good condition, but if you are not entirely satisfied please get in touch with us

Financial and Accounting Guide for Not-for-Profit Organizations John H. McCarthy

Financial and Accounting Guide for Not-for-Profit Organizations by John H. McCarthy

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Financial and Accounting Guide for Not-for-Profit Organizations Summary

Financial and Accounting Guide for Not-for-Profit Organizations by John H. McCarthy

About John H. McCarthy

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