Understanding Nonprofit Financial Statements

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Understanding Nonprofit Financial Statements

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Understanding Nonprofit Financial Statements

  1. 1. Understanding Nonprofit Financial Statements Presented by: Scott Haumersen, CPA, Managing Partner
  2. 2. In General• There are different types of nonprofit organizations so presentations may vary based on unique circumstances• Differences may exist between internal and external Financial Statements• Generally Accepted Accounting Principles (GAAP) apply including SFAS 116 & 117 along with other accounting industry standards
  3. 3. Basic Nonprofit Financial Statements According to GAAP• The Statement of Financial Position• The Statement of Activities• The Statement of Cash Flows• Notes to Financial Statements Optional: Statement of Functional Expense
  4. 4. Auditor’s Role• Provide an opinion on the GAAP Basis Financial Statements• Report deficiencies in internal control over financial reporting• Report certain information to audit committees
  5. 5. Basic Internal Financial Statements• May include: – Budget Analysis – Departmental Cost Centers – Projections – Cash Flow Analysis
  6. 6. Statement of Financial PositionPledges or Promises to Give• Many times these items are not recorded on interim financial statements• Oral, but most commonly written agreements by donors to contribute cash or other assets to the organization• May be Conditional or Unconditional – Conditional – Generally depends on some future event to occur before the promisor is bound (not recorded if there is more than a remote possibility the future event will not happen) – Unconditional – Generally the receipt of the promise is only contingent on the passage of time• May include restrictions
  7. 7. Statement of Financial Position• Assets Restricted for Long-term Purposes• Capital Campaign• Temporarily restricted net assets
  8. 8. Statement of Financial PositionLong Term Debt• Debt repayments in periods occurring after the next fiscal year• Also would include capital leases
  9. 9. Statement of Financial PositionNet Assets• Unrestricted – Assets which are not restricted either by donors or by law – Also includes board designated funds• Temporarily Restricted - Usage of is limited by donor-imposed time or purpose restrictions• Permanently Restricted – Assets which have been restricted by donor or law to be maintained by the organization in perpetuity – Endowment Funds
  10. 10. The Statement of Activities• Revenue Recognition• Exchange Transaction• Contributions• By category of Net Assets• Net Assets released from restrictions• Functional Allocation
  11. 11. The Statement of Activities• In-kind or Donated Goods or Services – Donated goods are recorded at their fair value • Catalogs • Vendors • Appraisals – Donated services also recorded at fair value, if: • Specialized – attorney, architect, plumber • Would otherwise be purchased by the organization• Unrealized Investment Income or Loss
  12. 12. The Statement of Cash-Flows• Non-cash items• Collections of Contributions restricted for long-term purposes
  13. 13. The Statement of Functional Expenses• Required for Voluntary Health & Welfare Organizations• Others may adopt
  14. 14. Notes to the Financial Statements• Required by GAAP to provide additional disclosures• Summary of Significant Accounting policies• Joint Cost Activities• Management & General Costs• Temporarily Restricted Net Assets• Conditional Promises to Give• Promises to Give
  15. 15. Ratio Analysis• Financial profitability• Liquidity• Capital Structure• Asset efficiency
  16. 16. Thank You! Scott Haumersen, CPA, Managing Partner Wegner CPAs 2110 Luann Lane Madison, WI 53713 608.442.1925 scott.haumersen@wegnercpas.com

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