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Understanding Nonprofit Financial Statements
- 1. Understanding Nonprofit Financial Statements Presented by: Scott Haumersen, CPA, Managing Partner
- 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. 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. 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. Basic Internal Financial Statements • May include: – Budget Analysis – Departmental Cost Centers – Projections – Cash Flow Analysis
- 6. Statement of Financial Position Pledges 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. Statement of Financial Position • Assets Restricted for Long-term Purposes • Capital Campaign • Temporarily restricted net assets
- 8. Statement of Financial Position Long Term Debt • Debt repayments in periods occurring after the next fiscal year • Also would include capital leases
- 9. Statement of Financial Position Net 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. The Statement of Activities • Revenue Recognition • Exchange Transaction • Contributions • By category of Net Assets • Net Assets released from restrictions • Functional Allocation
- 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. The Statement of Cash-Flows • Non-cash items • Collections of Contributions restricted for long-term purposes
- 13. The Statement of Functional Expenses • Required for Voluntary Health & Welfare Organizations • Others may adopt
- 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. Ratio Analysis • Financial profitability • Liquidity • Capital Structure • Asset efficiency
- 16. Thank You! Scott Haumersen, CPA, Managing Partner Wegner CPAs 2110 Luann Lane Madison, WI 53713 608.442.1925 scott.haumersen@wegnercpas.com