2 posts categorized "Not-for-Profit" Feed

New Liquidity Disclosures for Not-for Profits: Are You Ready?

NFP Liquidity DisclosuresUnder current financial reporting standards, not-for-profits are not required to illuminate clearly restrictions that affect the availability of liquid resources in their financial statements. But this is all about to change with the Financial Accounting Standards Board’s (FASB) new financial reporting standard (Accounting Standards Update (ASU) 2016-14), effective for fiscal years beginning after December 15, 2017.

In this update, FASB clarifies that the nature of an asset isn’t the only quality that affects its availability. Specifically, liquid resources are quickly converted to cash and available to fund general expenditures within one year following the balance sheet date. Internal (board-designated) and external (donor-imposed) restrictions could mean certain sums of cash and cash equivalents may not be used for general expenditures. If a board designates an amount of cash to be set aside for a building renovation, for example, it cannot be used to buy office supplies.

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Not-for-Profit Contributions: Counting v. Accounting

Counting moneyWhen is a contribution to a not-for-profit really a contribution? Many would say it depends on whether you ask someone in the accounting or development department. While the accounting office recognizes contributions in accordance with generally accepted accounting principles (GAAP), there are no required standards for counting and reporting fundraising receipts by the development office. The resulting differences create perhaps the greatest source of tension between the two teams. So what can be done to bridge the gap and foster a cooperative relationship that will best benefit the not-for-profit?

First, accept that what gets reported by each group will be different. And that’s okay, as long as the differences can be explained. There’s no need to hash out who’s right or wrong; just take time to understand each other’s math. What gets included, by whom, and when? Accountants need to explain GAAP in “non-accountant” language. Similarly, the development team needs to establish and share its consistent guidelines for reporting fundraising activity. Developing this understanding will take time and patience on both sides but is essential to forming a good working relationship.

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