NFP & Reporting

Question 1

What authoritative body has jurisdiction over private not-for-profit organizations?

Answer 1

Financial Accounting Standards Board (FASB).

Question 2

List the four broad categories of not-for-profit organizations.

Answer 2

1. Hospitals and other health care entities; 2. Colleges and Universities; 3. Voluntary Health and Welfare Organizations; 4. Other not-for-profit organizations.

Question 3

What type of not-for-profits consist predominantly of publicly funded hospitals and universities, although museums, parks, and landmarks can fall into this category as well?

Answer 3

“Public” (governmental affiliated) not-for-profits.

Question 4

What financial statement is required for Voluntary Health and Welfare organizations only?

Answer 4

Statement of Functional Expenses.

Question 5

List the two broad classifications for expenditures within a not-for-profit organization.

Answer 5

1. Program Services; 2. Supporting Services.

Question 6

What is the net asset category where expenses are recognized?

Answer 6

Unrestricted net assets.

Question 7

List the two sub-classifications of expenditures for supporting services within a not-for-profit organization.

Answer 7

1. Management and General; 2. Fund Raising.

Question 8

Describe the reporting requirement when expenses are paid out of temporarily restricted net assets.

Answer 8

“Net assets released from restrictions” is reported as a decrease in the revenue section of temporarily restricted net assets and as an increase in the revenue section of unrestricted net assets.

Question 9

List two types of temporary restrictions.

Answer 9

1. Time restrictions; 2. Purpose restrictions.

Question 10

List the three categories of a not-for-profit organization’s Net Assets.

Answer 10

1. Unrestricted; 2. Temporarily Restricted; 3. Permanently Restricted.

Question 11

List the three financial statements that are required for all private not-for-profit organizations.

Answer 11

1. Statement of Financial Position; 2. Statement of Activity; 3. Statement of Cash Flows.

Question 12

When is an implied time restriction recognized?

Answer 12

An implied time restriction can be recognized on donated long-lived depreciable assets.

Question 13

Define “endowments”.

Answer 13

Contributions to the organization from third parties for which the principal (corpus) must “remain intact in perpetuity.”

Question 14

Define “term endowments”.

Answer 14

Gifts and bequests from third parties which are to be retained and invested for a period of time or until a specific event occurs, but after the criterion has been met, the full amount can be spent.

Question 15

What value is used to record donated capital assets?

Answer 15

Fair market value at the date of donation.

Question 16

How are special event revenue and direct costs reported?

Answer 16

Reported at their gross amounts. Costs to promote the event are reported as part of fund-raising.

Question 17

What is the journal entry to record receipt of $100,000 in pledges when it is estimated that 20% of the pledges will be uncollectible?

Answer 17

DR: Pledges Receivable $100,000 CR: Est. Uncollectible Pledges $20,000 CR: Contribution (Revenue) $80,000

Question 18

When are contribution of services recognized?

Answer 18

Recognized if the services require special skills, the person providing the services possess those skills, and the services would have been purchased if not obtained by donation.

Question 19

List the three conditions that must be met in order for assets to be classified as a “collectible.”

Answer 19

1. Held for public exhibition, education, or research rather than financial gain; 2. Protected, kept unencumbered, cared for, and preserved; 3. Subject to a policy that requires proceeds from sales of collection items to be used to acquire other items for collections.

Question 20

When are conditional promises to give recognized?

Answer 20

Recognized when the conditions are substantially met or the likelihood of the conditions not being met is remote.

Question 21

List the characteristics of a contributions.

Answer 21

1. Unconditional; 2. Voluntarily made; 3. Nonreciprocal; 4. Not made by an owner.

Question 22

Describe the general revenue recognition rule for contributions.

Answer 22

In general, contributions are recognized as revenue in the period when the contribution is made, regardless of whether they are received in cash or not.

Question 23

Is charity care recognized in the financial statements of a not-for-profit hospital?

Answer 23

It is not recognized as revenues, receivable, or bad debt in the financial statements of a not-for-profit hospital.

Question 24

List the net asset categories for a not-for-profit hospital.

Answer 24

1. Unrestricted; 2. Temporarily restricted; 3. Permanently restricted.

Question 25

Define “capitation fees.”

Answer 25

Payments made to health care providers for comprehensive client coverage provided for a fixed fee; e.g., HMOs.

Question 26

List the financial statements required by a governmental hospital.

Answer 26

1. A balance sheet; 2. A statement of revenues, expenses, and changes in net position; 3. A statement of cash flows

Question 27

Are Cash Flows from Noncapital Financing Activities and Cash Flows from Capital and Related Financing Activities required for governmental healthcare agencies and not-for-profit healthcare agencies?

Answer 27

Cash Flows from Noncapital Financing Activities and Cash Flows from Capital and Related Financing Activities are required sections of the cash flow statement for governmental healthcare agencies but not for not-for-profit healthcare agencies.

Question 28

Define “contractual adjustments.”

Answer 28

A contra account to patient revenues that is based on rate reductions due to contractual arrangements with third-party payers.

Question 29

List the financial statements required by a not-for-profit hospital.

Answer 29

1. Balance Sheet; 2. Statement of Operations; 3. Statement of Cash Flows.

Question 30

List the net position categories used by a public university.

Answer 30

1. Unrestricted; 2. Restricted; 3. Invested in capital assets, net or related debt.

Question 31

List the net asset categories used by a private university.

Answer 31

1. Unrestricted; 2. Temporarily Restricted; 3. Permanently Restricted.

Question 32

Define “auxiliary enterprises”.

Answer 32

Activities carried on by an educational institution that are not directly related to the delivery of instruction (i.e., residence halls, dining services, athletics).

Question 33

How is tuition revenue reported?

Answer 33

Reported net of tuition discounts and scholarships in the operating statement .