Financial and accounting guide for not for profit organizations

Financial and Accounting
Guide for Not-for-Profit
Organizations
Seventh Edition
Malvern J. Gross, Jr.,
CPA
Retired Partner, PricewaterhouseCoopers LLP
John H. McCarthy,
CPA
Partner, PricewaterhouseCoopers LLP
Nancy E. Shelmon,
CPA
Partner, PricewaterhouseCoopers LLP
John Wiley & Sons, Inc.

Financial and Accounting
Guide for Not-for-Profit
Organizations
Seventh Edition

Financial and Accounting
Guide for Not-for-Profit
Organizations
Seventh Edition
Malvern J. Gross, Jr.,
CPA
Retired Partner, PricewaterhouseCoopers LLP
John H. McCarthy,
CPA
Partner, PricewaterhouseCoopers LLP
Nancy E. Shelmon,

CPA
Partner, PricewaterhouseCoopers LLP
John Wiley & Sons, Inc.
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Library of Congress Cataloging-in-Publication Data:

Financial and accounting guide for not-for-profit organizations /
Malvern J. Gross, Jr., [et al.].— 7th ed.
p. cm.
Malvern J. Gross’s name appears as main author entry in earlier ed.
Includes index.
ISBN-13 978-0-471-72445-2 (cloth)
ISBN-10 0-471-72445-9 (cloth)
1. Nonprofit organizations—Accounting. I. Gross, Malvern J.
HF5686.N56G76 2005
657'.98 dc22
2005000045
Printed in the United States of America
10 9 8 7 6 5 4 3 2 1
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and all of its achievements possible.
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Ⅲ vii Ⅲ
About the Authors
Malvern J. Gross, Jr. was the author of the first edition of this text and a signifi-
cant contributor to many of the subsequent editions. He is a retired partner of
Price Waterhouse (a predecessor to PricewaterhouseCoopers LLP) and a nation-
ally recognized authority on accounting and financial reporting for not-for-profit
organizations. He was chairman of the AICPA Subcommittee on Nonprofit
Organizations that wrote the 1978 landmark Statement of Position for Certain
Nonprofit Organizations, and of the Accounting Advisory Committee to the
Commission on Private Philanthropy and Public Needs. He was a member of the
committee that wrote the second edition of Standards of Accounting and Financial
Reporting for Voluntary Health and Welfare Organizations, and a coauthor of the
Museum Accounting Handbook. He served as an advisor to the Financial Account-
ing Standards Board in the early phases of its work on setting accounting stan-
dards for not-for-profit organizations, and to the New York State Charities
Registration Office, as well as an adjunct professor of accounting at Lehigh Uni-
versity, his alma mater. After retirement from Price Waterhouse he was president
of a not-for-profit organization, the National Aeronautics Association. He now
lives in the San Juan Islands off of the state of Washington.
John H. McCarthy served as the National Leader of PricewaterhouseCoopers’

Education & Nonprofit Practice before his retirement in 2005. He was a coauthor
of the sixth edition of this text. He also is the coauthor of Understanding Financial
Statements: A Strategic Guide for Independent College and University Boards, pub-
lished by the Association of Governing Boards of Universities and Colleges
(1998), as well as several publications by PricewaterhouseCoopers including:
The Changing Role of the Audit Committee (2004); Leading Practices for Colleges, Uni-
versities and Other Not-for-Profit Educational Institutions (2004); A Foundation for
Integrity (a 2004 guide for codes of conduct, conflicts of interest, and executive
compensation); Meeting the Challenges of Alternative Investments (2004); Under-
standing Underwater Endowment Funds (2003); and Financial Reporting and Contri-
butions: A Decision Making Guide to FASB Nos. 116-117 (1996) among others. He is
a CPA who, for more than 36 years, served PricewaterhouseCoopers’ education
and not-for-profit clients, including many of the most prestigious institutions in
the United States. He currently serves on several not-for-profit boards. He is a
past president of the Massachusetts Society of CPAs, Inc. (MSCPA) and a two-
term member of the Governing Council of the AICPA. He has received numer-
ous honors for his involvement in the community. He graduated from Boston
College and has an MBA from the University of Michigan Business School.
ABOUT THE AUTHORS
Ⅲ viii Ⅲ
Nancy E. Shelmon is a senior partner of PricewaterhouseCoopers LLP and is the
firm’s West Region Leader for the Education and Not-for-Profit Industry within
the United States. Nancy is a frequent speaker at AICPA and state CPA confer-
ences on financial reporting and accounting issues affecting not-for-profit orga-
nizations and is currently a member of the AICPA Not-for-Profit Expert Panel.
She is currently Chair of the Planning Committee for the AICPA’s annual Not-
for-Profit Conference. She has been serving education and not-for-profit clients
for over thirty years and has been involved with some of the most widely
respected organizations in North America. Nancy serves on the Board of Direc-
tors of the Los Angeles Urban League, the California Journal and Executive Ser-

vice Corps of Southern California. In addition to being a CPA, she is also a
Certified Fraud Examiner. She holds her accounting degree from the University
of Minnesota.
Ⅲ ix Ⅲ
Contributors
We also want to recognize the many past contributions of Richard F. Larkin, who
was a coauthor of the fourth, fifth, and sixth editions of Financial and Accounting
Guide for Not-for-Profit Organizations. Prior to his retirement from Pricewater-
houseCoopers, he served as a technical director for the Education & Nonprofit
practice. We are very grateful to Dick for his efforts on prior editions of this
Guide.
The seventh edition of this Guide represents the collaborative efforts of many
PricewaterhouseCoopers professionals who work with our not-for-profit clients
throughout the United States. The authors wish to very gratefully acknowledge
the contributions of the following PricewaterhouseCoopers partners, directors,
and managers to this Guide: Emily Bernhardt; Ted Budge; Amy Cloud; Ralph
DeAcetis; Diane Duncan; Kaye Ferriter; Cheryl Fletterick; Kevin Fordyce; Martha
Garner; Elaine Garvey; Dorian Gregory; Paul Hanley; Julie Henderson; Sandra
Johnson, Elisabeth Lippuner; Riva Mirvis; Layne Pinkernell; Christos Poulios;
Robert Spear; Gwen Spencer; Jessica Vronman; and Frederick Wentzel, Jr. Their
assistance has been invaluable.

Ⅲ xi Ⅲ
Preface
The authors have substantially revised the Financial and Accounting Guide for
Not-for-Profit Organizations to create this seventh edition. The changes in the text
reflect the ongoing evolution in not-for-profit accounting, financial reporting,
and the systems that support it. The sixth edition was published when Financial
Accounting Standards No. 116 (accounting for contributions) and 117 (financial
statements of not-for-profit organizations) were still relatively new and as a

result it was written from the perspective of organizations that were making the
transition from “fund accounting” and financial reporting to the new “net asset”
based financial reporting. The intent of the authors in the seventh edition is to
present a perspective of organizations that have now more fully integrated “net
asset” accounting into their financial reporting. The authors have also attempted
to streamline all chapters to the extent appropriate while updating them for the
latest professional standards.
Like its predecessors, the seventh edition has several objectives. The first
objective is to help not-for-profit organizations better manage their financial
resources. This starts with understanding—it’s easier to manage what you under-
stand. Financial and accounting principles are often intimidating, but this Guide
covers the basics and shows that the principles make sense. The second objective
is to help not-for-profit organizations better communicate their financial activi-
ties and financial condition to their stakeholders and the public.
A common thread running through the chapters in the seventh edition is the
need for greater accountability and transparency in financial reporting by not-
for-profit organizations. More than ever before, not-for-profit organizations must
be accountable to their stakeholders, including, among many others, donors,
lenders, regulators, and sponsors. Adapting to the new environment is a chal-
lenge, but one that the most successful not-for-profit organizations will under-
stand and embrace.
The seventh edition incorporates the current version of the new chapters
introduced in the cumulative supplements to the sixth edition:
•
“The External Financial Statement Reporting Model for Public Colleges
and Universities and Other Not-for-Profit Organizations Reporting under
GASB” (now Chapter 15), and
•
“E-Business for Not-for-Profit Organizations: How Can Not-for-Profits
Manage the Risks to Manage E-Business Opportunities?” (now Chapter 27)

PREFACE
Ⅲ xii Ⅲ
The other significant changes to the sixth edition include:
•
Consolidation of former Chapters 6 and 7, each of which dealt with fixed
asset accounting matters, into a single new Chapter 5, “Fixed Assets and
Depreciation.”
•
Consolidation of former Chapters 4 and 5, each of which dealt with fund
accounting, into a single new Chapter 4, “Fund Accounting and Internal
Financial Reporting.”
•
Chapter 28, “Principal Tax Requirements,” in this edition includes all of
the relevant information on taxes for not-for-profit organizations. Rele-
vant information from former Chapter 29, “Principal Federal Tax Forms
Filed,” has now been included in new Chapter 28. The actual tax forms
have been deleted since these forms change each year and the authors feel
that readers would be better served to examine the actual forms issued
each year by the Internal Revenue Service together with the applicable
instructions.
•
Former Chapter 30, “State Compliance Requirements,” has been deleted
from the Seventh Edition. Compliance requirements differ substantially
by state, and with the impact that the Sarbanes-Oxley Act is having on
various state regulations, the diverse issues that result are really beyond
the scope of an accounting and financial guide.
The FASB’s project on combinations of not-for-profit organizations remained
open when text went to print. As discussed in Chapter 7, the FASB expects to
issue an exposure draft on this in early 2005.
Ⅲ xiii Ⅲ

Contents
Chapter 1
Responsibilities for Fiscal Management 1
1.1 Keeping Financial Records for the Organization 2
1.2 Preparing Accurate and Meaningful Financial Statements 3
1.3 Implementing a Budget and Anticipating Financial Problems 4
1.4 Safeguarding Financial Assets and Providing Effective
Internal Controls 5
1.5 Complying with Federal and State Reporting and Regulatory
Requirements 6
1.6 Communicating Fiscal Information to the Board of Directors
and the Audit Committee 6
1.7 Ten Key Points to Consider in Not-for-Profit Fiscal Management 8
1.8 Conclusion 12
PART ONE
KEY FINANCIAL CONCEPTS 13
Chapter 2
Accounting Distinctions between Not-for-Profit and
Commercial Organizations 15
2.1 Stewardship versus Profitability 15
2.2 Principal Areas of Accounting Differences 16
2.3 Conclusion 21
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 31
3.5 Conclusion 31
Chapter 4

Fund Accounting and Internal Financial Reporting 33
4.1 Fund Accounting Defined 35
4.2 Categories of Funds 37
CONTENTS
Ⅲ xiv Ⅲ
4.3 Alternative Fund Groupings 40
4.4 Typical “Fund” Financial Statements 41
4.5 Transfers between Funds 44
4.6 Elimination of Funds for Reporting Purposes 45
4.7 Conclusion 47
Chapter 5
Fixed Assets and Depreciation 49
5.1 General Principles—Working Definitions 49
5.2 Property and Equipment—Classes and Kinds of Assets 51
5.3 Fixed Assets Where Title May Revert to Grantors 53
5.4 Collections 53
5.5 Fair Value Measurement 54
5.6 Contributions Restricted for Purchase of Fixed Assets 55
5.7 Impairment or Disposal of Long-Lived Assets 56
5.8 Conclusion and Recommendations 59
Chapter 6
Investment Income, Gains and Losses,
and Endowment Funds 61
6.1 Accounting Principles 62
6.2 Total Return Concept 72
Chapter 7
Affiliated Organizations, Pass-Through Transactions,
and Mergers 79
7.1 Types of Relationships Often Found 80
7.2 Definition of the Reporting Entity 83

7.3 Mergers of Not-for-Profit Organizations 87
Appendix 7–A Factors to be Considered in Deciding Whether
a Pass-Through Gift is Truly Revenue and Expense
to a Pass-Through Entity 92
Appendix 7–B SFAS 136—Transfers of Assets to a Not-for-Profit
Organization or Charitable Trust that Raises or Holds
Contributions of Others 95
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 (Per AICPA SOP 94-3) 99
Chapter 8
Contributions, Pledges, and Noncash Contributions 101
8.1 Expendable Current Support 103
8.2 Gifts-in-Kind 108
8.3 Support Not Currently Expendable 113
CONTENTS
Ⅲ xv Ⅲ
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 126
Appendix 8–B Checklist: Factors to Be Considered in Distinguishing
Contracts for the Purchase of Goods or Services from Restricted
Grants 128
Appendix 8–C Checklist: Factors to Be Considered in Assessing
Whether Contributed Services Are Considered to Require
Specialized Skills (per Paragraph 9 of SFAS 116, “Accounting
for Contributions Received …”) 130
Appendix 8–D Checklist: Factors to Be Considered in Determining
Whether or Not an Organization Would Typically Need

to Purchase Services if Not Provided by Donation 132
Appendix 8–E Checklist: Factors to Be Considered in Assessing
Whether a Donor Has Made a Bona Fide Pledge to a Donee 134
Appendix 8–F Checklist: Factors to Be Considered in Deciding
Whether a Gift or Pledge Subject to Donor Stipulations
Is Conditional or Restricted (as Discussed in SFAS 116,
Paragraphs 7, 22–23, 57–71, and 75–81) 136
Chapter 9
Accounting Issues Relating to Fundraising 139
9.1 Accounting for Gifts 140
9.2 Accounting for Fundraising Expenses 149
9.3 Other Tax Considerations 153
PART TWO
FINANCIAL STATEMENT PRESENTATION 155
Chapter 10
Cash-Basis Financial Statements 157
10.1 Simple Cash-Basis Statement 158
10.2 Simple Statement with Last Year’s Figures and Budget 159
10.3 Combined Cash-Basis Income Statement and Balance Sheet 161
10.4 Separate Statement of Receipts and Disbursements
and Statement of Net Assets 163
10.5 Statement of Income with Certain Cash Transactions Omitted 165
10.6 Modified Cash-Basis Statements 166
10.7 Conclusion 167
Chapter 11
Accrual-Basis Financial Statements 169
11.1 Simple Accrual-Basis Statements 170
11.2 Accrual-Basis Statements—Fundraising Organization 173
11.3 Accrual-Basis Statements—International Organization 175
11.4 Conclusion 179

CONTENTS
Ⅲ xvi Ⅲ
Chapter 12
Multiclass Financial Statements 181
12.1 FASB Statement of Financial Accounting Standards No. 117,
Financial Statements of Not-for-Profit Organizations 182
12.2 Preparation of Statement of Cash Flows 185
12.3 “Class” Financial Statements Explained 203
12.4 Columnar Format Presentation 208
12.5 A Complicated Set of Class Financial Statements 210
12.6 Summary or Condensed Statements 220
12.7 Conclusion 222
Appendix 12–A Financial Statements of Not-for-Profit
Organizations—Review Points 224
PART THREE
ACCOUNTING AND REPORTING GUIDELINES 229
Chapter 13
Voluntary Health and Welfare Organizations 231
13.1 Accounting Principles 233
13.2 Accounting for Contributions 233
13.3 Accounting for Other Income 236
13.4 Accounting for Expenses 237
13.5 Accounting for Assets 237
13.6 Net Assets 238
13.7 Financial Statements 239
Appendix 13–A Checklist: Factors to Be Considered in Deciding
Whether Allocation of Joint Costs of Multipurpose Activities
(under AICPA SOP 98-2) Is Appropriate 258
Appendix 13–B Checklist: Consideration of Whether Items Might
Be Reported as Operating or Nonoperating (within the Context

of Paragraph 23 of SFAS 117) 261
Chapter 14
Colleges and Universities 263
14.1 Authoritative Pronouncements 263
14.2 The Principal Financial Statements 264
14.3 Accounting Principles 268
Chapter 15
The External Financial Statement Reporting Model
for Public Colleges and Universities and Other
Not-for-Profit Organizations Reporting under the GASB 273
15.1 Introduction 274
15.2 Background 274
15.3 Accounting and Financial Reporting
for Nonexchange Transactions 276
15.4 External Financial Reporting for Public Colleges and Universities 279
CONTENTS
Ⅲ xvii Ⅲ
15.5 An Overview of GASB Statement No. 35: The External Reporting
Model for Public Colleges and Universities 280
15.6 Basic Financial Statements 281
15.7 Footnote Disclosures 291
15.8 Management’s Discussion and Analysis 297
15.9 Other Not-for-Profit Organizations Reporting under the GASB 298
Chapter 16
Health Care Providers 301
16.1 Introduction 302
16.2 Authoritative Pronouncements 302
16.3 Financial Statements 304
16.4 Accounting Principles 309
16.5 Additional Considerations for Tax-Exempt Debt Issuers 337

Chapter 17
Accounting Standards for Other Not-for-Profit
Organizations 343
17.1 Accounting Principles 344
17.2 Financial Statements 349
17.3 Combined Financial Statements 349
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 351
Chapter 18
Special Accounting Issues for Specific Organizations 355
18.1 Associations and Professional Societies 356
18.2 Churches 359
18.3 Clubs 360
18.4 Libraries 362
18.5 Museums 362
18.6 Performing Arts Organizations 364
18.7 Private Foundations 365
18.8 Religious Organizations Other Than Churches 368
18.9 Research and Scientific Organizations 369
18.10 Private Elementary and Secondary Schools 371
18.11 Public Broadcasting Stations 371
Chapter 19
The Financial Accounting Standards Board
and Future Trends in Not-for-Profit Accounting 373
19.1 Financial Accounting Standards Board 374
19.2 Trends in Not-for-Profit Accounting 380
19.3 New FASB Statements of Financial Accounting Standards
that Affect Not-for-Profit Organizations 385
CONTENTS

Ⅲ xviii Ⅲ
19.4 Other FASB Pronouncements and Projects 388
19.5 Conclusion 391
PART FOUR
CONTROLLING THE NOT-FOR-PROFIT
ORGANIZATION 393
Chapter 20
The Importance of Budgeting 395
20.1 The Budget: A Plan of Action 395
20.2 Monthly and Quarterly Budgets 401
20.3 Timely Interim Statements 404
20.4 A Five-Year Master Plan 413
20.5 Conclusion 415
Chapter 21
Avoiding Bankruptcy 419
21.1 Early Recognition of Problems 419
21.2 Remedial Action 426
21.3 Confronting Bankruptcy 431
21.4 Conclusion 432
Chapter 22
Small Organizations—Obtaining the Right Accountant 435
22.1 Level of Accounting Services Needed 436
22.2 Personality Characteristics 438
22.3 Alternatives to Accountants 439
22.4 Timing in Hiring a Replacement 441
22.5 Conclusion 441
Chapter 23
Small Organizations—Providing Internal Control 443
23.1 Reasons for Internal Control 444
23.2 Fundamentals of Internal Control 446

23.3 Some Basic Controls 446
23.4 Fidelity Insurance 452
23.5 Conclusion 453
Chapter 24
Effective Internal Accounting Control for Not-for-Profit
Organizations 455
24.1 Introduction to Internal Accounting Control 456
24.2 Elements of an Effective Internal Accounting Control System 458
24.3 Basic Internal Accounting Control System 465
24.4 Specific Nonprofit Internal Accounting Controls 473
Chapter 25
Independent Audits 483
25.1 Functions and Limitations 484
25.2 Benefits of an Independent Audit 489
25.3 Selecting a Certified Public Accountant 490
CONTENTS
Ⅲ xix Ⅲ
25.4 Public Accountants 492
25.5 Audit Committees 492
25.6 Conclusion 494
Appendix 25–A Checklist: Criteria for Selection of a CPA 496
Appendix 25–B Changing Role for the Audit Committee 499
Appendix 25-C Basic Template for an Audit Committee Charter 502
Chapter 26
Investments 511
26.1 Valuing Investments 511
26.2 Pooling versus Individual Investments 513
26.3 Calculating Share Values in Pooled Investments 516
26.4 Allocation of Pooled Income 520
26.5 Professional Investment Advice 521

26.6 Safeguarding Investment Securities 523
26.7 Conclusion 525
PART FIVE
PRINCIPAL FEDERAL TAX AND COMPLIANCE
REQUIREMENTS 527
Chapter 27
E-Business for Not-for-Profit Organizations:
How Can Not-for-Profits Manage the Risks
to Maximize E-Business Opportunities? 529
27.1 Whether You Call It E-Business or Technology-Enabled
Business, It Still Matters 530
27.2 Ask Yourself These Questions 531
27.3 Objectives 533
27.4 How Did We Get to the Internet Economy? 534
27.5 Where Are We Today? 536
27.6 What Is Risk Management? 537
27.7 How Are Not-for-Profit Organizations Using E-Business Today? 552
27.8 How Are Academic Institutions Using E-Business? 555
27.9 What Is the Path to E-Business Success? 558
Appendix 27–A What E-Business Models Exist? 560
Chapter 28
Principal Tax Requirements 565
28.1 Organizations Exempt from Tax 566
28.2 Charitable Organizations 568
28.3 Tax Status of Charitable Organizations: Public Charity
or Private Foundation 570
28.4 Other Concerns for Charities 573
28.5 Private Foundations 585
CONTENTS
Ⅲ xx Ⅲ

28.6 Private Operating Foundations 589
28.7 Noncharitable Exempt Organizations 590
28.8 Registration and Reporting 595
28.9 Federal Information and Tax Return Filing Requirements 598
28.10 State Information and Tax Reporting Issues 615
Chapter 29
Audits of Federally Funded Programs 617
29.1 Basic Requirements 617
29.2 Requirements and Definitions 619
29.3 Responsibilities of the Receiving Organization 623
29.4 What to Expect from the Audit 627
29.5 Conclusion 630
PART SIX
SETTING UP AND KEEPING THE BOOKS 631
Chapter 30
Cash-Basis Bookkeeping 633
30.1 Three Steps in a Bookkeeping System 633
30.2 Checkbook System 634
30.3 Cash-Basis System 639
30.4 Conclusion 650
Chapter 31
Simplified Accrual-Basis Bookkeeping 651
31.1 Books and Records 652
31.2 Chart of Accounts 653
31.3 Monthly Accrual Entries 655
31.4 Payroll Taxes 661
31.5 Fixed-Asset Register and Depreciation Schedule 663
31.6 Investment Ledger 669
31.7 Conclusion 669
Chapter 32

Full Accrual-Basis Bookkeeping 671
32.1 Books and Records 671
32.2 Chart of Accounts 674
32.3 Sales Register 674
32.4 Accounts Receivable Subsidiary Ledger 677
32.5 Cash Receipts Book 681
32.6 Accounts Payable Register 681
32.7 Cash Disbursements Book 683
32.8 Monthly Accrual Entries 685
32.9 Conclusion 687
CONTENTS
Ⅲ xxi Ⅲ
Chapter 33
Fund Accounting Bookkeeping 689
33.1 Chart of Accounts 690
33.2 Books and Records 693
33.3 Interfund Transactions 696
33.4 Trial Balance 700
33.5 Conclusion 701
Chapter 34
Automating the Accounting Records 703
34.1 When to Consider Automating or Upgrading 704
34.2 What to Automate 704
34.3 Selecting the Right Software 709
34.4 Implementing the New System 712
34.5 Common Pitfalls to Successful Automation 714
34.6 Conclusion 716
Appendix A
Accounting and Disclosure Guide for
Not-for-Profit Organizations 717

Appendix B
Code of Conduct 729
B.1 Codes of Conduct in the Not-for-Profit Sector 730
B.2 Sample Code of Conduct, Including a Conflicts of Interest Policy 732
B.3 Frequently Asked Questions 738
Appendix C
Basic Template for an Audit Committee Charter 741
C.1 Overall Purpose/Objectives 741
C.2 Authority 741
C.3 Organization 742
C.4 Roles and Responsibilities 744
Index 749

Ⅲ 1 Ⅲ
CHAPTER ONE
1
Responsibilities for Fiscal
Management
1.1 Keeping Financial Records
for the Organization 2
1.2 Preparing Accurate and
Meaningful Financial
Statements 3
(a) Nonaccountant Test 4
1.3 Implementing a Budget
and Anticipating Financial
Problems 4
1.4 Safeguarding Financial
Assets and Providing
Effective Internal Controls 5

1.5 Complying with Federal
and State Reporting and
Regulatory Requirements 6
1.6 Communicating Fiscal
Information to the Board
of Directors and the Audit
Committee 6
1.7 Ten Key Points to Consider
in Not-for-Profit Fiscal
Management 8
(a) Accounting Principles 8
(b) Financial Reporting 8
(c) Budgeting and
Resources 9
(d) Financial Management 11
(e) Government
Regulation 11
(f) Contributions 12
1.8 Conclusion 12
Not-for-profit organizations are among the most influential and powerful
institutions in our society. They range in size from small and local to large
and national—or even international. Their scope incorporates a wide
range of activity: health and welfare, research, education, religion, social,
and professional associations. They include foundations, membership
societies, churches, hospitals, schools, and sports and political organiza-
tions. By any measure, not-for-profit organizations comprise a significant
share of national income and employ a significant percentage of the
national workforce.
All not-for-profit organizations are defined by their mission. Execu-
tive management and the board of directors have the responsibility to