The Nonprofit FAQ: Accounting

Select an FAQ   (39):

AICPA SOP 98-2 and its Impact on Financial Reporting
Rules that took effect 12/15/98 require organizations to screen activities carefully if they include a fund-raising appeal and are not classified as fund-raising in the accounts; three writers explain the background.
Are fees charged by federated campaigns fundraising expenses? For whom?
It depends. What the donor says matters.
Are Ratios Useful? For Donors? For the Community? (Added 2/24/96)
When should donors be concerned about average costs (ratios) in evaluating the performance of organizations which seek donations as one of the ways they raise the money they need to operate?
Background on Accounting
Some useful links that offer information about accounting questions, organizations, and practices.
Can a nonprofit declare bankruptcy?
Yes. This item includes references to several discussions of the question from a variety of sources.
Can Members Review the Books & Financial Records?
An organization's by-laws should state the rights of its membership.
Can we sell donated equipment and use the proceeds?
The feelings of the donor as well as federal regulations must be considered when determining the use of a donation.
Choosing Accounting Software: Questions to ask
An early entry in the FAQ that still provides some useful advice.
Does an NPO really need a Treasurer?
In a volunteer-based organization, the treasurer may actually keep the books. In larger organizations, the responsibilities of the role change.
Guidance on accounting for equity investments by nonprofits
The approaches are different depending on whether the investment has an easy to measure value (like publicly traded stock) or not.
How can I determine my program costs easily?
A number of factors need to be considered when determining program costs.
How can I figure out how our organization should divide its expenses?
Oversight organizations suggest standards for the proportions spent on program services, administration, fundraising, etc.
How can nonprofits evaluate their fundraising productivity?
An expert in nonprofit accountability and evaluation shares his insights on how to interpret fundraising costs in a collection of essays called the Fundraising Productivity Series.
How do I find a volunteer accountant?
There are some organizations that offer help in making connections.
How does the IRS treat nonprofits' gambling revenues?
Many nonprofits rely on gambling activities to bring in much-needed revenue. IRS publication 3079 covers related taxes and other issues in detail.
How is Unrelated Business Income Tax (UBIT) Calculated?
UBIT is based on the corporate income tax rates. The IRS and NPOs have struggled with figuring out what is 'related' and what is not.
How should we acknowledge in-kind gifts?
Enthusiastically, of course. But there are some errors that must be avoided in this specialized area. Auctions require further attention.
How should we dispose of outmoded computer equipment?
You need to keep records and make sure there are no grounds for concluding that insiders took advantage of the situation for personal gain.
How to read a nonprofit's financial statement.
Some advice from the founder of the Internet Nonprofit Center.
How to value donated goods.
A gift acknowledgement, or receipt, must accurately describe the gift in kind but no monetary amount should be mentioned.
Is grantwriting a fundraising expense
It depends how the resulting revenue will be treated.
Is it possible to raise money with $0 fundraising expense?
Maybe. But the accounting rules make clear that it only happens in very special cases.
Is there some legal requirement to spend a certain percentage of funds
Foundations: yes. Public charities: no.
Policies for Financial Accountability
Here is a sample of a detailed list of policies governing how the board of a larger nonprofit might deal with financial oversight and controls.
Should fundraising revenue be reported 'gross' or 'net'?
'Gross' is the right answer here.
Should we use accrual accounting?
The accrual method is generally regarded as the standard.
Summary of federal rules about lobbying for 501(c)(3) organizations
Extensive discussions of the definition of and limits on lobbying by nonprofits.
We can't afford a full office and staff. Where can we turn?
You may want to consider fiscal sponsorship. Here are a couple of organizations that may be able to help.
What about calculating fund raising ratios?
These calculations are more difficult to interpret than they might appear.
What about Quicken or Quickbooks?
Recent editions have features suited to many nonprofits. It does not appear that it's advantageous to buy the special 'nonprofit' edition.
What do you actually get in an audit?
This page from the Canadian firm AssociationXpertise explains:
What is a Donation?
A 'donation' is a gift of money or property to a nonprofit organization.
What is the deal with FASB 116 and FASB 117 anyway?
A pointer to an accountant's discussion of the issues
What Is the Sarbanes-Oxley Act and Why Should Nonprofits Care?
Enacted in the wake of corporate scandals, 'SOX' sets new standards of accountability and board behavior. Strictly speaking, most apply only to publicly-traded corporations, but there's more to it than that.
What is Unrelated Business Income? How is it reported? Taxed?
Unrelated Business Income exists under US tax law when an exempt organization receives regular revenues from activities that are not related to its exempt purpose (unless certain further exemptions apply). A separate form (the 990-T) is used to report UBI and to calculate whether tax (UBIT) is due.
What's a good Mac accounting program?
Comments and advice from users.
What's involved in financial management?
Online resources for assisting nonprofits achieve sound financial management.
What's the best kind of accounting software?
Fund accounting software is used by larger organizations and those with more complicated accounting situations. Some organizations can use software designed for households or small businesses.
Who should process incoming donations?
Organizations often tussle over which department should open the envelopes that might contain donations. Strong arguments can be advanced to support the differing views.