The Simplified Guide to Not-for-Profit Accounting, Formation & Reporting

291 Pages·2010·2.38 MB·English

by  Laurence Scot

THE
Not-for-Profi t Organizations & Charities SCOT
Praise for S I M P L I F I E D G U I D E T O
THE SIMPLIFIED GUIDE TO NOT-FOR-PROFIT ACCOUNTING, FORMATION & REPORTING
“There are numerous publications about the NFP industry, but not many that give a good fundamental
NOT-FOR-PROFIT
understanding of the accounting principles. The material in this book will be of great help to new employees
as well as a good commonsense reference for those with experience. It clearly explains some of the more
diffi cult accounting concepts particular to Not-for-Profi ts.”
—Richard Tierney, Director of Finance, North Shore Animal League America
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“This book is a concise, complete review of the fundamentals of Not-for-Profi t accounting and governance. ACCOUNTING,
Every topic is covered with a directness and honesty that builds confi dence in those who need to learn how C
to do their jobs well. This is just what we need in today’s choppy Not-for-Profi t waters.” C
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—Rev. Luke L. Travers, OSB, Business Offi cer, Delbarton School/St. Mary’s Abbey OH
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“Larry Scot’s book is a clearly written step-by-step guide on how to set up and maintain accounting
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records. Every Not-for-Profi t fi nancial executive should have this book on their shelf for reference. I highly I
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recommend this book.”
IP FORMATION
—Gail Rizick, CPA/ABV/CFF, CVA, Cr.FA, ASA N
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YOUR A-TO-Z GUIDE TO NOT-FOR-PROFIT FORMATION, ACCOUNTING, AND REPORTING F
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If you need basic, easy-to-understand information on how Not-for-Profi t organizations are formed, how D
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they’re structured, and the unique accounting and reporting issues they face, The Simplifi ed Guide to G
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Not-for-Profi t Accounting, Formation, and Reporting is the only resource you need. U
MI & REPORTING
This comprehensive guide provides you with expert advice on how to maintain the fi nancial “books” of a D
typical Not-for-Profi t entity and what is needed to comply with most reporting requirements. Plus, it lays AE
out what a Not-for-Profi t organization is, the rules it must follow, the role and responsibilities of its board T T
of directors, and the various regulatory agencies that Not-for-Profi ts must report to. IO
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Straightforward and hands-on, this effective reference will help you navigate through all of the key N
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accounting and reporting issues unique to the Not-for-Profi t world, including: O
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■ Step-by-step instructions for forming a Not-for-Profi t &-
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■ Not-for-Profi t internal controls and fi nancial statements O
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■ Developing a “chart of accounts” and operating budgets R
■ Not-for-Profi t accounting rules and GAAP E-
■ Everything you need to know about the new Form 990 PP
■ Accounting for unrestricted and restricted contributions, grants, and other revenue OR
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■ Plus much more! RF
Whether you are performing accounting functions, responsible for fi nancial management, or simply want TI
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to understand Not-for-Profi t accounting, operations, and reporting, The Simplifi ed Guide to Not-for-Profi t I
Accounting, Formation, and Reporting is a great and handy book to have around for easy reference. N
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LAURENCE SCOT
is the cofounder and comanaging partner of Skody Scot & Company, a midtown
CPA fi rm formed in 1990 that specializes in servicing the Not-for-Profi t community. Scot has taught
undergraduate and graduate classes at several colleges; been lecturing and giving seminars to CPAs,
bankers, NFP D&Os (directors and offi cers), managers, and entrepreneurs for over twenty years on a
variety of subjects; and is the creator of the fi rst in-class certifi cate program in Not-for-Profi t accounting and
governmental reporting.
$49.95 USA/$59.95 CAN
L A U R E N C E S C O T
, MBA, CPA
ISBN: 978-0-470-57544-4 4-COLOR GLOSSY
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AdditionalPraisefor
TheSimplifiedGuideto
Not-for-ProfitAccounting,Formation,andReporting
‘‘This book is fantastic! Not-for-profit accounting can be quite complex at
times,butthisbookcutsrighttothepointandprovideseasy-to-understand
answers to difficult questions. I would recommend it to anyone and
everyonewhoworksinafinancialcapacityatanot-for-profitorganization.’’
—AlinaYavorovskaya,
EVPofFinanceandAdministrationandCFO,
SeedsofPeace
‘‘Laurence Scot has created an extremely practical, useful, and easy-to-use
guide that is a must read for anyone and everyone who is interested in
not-for-profits. Whether you are starting a not-for-profit or are a board
member, an officer, or a current or future staff accountant, you will greatly
benefitfromthisvaluableandcomprehensivebook.’’
—EceA.J.Yilmaz,MBA,CMA,CBM,PMP,
ExecutiveDirector,
AmericanCollegeNutrition
‘‘This is a definite read for anyone involved in the not-for-profit industry,
regardless of your level of prior knowledge. The not-for-profit world has its
own rules, and it is your responsibility to know them. Thankfully, Laurence
Scothasmanagedtoexplainallthebasicneed-to-knowsinveryclearwords.’’
—FilipJohansson,DirectorofFinanceandOperations,
Swedish-AmericanChamberofCommerce,Inc.
‘‘Accounting can’t be made too simple for me. If you want to start a
not-for-profit company or serve on a board, Laurence Scot’s simplified
guidewillbringthemystifyingworldofnot-for-profitaccountingintofocus.
Clearandstraightforward,thisguideisthebestanswertoallmyquestions.’’
—PiaLindstro¨m,TVandradiobroadcasting
‘‘As a trustee and treasurer of a private day school, this book equipped me
with all of the concepts associated with not-for-profit accounting to allow
metoexcelatperformingmyresponsibilitiesasafiduciary.’’
—SusanLevitt,privateschooltrusteeandtreasurer
‘‘Whilethereisnothingparticularlysimpleaboutnot-for-profitaccounting,
this book provides a veritable to-do list for organizations of any size. Larry
Scot’sbookisanexcellentresource.’’
—EricJorgensen,FinanceAssociate,
Me´decinsSansFrontie`res/DoctorsWithoutBordersUSA
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‘‘Laurence Scot successfully integrates extensive professional, educational,
and practical experience to produce a highly relevant, clearly written, and
insightful book. In my opinion, The Simplified Guide to Not-for-Profit
Accounting, Formation, and Reporting is the most concise, complete, and
important resource for everyone considering and practicing not-for-profit
accounting.’’
—MarkCarmichael,FinanceDirector,
WorldMonumentsFund
‘‘The only not-for-profit accounting guide of its kind, this book provides a
comprehensiveguidetostartingupanot-for-profitorganization,aswellthe
accounting requirements necessary for producing GAAP financial
statements for an NFP organization. I’m recommending this book to those
looking for a user-friendly desktop reference to answer all your
industry-relatedquestions.’’
—KimChadourne,DirectorofManagementReporting,
ColumbiaUniversity
‘‘A marvelous introduction to NFP accounting—it’s like having the great
teacher there in the office with me! Mr. Scot’s book is a must read for
anyoneworkinginthenot-for-profitsector.’’
—JoshuaPowers,DirectorofAdministration,
AssociationofBlackFoundationExecutives
‘‘Scot’s book is the Baedeker of not-for-profit accounting and reporting
practices—guiding the reader through the organization of a NFP—
responsibilities of its board of directors and critical government reports to
file. Itsucceedsadmirably in its goal tosteer readersaroundthe hazardsof
organizing,managingandoverseeinganot-for-profitorganization.’’
—KarenRockey,Treasurer,
FinancialWomen’sAssociationofNewYork
E1FFIRS 04/09/2010 21:56:28 Page1
The Simplified Guide to
Not-for-Profit Accounting,
Formation, and Reporting
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The Simplified Guide to
Not-for-Profit Accounting,
Formation, and Reporting
Laurence Scot
JohnWiley&Sons,Inc.
E1FFIRS 04/09/2010 21:56:32 Page4
Copyright#2010byLaurenceScot.Allrightsreserved.
PublishedbyJohnWiley&Sons,Inc.,Hoboken,NewJersey.
PublishedsimultaneouslyinCanada.
Nopartofthispublicationmaybereproduced,storedinaretrievalsystem,ortransmittedinanyformor
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07030,[phone],fax[phone],oronlineathttp://www.wiley.com/go/permissions.
LimitofLiability/DisclaimerofWarranty:Whilethepublisherandauthorhaveusedtheirbesteffortsin
preparingthisbook,theymakenorepresentationsorwarrantieswithrespecttotheaccuracyor
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LibraryofCongressCataloging-in-PublicationData:
Scot,Laurence.
Thesimplifiedguidetonot-for-profitaccounting,formation&reporting/LaurenceScot.
p.cm.
Includesindex.
ISBN978-0-470-57544-4(pbk.)
1. Nonprofitorganizations(cid:1)Accounting. 2. Nonprofitorganizations(cid:1)Finance. I. Title.
HF5686.N56S362010
6570.98(cid:1)dc22
2009048436
PrintedintheUnitedStatesofAmerica
10 9 8 7 6 5 4 3 2 1
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Contents
Preface vii
CHAPTER 1 INTRODUCTION 1
CHAPTER 2 NFP ORGANIZATION FORMATION 7
CHAPTER 3 NFP ORGANIZATIONAL STRUCTURE 29
CHAPTER 4 INTRODUCTION TO NFP ACCOUNTING
AND REPORTING 41
CHAPTER 5 NFP ACCOUNTING SYSTEM AND
FINANCIAL STATEMENTS 63
CHAPTER 6 ASSETS—CONCEPTS AND DATA FLOW 87
CHAPTER 7 LIABILITIES AND NET ASSETS—
CONCEPTS AND DATA FLOW 123
CHAPTER 8 ACCOUNTING FOR SUPPORT AND REVENUE 139
CHAPTER 9 ACCOUNTING FOR PERSONNEL
COSTS, AND OTHER EXPENSES 155
CHAPTER 10 INVESTMENTS, POOLING, AND
SPLIT-INTEREST AGREEMENTS 173
CHAPTER 11 SUBSIDIARIES AND INTERRELATED ENTITIES 183
CHAPTER 12 BUDGET DEVELOPMENT AND APPLICATIONS 189
CHAPTER 13 SPECIAL TYPES OF NFP ORGANIZATIONS 199
CHAPTER 14 REGULATORY REPORTING (990, 990-T,
AND 990-PF) 205
CHAPTER 15 CONTRIBUTION/GRANT APPLICATIONS
AND REPORTING 227
CHAPTER 16 AUDITS—PREPARATION AND RESPONSE 235
CHAPTER 17 CONCLUSION 243
v
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vi Contents
APPENDIX A TAX-EXEMPT ORGANIZATION REFERENCE CHART 245
APPENDIX B SAMPLE NFP CHART OF ACCOUNTS 253
APPENDIX C ABBREVIATIONS 257
Glossary 259
AbouttheAuthor 269
Index 271