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

A complete and easy to understand guide to the fundamentals of how not-for-profit organizations are formed and run, as well as their structure and the unique accounting and reporting issues they face.

Providing you with a comprehensive understanding of how to maintain the "books" of a typical nonprofit entity and comply with numerous reporting requirements, The Simplified Guide to Not-for-Profit Accounting, Formation & Reporting equips you with everything you need to know to form a Not-For-Profit, setup an accounting system, record financial transactions and report to donors and regulatory bodies.

Topics include:

• Step-by-step guide to forming a Not-For-Profit and applying for tax exemption
• Becoming familiar with unique Not-For-Profit accounting rules such as classifying contributions/grants and recording restrictions, allocation of expenses to programs and supporting services and investment classification and reporting
• Budget development, payroll processing and accounting for personnel costs
• Shows how to prepare and understand required Not-For-Profit financial statement and their components
• Provides you with a broad understanding of the numerous filing requirement required by donors, grantors and government regulatory agencies

Practical and comprehensive in scope, The Simplified Guide to Not-for-Profit Accounting, Formation & Reporting offers a wealth of practical information to accountants and non-accountants alike for understanding Not-For-Profit financial transactions, financial statements and the many internal and external reports they must prepare.

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

Appendix A Tax-exempt Organization Reference Chart 245

Appendix B Sample Nfp Chart of Accounts 253

Appendix C Abbreviations 257

Glossary 259

About the Author 269

Index 271

LAURENCE SCOT is the cofounder and comanaging partner of Skody Scot & Company, a midtown CPA firm formed in 1990 that specializes in servicing the Not-for-Profit community. Scot has taught undergraduate and graduate classes at several colleges; been lecturing and giving seminars to CPAs, bankers, NFP D&Os (directors and officers), managers, and entrepreneurs for over twenty years on a variety of subjects; and is the creator of the first in-class certificate program in Not-for-Profit accounting and governmental reporting.

Praise for 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 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 difficult accounting concepts particular to Not-for-Profits."
—Richard Tierney, Director of Finance, North Shore Animal League America

"This book is a concise, complete review of the fundamentals of Not-for-Profit accounting and governance. Every topic is covered with a directness and honesty that builds confidence in those who need to learn how to do their jobs well. This is just what we need in today's choppy Not-for-Profit waters."
—Rev. Luke L. Travers, OSB, Business Officer, Delbarton School/St. Mary's Abbey

"Larry Scot's book is a clearly written step-by-step guide on how to set up and maintain accounting records. Every Not-for-Profit financial executive should have this book on their shelf for reference. I highly recommend this book."
—Gail Rizick, CPA/ABV/CFF, CVA, Cr.FA, ASA

YOUR A-TO-Z GUIDE TO NOT-FOR-PROFIT FORMATION, ACCOUNTING, AND REPORTING

If you need basic, easy-to-understand information on how Not-for-Profit organizations are formed, how they're structured, and the unique accounting and reporting issues they face, The Simplified Guide to Not-for-Profit Accounting, Formation, and Reporting is the only resource you need.

This comprehensive guide provides you with expert advice on how to maintain the financial "books" of a typical Not-for-Profit entity and what is needed to comply with most reporting requirements. Plus, it lays out what a Not-for-Profit organization is, the rules it must follow, the role and responsibilities of its board of directors, and the various regulatory agencies that Not-for-Profits must report to.

Straightforward and hands-on, this effective reference will help you navigate through all of the key accounting and reporting issues unique to the Not-for-Profit world, including:

• Step-by-step instructions for forming a Not-for-Profit
• Not-for-Profit internal controls and financial statements
• Developing a "chart of accounts" and operating budgets
• Not-for-Profit accounting rules and GAAP
• Everything you need to know about the new Form 990
• Accounting for unrestricted and restricted contributions, grants, and other revenue
• Plus much more!

Whether you are performing accounting functions, responsible for financial management, or simply want to understand Not-for-Profit accounting, operations, and reporting, The Simplified Guide to Not-for-Profit Accounting, Formation, and Reporting is a great and handy book to have around for easy reference.