NFP Flashcards
(3 cards)
A nongovernmental, not-for-profit day care center pays its executive director a salary of $80,000. The director’s time is spent as follows:
Activity & Time spent
Providing Direct Educational Services 40%
Conducting Membership Development Activities 30%
Fundraising Activities 20%
Recordkeeping and Budgeting 10%
In the Statement of Functional Expense, what amount of the executive director’s salary should be reported as supporting activities?
$48,000 = $80,000 X .60
In the Statement of Functional Expenses for a Nongovernmental, Not-For-Profit Organization, expenses are categorized into Program Services and Supporting Activities. Supporting Activities are expenses that support the organization but are not directly related to the program services. Supporting activities are typically divided into three categories:
Management and General: These include administrative costs necessary to operate the organization, such as recordkeeping, budgeting, general oversight, and strategic planning.
Fundraising: These expenses relate to activities undertaken to raise funds for the organization, such as organizing fundraising events and campaigns.
Membership Development: These are expenses related to activities aimed at recruiting and retaining members, if applicable to the organization.
Providing Direct Educational Services (40%) is categorized as program services because it directly relates to the primary mission of the daycare center—providing educational services to children. Others are treated as Supporting Activities.
In a statement of activities of a voluntary health and welfare organization, contributions to the building fund should
Be included as an element of support
In the statement of activities of a voluntary health and welfare organization, contributions are classified as support or revenue based on their nature. Contributions that are donor-restricted (e.g., for a building fund) are categorized as support because they represent donations made to the organization for its programs or activities, even if they are temporarily or permanently restricted. The contributions would be recorded under net assets with donor restrictions until the restrictions are met (e.g., when the funds are spent on the building).
Which of the following statements is correct regarding the statement of cash flows for a nongovernmental not-for-profit organization?
- Cash received from service recipients is a Financing Activity.
- Cash collected on contributions receivable is an Investing Activity.
- Grants paid is an Operating Activity.
- Cash paid to employees and suppliers is an Investing Activity.
Grants paid is an Operating Activity.
