SU 1: GOV & NFP entitites Flashcards
Organization created by statute or under nonprofit corporation law are governmental if:
They have one or more of the following characteristics:
1) officers popularly elected or controlling majority of their governing body is appointed or approved by government officials
2) have power to enact and enforce a tax levy
3) hold power to directly issue debt whose interest is exempt from federal taxation
4) face the potential that a government might unilaterally dissolve the entity and assume their assets and liabilities
Basic characteristics that distinguish nonprofit orgs from for profit enterprises
1) receive significant amounts of their resources from providers who do not expect equivalent value in return
2) operate for purposes other than to provide goods and services at a profit
3) lack ownership interests like those of a business enterprise
Governmental accounting standards board
GASB
Accounting standards-setting body for state and local governments
Major environmental differences between governments and business enterprises
1) organizational purposes
2) sources of and processes for generating revenues
3) relationship with stakeholders
4) potential for longevity
5) role of the budget
Performance and accountability report
Report required of federal agencies that encompasses both financial and performance reporting
Internal accounting focus for governments and nonprofits
Controls needed to ensure compliance with laws and donor restrictions
Federal accounting standards advisory board
FASAB
Sets standards for federal governments
GASB reporting objectives for state and local government
Financial reporting to assist in fulfilling the government’s duty to be publicly accountable and to help users assess that accountability
Requirements for state and local government financial reporting
1) provide data to show that current year revenues were sufficient to pay for current year services
2) demonstrate whether resources were obtained and used in accordance with the legally adopted budget
3) help users assess the entity’s service efforts, costs, and accomplishments
(Also shows ability to meet obligations as they come due, and information on financial position and available resources)
FASAB objectivs for federal financial reporting
1) assist in fulfilling the government’s duty to be publicly accountable for resources and expenditures (budget integrity)
2) should assist report users in:
- evaluating entity’s service efforts, costs, accomplishments and management of assets and liabilities
- assessing how nation is impacted by gov operations and investments (changes in national financial condition)
- understanding if financial management systems and controls are adequate
FASB reporting objectives for nonprofit orts
Information useful to present and potential resource providers to make rational decisions about allocating resources to org.
- services provided and ability to continue providing
- stewardship of responsibilities and resources
- performance of services
Fund accounting
Entity’s assets, liabilities and bet assets are segregated into separate accounting entitites based on legal requirements/donor restrictions/ special regulations
Each find has its own set of self-balancing accounts (assets = liabilities+ fund balance aka the unique resources of the fund and who has claim to those resources)
Mostly now only for internal use (GASB requires government-wide and fund-based external reports.)
Budgetary accounting
Ensures legally adopted budgets are not exceeded
Modified accrual basis accounting
Used by state and local governments for basic government functions
Measure only inflows and outflows of CURRENT FINANCIAL resources (vs. all economic resources)
Financial reporting: state and local governments
Two levels:
1) government- wide (distinguishes only between government and business type activities)
- accrual basia
2) fund-level (reports on individual major funds)
- prepared on basis used by individual fund
