NonprofitEye

What words strike fear into the hearts of nonprofit accountants? Here is my list so far: Matching Costs Depreciation In-kind Donations Cost Allocation Overhead If auditors want to play "gotcha" all they have to do is utter these 4-letter words. No matter how properly a nonprofit handles these, they will always be open to question. Auditors know this, and so, when they have no findings, they seem to always pull these out of the hat. Matching Costs: How did you calculate these costs? How do you ensure you haven't used the same funds to match multiple grants? Depreciation: Why haven't you depreciated your capital improvements? Because you won't let us own the building! In-kind donations : How did you value these? Did you reflect them on your general ledger ? Cost Allocations : What is your basis? Do they fluctuate over the year? Did you allocate based on budgets (g-d forbid!) Overhead : You can't charge this here, it's unallowable....

You've heard of SOP-98-2 right?   SOP is acronym for "Statement of Position". Today we're talking about SOP-98-2 or " Accounting for Costs of Activities of Not-for-Profit Organizations...that include Fund-Raising ." SOP-98-2 has been effective since December 15, 1998 and applies to all fundraising activities of NPO's and to state and local government entities although most nonprofit managers haven't heard of it, we've been subject to this rule for over a decade. "Accountability" "Misleading the Public" "How much of your donation goes to the cause". These topics have receive a lot of media play. Your donors want to know "if I make a one dollar donation, how much will go the cause?  Typically the answer is 75 to 85%. Most folks would be okay with knowing that 80 cents of your buck go to the cause, yes. But what about the cost of fundraising? If you use a professional fundraiser, it's possible tha...

How did all of this madness evolve? In the beginning was a social ill, a problem that needed solving. Enter government funds set aside to help with that particular problem. If 100% of your funding goes to pay for 100% of one project, you only need be concerned that the expenditures are reasonable right? Wrong! Read the federal regulations (if you can stay awake) and first find out if they are allowable costs. Once you have an allowable cost and determined that it is "reasonable" you should be in the clear. Unless.... Unless you have two sources of funds funding one project. Sound's simple, but that's when the trouble begins. Have $100,000 from source A and $100,000 from source B, it's logical to charge 50% of the costs to each. But wait, I hope you have a cost allocation plan. And wait, I hope that plan isn't derived from your budget. What? If source A pays for a counselor who spends 30% of her time on the project, then your 50/50 plan is not accurate. Fur...