Comparative Financial Statements

[Wm]

Sun, 21 Dec 2014 15:14:21 <54972A1D.20900 at mtdata.com>  Mike or Penny 
Novack <stepbystepfarm at mtdata.com>

>
>>
>>> d) There will be some fixed text.For example, as a non-profit can 
>>>choose policy for "fixed assets" but that gets stated as part of the 
>>>report and there other things like that which might need explanation 
>>>(for many years we were carrying an INFORMALLY restricted fund -- 
>>>morally but not legally restricted)
>>
>>
>> That is an interesting discussion point.  A non-profit I'm doing some 
>>work for says all of their funds are unrestricted.  I'm less certain 
>>as I know for a fact there is some money in a bank account that is 
>>very definitely restricted from both access and day to day use.  The 
>>money isn't needed right now but I'm reporting it as a restricted 
>>amount until someone lets me know they can get their paws on it by 
>>writing a cheque.
>
>OK, maybe I need to explain what I meant.
>
>If somebody makes a donation writing "this is for the xyz expense" then 
>those are restricted funds, restricted to use for xyz amounts. That 
>restriction would show on the books (in the Balance  Sheet) because 
>legally restricted (technically "donor restricted funds"; there are 
>other sorts of restricted funds possible).

That is my understanding too.  Different reporting here but very 
definitely the same responsibility about reporting.

Can we stop fighting about that now? You seem to me to keep on telling 
people that broadly agree with you what you have said before.

>But perhaps the letter worded it this way. "I'd like the funds to be 
>used for xyz, but if the organization needs them, the funds can be used 
>for other purposes". Now that is not a legal restriction, but I think 
>you would agree that the organization had a moral duty to try to 
>reserve those funds for the purpose intended by the donor and account 
>for their use. But not being legally restricted, not as a liability* on 
>the balance sheet.

I see that as unrestricted but would check with the gift giver and 
wouldn't apply otherwise if they wanted it restricted.  An explanation 
of restricted funds is often useful in a case such as this as a donor 
may not realise what it means to the recipient organisation, i.e. a 
slightly broader restriction may meet the donor needs and the org needs.

>Note that in earlier discussions you referred to keeping such funds as 
>if in a separate asset account.

That is sometimes necessary.

>That is indeed how I handled morally restricted funds.

My POV isn't, interestingly, moral, I'm honest, which is different :)

>Also note that the sense in which I am using "restricted" might be 
>different than you are. I'm not referring to  the process by which 
>those funds could be accessed. Thus if the funds are in bank account X 
>where checks must be signed by John Q. and John has left to sail 
>singlehanded around the world there could be difficulties actually 
>getting to those funds but they aren't restricted in an accounting 
>sense. However, that is also a perfect example of an item that needs 
>annotation in the financial statement (along the lines "these funds are 
>there; but until we can get John to act or until we can make changes to 
>the bylaws and with the bank, etc. we can't get to them")

Not an issue for my org

>It's also an example why between whatever reports an accounting package 
>puts out and the finished financial report a full service editor might 
>be necessary.

Don't understand that in plain english, the editor bit, that is.

>Michael
>
>* Balancing the fact that the money is actually in bank account, but 
>the organization has to "earn" the right to use those funds (do 
>whatever lifts the restriction, usually by incurring expenses qualified 
>to be paid using those funds)

I think you and I are generally in tune on this.

-- 
Wm...