Comparative Financial Statements

[Mike or Penny Novack]

>
>> 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).

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.

Note that in earlier discussions you referred to keeping such funds as 
if in a separate asset account. That is indeed how I handled morally 
restricted funds. 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")

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.

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)