Common Financial Reporting Deficiencies (Part 2)
February 15, 2016
By Brian Collins, CPA
This is Part 2 of a 3-part series. To see Part 1, please click here.
Continuing on from last week’s post, this week we’re discussing the common errors in the Statements of Activities and Functional Expenses as covered by our own Phil Bergamo and Jessica Dima a recent EisnerAmper LLP webinar titled “Common Financial Reporting Deficiencies for Not-for-Profit Organizations.”
|Common Error||Proper Reporting|
|Net Net assets not properly released from restriction.Net assets not properly released from restriction.assets not properly released from restriction.||Net assets restricted for specific purposes should be released from restriction before spending unrestricted net assets on the same purpose.|
|Misclassification of revenue from exchange transactions.||Revenue from exchange transactions (service fees, tuition, membership dues, and most government grants) should be classified as unrestricted revenue. Only donors can impose restrictions and therefore exchange transaction revenue should not be classified as temporarily restricted.|
|Contributions related to pledges due in future periods is reported as unrestricted revenue.||Amounts related to pledges due in future periods should be classified as temporarily restricted revenue. There is generally an implied time restriction (since the cash is not available to spend) unless the donor indicates that the contribution is intended to support the current period, in which case it would be reported as unrestricted.
|A summary of expenses by function are not disclosed or the discloser does not include all of the organization’s expenses.||
|Expenses not appropriately allocated and/or consistently applied.||