Nonprofit Financial Management Quiz

Functional Expenses

• Program classifications relate to goods or services that achieve the main mission, including research, information, and advocacy.
• Support activities assist nonprofits in fulfilling their missions, such as fundraising and general management.

Joint Costs of Fundraising

• Total costs of fundraising activities are reported as fundraising costs unless linked to a bona fide program or management activity.
• Costs should be allocated between bona fide functions and fundraising using an equitable base.
• Criteria to determine a bona fide program include:
  • Purpose: The joint activity helps achieve a designated program purpose.
  • Audience: Primarily selected for program purposes rather than potential donations.
  • Content: Motivates the audience toward mission fulfillment or meets management responsibilities.

Restricted Assets

• Restricted assets are not available for current operations due to donor limitations for long-term purposes.
• FASB requires these assets to be classified separately from current assets on financial statements.

Gifts in Kind

• Gifts in Kind represent donations of materials or services.
• Unconditional gifts in kind are recorded at fair value, impacting both contribution revenue and expenses.
• Donated materials consumed in service provision are included in service costs.
• Contributed services recognized at fair value must either enhance nonfinancial assets or require specialized skills.

Land, Buildings, and Equipment

• Recorded at fair value upon donation, these assets can be donor-restricted or unrestricted.
• Donor restrictions on buildings and equipment generally expire upon asset usage, unless specific time or purpose limitations are imposed.

Special Events

• Special events are fundraising activities providing direct benefits to attendees.
• The contribution amount exceeds the cost of direct benefits, resulting in contribution revenue for the nonprofit.
• Revenues from these events are reported gross, with direct expenses documented separately.
• For peripheral special events, direct expenses may be netted against revenues.
• Promotion and conduct expenses of special events are categorized as fundraising expenses.

Accounting for Revenues, Gains, and Support

• Revenues: Increases in net assets from exchange transactions, where the counterpart benefits tangibly.
• Gains: Net asset increases from incidental transactions beyond management control.
• Support: Revenues from contributions or nonexchange transactions, where donors derive no tangible benefits.

Contributions and Gifts

• Contributions are voluntary, unconditional, and nonreciprocal transfers of cash or assets to a nonprofit.
• Contributions may have restrictions set by the donor.

Pledges

• Pledges represent promises to contribute assets.
• Conditional pledges: Depend on future events and are not recorded until conditions are met.
• Unconditional pledges: Based on time or demand, these are reported as support upon promise acceptance and recorded as net assets with donor restrictions if intended for future periods.
• Unconditional pledges expected within one year are valued at net realizable value.

Test your knowledge on the key concepts of nonprofit financial management, including functional expenses, joint costs of fundraising, and restricted assets. This quiz covers the importance of aligning financial activities with the mission of nonprofit organizations.