Non Profit Financial Accounting for Fundraising and Multi-Purpose Activities
The generally accepted accounting principles for non-profit organizations require that financial reports be given or presented in three categories, namely: management; program; and fundraising. Fundraising expenses comprise of conducting activities and campaigns to solicit and raise funds from other organizations, individuals and government agencies.
The audit guide for fundraising involves the drawing-up or listing of potential donors who will contribute money, kind and time for a single commutative objective. Accounting costs for contributions (administrative expenses) and direct benefits like food are not usually reported. This is likewise true for the time given by volunteers in behalf of the cause; as this is not considered to be a fundraising expense or revenue from contribution.
There are several kinds of program services offered by non-profit organizations, therefore there are various types of expenses which can be classified as program expenses. Some expenses may be linked to the representation of program services. This includes the food given by companies/corporations, workforce salaries in the office, etc.
Multi-purpose activities pertain to combining fundraising activities with another type of program activity like public education. This is normally termed as joint costs activity that falls within the non profit fund accounting system of the organization and recognized to be fundraising costs. If the charity cannot show or present any bona fide program activity as part of the overall activity, then related expenditures cannot be categorized under fundraising costs.
In order for the activity be classified as bona fide or genuine in the accounting for non profit organizations, it should conform to three main criteria as follows: 1) purpose – was the objective of the activity accomplished without the presence of a fundraising element? And was it conducted by people who have expertise in the fundraising activity? It is in this part where the evaluation of compensation for those who conducted the activity will be undertaken. 2) Audience – the target audience must not only represent people who can contribute to the cause but should likewise involve those who will benefit from the program. 3) Content – materials provided during the activity must have an educational value and must be program oriented.
It is significant to consider that accounting for non profit organizations follows a certain criteria or guideline which makes it quite complicated in terms of government agency requirements (IRS, States) that require the proper classification of cost expenditures.
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