Discussion:NonProfit - Chapter P/L F/Stmt Presentation?

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Discussion Forum Index --> Accounting Questions --> NonProfit - Chapter P/L F/Stmt Presentation?

Dude7707 (talk|edits) said:

10 June 2013
We have Non-Profit which prepares both State and Chapter financials, however State is on Accrual for both Financials and 990. Chapter is on cash-basis.

Issue, State pays $1/member for each meeting they attend during the fiscal year and pays usually month or so after year end to each chapter.

Before New Association, (NA) who handles all our accounting, each chapter would record this payment from the State as “State Revenue Sharing”

On their financials and Revenue Sharing Expense at the State level.

Now, NA is stating all monies coming from the chapters are all part of the state, and have eliminated the “State Revenue Sharing” Account and just using the Revenue Sharing Expense account. So when Chapter receives annual State Revenue Sharing payment It is recorded to Revenue Sharing Expense as an credit in the Expense section of the Chapter financials.

To me this is not correct since this is revenue to the chapter and belongs in the Revenue section. My recommendation, setup An State Revenue Sharing account so now Chapter financials are presented correctly. The issue, here is there are two Methods of accounting, one being Accrual and the other Cash Basis. The other, the NA is trying to have only One master COA And handle all the accounting of the chapters, which I understand but they are violating the comparison principle since now They eliminated the State Revue Sharing account. Now comparative chapters financials will be incorrect.

Their State Treasury reply is:

Technically, the State level and all the Chapters are one entity. So, when the State issues Revenue Sharing checks to the Chapters, it is, in essence, an internal company transaction. Before the Pilot Project, Chapter information was only entered into the State accounting records annually, on an accrual basis. So, the checks written by State would be a debit to Chapter Revenue Sharing expense and when the “income” at the Chapter level was reported, it netted or zeroed out the transaction.

Specifically in this case, the expense at the State level was reported in Accounts Payable at the end of the fiscal year ending June 30, 2012. When Chapter received and deposited the check in July or August 2012, it was entered as a credit to the Chapter Revenue Sharing expense account. There is no income account in the State’s Chart of Accounts for Chapter Revenue Sharing. At the State level, this is an expense – so that is where it was posted.

Your Comments?

Natalie (talk|edits) said:

June 11, 2013
Which entity is your client? Are the chapter financials stand-alone?

Dude7707 (talk|edits) said:

11 June 2013
They are not my client, just the accounting association I belong to. As for the chapters, they are all considered One entity.

Natalie (talk|edits) said:

June 12, 2013
Are the chapter financials stand-alone, i.e., are they issued separately?

Dude7707 (talk|edits) said:

12 June 2013
Stand-alone meaning are they prepared by each chapter independently? Originally Yes.

Now, NA wants to handle all accounting for chapters and prepare the monthly chapter financials.

Does this answer your question?

Also, just FYI, have another reply from one of our members:

You have State reporting and Chapter reporting. For Chapter purposes, it is a specific revenue source. For the State, it is not a specific revenue source and seems appropriate to net against the expense.

Natalie (talk|edits) said:

June 13, 2013
If statements are issued separately, I would expect to see revenue listed in the revenue section.

The bigger issue here, I think, is that the state is on the accrual basis and the chapters on a cash basis. If I were working with this group, I would recommend that all reporting be done on the accrual basis.

What is your concern about comparability?

Dude7707 (talk|edits) said:

13 June 2013
I agree, having both State and Chapter on same accounting method would resolve this issue. However, for whatever reason, they are not.

Too much work perhaps the State will claim.....really!

As for comparative, if Chapters want to prepare comparative Income Statements, now that NA has change method of reporting "Revenue Sharing Income" you now have lost comparability. Originally coded to Income now crediting to an expense account.

Natalie (talk|edits) said:

June 14, 2013
It would seem the state would want all of the chapters using the same basis of accounting because it would reduce the amount of work, e.g., end-of-period adjustments to convert to accrual.

In any case, I don't quite understand why comparability is lost just because revenue is moved to an expense line. If they were comparable before, they should still be comparable. What am I missing?

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