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According to Andy Lamas
Organizations
100
What financial statements are nonprofits required to issue?
Statement of Financial Accounting Standards No. 117 “Financial Statements of Not-for-Profit Organizations”, §6 “Scope”: “A complete set of financial statements of a not-for-profit organization shall include a statement of financial position as of the end of the reporting period, a statement of activities and a statement of cash flows for the reporting period, and accompanying notes to financial statements.”
100
If you are an executive director, why wouldn't you want to accept too many restricted donations?
They will make your net worth greater, but that money may not be able to be used for what you want it for. It can dissuade possible funders from giving money because it looks like you already have a lot.
100
What is the meaning of “equity”? Please also provide synonymous words for it.
The meaning of “equity”: In financial accounting, it is the owners' interest on the assets of the enterprise after deducting all its liabilities. It appears on the balance sheet, one of four financial statements. Ownership equity includes both tangible and intangible items (such as brand names and reputation). In contrast, book value includes only the tangible assets. "What you own" - "what you owe"="Equity"="net assets"="net worth"
100
According to Andy Lamas, what is the “night of the living dead” phenomenon?
It is when an asset that is still in use depreciates to the point of not showing up on the financial statement. Ex; the historic buildings on Penn’s campus
100
What are the common cooperative forms? (Name at least four)
Consumer cooperatives Worker cooperatives Producer cooperatives Housing cooperatives Hybrids Purchasing/service cooperatives
200
Describe the relationship between the income statement and balance sheet. How does the income statement affect the balance sheet from one year to the next?
Net assets at the beginning of the year (Balance sheet) + Change in net assets (from your income statement) = Net assets at the end of the year (Balance sheet) All transactions that affect the income statement will affect the balance sheet.
200
As a donor, why would you want to give a restricted asset?
You can be sure that your money will be used the way you want it to be used
200
What does “depreciation” mean?
In accounting, an expense recorded to allocate a tangible asset's cost over its useful life. Because depreciation is a non-cash expense, it increases free cash flow while decreasing reported earnings.
200
Why is it that social security works and the American welfare system doesn’t?
Social security is protected by the rich, who have more political power, because they benefit from it. Social security adjusts for inflation. The welfare system is not protected by people with political power because it is for the poor only and does not adjust for inflation over time. The same is true for minimum wage.
200
Who owns a for-profit, a nonprofit, a worker cooperative and a consumer co-op?
Shareholders own a for-profit company. No one owns a nonprofit. If a nonprofit were to "close down", the board of directors of the nonprofit must distribute all of its assets to another nonprofit after all debts have been settled. A worker co-op is a cooperative owned and democratically controlled by its worker-owners. A consumers' co-op is a cooperative business owned by its customers for their mutual benefit.
300
Where in financial statements can you see the results of the fund raising campaign?
Statement of Activities (Income Statement): you can see the expenses of the fund raising campaign and the increase in revenues that might result from that campaign but usually you will need additional information about the sources of revenue to prove this link. Statement of Financial Position (Balance Sheet): Increase in assets (Cash if you received cash donations/contributions or other assets if you received in-kind donations/contributions)
300
If you were reviewing an organizations financials before going to a job interview with them, what would be the first four things you would look at?
1) the notes about the mission of the organization. 2) auditor’s report 3) cash flow statement 4) net assets
300
Please compare the “cash-based accounting” and “accrual based accounting”
“Cash-based” accounting recognizes income when money is received. “Accrual-based” accounting recognizes income when goods are shipped or services are rendered. Under the cash method, an expense is recognized when it's paid. Under the accrual method, an expense is recognized when the business is obligated to pay it.
300
Why is it that people talk about net worth when we speak about someone wealth, but in politics we talk about median income?
Discrepancies look smaller when we talk about median income because that number doesn’t account for assets that someone would include when calculating net worth. 30% of African-Americans in the US have a net worth of zero.
300
What are the organizational forms of the following organizations: Green Mountain Coffee Roasters, Harvard University, Praxis Consulting Group, Weaver's Way, Colors restaurant. (to get points you have to give at least 4 correct answers)
Green Mountain Coffee Roasters - for-profit Harvard University - nonprofit Praxis Consulting Group - for-profit Weaver's Way - consumer/food co-op Colors restaurant - worker co-op
400
What does a qualified opinion of an auditor mean? (hint: Bruce doesn't like it and tries to avoid it in his job)
A qualified opinion is issued when the accountant believes the financial statements are, in a limited way, not in accordance with generally accepted accounting principles. A qualified opinion might include wording such as, "In our opinion, except for the omission of... the accompanying financial statements present fairly..." An unqualified opinion includes wording such as, "In our opinion, the accompanying financial statements present fairly the financial position of ABC Agency at the fiscal year ending June 30, 19XX, ... in conformity with generally accepted accounting principles."
400
If you were looking to donate to an organization, what are some things that would be important to know about their financial standing?
1) do they have the ability to achieve what I want them to? 2) are they responsible with their finances? 3) what type of asset is most appropriate to achieve the goal?
400
What is the difference between “insolvent” and “illiquid”?
"insolvent": Describing a situation in which an individual or firm is unable to service its debts. This occurs when the individual or firm has a little or no cash flow, and may occur due to poor cash management. An insolvent individual or firm often declares bankruptcy, or it may arrive at an understanding with creditors in which it restructures payments. "illiquid": An asset of a person or organization that is illiquid is not easily convertible into cash.
400
According to Andy Lamas, an atheist would like which method of accounting best? Why?
The cash basis of accounting because you can never tell/predict what will happen in the future.
400
If a nonprofit has 501(c)3 status does it have to pay any taxes and when?
If a tax-exempt organization has employees, it is responsible for Federal Income Tax Withholding and Social Security and Medicare taxes. Some organizations are responsible for Federal Unemployment Tax. It may also owe tax on any unrelated business income. (Unrelated business income is income generated by a business activity not substantially related to the exempt purpose of the organization and regularly carried by that organization.) A nonprofit has to file a tax return. Once its receipts (all the money it takes in from any source) exceed $25,000, it needs to file a return.
500
What is the purpose (or purposes) of the favorite Bruce's statement?
The cash flow statement has 2 primary purposes. One, it indicates how much cash money flowed into or out of the organization over a period of time, usually a year. Second, it reconciles the other two financial statements - income statement and balance sheet. For the income statement, it reconciles the accounting assumptions with the actual cash the organization received. For the balance sheet, the cash flow statement shows the differences in the level of assets or liabilities from the previous reporting period.
500
If you were a creditor, what would you look for in an organizations investments before deciding whether to give them credit? In their accounts receivable? (hint: it is called the same in both cases)
Concentration of Credit Risk
500
What are the meanings of “contribution,” “donor restrictions” and “donor conditions”?
Contributions: An unconditional transfer of cash or other assets to a not-for-profit entity or the settlement or cancellation of its liabilities in a voluntary nonreciprocal transfer by another entity acting other than as an owner. Donor restrictions: A stipulation and limitation in the use of contributed assets. These restrictions can be limited as to purpose, time, or both. Donor conditions: A future or uncertain event whose occurrence or failure to occur can result in the return of the assets transferred to the promisor or the release of the promisor from an obligation to transfer assets.
500
According to Andy Lamas, what is the most effective structure for an organization that wants to make a positive change in the community?
It depends. Non-for-profits, co-ops, socially responsible for-profits and hybrid organizations can all be equally effective. One must evaluate which structure is best for each specific organization’s mission and clientele.
500
In a nonprofit organization what is the board's responsibility in investment?
The board of directors of a nonprofit organization has a responsibility to safeguard the organization's assets, and to ensure that funds are used to further the organization's goals. In addition, the board must ensure that donor designations are honored, and that cash and other investments are managed wisely. Specifically, the board should review three areas related to investments: Cash Management, Endowment Funds, Maximizing Income Through Prudent Investment.