Slide 31-1 31 CHAPTER 31 NOT-FOR-PROFIT ORGANIZATIONS: PUBLIC NPOs.
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Transcript of Slide 31-1 31 CHAPTER 31 NOT-FOR-PROFIT ORGANIZATIONS: PUBLIC NPOs.
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Slide 31-1
31 CHAPTER 31
NOT-FOR-PROFIT ORGANIZATIONS:PUBLIC NPOs
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Slide 31-2
31FOCUS OF CHAPTER 31
Accounting for Public Health Care Organizations
The AICPA’s New HCO Audit & Accounting Guide
Accounting for Public Colleges & Universities
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Slide 31-3
31PART I
PUBLIC HEALTH CAREORGANIZATIONS (HCOs)
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Slide 31-4
31
Public HCOs: The GASB Guidance
Financial reporting for public HCOs falls under GASB’s jurisdiction. GASB guidance encompasses both: GASB pronouncements
and AICPA’s 1996 HCO Audit and
Accounting Guide (cleared by both FASB and GASB).
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Slide 31-5
31 Public HCOs: The AICPA’s 1996 HCO Audit Guide
The AICPA’s 1996 HCO Audit guide: Applies to both:
Private HCOs and Public HCOs.
Is to be read in conjunction with the reporting requirements of FAS 117, “Financial Statements of Not-for-Profit Organizations.”
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Slide 31-6
31 Public HCOs: The AICPA’s1996 HCO Audit Guide
SAS 117 (para. 3) allows AICPA’s 1996 audit guide to provide more specific accounting guidance than that set forth in FAS 117.
Thus allowable differences exist between the two documents.
Furthermore, slight terminology differences exist in the financial statements between public HCOs and private HCOs.
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Slide 31-7
31 Public HCOs:An Overview
Measurement focus: Flow of economic resources
Basis of accounting: Accrual basis Financial reporting: Aggregated basis
Description of outflows: Expenses Depreciation recorded: Yes Title of the operating Statement of
statement: Operations
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Slide 31-8
31 Public HCOs:Financial Statements Used
Required Financial Statements--ALL On An AGGREGATED Basis: A balance sheet. A statement of operations. A statement of changes in fund balances. A statement of cash flows--2 categories of
cash flows from financing activities: Capital and related financing activities. Noncapital financing activities.
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Slide 31-9
31 Public HCOs:Balance Sheet--Unique Aspects
Compared to private NPOs (Ch. 30), the major balance sheet differences are: “Fund Balance” is used instead of
“net assets”--even though the B/S is presented on an aggregated basis.
The fund balance section may show only 2 categories (restricted and unrestricted) rather than 3 categories (UR, TR, and PR).
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Slide 31-10
31 Public HCOs:Operating Statement--Unique Aspects
Compared to private NPOs (Ch. 30) the major OPERATING STATEMENT differences are: Inflows and outflows for the restricted
funds are NOT shown. Restriction expirations are reported in
the revenues section (e.g. as grant revenue)--NOT in a separate category called “Net Assets Released from Restrictions.”
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Slide 31-11
31 Public HCOs:Operating Statement--Other Aspects
The statement of operations must includea “performance indicator.” Examples are: Revenues over expenses. Revenues & gains over expenses
& losses. The “bottom line” in the statement of
operations must be the total increase or decrease in the unrestricted net assets.
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Slide 31-12
31 Public HCOs: Operating Statement--Unique Aspects
Nonoperating items must be reported separately from operating results: Extraordinary items, cum. effect of
account-ing changes, & discontinued operations.
Net change in fair value of investments. Equity transfers to/from affiliates. Unrestricted long-lived asset
contributions (and assets released from donor restrictions related to long-lived assets).
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Slide 31-13
31 Public HCOs: Statement of Changes in Fund Balance
(Ch. 30) (Ch. 31) Private NPOs Public HCOs Statement of changes in net assets or fund balance used.. NO YESExplanation: (not needed) (needed) 1. Private NPOs use a statement of activities that shows (a) ALL categories of net assets AND (b) the change in net assets for the period (an all-inclusive approach). 2. Public HCOs use a statement of operations that EXCLUDES the restricted funds. Thus the additional statement is needed (at least for the excluded funds).
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Slide 31-14
31 Public HCOs: Statement of Changesin Fund Balance--A Item of Duplicity
The change in the UNRESTRICTED FUND BALANCE for the period is shown in BOTH: The statement of operations AND The statement of changes in fund
balance. However, the unrestricted fund balance at
the BEGINNING and the END of the period is shown ONLY in: The statement of changes in fund
balance.
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Slide 31-15
31 Public HCOs: Receipt of Restricted Contributions
Receipt of Restricted Contributions (both temporary and permanent): When RECEIVED, report as increases in
the restricted column(s) of the statement of changes in fund balances. Do NOT report in the statement of
operations when they are received. Report in the statement of operations
LATER when TR restrictions expire.
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Slide 31-16
31 Public HCOs: Expirations of Restrictions
As restrictions expire on temporary restrictions, they are reported as: DECREASES in the restricted column of
the statement of changes in fund balances AND
INCREASES in the revenues section of the statement of operations by their nature.
The caption “net assets released from restrictions” is NOT used by public HCOs.
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Slide 31-17
31 Public HCOs:Bad Debts and Contractual Adjustments
Bad Debts: Must be reported as EXPENSES in the
statement of revenues and expenses. Cannot be reported as an adjustment
to patient service revenues. Contractual Adjustments (such as
discounts given to third-party payers): Must be reported as an adjustment to
PATIENT SERVICE REVENUES (netted).
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Slide 31-18
31 Public HCOs:Charity Care
Charity Care: Health care that is provided free--NOT expected to result in cash inflows. Nonrecognition: The value of charity
care is NOT recognized in the financial statements as receivables or revenues (because no cash inflow is expected).
Disclosures required: HCO’s policy for providing charity care. Level of charity care provided.
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Slide 31-19
31 Public HCOs: Investments--Summary of GAS 31
Value investments at their FAIR VALUE. Exception: Most money market investments
with a maturity of one year or less at time of purchase may be valued at amortized cost.
Report ALL investment income (includes mar-ket adjustments) in the operating statement. Make no distinction between realized and
unrealized gains and losses in presenting the “net change in fair value of investments.”
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Slide 31-20
31 Public HCOs: Investments--Summary of GAS 31
Investments in equity securities to which GAS 31 does NOT apply: Equity securities not having a
readily determinable fair value. Equity securities accounted for under
the equity method of accounting.
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Slide 31-21
31PART II
PUBLIC COLLEGES AND UNIVERSITIES (C&Us)
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Slide 31-22
31
Public C&Us: The GASB Guidance (GAS 35)
Must follow one of the two sets of guidance for “special purpose governments” that are set forth in GAS 34. Guidance for when: Guidance Set #1: Engaged only in business-
type activities (almost all private C&Us will use this guidance).
Guidance Set #2: Engaged only in
governmental activities or engaged in both governmental activities and business-type activities (few private C&Us will use this guidance).
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Slide 31-23
31
Public C&Us: The GASB Guidance (GAS 35)
Guidance Set #1: Engaged only in business-type activities. Must present: Management’s Discussion and
Analysis (MDA). Financial statements required for
Enterprise Funds. Required Supplementary Information
(RSI), if applicable.
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Slide 31-24
31
Public C&Us: The GASB Guidance (GAS 35)
Guidance Set #1: Engaged only in business-type activities. Enterprise Funds: Use accrual basis. Report depreciation expense in
operating statement. Use the all-inclusive format in the
operating statement (the entire change in net assets for the period).
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Slide 31-25
31
Public C&Us: The GASB Guidance (GAS 35)
Guidance Set #1: Engaged only in business-type activities. Operating statement categories: Revenues. Expenses. Nonoperating revenues and expenses Specified items
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Slide 31-26
31
Public C&Us: The GASB Guidance (GAS 35)
Guidance Set #1: Engaged only in business-type activities. Nonoperating revenues and expenses include: Noncapital appropriations Noncapital gifts. Investment income Interest expense on capital asset-
related debt. Other nonoperating revenues.
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Slide 31-27
31
Public C&Us: The GASB Guidance (GAS 35)
Guidance Set #1: Engaged only in business-type activities. Specified items include: Capital appropriations. Capital grants. Capital gifts. Additions to permanent endowments.
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Slide 31-28
31
Public C&Us: The GASB Guidance (GAS 35)
Guidance Set #2: Engaged only in
governmental activities or engaged in both governmental activities and business-type activities. Must report:
In the same manner as state and local governments. Thus must present both: Fund-based financial statements. Government-wide financial
statements.
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Slide 31-29
31 Public C&Us: Investments
The two slides that discuss GAS 31 that are at the end of PART I (slides 19 and 20) apply to C&Us as well as to HCOs.
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Slide 31-30
31End of Chapter 31
Time to Clear Things Up--Any Questions?