Part IV: Statement of Revenue

From NCCS Wiki

The revenue schedule FAILED to ADD (and perhaps should add):

• the number of donors/payers in the different revenue categories
• a distinction between individual and corporate donations
• program service revenue provided directly by the client or client's family
• a line for unrealized gains and losses

The lack of an explicit unrealized gain or loss line is particularly problematic as unrealized gains and losses are reported inconsistently in the current Form. I have seen it reported in the current form:

• not included at all
• in "other changes in net assets" (Part I Line 20)
• other investment income (Part I Line 7)
• other revenue (Part I Line 11)

Interestingly, the new instructions tell you where NOT to report unrealized gains and losses (Part IV, Lines 8 or 10a) but not where you should !

The revenue schedule ELIMINATED (and perhaps should not):

• the Reconciliation to the changes in net assets (Part I Lines 18 to 21 in the current form)

So, the schedule does not show that revenues - expenses = net income and net income +/- other changes in net assets = changes in net assets.

This problematic as a number of nonprofits presently report other changes in net assets and now there is no place to record these changes. The IRS may have decided to eliminate the other changes in net assets line as it is often incorrectly used. However, there are times (such as changes in prior year's balances) when you would like to make it clear to the reader of the financial statements that something other than current year revenues and expenses changed net assets.

Improved Transparency

The form could do more to help the reader's understand the difference between:

• Restricted vs. Unrestricted Revenues

I recommend that a section be added to Part IV that asks any nonprofit that has adopted SFAS 117 to reconcile as follows:

Line a: Total Unrestricted Revenues (excluding net assets releaased from restrictions)

Line b: Total Temporarily Restricted Revenues (excluding net assets releaased from restrictions)

Line c: Total Permanently Restricted Revenues

Line d (sum of Lines a to c): Total Revenues

and separately disclose the amount of temporarily restricted net assets released from restrictions

• Accrual vs. Cash Revenues

Ask nonprofits to disclose a separate figure which is the total gross receipts directly under total revenues.

Elizabeth Keating CPA, 23 June 2007

[edit] Reporting of Contributions

The draft form is more detailed than the current form, especially when viewed in conjunction with Schedule D (Endowment Funds), and Schedule M (Non-Cash Contributions). That said, the addition of several more items would make the new form a substantially more useful for policy and research purposes:

• A further breakdown of contributions between individuals, corporations and corporate foundations, private & community foundations, donor-advised funds, federated campaigns, and special events would be useful.
• The number of contributors in each group is valuable to understanding fundraising efficiency.
• A breakdown of revenues by type of restriction (unrestricted, temporarily restricted, and permanent restricted) was included on the Form 990 in the 1980s and should be included again.
• A breakdown for each category by cash and noncash contributions for each category is also valuable.

Three sample tables (the draft is in Excel format) for collecting information on private contributions are available here. The first represents the "ideal" from a researcher's perspective, the second eliminates some information, and the third is a modest improvement and readily incorporated into a paper form.

Tom Pollak 8/3/07