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Who Really Owns a Nonprofit?

I nice article by The Foundation Group

The concept of who owns a nonprofit organization can be hard for some to grasp, especially given that the answer is, “No one…and everyone!”  We encounter this confusion with new clients on a fairly regular basis.  And, given people’s understanding of how basic business operates, it is understandable.  In order to fully appreciate the concept of “non-ownership”, it is helpful to first talk about the various types of business entities.  Then, we’ll look at organizational purpose.  By the end of the article, it should make a lot more sense....See full article here..


Audit Committees and the Nonprofit Revitalization Act of 2013

New Guidance was publiched by the NYS Charities Bureau.

You can find it here:



New York’s Executive Law requires most organizations that solicit charitable contributions in New York to register with the Attorney General’s Charities Bureau.1 Organizations whose revenues exceed the thresholds described later in this guidance are required to submit audited financial statements “in conformity with generally accepted accounting principles, including compliance with all pronouncements of the financial accounting standards board and the American Institute of Certified Public Accountants.”2 The audit must be submitted with New York’s Annual Filing for Charitable Organizations (Form CHAR500) and Internal Revenue Service Form 990. To enhance compliance with the audit requirement, the Nonprofit Revitalization Act of 2013 (“the NPRA”) added section 712-a to the Not-for-Profit Corporation Law (“N-PCL”) setting forth the audit oversight responsibilities of not-for-profit corporations and section 8-1.9 to the Estates, Powers and Trusts Law (“EPTL”) setting forth the responsibilities of trusts3 that are subject to the audit requirements. EPTL section 8-1.9 specifically makes applicable to charitable trusts a number of sections of the NPRA, including the provisions addressing audit oversight, as well as related party transactions and mandatory conflict of interest and whistleblower policies. This guidance has been prepared to assist nonprofits in implementing audit oversight procedures or revising procedures already in place. It should not, however, be viewed as a substitute for advice from an organization’s attorney or accountant.


A practical note on accounting for and segregating board designated (and restricted) net assets

If the board (and not an outside donor) wants to restricted assets, it is called "Board Designated' and it is still  "Unrestricted" in an accounting sense since the board can  undesignated it as well.  Most likely the asset an organization wants to designate (or restrict) is cash, but it could be any other asset (i.e. real estate that can't be sold and is restricted to be a park).  Currently, for accounting, there are no rules as to how you segregate the asset you want to restrict.  For the financial statements, the asset itself is not shown as restricted. In the Net Assets section (equity) of the balance sheet, the total amount that the organization has restricted or designated is broken out from what is unrestricted. It does not show what the restricted asset is or why its being restricted.   The note to the financials explains what it is.
In a practical sense, many organizations do open up a separate bank account to move funds to that are restricted or designated. This is not necessary though (unless a funder requires funds to be in a separate bank account).  If it's a long term goal (i.e. a church saving to buy a building in 20 years) opening a savings account makes sense.  Also , all restrictions and designations need to be tracked - amounts added to restricted (or designated) funds , amounts released from restrictions (or designated). This can be confusing , especially if there are multiple designations and restrictions going on. It is usually not practical to track this in your accounting software (i.e. Quickbooks). The best approach I find is to track on an excel schedule.  Released from restrictions just means funds were expended on their purpose.  If 10K was restricted for use in a future year for a program, the amounts are "released" from restrictions in the future period when that amount is spent on the program....