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Accounting and Finance for

Non-Profit Organizations

Table of Contents
Page
Part 1 1 hour (1 2 PM) Basic Accounting - Optional
1.
Cash Accounting and the Bank Reconciliation
2.
Accrual Accounting Payables and Receivables
3.
Capital Assets and Inventory
4.
Accounting for Revenues an Overview
5.
Simply Accounting and Quickbooks Demonstration
6.
Working Papers and Adjusting Entries

3
4
13
15
17
18

Part 2
7.
8.
9.
10.
11.
12.

- 1.5 hours (2:15 3:45)


Accounting for the GST 10 minutes
Accounting for Payroll 15 minutes
Other Reporting to CRA, and the Alberta Government 30 minutes
Internal Controls 15 minutes
Budgets, Business Plans and Performance Measures 20 minutes
Other Resources and Final Questions 5 minutes

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37
46
38
53
62

Part 3
13.
14.
15.
16.
17.
18.
19.

- 1 hour (4 5 PM) Advanced Financial Accounting - Optional


An Overview of the Canadian Accounting System for NPOs
Reporting Entity
Fund Accounting
Expense Recognition
Revenue Recognition
The Statement of Changes in Net Assets and Cash Flows
Wrap Up: Options available for NPOs

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67
69
75
80
84
90

1. Cash Accounting and the Bank Reconciliation


The bank statement debits and credits
Using a synoptic journal to do your accounting the Toy Club

Savings Account - Synoptic

Date

Item

Jan 1/05 Balance Forward


Jan-06 Transfer (to chequing)

Bank
Debit

Credit

Transfer
to/from
Chequing

Control
total

1000.00

1000.00

200.00

200

0.00

200.00

200.00

0.00

Total debits less credits

800.00

Balance per bank statement

800.00

Toy Club - Synoptic


Chequing Account
accounting on a cash basis
Date
Item
01-Jan-05
01-Jan-06
10-Jan-05
11-Jan-05
11-Jan-05
17-Jan-05
28-Jan-05
30-Jan-05

Description

Balance Forward
Transfer (from savings)
Donations
Cheque 1
toy purchase
Cheque 2
toy purchase
Cheque 3
delivery
Cheque 4
photocopies
Donations

Total debits less credits

Bank
Debit

Bank
Credit

Credit

Debit

Cr

Dr

500.00
200.00
1000.00

Bank statement

Disbursements

Donations
Cr

Office
Dr

Toy
Purchases
Dr

Delivery
Dr

200.00
1000.00

650.00
345.00
122.00
65.00

650.00
345.00
122.00
65.00
500.00

500.00

1182.00 2200.00

200.00 1500.00

1018.00

outstanding cheques
cheque 2

Receipts
Transfer
from
Savings
Cr

345.00
1363.00

65.00

995.00

122.00

Control
total

0.00
0.00
0.00
0.00
0.00
0.00
0.00

0.00

Toy Club
Statement of Financial Position
Cash Basis

January 31

Assets
Cash - Chequing
Cash - Savings

$ 1,018.00
800.00

$ 1,818.00

Net Assets
Unrestricted net assets

1,818.00
$ 1,818.00

Toy Club
Statement of Operations
Cash Basis

Month Ending
January 31

Receipts
Donations

$ 1,500.00

Disbursements
Office
Toy purchases

65.00
995.00

Delivery

122.00
1,182.00

Increase in Cash

318.00

Cash, beginning of month


Cash, end of month

1,500.00
$ 1,818.00

2. Accrual Accounting Receivables and Payables


Why use accrual accounting?
When are amounts receivable?
When are amounts payable and when do we record accrued liabilities?
The Toy Club general ledger sample accruals
- setting up a receivable and payable
- recording the subsequent payments

Toy Club
General Ledger
Date

01-Jan-05
01-Jan-06
10-Jan-05
11-Jan-05
11-Jan-05
17-Jan-05
28-Jan-05
30-Jan-05
31-Jan-05
31-Jan-05
31-Jan-05
31-Jan-05

Assets

Item

Description

Savings

Balance Forward
1000.00
Transfer (from savings)
-200.00
Donations
Cheque 1
toy purchase
Cheque 2
toy purchase
Cheque 3
delivery
Cheque 4
photocopies
Donations
Payables
delivery
Receivables
promised donation
Inventory
distributions
Deferred Cont
recognize rev

Totals

800.00

Contributions Toy
Chequing Receivable
Inventory

500.00
200.00
1000.00
-650.00
-345.00
-122.00
-65.00
500.00

1018.00

outstanding cheques
cheque 2
Bank statement

345.00
800.00

1363.00

Liabilities

Deferred

Net Assets

Accounts
Payable

Contributions
Boys
Girls
Toys
Toys

Revenues

Unrestricted
Net Assets Donations

Expenses

Office

Toy
Distributions Delivery

Control
total

-1500.00
-600.00

-400.00

650.00
345.00
122.00
65.00
-500.00

0.00

995.00

0.00

-600.00

-400.00

-1500.00

-500.00

65.00

0.00

122.00

0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00

0.00

Toy Club
General Ledger
Date

01-Jan-05
01-Jan-06
10-Jan-05
11-Jan-05
11-Jan-05
17-Jan-05
28-Jan-05
30-Jan-05
31-Jan-05
31-Jan-05
31-Jan-05
31-Jan-05

Assets

Item

Description

Savings

Balance Forward
1000.00
Transfer (from savings)
-200.00
Donations
Cheque 1
toy purchase
Cheque 2
toy purchase
Cheque 3
delivery
Cheque 4
photocopies
Donations
Payables
delivery
Receivables
promised donation
Inventory
distributions
Deferred Cont
recognize rev

Totals

800.00

Contributions Toy
Chequing Receivable
Inventory

500.00
200.00
1000.00
-650.00
-345.00
-122.00
-65.00
500.00

Bank statement

Net Assets

Accounts
Payable

Contributions
Boys
Girls
Toys
Toys

Unrestricted
Net Assets Donations

Revenues

Expenses

Office

Toy
Distributions Delivery

-600.00

-400.00

650.00
345.00
122.00
65.00
-500.00
145.00
-300.00
-400.00

1018.00

1363.00

Control
total

-1500.00

300.00

345.00
800.00

Deferred

-145.00

outstanding cheques
cheque 2

Liabilities

300.00

595.00

400.00

-145.00

100.00

300.00

-500.00

-100.00

-400.00

-1500.00

-1200.00

65.00

400.00

267.00

0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00

0.00

Toy Club
Statement of Financial Position

January 31

Assets
Cash

$ 1,818.00

Contributions Receivable

300.00

Inventory

595.00

$ 2,713.00
Liabilities
Accounts Payable

145.00

Deferred Contributions
Toy donations

600.00

Net Assets
Unrestricted net assets

1,968.00
$ 2,713.00

Toy Club
Statement of Operations

Month Ending
January 31

Revenues
Donations

1,200.00

Expenses
Office

65.00

Toy Distributions

400.00

Delivery

267.00
732.00

Increase in Net Assets

468.00

Net Assets, beginning of month


Net Assets, end of month

1,500.00
$

1,968.00

3. Accounting for Capital Assets and Inventory


What is a capital asset?
Do we need to account for them and why? The Alternatives.
Accounting in the financial statements Canadian Foodgrains Bank example. Recording
the asset purchase and depreciation.
What is inventory?
Consumable inventory and inventory held for resale.
Do we need to account for it and why?
Journal entries made to the Toy Club

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Capital Assets
Current policy is to capitalize or
gross revenues > $500,000?

NO

YES

Set Policy

Expense:

Capitalize:

1. Provide note
1. Determine
disclosure
threshold
(description, age,
2. Set classes
useful life, amount
(furniture, building,
expensed in period)
computer
equipment, land)
-Non-depreciable
-Depreciable
3. Determine useful
life for each class
and amortize.
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4. Accounting for Revenues an Overview


The accounting rules are complex and discussed in greater detail in the advanced
financial accounting session.
The basic principles however are that sales and service type, commercial like
revenues are recognized when earned, as in the for-profit world.
Contract revenues are recognized over the period of the contract, unless expenses are
unclear then the revenues and expenses are deferred.
The primary method of accounting for contributions is the deferral method of
accounting for contributions.
Under the deferral method, restricted donations and grants are recognized when
received or receivable.
Example: Canadian Foodgrains Bank
There is another method of accounting for restricted contributions, which we will
discuss in the advanced section.
You have the option of accounting for contributed materials and services.
You must account for contributed capital assets, and at their value.

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Assets
Current assets:
Cash and short-term investments
Receivables and prepaid expenses
Grain inventory
Land
Capital assets

$ 17,288,142
3,372,62
224,275
$ 20,885,039
127,040
107,752
$ 21,119,831

Liabilities, Deferred Contributions and Net Assets


Current liabilities:
Accounts payable and accrued liabilities
Deferred contributions
Net assets:
Restricted
Unrestricted

$ 1,563,139
60,498

10,632,051
8,864,143
$ 21,119,831

Statement of Operations - Year ended March 31, 2003


2003
Revenue
Cash donations
Grain donations

2002

$ 4,878,859
$ 3,207,139
3,270,1est 0. Tw09363,20$

5. Simply Accounting and Quickbooks Demonstration


Simply Accounting
- an overview of the modules in Simply Accounting
- the reports that can be produced
- project report for the Toy Club
Quickbooks
- income summary by class for the Toy Club
Differences between the Software
- reversing entries in Simply
- no account codes in Quickbooks
- deceptive bank reconciliations
- accrual vs. cash basis in Quickbooks
- more typical NPO type default accounts in Quickbooks
- Simply is more widely accepted among NPOs
Other software and accounting options

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6.

Year-End Working Papers and Adjusting Entries


Working papers document the support for year end balances, and
Are useful for review by the board and management
Are useful for the auditor, and result in less costly audits
May be needed to support future audits
A lead schedule should be prepared that lists the account balances included in each
financial statement category. This should be referenced to the supporting
documentation for year end balances.
Cash and Investments
Cash
Bank reconciliations are needed for all bank accounts
The only items remaining on a bank reconciliation should be those reconcling
items required to facilitate an accrual basis of accounting for cash, ie
outstanding deposits, cheques, and transfers
there may be uncorrected bank errors left on the reconciliation
The accounting needs to adjusted for all other reconciling amounts including
unrecorded interest or service charges
Investments
The lead schedule should be supported by investment certificates
Accrue interest, even if not paid, because we want all revenue earned in the
year recorded in the proper period.

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Lead Schedule
Cash
Bank 1
Bank 2
Bank 3
Total Cash

$150.00
$200.00
$100.00
$450.00

Cash total on Financial Statements $450.00

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Bank Reconciliation
Any Not-for-profit
December 31

Balance per bank

$200

Add/Subtract
Outstanding cheques

$ 50

Outstanding deposits

$0

Outstanding transfers

$0

Other reconciling items*

$?

Balance per general ledger

$150

Outstanding transfers would be transfers between accounts.


*There should not be any other reconciling items, unless there is an error on
the bank statements. All other reconciling items should be adjusted in
preparing the year-end statements.

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Investments
Any Not-for-profit
December 31, 2002
Investment
GIC #1
GIC #2
Total

Amount
$ 511.25
$1,014.99
$1,526.24

Interest Accrual
Investment 1

- Purchased January 1, 2002


- 2.25% interest
- Year-end December 31, 2002
(Amount X Interest Rate) X # months held / 12 months
(500 X 2.25%) x 12/12
$11.25 accrued interest
Investment 2

- Purchased April 1, 2002


- 2% interest
- Year-end December 31, 2002
(1,000 X 2%) X 9/12
$14.99 accrued interest

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Accounts Receivable and Contributions Receivable


Accounts Receivable
Usually not substantial, except where there is significant sales and service
revenue
An aged accounts receivable listing may be useful if substantial receivables
exist
Contributions Receivable
Grants or pledges that are promised but not received
Should have documentary evidence that pledges existed at year end (eg. letter)

Accounts Receivable
Any Not-for-profit
December 31
Name
GST
Receivable
John Doe
Total

Current
100
100

30-60
30
30

60-90

> 90

Total
100
30
130

Total per G/L $130.00

Contributions Receivable
Any Not-for-profit
December 31
Name

Amount

When
Pledged

Nancy Roo

100

November 5

Kent Talkman

50

December 1

Total

150

Description
Purchase of new
theater supplies
Purchase of new
theater supplies

Total per G/L $150.00

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Prepaid Expenses
Expenses paid for in advance are prepaid expenses, and recorded as assets
Examples: prepaid insurance, and rent
Insure prepaids set up in the previous fiscal year are expensed if appropriate
List of all prepaid and supporting calculations

Prepaid Expenses
Any Not-for-profit
December 31
Prepaid

Amount

Insurance

200

Rent
Total

2000
2200

Calculation
$2400 X 1/12 months (Feb 1 Jan
31) record Jan insurance as prepaid
Last months rent, January rent

Total per G/L $2,200


Prepaid Rent
Example

Year-end Dec 31.


Moved into your new office on October 1
Signed a one-year lease
Paid your first and last months rent
All other payments had to be made before the first of the month
Monthly rent is $1,000
Januarys rent was paid on December 31

October 1 entry:
DR rent expense
DR prepaid rent
CR cash

December 31 entry:
DR prepaid rent 1000
CR cash
1000

1000
1000
2000

To record October rent expense and


last months rent as prepaid

To record Januarys rent as


prepaid

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Capital Assets
Capital assets provide a service or benefit that is used up over an extended
period of time
Recommend that you keep a record or list of capital assets even when such
assets are expensed
A listing should include: whether the asset was donated or purchased,
description, amortization rate, date put into service, and cost/fair value

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Capital Asset Listing


Any Not-for-Profit
December 31, 2002

Donated /
Purchased

Description

Date put in
Service

Amort Opening
Rate Cost

D - fair value Office desks


01-Jan-02
P
Filing Cabinets
01-Jan-01
Total Office Furniture

1/5
1/5

1/3

Computers
01-Jan-01
Total Office Equipment

Additions Disposal Ending Cost


s
375

200
200
300
300

375

Opening Amort
Amort

Ending Amort Net Book


Value

375
200
575

0
40
40

75
40
115

75
80
155

300
120
420

300
300

100
100

100
100

200
200

100
100

Policy is to take full year's amortization in the year of acquisition and none in the year of disposal.

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Restricted Contributions

It is important to account for the use of contributions that have been restricted
as contributions are governed by trust law
Restricted contributions need to be accounted for throughout the year to
ensure conditions are met by the organization. This should be documented.
Similarly, the ending balances of unspent and unamortized contributions
should be supported by letters from donors and other supporting
documentation

Restricted contributions need to be accounted for regardless of whether they are


included in ending restricted fund balances or deferred contributions.

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Deferred Capital Contributions

Deferred Contributions
For Youth Work
For Youth Worker's Salaries

3000
500
3500

For New Admin Building


For Vehicles

5000
2000
7000

Unamortized Deferred Capital Contributions

Description

Opening
Ending Deferred
Deferred
Capital
Capital
Contributions Additions Disposals Contributions

Date put in Amort


Service
Rate

Office desks
01-Jan-02
Total Office Furniture

1/5
0

375
375

Ending
Unamortized
Deferred
Capital
Ending Amort Contributions

Opening
Amort
Amort

375
375

0
0

75
75

75
75

300
300

Capital Assets
Donated /
Purchased

Description

Date put in Amort


Service
Rate

Opening
Cost

D - fair value Office desks


01-Jan-02
P
Filing
01-Jan-01
Cabinets
Total Office Furniture

1/5
1/5

1/3

Computers
01-Jan-01
Total Office Equipment

Additions Disposals Ending Cost

300
300

Net Book
Ending Amort Value

375

375
200

0
40

75
40

75
80

300
120

375

575

40

115

155

420

300
300

100
100

100
100

200
200

100
100

200
200

Opening
Amort
Amort

Policy is to take full year's amortization in the year of acquisition and none in the year of disposal.

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Payables, Accrued Liabilities


An account payable is a liability that arises when an invoice is received at the year
end and unpaid
Insure all invoices received and not paid by the fiscal year end are recorded in
the year
An accrued liability is a liability where you do NOT have an invoice but the
goods or services were received prior to year-end
The accrual may often be an estimate but accruals should be as accurate as
possible

Procedures to follow to ensure all accruals are recorded:


If you issue POs, review them to see if any relate to work that has been
completed by the year-end but no invoice has been received
Review invoices received after the year-end, looking for invoices for work
that was completed at the year end, and goods received by the year end
To accrue or not to accrue:

1. You had someone come in to fix your photocopier on December 20th.

You did not receive the bill till January 15th. The bill is dated January 7th. Do
I accrue this bill if my year-end is December 31?
2. You ordered some office supplies on December 15th. The goods were on
back order. You received them on January 10th with the bill. Do I accrue this
bill?

28

Accounts Payable
Any Not-for-profit
December 31
Name

Jills Printing
Jacks Maintenance
Total

Amount
150
50
200

Total per G/L $200


Accrued Liabilities
Any Not-for-profit
December 31
Name

Gas
Payroll
Total

Amount
50
100
150

Total per G/L $150

Accrued liabilities example:


(assume December 31 year end)
Payroll employees get paid every two weeks. They worked December 17 to 31
and were paid on January 7th. You would need to accrue the payroll expense for
December 17 31 by DR payroll expense and CR accounts payable/accruals.
Gas you receive a $100 gas bill in January that is for the period December 15Jan 15.
To accrue a half of a months gas bill you could just divide the bill by 2. Or you
could prorate the bill over the number of days in the fiscal year (16/31X100 =
$51.61).

29

Loans
Current amounts (payable within one year) and long-term amounts (payable for
all periods over one year) must be broken out separately.
Example
The fiscal year end is December 31. You received a $5,000 loan on
January 1, to be repaid annually over five years with an interest rate of
5%.
At the year end you would need to ensure any amount repayable within a
year is reclassified to the current liabilities.
At the year end, you will need to make the following entry to record the
current portion of the loan repayable:
DR Long Term Debt
1000
CR Current Portion of Long Term Debt

1000

And you will need to accrue the interest payable on the loan:
DR Interest Expense
250
CR Current Portion of Long-Term Debt

250

The Balance Sheet at December 31, would show:


Current portion of Long-Term Debt

$1250

Long-term Debt

$4000

30

Disclosures to keep in mind throughout the year


There are a number of disclosures required by generally accepted accounting principles.
Below we have listed the significant disclosures that you may want to keep in mind
during the year, as it may be difficult to gather this information after the fact. Please see
www.cassfraser.ca for a more comprehensive listing of the disclosure requirements by
financial statement category
The Details of External Restrictions and Inter-Fund transfers
The nature and amount of any external restrictions of net assets and contributions needs
to disclosed in the year end statements. Also the details of inter-fund transfers need to be
disclosed.
Contributions by Major Source
Contributions by major source need to be detailed in the statements or notes. There is
significant leeway allowed in this regard. Disclosure may be in general categories, for
example: Government of Alberta, individuals, and corporations, or it may identify large
donors. Ideally the accounting coding will facilitate this disclosure if there are significant
contributions to track.
Contributions of Materials and Services
When someone donates an item (eg. Computer, books for a library) or a service (eg. An
accountant preparing your financial statements for free, a carpenter volunteering to
renovate old office space into a classroom) your policy may be to record the value of the
items/services donated.
Capital Assets
If you are not recording capital assets you need to disclose certain information about the
capital assets in the notes to the financial statements. (description, age, expected life,
amount expensed during the period, etc.).
Cash Flows
The details of investing and financing activities, including investment sales and purchases
needs to be disclosed in the statement of cash flows at the year end. Normally capital
asset purchases and sales are recorded on a schedule detailing the additions, disposals and
amortization of capital assets.
Related Party Transactions
Transactions that involve members of the board or family members or companies related
to members on the board need to be disclosed in the statements or notes, except for
reimbursements. You should keep track of these transactions as they occur, and the
method of valuing these transactions.

31

7. Accounting for the GST


-

We will just cover the basics of the GST here


- The GST can be quite specific for some organizations, especially
hospitals, and some quasi-government organizations. We wont discuss
those special circumstances.
- Also there are a number of reporting options that can be used including
simplified calculations allowed
- You are best to first consult CRAs guides RC 4081 GST/HST
information for Non-Profit Organizations and RC 4082 GST/HST
information for Charities for more detailed discussion
However, for most NPOs the two things that need to be considered are:
- Do I have to register for the GST? And
- Am I eligible for the Public Service Bodies Rebate?

Do I have to register for the GST?


You have to register if taxable supplies exceed $50,000 in four quarters, a one year
period. Charities can be exempted if gross revenues are less than $250,000 a year.
So what is a taxable supply? It is basically revenue that is received for goods and
services, unless that revenue is exempt.
The Excise Tax Act defines what is exempt. Two good rules of thumb are:
It wont be exempt if the service or sale is likely to be offered by a commercial profit
orientated enterprise
The government makes special rules to be nice to NPOs and Charities
If youve got a suspicion something may be exempt, its almost as easy to just call CRA
and ask them. They have rules you would not imagine. See the list of exempt activities
on page 35:
If you are not exempt, you must register, collect the tax and you can claim any GST paid
on the expenses associated with providing the taxable supplies. There is a generous
formula for charities.
Am I eligible for the Public Service Bodies Rebate?
You are eligible for the Public Service Bodies Rebate if 40% of revenue in the fiscal
year, or previous two fiscal years, was from government, or if you are a registered charity
If you are eligible you can receive 50% of the GST paid on eligible expenses, which
include general operating expenses and so on.
The key here is that you cannot claim the credit on expenses paid for taxable supplies.

32

Typical Journal Entries for the GST


- if you are registered
- if you are claiming the public service bodies rebate

33

The GST
Register for the GST?
- if taxable sales are > $50,000 in
four consecutive quarters
- charities only need to register if
taxable sales exceed $50,000 and
gross revenues exceed $250,000
- you may register if input tax
credits on commercial activities
are desired

Public Service Bodies Rebate 50%


- available for all charities, and
- organizations with at least 40%
government revenues in the year,
or previous two years
34

Some Exempt Taxable Supplies


Some Exemptions for Non-Profit Organizations
admission to a place of amusement where the maximum price is less than $1
admission to athletic events or performances where 90% of the performers or
athletes are neither directly or indirectly paid; government grants and expense
reimbursements are not considered pay
goods and services provided for free (blood and blood derivates are zerorated)
the sale of goods in fundraising where: 1-the organization is not in the business
of selling the goods 2-the salespeople are volunteers 3-each item costs $5 or
less 4-the goods are not sold at an event in competition with those in the
business of selling those goods
admission to gambling events that are not conducted in a commercial hall, and
90% of the assistants are volunteers
lottery, raffle tickets, bingo cards, and casino bets (except the sale of provincial
tickets)
goods sold at an amount less than or equal to the direct cost
certain memberships, see the CCRA guide
most sales and leases of real property, see the CCRA guide
recreational fees for children 14 and under, except where there is substantial
overnight supervision
recreational services for underprivileged persons
food, beverages and short-term accommodation to relieve poverty, suffering or
distress
donations, grants and subsidies
most sponsorships, for example the use of logos etc, but not for example
advertising in a newsletter
library cards of public libraries
Some Exemptions for Charities
all of the above, and:
most services
sales of used and donated goods
short-term residential accommodation
meals-on-wheels programs
parking space rentals
short-term facility rentals
catering services for private functions (eg. Wedding receptions)
total admission to fundraising events
most goods and services sold and provided in fundraising activities (unless the
activity is regular or continual for a significant part of the year.
Some taxable supplies are "zero-rated," and the tax charged is 0%. Examples of
"zero-rated" supplies are basic groceries, prescription drugs, and certain medical
devices. An organization is entitled to the full input tax credits for the GST paid

35

on purchases relating to the provision of these "zero-rated" taxable supplies.

36

8. Accounting for Payroll


The payroll rules
- contractor vs employee
- the TD1
- deductions to be made in the year, using the tables
- payroll remittances
- completing the T4
- taxable vs non-taxable benefits
- the ROE
-

record the employers liability

37

9. Internal Controls
Control Environment
- effective control starts with managements attitude to controls
- this begins at the Board level
- does the Board understanding the risks relating to fraud and
error, and the controls that mitigate those risks?
- The CICAs audit standards suggest that the Board should
understand managements process for identifying and
responding to the risks of fraud and error
- A finance and audit committee should be considered, to ensure
sufficient attention is given to financial matters and to fiduciary
responsibilities of a financial nature; this also allows the Board
to focus its efforts more efficiently
- The Board should review financial results including budget
versus actual results

38

Control Systems and Procedures


The Key Financial Controls of any system
include:

segregation of duties
reconciliations within and outside the
accounting system
approval of transactions

a review of transactions and financial


results, including budgets

a review supporting schedules, and other


supporting documentation for transactions

policies with respect to the treatment of


transactions

39

Control Systems
Donation Example
$ Mail
Person A & B

Person C

open mail and record


donations on a blotter

prepares bank deposit


and deposits cash

Person D
ensures the total bank
deposit agrees to the
listing

Expense example
Person A

Person B

Person C

Approves expense and


account coding

Enters transactions to
general ledger

Signs the cheque after


reviewing invoice

Reviews coding in FS

40

Revenue and Receipt Controls


The basic objectives are to ensure:
- revenues are completely and accurately recorded
- receipts are safeguarded
- restrictions are complied with
Weve included on page 44, some common and useful revenue
controls you may wish to consider. Weve focussed on donation
controls. Donations can be the most difficult to obtain assurance over,
especially where there are a lot of minor cash donations. Often audit
opinions are qualified with respect to cash donations.

41

Develop policies to determine the fair


value of donated assets and record them
in the organizations records.

Develop specific policies regarding the


recording of donated materials and
services and estimating their fair value.

Develop procedures to detect and account


for restrictions on contributions:
- Keep letters etc on file, so they can
be accessed and reference from
accounting records.

42

Expense and Expenditure Controls


The basic objectives are to ensure:
a record of all disbursements is made
authorized persons approve the disbursements, and
all payables are recorded at the period end
- Someone should review and approve the invoice
account distribution and approve the invoice for
payment
- Supporting documentation should accompany
cheques presented for signature
- Invoices should be marked as paid to prevent
duplicate payments
- Pay from invoice only, and not the statement
- Only authorized persons should have access to
blank cheques
- Cheque signers should be authorized by the board
of directors
- Cheques should not be signed in advance or made
out to cash
- Cheques should be signed by two persons
- Bank reconciliations should be prepared and
reviewed
- Procedures should be in place to ensure all
invoices pertaining to the fiscal year are accrued

43

Typical Controls required in an NPO Environment


Membership Fees and Sales
Membership fees, and sales revenues
- attempt reconcile these revenues independently of the accounting system
- Examples
i. Inventories, reconcile to items sold and cost of sales
ii. membership fees, reconcile to membership database
iii. Ticket sales
1. Reconcile sales with expected revenues
2. Use pre-numbered and preprinted ticket booklets with
detachable stubs
3. Control the distribution and sale of tickets or tokens
-

Segregate where possible the record-keeping from the accounting function,


those responsible for making deposits etc

Donations
Donations can be the highest risk as these amounts cannot be reconciled to revenue
generating activities. It is therefore necessary to have strong controls to ensure these
amounts are completely recorded.
In all cases, where possible, segregate of incompatible tasks: for example canvassing,
receipt of revenues within the organization, bookkeeping, bank deposits
Donations received through the mail
- Mail opened by two people
- Immediate endorsement of cheques for deposit only
- Preparation of a list of the amounts received, signed by preparer
- Forward a copy of the list to the person preparing the deposit slip, and to the
person in charge of bookkeeping
- Segregation of incompatible tasks: opening mail, bookkeeping, bank deposits
Donations received through door-to-door or direct solicitations
- Door-to-door solicitation or collection by two-person teams
- Use of pre-numbered envelopes to collect donations, which are sealed on the spot
when the donation is received; the envelopes may then be forwarded to the
organization with a list of donations received

44

Donated property, plant and equipment


- Develop policies to determine the fair value of the property and record it in
the organizations records
Donated materials and services
- Develop specific policies to record donated materials and services and to
estimate their fair value
- Implementation of procedures for the registration and compilation of donated
materials and services (signed and approved time sheets, records of donated
materials)
Detection and recording of restrictions of donations
- Develop procedures to detect restrictions: review of documents supporting
donations, contributions or grants
o Keep letters etc on file, so they can be accessed and reference from
accounting records
- Create procedures to ensure that restrictions are respected: record of restrictions,
communicate restrictions to those in charge of budgeting etc, periodically review
restrictions in place
- Separate recording of restricted donations, contributions or grants
Payroll
- Attendance and time records should be used, this becomes important for tracking
vacations etc, the detail of this will depend on the policies of the organization,
staff arrangements etc
- Time should be approved by a person knowledgeable of the actual time worked
- Variances between actual and budgeted payroll should be investigated
Capital Assets
- Policies should distinguish between capital items and a repairs and maintenance
expenses, determine a cutoff amount below which items are expensed, establish
amortization basis, and the method for determining the fair value of contributed
capital assets
- Detailed capital asset records should include the description, date purchased or
received by contribution, cost or fair value at dates of contribution, contributor or
funding source restrictions on use or disposition, etc
- At least annually, a physical inventory of property and equipment should be made
reconciliations prepared and reviewed and any discrepancies followed up

45

10. Reporting to CRA and the Alberta Government

T2 Corporate Tax return and the GIFI return


- every organization incorporated in Canada, except registered charities, must
file this, regardless of whether there is taxable income
- have within six months of year-end to file, however there is no penalty unless
there is tax owing
- Can use the T2 short and GIFI short for this purpose, the T2 Short is only 2
pages long

Not for Profit Information return


- Must be filed if
- revenues from taxable dividends, interest, rentals, or royalties is more than
$10,000
- total assets were more than $200,000 at the end of the previous fiscal
period
- or, had to filed last year: continues forever
- has to be filed within six months, or can be fined $25 per day. CRA has been
fining some organizations for being late.
The T3010
- The new T3010 is only 4 pages instead of 12: good news
- You may want to consult CRAs rules charitable donations to ensure you
remain in compliance, as compliance questions have now been dropped
from the return. The rules are nicely summarized in RC4108, a guide put
out by CRA, which discusses all the rules for receipts, the disbursement
quota and so on. You can download this from the web if you like. See
also CRA receipt samples.
- Also there are new more generous rules on split receipting that you may
want to be aware of: eg where a person pays for a golf tournament where a
portion of the fee is actually a donation, a receipt can be issued
- A regime of fines is in place for late filing etc
- Filling out the T3010

46

Canada Customs
and Revenue Agency

Agence des douanes


et du revenu du Canada

200

T2 SHORT RETURN
(2001 and later taxation years)

Code 0101
055

Do not use this area

This form serves as a federal and provincial or territorial corporation income tax return, unless the corporation is
located in Quebec, Ontario, or Alberta. If the corporation is located in one of these provinces, you have to file
a separate provincial corporate return.
Parts, sections, subsections, and paragraphs mentioned on this return refer to the Income Tax Act. This return may
contain changes that had not yet become law at the time of printing. If you need more information about items on the
return, including proposed legislation, see the corresponding items in the 2001 T2 Corporation Income Tax Guide.
Send one completed copy of this return, including schedules, and the General Index of Financial Information (GIFI) to your
tax services office or to the tax centre that serves the corporation. You have to file the return within six months after the end
of the corporations taxation year. See items 1 to 5 in the guide for more information on when and how to file T2 returns.

Identification
Business Number (BN) (item 11) . . . . .
Corporations name (item 12)
002
Has the corporation changed its name
since the last time we were notified? . . . .
Address of head office (item 13)
Has the address changed since the
last time we were notified? . . . . . . . . . . .

001

003

1 Yes

If yes, do you have a copy of


the articles of amendment? . . . . . .

2 No

010

1 Yes

Taxation year start

2 No

City

MM

DD

YYYY

Province, territory, or state

Has there been an acquisition of control


to which subsection 249(4) applies since
the previous taxation year? . . . . . . . . . . . . .

063

Postal code/ZIP code

If yes, provide the date control was


acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . .

065

016
Country (other than Canada)

1 Yes

018

YYYY

Mailing address (if different from head office address) (item 14)
Has the address changed since the last time we were notified?
020 1 Yes
2 No

Is the corporation a professional


corporation that is a member of
a partnership? (item 18) . . . . . . . . . . . . . . 067

c/o

MM

DD

2 No

MM

1 Yes

2 No

070

1 Yes

2 No

071

1 Yes

2 No

DD

Is this the first year of filing after:

022
023
City

Province, territory, or state

025

Incorporation? (item 19) . . . . . . . . . . . . . .


Amalgamation? (item 20) . . . . . . . . . . . . .
If yes, please provide Schedule 24

026
Postal code/ZIP code

Country (other than Canada)


027

028

Location of books and records (item 15)


031
Province, territory, or state

City
035

036
Postal code/ZIP code

Country (other than Canada)


037

038

040 Type of corporation at the end of the taxation year (item 16)
Canadian-controlled
5
private corporation (CCPC)

Has there been a wind-up of a subsidiary under section 88 during the


current taxation year? (item 21)
......

072

1 Yes

2 No

Is this the final taxation year before


amalgamation? (item 22) . . . . . . . . . . . . .

076

1 Yes

2 No

Is this the final return up to


dissolution? (item 23) . . . . . . . . . . . . . . . .

078

1 Yes

2 No

If yes, please provide Schedule 24

032

061
YYYY

012

021

2 No

Taxation year-end

060

017

1 Yes

To which taxation year does this return apply? (item 17)

011

015

004

Other corporation
(please specify, below)

"Nil" or "net loss" for income tax


purposes from Schedule 1, financial
statements, or GIFI . . . . . . . . . . . . . . . . . 300

Provincial or territorial
jurisdiction (item 131) . . . . . . . . . . . . . . . . 750

840
085 If the corporation is exempt from tax under section 149 tick one of Tax instalments paid (item 158) . . . . . . . .
the following boxes: (item 25)
894 If there are excess payments in this years instalment account,
An agricultural organization, a board of trade or a chamber of commerce; or,
please indicate whether they should be: (item 159)
1
a non-profit club, society or association
2
Refunded,
1
Non-profit corporations for scientific research and experimental development
3
Transferred to next years account, or
2
Certain farmers and fishermens insurers
4

Exempt under other paragraphs of section 149 (please specify)

Applied to another liability. (attach instructions)

Do not use this area

091

092

093

094

095

096

097
T2 Short E (02)

(Ce formulaire existe en franais.)

Page 1 of 2

Canada Customs
and Revenue Agency

Agence des douanes


et du revenu du Canada

GENERAL INDEX OF FINANCIAL INFORMATION SHORT

Name of corporation

Form identifier 100/101

Taxation year-end

Business Number

Year

Month

Day

Balance Sheet information


Assets

Liabilities
Current

Current
Cash and deposits . . . . . . . . . . . . . . . . . . . . . . . .

1000

Bank overdraft . . . . . . . . . . . . . . . . . . . . .

2600

Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . .

1060

Amounts payable and accrued liabilites . .

2620

Allowance for doubtful accounts . . . . . . . . . . . . . .

1061

) Amounts payable to members of NPOs . .

2630

Amounts receivable from members of NPOs . . . . .

1073

Taxes payable. . . . . . . . . . . . . . . . . . . . . .

2680

Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1120

Short term debt . . . . . . . . . . . . . . . . . . . . .

2700

Short term investments . . . . . . . . . . . . . . . . . . . . .

1180

Due to shareholder(s)/director(s). . . . . . . .

2780

Loans and notes receivable . . . . . . . . . . . . . . . . . .

1240

Due to related parties . . . . . . . . . . . . . . . .

2860

Due from shareholder(s) / director(s) . . . . . . . . . . .

1300

Current portion of long term liability . . . . .

2920

Due from / investment in related parties . . . . . . . .

1400

Other current liabilities. . . . . . . . . . . . . . . .

2960

Other current assets. . . . . . . . . . . . . . . . . . . . . . . .

1480

Total current liabilities . . . . . . . . . . . . . .

3139

Total current assets . . . . . . . . . . . . . . . . . . . . . . .

1599

Long term
Capital
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Long term debt . . . . . . . . . . . . . . . . . . . . .

3140

1600

Deferred income . . . . . . . . . . . . . . . . . . .

3220

Depletable assets . . . . . . . . . . . . . . . . . . . . . . . . . .

1620

Deferred income taxes . . . . . . . . . . . . . .

3240

Accumulated amortization of depletable assets . . .

1621

) Due to shareholder(s)/director(s). . . . . . . .

3260

Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Due to related parties . . . . . . . . . . . . . . . .


) Other long term liabilities . . . . . . . . . . . . .

3300

Accumulated amortization of buildings . . . . . . . . .

1680
1681

Machinery and equipment . . . . . . . . . . . . . . . . . . .

1740

Total long term liabilities. . . . . . . . . . . . .

3450

Accumulated amortization of machinery


and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . .

1741

) Amounts held in trust . . . . . . . . . . . . . . . .

3470

Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . .

1787

3499

Accumulated amortization of furniture


and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

*Total liabilities . . . . . . . . . . . . . . . . . . .
(Add 3139, 3450, and 3470)

1788

Other tangible capital assets. . . . . . . . . . . . . . . . . .

1900

Accumulated amortization of other tangible


capital assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1901

Total tangible capital assets . . . . . . . . . . . . . . . .

2008

Total accumulated amortization of


tangible capital assets . . . . . . . . . . . . . . . . . . . . .

2009

Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . .

2010

Accumulated amortization of intangible assets . . .

2011

Resource rights . . . . . . . . . . . . . . . . . . . . . . . . . . .

2070

Accumulated amortization of resource rights . . . . .

2071

Total intangible capital assets . . . . . . . . . . . . . .

2178

Total accumulated amortization of


intangible capital assets . . . . . . . . . . . . . . . . . . .

2179

3320

Shareholder equity
3500

Common shares . . . . . . . . . . . . . . . . . . .

Preferred shares . . . . . . . . . . . . . . . . . . .

3520

) Contributed and other surplus . . . . . . . . .

3540

Retained earnings (deficit) . . . . . . . . . . . . .

3600

*Total shareholder equity . . . . . . . . . . .

3620

Total liabilities and shareholder


equity (Add 3499 and 3620) . . . . . . . . .

3640

) Retained earnings (deficit) start . . . . . .

3660

...................

3680

Dividends declared . . . . . . . . . . . . . . . . . .

3700

Statement of Retained earnings (deficit)


Net income/loss

Long term
Due from shareholder(s)/director(s) . . . . . . . . . . .
Investment in joint venture(s)/partnership(s) . . . . .

2180

Other items affecting retained earnings . .

3740

2200

Interfund transfer . . . . . . . . . . . . . . . . . . .

3745

Due from/investment in related parties

........

2240

**Retained earnings (deficit) end . . .

3849

Long term investments . . . . . . . . . . . . . . . . . . . . .

2300

Long term loans . . . . . . . . . . . . . . . . . . . . . . . . . .

2360

Other long term assets . . . . . . . . . . . . . . . . . . . . .

2420

Total long term assets . . . . . . . . . . . . . . . . . . . . .

2589

Assets held in trust . . . . . . . . . . . . . . . . . . . . . . . .

2590

*Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(add 1599, 2008, 2009, 2178, 2179,

2599

* Required line items must be completed.


** Required if any of line items 3660 to 3745 completed.

2589, and 2590)


T1178 E (01)

(Ce formulaire existe en franais.)

Page 1

Canada Customs
and Revenue Agency

Agence des douanes


et du revenu du Canada

Do not use this area

NON-PROFIT ORGANIZATION (NPO) INFORMATION RETURN


This return is for:
l non-profit organizations (NPOs) described in paragraph149(1)(l) of the Income Tax Act; and
l organizations described in paragraph 149(1)(e) of the Act (agricultural organizations,
boards of trade, or chambers of commerce).
These organizations may have to file this return if they received or were entitled to receive gross investment revenue
greater than a certain amount or assets which are more than a certain amount, or if the organization had to file the NPO
return for a preceding fiscal period.
To determine if your organization has to complete this return, please see the guide called
Income Tax Guide to the Non-Profit Organization (NPO) Information Return.

Section A Identification

Fiscal period
Year

Month

From

Day

Year

Month

Day

Business Number
(BN), if any

to

Name of organization

Trust
(T3) number, if any

Mailing address

Is this the final return to be filed


by this organization? If yes,
1 Yes
please attach an explanation.

City

Type of organization
(see the related guide)

Province

Postal code

Section B Amounts received during the fiscal period


Amounts received
Membership dues, fees, and assessments received . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal, provincial, or municipal grants and payments received . . . . . . . . . . . . . . . . . . . .

100

Interest, taxable dividends, rentals, and royalties received . . . . . . . . . . . . . . . . . . . . . . . .


Proceeds of disposition of capital property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross sales and revenues from organizational activities . . . . . . . . . . . . . . . . . . . . . . . . . .

102
103

Gifts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

105

Other receipts
(please specify)

106

Total receipts (add lines 100 to 106) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

107

101

104

Section C Statement of assets and liabilities at the end of the fiscal period
Assets
Method used to record assets
Cash and short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amounts receivable from members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

108
109

Amounts receivable from all others (not included on line 109) . . . . . . . . . . . . . . . . . . . . . .


Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

110
111

Long-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets
(please specify)

113
114

Total assets (add lines 108 to 115) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

116

112

115

Liabilities
Amounts owing to members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amounts owing to all others
(please specify)

117

Total liabilities (add lines 117 and 118) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

119

T1044 E (02)

118

(Ce formulaire existe en franais.)

2 No

Canada Customs
and Revenue Agency

Agence des douanes


et du revenu du Canada

REGISTERED CHARITY INFORMATION RETURN

Section A Identification
z

To complete this form, you will need the guide called Completing the Registered
Charity Information Return, T4033A.

The Privacy Act protects personal information given on this form, which is kept in a
personal information bank.

Except for yes/no questions, if a question does not apply to your charity, please leave
it blank.

Please attach a bar code label here before


you mail this return. If no label, enter:
1. Fiscal Period Ending
Year

Month

Day

2. BN/registration
number

A1 Has the charity made any changes to its governing documents during the fiscal period (e.g., letters patent, articles of
incorporation, constitution, trust, or by-laws)? (If yes, see the guide.). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1500

Yes

No

Yes

No

A2 Was the charity an internal division regulated by the governing documents of another charity (i.e., it had no governing
documents establishing its independent existence)? If yes, what is the name and BN/registration number of the other charity? . . . . 1510
Name

BN/registration number (##### ####RR####)

A3 Was the charity linked in a subordinate way to a provincial, national, or international organization? If yes, what is the name of
this organization and its BN/registration number (if applicable)?

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1540

Name

Yes

No

BN/registration number (##### ####RR####)

A4 Has the charity wound-up, dissolved, or terminated operations? (If yes, see the guide.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1570
A5 Has the charity amalgamated, merged, or consolidated with another organization? (If yes, see the guide.) . . . . . . . . . . . . . . . . . . . 1580

Yes
Yes

No
No

Section B Directors/Trustees and Like Officials


B1 You must attach a list with the last name, first name, and initial of each director/trustee and like official, home address (including street number, street
name, city, province or territory, and postal code), position in the charity, whether or not they were a director/trustee at the end of the fiscal period,
telephone number, if they are at arm's length from all other members of the governing board and their date of birth. Only the Public information
section on the worksheet is available to the public. The Confidential information section is for the CCRA's use only and remains confidential.
Use the worksheet included in the guide or a sheet with the same information in the same format to enter this information, and attach it to this return.
See the guide for an explanation of the term arm's length. Have you attached the list required above? . . . . . . . . . . . . . . . . . . . . . . 1700
Yes
No

Section C Programs and General Information


C1 Was the charity inactive during the fiscal period? If yes, please explain why in the "Ongoing programs" space below. . . . . . . . . . . . 1800
Yes
No
C2 Describe how the charity carried out its charitable purposes during the fiscal period. Give detailed information so a reader can clearly understand what
the charity actually did to fulfill its mandate. Describe the charity's ongoing programs and new programs in the spaces provided below. Do not attach
additional sheets of paper or annual reports. Do not include a description of fundraising activities in this section. Grant-making charities should describe
the types of organizations they support. Please number each program. (See the guide for instructions on how to describe your programs.)
Ongoing programs

New programs

C3 For programs carried on in Canada, check the appropriate box to show where the programs were carried on.
2000
T3010A E (05)

A single rural, city, or metropolitan area

2010

Provincially or territorially

(Ce formulaire existe en franais.)

2020

In more than one province or territory

C4 Did the charity carry on programs, directly or indirectly, outside Canada? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2100
If yes, were any carried out:
z by employees or volunteers of the charity? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2110
z
z
z

under agency agreement, contract, joint-venture, or similar arrangements? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2120


through gifts to qualified donees? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2130
by other means? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2140

Yes

No

Yes

No

Yes

No

Yes
Yes

No
No

C5 For programs the charity managed directly, outside of Canada, list the countries or regions where programs were carried on. Do not include countries or
regions where programs were managed by a qualified donee.

C6 Did the charity issue scholarships, bursaries, awards, prizes, or honoraria to an individual during the fiscal period? . . . . . . . . . . . . . 2300

Yes

No

Yes

No

C7 A charity may pursue political activities that are non-partisan, related to its charitable purposes, and limited in extent. During the
fiscal period, did the charity carry out political activities or provide assistance to another organization to carry out political
activities? (See the guide for information on political activities.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2400
C8 If the charity carried on fundraising activities, check all fundraising methods that it used during the fiscal period.
2500

Advertisements/posters/flyers/radio or TV commercials

2560

Fundraising dinners/galas/concerts

2620

Telephone solicitations

2510

Auctions

2570

Fundraising sales (e.g., cookies, chocolate)

2630

Tournaments/sporting events

2520

Bingo/casino nights
Collection plates/boxes

Mail campaigns
Planned-giving programs

2640

2530

2580
2590

2540

Door-to-door solicitation

2600

Targeted corporate donations/sponsorships

2550

Draws/lotteries

2610

Targeted contacts

Walk-a-thons/bike-a-thons (etc.)
2650
Other
2660 Specify:

C9 Did the charity use incentive-based compensation (e.g., bonuses, commissions, finder's fees, honoraria) for fundraisers? . . . . . . . 2700
If yes, were these incentives paid to:
z contracted fundraisers? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2710

Yes

No

Yes

No

staff or volunteers? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2720

Yes

No

C10 Did the charity charge fees for, or otherwise receive regular revenue from goods, services, or the use of the charity's assets? . . . 2800

Yes

No

C11 Did the charity make gifts to qualified donees? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2900


Yes
No
If yes, you must attach a list with the name of each qualified donee and its location, BN/registration number, the total amount of the gift for the fiscal
period, the amount, if any, of specified gifts, and whether or not it is an associated charity. List the qualified donees in the order of the total amount of
the gifts made, starting with the largest. Use the worksheet included in the guide or a sheet with the same information in the same format and attach it to
this return.
C12 If the charity received non-cash gifts (gifts in kind) for which it issued tax receipts, check all the types of gifts that apply.
3000

Artwork/wine/jewellery

3040

Cultural property

3080

Publicly-traded securities/mutual funds

3010

Building materials

3050

Ecological property

3090

Privately-held securities

3020

Clothing/furniture/food
Vehicles

Machinery/equipment (including computers/software)


Hedge funds/life insurance policies

3100

3030

3060
3070

Other
3110 Specify:

Section D Compensation
Note: Compensation includes all forms of remuneration (e.g., salaries, fees, and honoraria) and benefits (e.g., personal use of a car or office space).
D1 On average, how many permanent, full-time, compensated positions did the charity have in the fiscal period? . . . . . . . . . . . . . . . . .

3600

D2 For the five highest compensated positions indicate the number of positions in each of the following annual compensation categories. Include only
those positions that are permanent, full-time positions.
3700

$1 $39,999

3710

$40,000 $79,999

3720

$80,000 $119,999

3730

$120,000 and over

D3 On average, how many part-time or part-year employees did the charity employ in the fiscal period? . . . . . . . . . . . . . . . . . . . . . . . .

3800

D4 What was the total expenditure on compensation for part-time or part-year employees in the fiscal period? . . . . . . . . . . . . . . . . . . .

3850 $

D5 Did the charity compensate any of its directors/trustees or like officials, during the fiscal period? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3900

.00
Yes

No

Yes

No

D6 Except for compensation, did the charity, directly or indirectly, transfer any part of its income or assets to individuals or
organizations not at arm's length to the charity? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3950

Section E Financial Information


E1
E2 Please show figures to the nearest single dollar. Do not show cents. See the guide for an explanation of the terms.
Assets
Cash, bank accounts, and short-term investments

.00

.00

Liabilities
Accounts payable and accrued liabilities . . . . . 4300
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . 4310

.00

Amounts owing to non-arm's length parties

4320

.00

.00

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . 4330


Total liabilities (add lines 4300 to 4330) . . . . 4350

.00

4100

.00

Amounts receivable from non-arm's length parties 4110


Amounts receivable from all others . . . . . . . . . . . . 4120
Investments in non-arm's length parties . . . . . . . . 4130

.00
.00

Section F Other Required Information


F1 What were the total expenditures on programs outside Canada during the fiscal period, excluding gifts to qualified donees? . . . .
F2 If the charity retained contracted fundraiser(s), enter:

5400

.00

a. the gross revenues collected by the fundraiser(s) on behalf of the charity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5450
5460
5470

$
$
$

.00

b. the amounts paid to and/or retained by the fundraiser(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


c. the net fundraising revenue received by the charity (line 5450 minus line 5460) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5500

$
$
the amount deemed to be a tax-receipted gift for the fiscal period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5520 $

.00

5510

.00

.00
.00

F3 If the charity has written permission to accumulate property, enter:


z
z
z

the amount accumulated for the fiscal period, including income earned for the fiscal period on previously accumulated funds . .
the amount disbursed for the fiscal period for the specified purpose we have granted permission for . . . . . . . . . . . . . . . . . . . .

.00

F4 Of the tax-receipted gifts received by the charity for the fiscal period, enter:
z the total eligible amount of tax-receipted non-cash gifts (gifts in kind) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5600

.00

the total eligible amount of tax-receipted tuition fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5610

.00

$
$
z the total eligible amount of tax-receipted enduring property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5640 $
F5 Enter the amount, if any, of enduring property spent in the fiscal period. (See the guide.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5710 $
z

F6 Enter the capital gains from the disposition of enduring property in the fiscal period. (See the guide.) . . . . . . . . . . . . . . . . . . . . . .

5720

F7 Is the charity claiming an amount that is less than the maximum capital gains reduction? (See the guide.)

.00
.00

.00

.................

5730

..............................................

5740

.00

F8 If the charity is taking a special reduction, which we have approved, to its disbursement quota, enter the special reduction
amount for the fiscal period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5750

.00

F9 Did the charity acquire a non-qualifying security or allow a donor to use any of the charity's property under the circumstances
described in the guide during the fiscal period? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5800

If yes, enter the amount from line 11 of form T1259. (See the guide.)

Yes

Yes

No

No

F10 Indicate the average value of property not used for charitable activities or administration during:
z

the 24 months before the beginning of the fiscal period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5900

the 24 months before the end of the fiscal period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5910

$
$

.00
.00

Section G For Foundations Only


Note: See the guide for an explanation of the terms and requirements of this section.
G1 In the fiscal period, did the foundation acquire control of a share-capital or for-profit corporation? . . . . . . . . . . . . . . . . . . . . . . . . . .

6000

Yes

No

selling investments, or in administering charitable programs? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


G3 For private foundations only: At any time during the fiscal period, did the foundation hold any shares, rights to acquire such

6100

Yes

No

shares, or debts owing to it that meet the definition of a non-qualified investment? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6150

Yes

No

G2 Did the foundation incur debts at any time during the fiscal period other than for current operating expenses, in purchasing or

Section H Certification
H1 To be completed by a director/trustee or like official of the charity. It is a serious offence under the Income Tax Act to provide false or deceptive
information.
I certify that the information given on this form, the basic information sheet, and any attachments is, to the best of my knowledge, correct, complete, and
current.
Name (please print)

Position in charity

Signature

Date signed

Section I Confidential Data


I1

Physical location (address) of the charity (Do not use rural route or post office box numbers.)

Number, street, apt. no., or lot and concession no.


City
Postal code:

Province or territory and postal code


I2

Location of the charity's books and records

Number, street, apt. no., or lot and concession no.


City
Postal code:

Province or territory and postal code


I3 Name and address of the person who completed this return
Name
Firm name (if applicable)
Number, street, apt. no., R.R. no., or P.O. box no.
City
Province or territory and postal code
Phone number (
Printed in Canada

Fax number (

Postal code:
)

Sample Official Donation Receipts


There have been changes to the requirements for official donation receipts. To
make issuing receipts as simple as possible for charities and still meet the
necessary requirements, we have provided sample official donation receipts.
Different receipts correspond to different circumstances. Please note that these
receipts contain the information that must be provided according to the Income Tax Act.
However, they are only a guide and your receipts do not have to appear exactly as
presented but must contain all the relevant information.
Sample 1 Cash gift (no advantage)
This is the most common scenario. The items in this sample receipt should be included
on your official donation receipt if the donor or any other person receives nothing in
return for the gift. For example, the donor makes a cash (or cheque) gift of $20. There is
no advantage received or receivable by the donor or any other person for the gift.
Therefore, the eligible amount of the gift is $20.
Sample # 1 Cash Gift (no advantage)
Official Donation Receipt For Income Tax Purposes
Charity name

Canadian charity address

Date donation received_______________

0001
Charity BN/ Registration #
Donated by ______________________
First name, initial, last name
Address

Eligible amount of gift for tax purposes_________________________

______________________
______________________
______________________

Date receipt issued ________________


Location receipt issued _____________
Authorized signature

______________

For information on all registered charities in Canada under the Income Tax Act please contact:
Canada Revenue Agency www.cra.gc.ca/charities

Sample 2 Cash gift with advantage


The items in this sample receipt should be included on your official donation receipt if the
donor or any other person receives something in return for the gift i.e., meal, golf
tournament, book etc. For example, the donor pays $50 to attend a fundraising luncheon
where the only consideration received is a meal valued at $20. The total amount
received by the charity is $50 and the value of the advantage (the meal) is $20.
Therefore, the eligible amount of the gift is $30.
If the amount of the advantage exceeds 80% of the fair market value of the gift, the
charity is advised to contact the CRA before issuing a receipt.

Sample #2 Cash Gift with advantage


Official Donation Receipt For Income Tax Purposes
Charity name

Canadian charity address

0001
Charity BN/ Registration #

Date donation received_______________

Donated by ______________________
First name, initial, last name

Total amount of cash received by charity_________________________A

Address

_______________________
_______________________
_______________________

Date receipt issued ________________


Value of advantage __________________________________________B
(cash/ fair market value of property or services)
Eligible amount of gift for tax purposes_________________________C

Location receipt issued _____________

For information on all registered charities in Canada under the Income Tax Act please contact:
Canada Revenue Agency www.cra.gc.ca/charities

Sample 4 Non-cash gift with advantage


The items in this sample receipt should be included on your official donation receipt for a
non-cash gift if the donor or any other person receives something in return for the gift.
For example, the charity receives a house valued at $100,000 and the donor receives an
advantage of $20,000 in cash. Therefore, the eligible amount of the gift is $80,000.
If the amount of the advantage exceeds 80% of the fair market value of the gift, the
charity is advised to contact the CRA before issuing a receipt.
Sample #4 Non-cash Gift with advantage
Official Donation Receipt For Income Tax Purposes
Charity name

Canadian charity address

0001
Charity BN/ Registration #

Date donation received_______________

Donated by ______________________
First name, initial, last name

Total amount received by charity___________________________A


(fair market value of property)

Address

Value of advantage______________________________________B
(cash/ fair market value of property or services)

_______________________
_______________________
_______________________

Date receipt issued _______________


Location receipt issued _____________

Eligible amount of gift for tax purposes____________________C


(line A minus line B)
Authorized signature _______________
Description of property received by charity___________________
Appraised by____________________________
Address of appraiser______________________

For information on all registered charities in Canada under the Income Tax Act please contact:
Canada Revenue Agency www.cra.gc.ca/charities

Official Donation Receipt For Income Tax Purposes


Statement that the receipt is official for tax purposes.
001
Sample serial number of receipt.
Charity name
Name of charity as recorded with the Minister.

Canadian charity address


Canadian address of charity as recorded with the Minister.
Charity BN/ Registration#
The registration number as assigned by the Minister.
Date donation received
If the donation is a cash donation, use either the day on which or the year during
which the donation was received.
If the donation is a non-cash gift, use the day on which the donation was
received.
Total amount received by charity
The fair market value of property received from the donor. Fair market value
generally means the highest price, expressed in dollars, that a property would
bring in an open and unrestricted market, between a willing buyer and a willing
seller who are knowledgeable, informed, and prudent, and who are acting
independently of each other.
If the amount of the gift is in excess of 5,000, the charity is required to obtain
specific information from the donor. Please contact the CRA for more
information. (Exceptions include ecological gifts, inventory, real property situated
in Canada, publicly traded securities or cultural property, the value of which is
certified by the Cultural Property Export Review Board.)
Value of advantage
Total amount of all benefits provided to donor or any other person for the gift.
(i.e.,value of books, meals, golf tournaments etc.)
Eligible amount of gift for tax purposes
This is a new term used in the Income Tax Act to refer to the amount that the
donor can claim for tax purposes for the donation.
Description of property
A brief description of property received by charity.
Appraised by
Name of appraiser if property is appraised.
It is recommended that property be appraised if the value is over $1,000.
However, there is no legal requirement to have property appraised. If the
property has been appraised, the name and address of the appraiser must be
provided. If the property has not been appraised, the charity must be able to
substantiate the value of the property.

Address of appraiser
Address of appraiser if property appraised.
It is recommended that property be appraised if the value is over $1,000.
However there is no legal requirement to have property appraised. If the property
has been appraised, the name and address of the appraiser must be provided. If
the property has not been appraised, the charity must be able to substantiate the
value of the property.
Donated by
Name of the donor including, in the case of an individual, the donors first name
and initial.
Address
Address of the donor.
Date receipt issued
The day on which the receipt was issued.
Location receipt issued
Place or location receipt was issued.
Authorized signature
The signature of an individual who has been authorized by the charity to
acknowledge donations.
Canada Revenue Agency www.cra.gc.ca/charities
A listing of all registered charities under the Income Tax Act.

Alberta Government Filings


-

there are a number of filings that are potential including filings under the
Charitable Fund Raising Act, and various reports for Arts organizations etc.

the Casino report

the Society Annual Return

52

11. Budgeting, Business Planning and Performance Measures


Budgeting Considerations
-

Budgeting is Good Financial Planning

For which of you, intending to build a tower, does not sit


down first and count the cost, whether he has enough to
finish it Luke 14:28
-

Dont faith budget, be realistic since some areas of your service may
suffer
Consider previous results in forming expectations
Budget on the same basis as your financial reporting
- A supplemental cash flow budget can account for the non-cash
items such as capital, and deferred contributions
Budgeting should be timely
May want to consider a supplemental revision process
Consider a 3 to 5 year plan
- Which would account for the use of a built up surplus/deficit,
capital expansions, large one time programs that do not occur
annually
Budget to ending surplus and not net income
- Once youve established the appropriate ending surplus as
determined through the long range plan.

53

Year End

54

Budgeting to Ending Surplus


Unrestricted Net Assets
Budget

Actual

Revenues

80

85

Expenses

100

100

Excess (Deficiency) of Revenues over


Expenses

-20

-15

20

20

Unrestricted Net Assets,


beginning of year

15

15

Unrestricted Net Assets


end of year

15

20

Investment in Capital Assets


Transfer from (to) Internally Restricted
Net Assets
Net Increase in Unrestricted
Net Assets

55

Use Managerial Accounting Techniques


Zero Based Budgeting vrs Incremental Budgeting
Prioritize Goals and then Resources
Discretionary vrs Non-Discretionary Expenses
Fixed vrs Variable Costs
Consider the Appropriateness of the Cost Structure
Is Overhead too High?
Budgets for Special Projects and Fundraising
Campaigns
Analyze Historical Gross Margins
Monitor Actual Results against Expected Results

56

Business Plans Goals and Performance Measures


You may want to consider this model of planning
and reporting
1) Determine what you consider to be goals of
your organization
- no more than 5 or 6
2) Determine your strategies for achieving those
goals
3) Determine how you will measure the success in
achieving those goals
- Performance Measures
4) Report against the Results
- Planned and Actual Expenditures
- Planned and Actual Performance
This form of planning and reporting may be
especially useful as a way of reporting to donors not
involved in the operations.

57

Camrose Church
Goals
1) Increase the Quality of Worship
2) Share the Message of Christ
3) Brotherly Love
4) Care for the Lonely
5) Heal the Sick
6) Instruct the Church

58

Camrose Church
Goal 1
Increase the Quality of Worship
Strategies
Encourage the Church to spend more time in prayer for
the worship team and the worship.
Encourage the worship team to pray prior to the service.
Sing songs that express devotion to God.
Find a worship leader with a gift of leading people into
worship of God.
Find out what other churches do successfully in
worship.

59

Camrose Church
Goal 1
Increase the Quality of Worship
Performance Measures

Outcome Orientated Measures:


1.

Survey the congregation with respect to the quality of


worship.
Target: 80% believe there is an Improved Quality of
Worship

Output Orientated Measures

1.

% of Songs that express Personal Devotion to God


Target: 2/3 of Songs express Personal Devotion and
Commitment to God

2.

Length of time the Church spends in worship


Target: 30% increase in time spent in worship as a
congregation

60

Camrose Church Annual Report


Page 4

Goal 1
Improve the Quality of Worship
Performance Measure
Survey Congregation:
- Target: 80% believe there is an improvement in the quality of
worship over the past year
Results:
- A survey was conducted in February of 2003. 86% per cent of
those surveyed believed there was an increase in the quality of
worship.

61

12. Other Resources and Final Questions

- Incorporation and Alberta Government Filing


requirements www.gov.ab.ca
- Registering a charity and Federal Government
requirements www.cra-adrc.gc.ca
- All Forms are Online
- Guides are Online
- RC4108 Registered Charities and the
Income Tax Act
- RC4081 GST for Non-Profit Organizations
- RC4082 GST for Charities
- Accounting www.cassfraser.ca
- Accounting Tutorial explaining common
journal entries under the different methods of
Accounting
- Sample Financial Statements
- Dissertation on Accounting Principles and
Disclosure Requirements sorted by Main
Categories

62

13. An Overview of the Canadian Accounting System for NPOs


-

the double entry accounting system was invented by Fra Luca Pacioli in 1494
basically it consists of a balance sheet where debits are the things you own and the
offsetting credits show how those assets are spoken for
to decrease a debit balance we make a credit entry and vice versa
an asset is something with a future benefit
the benefit of an asset can be received over time as in the case of a capital asset
in an NPO, the balance sheet shows the total assets on hand and the availability of
those assets for future services ( a profit organization would show the availability of
assets for distribution to shareholders retained earnings as opposed to net assets)
at the highest level, NPO accounting is simple, we simply show the assets available
for future services and the change in the assets available for future services, the
change is explained in the statement of operations
revenues are an increase in the assets available for future services, and expenses are
decreases in the assets available for future services
expenses are debits because they reduce the balance available for future services
the most confusing area in NPO accounting is the treatment of temporarily restricted
contributions.
Many accountants see temporarily restricted contributions as analogous to unearned
revenues and do not wish to recognize these revenues in the statement of operations
until the related expenses are incurred. This is the predominant view in Canada. The
primary method of accounting in Canada is the deferral method of accounting for
contributions which presents temporarily restricted donations just outside net
assets. No recognition of these revenues is made in the statement of operations until
the related expenses are incurred. Even where the restrictions have been fulfilled,
these contributions continue to be deferred until the related expenses are incurred.
Other accountants believe that since restricted donations represent an increase in the
assets available for future services they should be recognized as revenue immediately.
This is the predominant view in the US. However, the US model, while recognizing
temporarily restricted contributions immediately, still attempts to show some
matching of restricted revenues with related expenses in the statement of operations
by including and reversing these (this can be horrendously complicated to the reader
of the statements).

63

BEGINNING of YEAR

DR

CR

ASSETS

AVAILABILITY OF ASSETS
FOR FUTURE SERVICES

things with a benefit

CASH

Assets not available


for future services

PAYABLES AND
DEBT

RECEIVABLES

INVENTORY

Assets available
for future services

NET ASSETS

$70 thousand

CAPITAL
ASSETS

64

END of YEAR (U.S. Model and Canadian Restricted Fund Method)

DR

CR

ASSETS

AVAILABILITY OF ASSETS
FOR FUTURE SERVICES

things with a benefit

CASH

for

Assets not available


for future services

PAYABLES AND
DEBT

CR
$70K
RECEIVABLES

Revenues
- Economic events
resulting in
increases in
available assets

INVENTORY
NET ASSETS

Assets available
for future services
CAPITAL
ASSETS

$350K

contributions of

$70
thousand
cash,
capital assets,
promises of cash
Expenses
- Economic events
resulting in
decreases in
available assets
DRs

-270K
$150K
65

Deferral Method of Accounting for Contributions

DR

CR

ASSETS

AVAILABILITY OF ASSETS
FOR FUTURE SERVICES

things with a benefit

CASH

Assets not available


for future services
Assets associated with
temporary restrictions

PAYABLES AND
DEBT

CR

DEFERRED
CONTRIBUTIONS

RECEIVABLES

$70K
Revenues
- Economic events
resulting in
increases in
available assets

INVENTORY
NET ASSETS

CAPITAL
ASSETS

END of YEAR

Assets available
for future services
(except as above)

$300K

contributions of
cash, capital assets,
promises of cash
Expenses
- Economic events
resulting in
decreases in
available assets
DRs

-270K
$100K
66

14. Reporting Entity


-

What are we accounting for?

Controlled Organizations
- The first fundamental principle of accounting is that an accounting should
be made for the activities under the control of a person or group of
persons, which is normally a board of directors
- Concept can be quite significant in the for-profit sector
- Definition of control is similar in the not-for-profit sector
- the ability to determine strategic operating, investing and financing
activities
- presumed to exist where the organization can appoint the
majority of the board
- control may also be deemed to exist if
- changes to bylaws or charter require consent,
- significant economic interest exists
- or the purposes of the organizations are integrated
- consolidation or note disclosure is required
Significantly Influenced Organizations
- the ability to influence strategic operating, investing and financing
activities
- proportionate consolidation of for profit entities
- otherwise note disclosure of relationship and organizations
purpose, community of service, tax status and any economic
interest
Economic Interest
- another organization holds resources to generate revenue or
services, or if there is an obligation to fund the liabilities of
another organization
- note disclosure
Funds held in trust
- the accounting rules are not clearly defined
- generally an asset only belongs to an organization if it can control
it
- note disclosure may be the most appropriate

67

Control
The ability to control the financial decisions
of another organization
Presumed to be present if there is the ability
to appoint the majority of board members of
another organization
Other Indicators of Control
Significant Economic Interest
Ability to Change Bylaws
Common and Complimentary Objectives

68

15. Fund Accounting


-

Once youve established what you are accounting for, the next step is to
decide how you want to account your activities
Unlike for-profit accounting which allows only one method of accounting,
there are a number of choices
Perhaps the most common set of NPO financial statements presents a single
column balance sheet and a single column statement of operations
- Example: Canadian Foodgrains Bank
The alternative is Fund Accounting

What is Fund Accounting?


- Example: Dalhousie Medical Research Foundation
- Like there are separate sets of books, separate sets of statements within
the statements
- The common method of fund accounting is the restricted fund method
that is used to account for specifically identified externally restricted
revenues. We will discuss revenue recognition under fund accounting
a bit later.
- Not necessary to show the balance sheet in separate funds, only totals
needed
- How this works in the accounting
- A look at the trial balance
- A Fund is a self balancing set of accounts

69

Assets
Current assets:
Cash and short-term investments
Receivables and prepaid expenses
Grain inventory
Land
Capital assets

$ 17,288,142
3,372,62
224,275
$ 20,885,039
127,040
107,752
$ 21,119,831

Liabilities, Deferred Contributions and Net Assets


Current liabilities:
Accounts payable and accrued liabilities
Deferred contributions
Net assets:
Restricted
Unrestricted

$ 1,563,139
60,498

10,632,051
8,864,143
$ 21,119,831

Statement of Operations - Year ended March 31, 2003


2003
Revenue
Cash donations
Grain donations

2002

$ 4,878,859
$ 3,207,139
3,270,1est 0. Tw09363,20$

Financial Statements of
Dalhousie Medical Research Foundation
Statement of Operations and Changes in Fund Balances
Year Ended March 31, 2003

General
Fund
Revenue
Investment
income (Note 4)
$ 398,599
Donations
1,319,066
Write-down of investments (465,879)
1,251,786
Expenses
Research activities:
Equipment grants
226,097
Less: recovery of grants
(4,701)
Associateships
96,091
Fall River health forum
(Note 5)
Fellowships
Studentships
Prizes and awards
3,000
Research
Grants
492,750
Laboratory renovations
850,000
Travel and other (Note 5)
1,663,237
Administrative and
support cost
555,884
2,219,121
Excess of revenue over expenses
(expenses over revenue)
(967,335)

Endowment
Fund

723,346 $ (234,518)
516,491
311,122
(267,953)
(333,344)
971,884
(256,740)

2002

Total

Total

887,427
2,146,679
(1,067,176)
1,966,930

$ 2,484,306
3,319,033
(373,186)
5,430,153

226,097
(4,701)
96,091
-

159,850
(8,800)
87,458
104,076

59,442
45,782
84,175

59,442
45,782
87,175

151,826
56,851
78,994

340,690
530,089

833,440
850,000
2,193,326

154,957
500,000
10,467
1,295,679

530,089

555,884
2,749,210

418,858
1,714,538

441,795

(256,740)

(782,280)

3,715,616

Statement of Net Assets


Fund balances, beginning
of year

1,441,489

1,887,900

37,244,645

40,574,034

36,858,418

Interfund transfers (Note 5)

(152,772)

82,436

(235,208)

$ 2,412,131 $ 36,752,697

$ 39,791,754

$ 40,574,034

Fund balances, end of year

626,926

See accompanying notes to the financial statements.

34

Restricted
Fund

2003

Dalhousie Medical Research Foundation


Statement of Financial Position
March 31, 2003

General
Fund
Assets
Current
Cash and cash equivalents $
30,688
Prepaid expenses
3,300
Receivables
Accrued investment income
3,716
Commodity tax receivable`
64,125
Foreign taxes recoverable
545
Due from Dalhousie University 95,837
198,211
Investments (Note 3)
Interfund

Restricted
Fund

641,926

- $
-

2002

Total

Total

30,688
3,300

119,060
-

232,119
55,603
287,722

235,835
64,125
95,837
95,837
485,933

247,583
28,340
61,784
61,784
456,767

2,387,523
(198,118)

36,377,768
374,933

39,385,821
-

40,210,331
-

$ 2,477,127 $36,752,701

$ 39,871,754

$ 40,667,098

620,530
(176,815)
$

Endowment
Fund

2003

Liabilities and Fund Balances


Liabilities
Current
Payables and accruals

Fund Balances

15,000

626,926
$

641,926

65,000 $

2,412,131

80,000

93,064

36,752,697

39,791,754

40,574,034

$ 2,477,131 $36,752,697

$ 39,871,754

$ 40,667,098

On behalf of the Board

Director

Director

See accompanying notes to the financial statements.


35

Here we present a trial balance for a fictitious organization. We have bolded the accounts
for the capital fund, the rest of the accounts are the operating fund.
Trial Balance - all accounts
dr
Bank - operating account
Bank - capital account
Contributions receivable
Flower Pin inventory
Capital assets
Accumulated ammortization
Accounts payable
Bank loan - current portion
Bank loan - long term
Deferred capital contributions
Deferred contributions
Net assets
Flower Pin sales
Flower Pin cost of sales
Capital contributions recognized
Unrestricted contributions
Spring fling contributions recognized
Administration costs
Amortization
Interest expense
Spring fling expenses

cr
350
150
100
300
2000
800
100
130
500
400
200
450
450
150
50
100
500
65
100
65
400
3680

3680

Below we separate out the operating fund accounts, note that we need to restate the
opening net asset balance, pulling out the opening balance for the operating fund, in order
to balance the accounts.
Operating Fund
dr
Bank - operating account
Contributions receivable
Flower Pin inventory
Accounts payable
Deferred
contributions
Operating Fund - opening balance
Flower Pin sales
Flower Pin cost of sales
Unrestricted contributions
Spring fling contributions recognized
Administration costs
Spring fling expenses

cr
350
100
300
100
200
15
450
150
100
500
65
400
1365

1365

73

Below we present the capital fund accounts, with the opening balance of the capital fund.
See the opening balance of the two funds equals the opening net assets we presented
earlier, under the deferral method.
Capital Fund
dr
Bank - capital account
Capital assets
Accumulated ammortization
Bank loan - current portion
Bank loan - long term
Deferred capital contributions
Capital Fund - opening balance
Capital contributions recognized
Amortization
Interest expense

Operating Fund - opening balance


Capital Fund - opening balance
= Net Assets

cr
150
2000
800
130
500
400
435
50
100
65
2315

2315

15
435
450

74

16. Expense Recognition


Cash accounting is no longer permitted except under very strict circumstances
- almost anything was permitted for NPOs prior to 1996
- an audit can no longer give an opinion on a basis other than GAAP, except
for purposes of reporting compliance with agreements etc.
In accounting for expenses, accrual accounting must be used
- expenses are recognized when services are received, liabilities are incurred, or
resources are used
- the accounting for the use of resources is described on the next page

75

Capital Assets
- are amortized but may be expensed when
purchased if total revenues are less than $500,000
- cannot revert to this policy one assets have been
capitalized
- amortization should be straight-line over the
expected life of the asset
- can use a threshold
Collections
- collections of rare, preserved and protected items
such as works of art and historic treasures do not
need to be capitalized if there is a policy to maintain
the collection
Capital Leases
- the asset cost and liability needs to be recognized in
the period of the inception of the lease if:
- the present value of minimum lease payments
is at least 90% of fair value
- the lease period is at least 75% of the
economic life
- there is a bargain purchase option
- title to the asset transfers
Inventory
- the exception for capital assets does not apply to
inventory
- inventory of consumable items and items held for
resale should be recorded if material

76

Expense Presentation
Level of detail can be an issue in NPOs, depending on who the users are
Expenses can be reported by object, function, or program: but preferably not a
mix of these methods.
Presentation by object and function is required by government organizations.
In the United States, FASB No. 117 requires the functional classification of
expenses, and for certain non-profits, voluntary health and welfare organizations,
it requires the additional disclosure of the natural classification of expenses. For
other organizations, FASB only suggests this as desirable disclosure. The natural
classification of expenses shows expenses by the nature of the expense, for
example salaries, professional fees, interest and so on. This disclosure would
typically be presented in a supporting schedule that reconciles to the expenses
reported in the statement of operations.

77

Department of Resource Development

Statement of Operations
For the year ended March 31, 2001
(in thousands)
2001
Actual

$ 4,048,000
135,000

1,086
4,184,086

$ 10,585,955
255,968

3,562
10,845,485

$ 4,681,284
133,599
8,200
4,139
4,827,222

2,631
65,761
16,879
1,843
87,114

2,965
61,118
16,879
1,899
82,861

2,553
61,040
15,338
1,307
80,238

35

35

185
(29)
156

(70)
30
(40)

87,149

83,017

80,198

$ 4,096,937

$ 10,762,468

$ 4,747,024

(Restated, Note 12)

Revenue: (Schedules 1 and 2)

Non-renewable resource revenue


Freehold Mineral Rights Tax
Internal government transfers
Other revenue

Expenses: directly incurred (Note 2b and Schedules 6 and 7)


Voted (Schedules 2, 3 and 4)

Ministry support services


Resource development and management
Energy and utilities regulation
Northern development

Valuation Adjustments

Provisions for doubtful accounts


Provisions for vacation pay

Total expenses

Net operating results

The accompanying notes and schedules are part of these financial statements.

Department of Resource Development

Statement of Operations

Budget

Department of Resource Development

2000
Actual

81

Department of Resource Development

Schedule of Expense Directly Incurred - Detailed by Object

Budget

2001
Actual

2000
Actual

$ 33,706

$ 32,143

$31,743

Supplies and services

25,925

21,027

19,560

Grants

23,494

26,365

25,088

71

64

77

4,558

3,846

4,388

87,754

83,445

80,856

Voted:

Salaries, wages and employee benefits

Financial transactions and other


Amortization of capital assets
Total voted expenses before recoveries

Department of Resource Development

Schedule 3

S c h e d u l e o f E x p e n s e D i re c t l y I n c u r re d

For the year ended March 31, 2001


(in thousands)

91
Less: Recovery from support service arrangements
with related parties
Total Voted Expenses

(640)

(584)

(618)

$ 87,114

$ 82,861

$ 80,238

The Department provides financial services to Alberta Environment and Alberta Agriculture Food and Rural
Development. Costs incurred for these services are recovered from Alberta Environment.

Department of Resource Development

17. Revenue Recognition


Revenue Recognition of Investment, and Sales and Service Revenue
Everything other than contributions is accounted for using for-profit accounting
rules
- Interest income over time when earned, royalties when received, dividends
when declared
- Sales and service revenues when earned
- Membership fees over the period of the membership, if there is an
obligation to be fulfilled by the organization
- Contract revenue matched proportionately against the expenses, however
the revenues and expenses may be deferred until completion if there are
significant uncertainties about progress to completion
Contributions
A contribution is a non-reciprocal transfer, and would include grants,
contributions of capital assets, materials and services, and the forgiveness of debt
Contributions can be unrestricted or restricted
The donors designation can be implicit or explicit
Not required to record contributed materials and services
- may record either or both, no option on contributed capital assets
- must disclose policy
- must otherwise be purchased
- amounts must be reasonable estimable
- can use note disclosure of volunteer hours etc.
Contributions Receivable must be recorded
-

No different than any other receivables.


Pledges are recorded when the organization has been promised the money
Grants are receivable when approved
There should be evidence the pledge or grant existed at year-end and was
approved eg verbal evidence is likely insufficient for audit purposes
There must be assurance of collection to recognize a pledge, through history
or the actual receipt after the year-end, there should also be reasonable
assurance regarding the amount to be received, a percentage of amounts to be
received might be based on past history

80

Accounting for Unrestricted Contributions


An unrestricted contribution would be recognized as revenue when it is received
or receivable. This is the case under the deferral and restricted fund methods.
Accounting for Restricted Contributions under the Deferral Method of
Accounting for Contributions
-

Under deferral method of accounting for contributions, a restricted


contribution can only be recognized as earned when the organization uses
the contribution on the purpose designated by the donor, the contribution is
recognized when the related expense occurs
- Until the expense occurs the amount received is treated as a type of
liability
- When the money is received the entry is debit cash, credit deferred
contributions: a balance sheet account, like unearned revenue or accounts
payable
Sample Journal Entries, for Canadian Foodgrains Bank on Page 70
Accounting for Restricted Contributions under the Restricted Fund Method
-

This method is typically used by Foundations and organizations wanting


to separate the accounting for certain activities Dalhousie Example on
Page 72

When a contribution is received into a restricted fund and not spent, it


becomes part of the ending fund balance
- The amount of unspent externally restricted contributions held in a
restricted fund needs to be tracked as there may be internally restricted
transfers to a restricted fund

An organization may chose to set up as restricted funds at any time for any
purpose.

There must be a general fund for the organizations general operations.


If a contribution is received and there is no restricted fund set up for it, the
contribution must be accounted for in the general fund which will use the
deferral method of accounting for contributions

All unrestricted revenues should be recognized in the general fund,


including unrestricted sales and service revenues: however external
restrictions may exist for example by way of gaming license requirements

81

Sample Journal Entries Contribution Recognition under the Deferral Method

Someone makes a $1,000,000 contribution to pay for wheat for Afghanistan.


1) On receipt of the donation
Dr
Cr
2) When the expense is recognized
Dr
Cr
Dr
Cr

Someone makes a $20,000 contribution to pay the insurance invoice for one
years insurance Sept 30 to Sept 30.
1) On receipt of the donation
Dr
Cr
2) On purchase of the insurance
Dr
Cr
2) When the current years expense is recognized
Dr
Cr
Dr
Cr

82

Someone makes a $15,000 donation to purchase a tractor for harvesting


wheat.
1) On receipt of the donation
Dr
Cr
2) When the asset is purchased
Dr
Cr
Dr
Cr
3) As the asset is amortized
Dr
Cr
Dr
Cr

83

18. The Statement of Changes in Net Assets and the Statement of Cash Flows
The Statement of Changes in Net Assets:
Accounting for Internally Restricted Amounts, and Changes in the
Investment in Capital Assets.
-

Graph of the Balance Sheet


- We can separate the net asset balance into a number of categories
- Investment in Capital Assets
- Externally restricted net assets
- Contributions
- Other External Restrictions, eg. Lottery Money
- Internal restrictions
- Unrestricted Balances

We account for the changes in the net asset balance on the statement of
changes in net assets
- Athabasca University example

The Statement of Cash Flows


-

details the sources and uses of cash


the indirect or direct method may be used
examples
the direct method may be preferable in that it shows exactly who the money
came from and was distributed to, mirrors the statement of operations
the indirect method may be effective in showing how operations were
financed through the management of receivables, payables etc, focus is on
the balance sheet

84

Graph of the Balance Sheet of an NPO

20

thousands

20
40

Capital
Assets
40

Assets

Liabilities

20

Net
Assets or
Fund
Balances
on the
Restricted
Fund
Method

Deferred
Contributions or
Externally restricted
fund balances

unrestricted
internally
restricted
60
invested
in capital
assets

Net Assets on
the Deferral
Method

Liabilites and Net Assets

Net Assets plus Deferred Contributions on the Deferral Method


= Net Assets or Fund Balances on the Restricted Fund Method

85

Athabasca University Annual Report 2002 - Statement of Financial Position

Page 1 of 1

Liabilities and Net Assets

Current Liabilities
Accounts payable and accruals

$1,834

$1,693

Salaries and benefits payable

4,455

3,755

Deferred revenue (Note 8)

7,682

6,995

Deferred contributions (Note 9)

957

1,639

Due to Joint Venture (Note 4)

398

47

429

15,373

14,511

153

200

13,878

13,038

1,261

30,665

27,749

Investment in capital assets (Note 7)

9,471

8,472

Endowments (Note 13)

1,089

1,089

Internally restricted (Note 14)

4,735

5,763

1,274

15,295

16,598

Current portion of obligation under capital lease (Note 10)

Obligations under capital lease (Note 10)


Unamortized deferred capital and deferred course
development contributions (Note 11)
Deferred capital contributions (Note 12)
Net assets

Unrestricted

$45,960 $44,347

http://www.athabascau.ca/report2002/financ.htm

11/11/2004

Athabasca University Annual Report 2002 - Statement of changes in Net Assets

Page 1 of 1

Annual Report 2001-2002: Statement of Changes in Net Assets


For the year ended March 31, 2002 (thousands of dollars)

2002

2001

Investment
in Capital
Internally
Assets Endowments Restricted Unrestricted
Balance, beginning of year

Total

Total

$8,472

$1,089

$5,763

(1,478) (1,478)

2,345

(2,345)

Repayment of obligations
under capital lease

429

(429)

Capital contribution for land

175

175

Less amortization
of internally
funded assets

(1,950)

1,950

Interfund transfers

(1,028)

1,028

$9,471

$1,089

$4,735

Excess of expenses
over revenue
Investment in capital
assets

Balance, end of year

http://www.athabascau.ca/report2002/assets_print.htm

$1,274 $16,598 $17,205


(607)

$ - $15,295 $16,598

11/11/2004

Cass Fraser Accounting

Page 1 of 1

SpringTime
Statement of Cash Flows
For the Year Ending December 31, 2000
2000

1999

Cash Flows from Operating Activities


Cash received from contributors

Cash received from flower pin sales

800

700

200

500

(500)

(550)

(60)

(70)

440

580

10,200

(10,200)

Contribution for debt repayment

100

Contribution of desk

200

Contributed desk put in service

(200)

Repayment of loan principal

(100)

(100)

(100)

Net increase in cash

440

480

Cash at beginning of year

500

20

Cash paid to suppliers


Loan interest paid

Cash Flows from Financing and Investing activities


Contribution for endowment
Purchase of bond

Cash at end of year

http://www.cassfraser.ca/html/gaap/direct_method.html

940

500

11/11/2004

REAL ESTATE COUNCIL OF BRITISH COLUMBIA


Statement of Cash Flows
Year Ended June 30, 2004
2004
Cash flows from (used in) operating activities
Excess of revenue over expenditures for the year
Items not involving cash:
Amortization
Loss (gain) on sale of equipment

Change in non-cash working capital


Increase in accounts and accrued interest receivable
Decrease (increase) in prepaid expenses
Increase (decrease) in accounts payable and accrued liabilities

Cash flows from (used in) investing activities


Purchase of equipment, net of contributions applied
Sale proceeds of equipment

Net increase in cash


Cash, beginning of year

458,003 $

2003

705,204

124,410
(10,305)

94,081
5,108

572,108

804,393

(32,998)
(7,264)
35,716

(14,622)
477
(33,206)

567,562

757,042

(227,461)
21,000

(67,728)
595

(206,461)

(67,133)

361,101

689,909

2,006,164

1,316,255

Cash, end of year

2,367,265 $

2,006,164

Cash is comprised of:


Cash and cash equivalents
Short term investments

1,168,450 $
1,198,815

806,455
1,199,709

2,367,265 $

2,006,164

19. Accounting Principles Wrap-up: Options Available to NPOs


An accounting change must result in a more appropriate presentation
The First option is whether or not to follow generally accepted accounting
principles (GAAP).
If you are not seeking an unqualified audit opinion or review engagement report
and you do not feel the readers are going to be well served through the application
of Canadian GAAP, you may want to prepare your monthly statements or annual
statements on a cash basis or simple accrual basis. I would recommend at least the
following:
- accrue all payables and receivables to get a better picture of your financial
position
- maintain good records of the cost of purchased assets and fair value of
donated assets
- account for the use of all externally restricted donations and grants
Otherwise See Chart for GAAP

90

The Options
Pros and Cons
Restricted Fund Method
Pros

Cons

A good way to separate the revenues


and expenses, and ending surpluses
of given activities or cost centres

Statements are bigger, and it may


be more difficult to capture the
whole picture

It is not possible to add funds across


the statement of operations, and
therefore total revenues and expenses
Revenue recognition rules are easy to cannot be shown on a line by line
basis
understand
An easy method of tracking
externally restricted contributions

Net Assets Fund Balances


represent the assets available for
future operations

Requires accounting staff to have a


knowledge of fund accounting

Deferral Method
Pros

Cons

Can present a single column


statement of operations and
statement of financial position

More complicated revenue


recognition rules

Revenue recognition may be more


appropriate for not-for-profits with a
net-income focus
The most widely used method in
Canada

Revenue recognition follows for


profit model
Results in a net asset balance on the
statement of financial position that is
not representative of the ability to
provide future services

91

The Options
Pros and Cons
Capitalizing Assets
Organizations with Gross Revenues < $500,000
Pros

Cons

May need to capitalize assets in the


future once revenues exceed
$500,000

Requires more complex accounting,


in terms of recording depreciation
and the amortization of deferred
capital contributions

A better representation of the true


service potential on the statement of
financial position

Accurate historical records may not


be available

Encourages more accurate


recordkeeping for capital assets and
possibly better control over assets

Organizations with significant real


estate may be showing undervalued
assets

Recording Contributed Materials and Services


Pros
Shows a more complete picture of
the resources received and used
Establishing the value of resources
required may help in planning,
especially if these resources may
need to be purchased in the future

Cons
Requires valuations to be made.
This may be time consuming and
possibly impractical.
Disclosure of amounts subject to
significant uncertainty is appropriate
only in the notes

Provides more donor recognition


with respect to the value of
contributed materials and services

92