Academic journal article Journal of Accountancy
New Role for NPO CPAs
Charities want to report most expenses as program services rather than as administrative or fundraising activities to appear favorably to the public and attract potential donors. Publications often rate charities based on the percentage of money spent on fundraising, and state regulators are concerned as well.
Gregory B. Capin, chairman of the NPO committee, said some charities will be unhappy with the new SOP. He suggested that CPAs be proactive in advising their clients about the rules to avoid surprises and to take advantage of planning opportunities. "CPAs and the charities' accounting staffs should be involved early in planning or reviewing activities that include fundraising and are intended to further a program or public education purpose. This will help management understand the accounting implications at an early stage rather than after the fact, when nothing can be changed. It also will minimize surprises and contentious accounting issues during an audit."
Capin said that the new statement is much clearer than SOP 87-2 in applying the criteria of purpose, audience and content, and it makes it explicitly clear that talking about the needs and causes the charity serves is in support of fundraising, not program and public education activities--unless there is a motivation to an action other than giving. …