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Introduction Accounting & Finance

0 Ron Bauers
money Editor's Abstract

Past attendees at ICSOM and ROPA conferences will recognize Ron Bauers as “the” authority on not-for-profit accounting. Ron is a CPA and college professor, but he’s also a professional guitarist and a member of Local 70-558 in Omaha, NE. He has given many presentations to symphony musicians about how to read a financial statement, the structure of endowments, and similar “dry” accounting subjects. Yet conference after conference, his presentations are extremely popular and have been voted among the best sessions at the conference.

I asked Ron to prepare a course on not-for-profit accounting for orchestra musicians who serve on their Orchestra Committee and/or Board (or for any interested musician), so we can all learn to understand all the figures a symphony deals with: budget forecasts and reforecasts, monthly cash flow numbers, endowment restrictions, yearly audit statements, etc.

In his introductory column, Ron presents an overview of his plans for his course, plus a course outline.

Ann Drinan

The Initial Direction of the Column

Because this is an accounting and finance column, it will contain information about accounting and finance issues, but will specialize in not-for-profit organizations, with a focus on symphony orchestras, opera companies, and ballet companies.

In recent months I have had several conversations with orchestra musicians who are interested in learning and understanding accounting for not-for-profit organizations. Therefore, my first contribution to the Orchestra Musician Forum will be in the form of an introductory course: Accounting for Not-for-Profit Organizations. I will present the material in many small articles to accommodate all of the readers of this column, regardless of their current understanding of non-profit accounting. I have three reasons for using this approach:

  1. This modular format is certainly not intended to insult the intelligence of any of the forum’s readers. However, having taught accounting for many years on the university level, I know that accounting information overload comes very fast, creates confusion, impedes learning and, more importantly, hinders understanding of the material.
  2. Presenting not-for-profit accounting to non-accountants is challenging because it is an advanced accounting topic that is offered only to upper undergraduate or graduate level accounting majors, who attest that it is a very difficult topic. The average university business student is not required to take any not-for-profit accounting courses – rather their programs require only basic financial and managerial accounting principle courses that strictly emphasize for-profit accounting. (This may account for the fact that some of the business professionals that serve on your Boards of Directors may not be very knowledgeable about not-for-profit accounting, unless they have worked for a non-profit or have obtained their knowledge from some other source.)
  3. By teaching this topic in small modules, I will be able to adjust the direction of the course according to feedback from the readers of the forum or if I think that it requires adjustment.

What follows is a tentative, general outline of this introductory course, which, of course, is subject to change. After this initial excursion into the accounting aspects of not-for-profits, I plan to present a series of articles, or courses, on the financial analysis of accounting information.

As we proceed, I welcome your questions and comments about the material I present and the direction this introductory course takes. And I urge you to share your experiences of applying this information to an examination of your own orchestra’s financial statements.

Not-For-Profit Accounting 101 Course Outline

  1. A Very Short History of Not-For-Profit Accounting
  2. What are the Differences Between Not-For-Profit and For-Profit Accounting?
    • Why is it necessary?
    • Who decides how not-for-profits record their accounting transactions?
  3. What Are the Elements of Accounting?
  4. What Are Accrual, Fund, and Net Assets Accounting?
  5. The Statement of Financial Position
    • Assets Liabilities
    • Net Assets
  6. The Statement of Activities
    • Revenues Expenses
    • Non-operating revenues and expenses
    • Results
  7. The Statement of Changes in Net Assets
    • Unrestricted
    • Temporarily restricted
    • Permanently restricted
  8. The Statement of Cash Flows
    • Operating activities
    • Investing activities
    • Financing activities
  9. Audits
    • What are they and what are they not?
    • Why are they necessary?
    • Who can perform them?
    • What are the elements of an audit?
      • Financial statements
      • Footnotes
      • Other materials

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