NFP

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  • #199665
    ncales
    Member

    Why would a grant be considered an expense to NFP

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  • #755530
    Anonymous
    Inactive

    With this limited information, I'm going to offer 2 ideas:

    1. The NFP is the one giving the grant. Example: an NFP, The National Foundation to Ban Spaghetti, gives a grant to the Kids Against Spaghetti to fund anti-spaghetti protests)

    2. The NFP receives a grant which is restricted to a specific purpose and which is required to be expended in that fiscal period for that purpose. Example: an NFP, The National Foundation to Ban Spaghetti, receives a grant to run ads during the political campaigns in 2016. They're on a calendar year fiscal period, so the whole $120,000 grant must be expended during 2016, so they consider the grant to represent both an anticipated income and expense of equal amounts.

    Scenario 1 is the only one that the grant itself would be an expense; however, in Scenario 2, the presence of the grant would still indicate expenses to come. So, on a financial statement, Scenario 1 would list a grant as an expense; in the budgeting phase, for Scenario 2, if I'm going to include the grant as income then I also need to include a matching expense.

    If neither of these really explain, then give me some more info about what/where you found and I can see if I can explain the specific situation you ran into. I work in a NFP and we work quite a bit with grants, so hopefully I can help out more when I know what the specific situation is. 🙂

    #755531
    ncales
    Member

    Thank you. I forgot that grants can be restricted. The question did not give much details

    Becker f-9 question

    In a not -for- profit organization, which of the following should be included in total expenses

    Grants to other org depreciation

    I JUST noticed I didn't read the question carefully

    #755532
    Anonymous
    Inactive

    Yeah, the key is the word “to” in this case, cause it's a grant TO the other org, not FROM the other org. The joy of CPA questions, where the big important words don't matter, and the insignificant words change everything!

    But on the bright side, you got a reminder about restrictions too. 🙂 In the practicality of real-world NFPs, almost all grants have restrictions, or at least almost all the ones I've dealt with. It's rare that someone just says “Hey you're so awesome we're going to give you money to use for whatever you want – even if the President just wants to take a vacation to Tahiti with it.” Usually they give it to the NFP to use for _______. However, only in a budgeting context or another rare situation would the anticipated expense cause a received restricted grant to be considered as an expense and not just income.

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