In this video, we cover expenses on Voluntary Health and Welfare Organizations (VHWO) as covered on the CPA exam FAR.
Start your free trial: farhatlectures...
In the accounting and financial reporting for Voluntary Health and Welfare Organizations (VHWOs), distinguishing between program expenses and support expenses is crucial. These categories help these organizations report transparently how funds are used, which is important for donors, grantors, and regulatory bodies. Here's an overview of what these expenses entail and how they are typically categorized:
Program Expenses
Program expenses are costs directly related to the primary mission activities of the organization. These are the services that the VHWO provides to meet its organizational objectives, which could include public health services, educational programs, counseling services, and more. The primary aim of categorizing these expenses is to show how much of the organization’s resources are going directly toward achieving its mission.
Examples include:
Costs related to delivering health services like clinics for the uninsured.
Expenses for conducting health education and wellness programs.
Salaries of program staff directly involved in service delivery.
Supplies and equipment used directly in program services.
Direct costs associated with organizing and conducting outreach or intervention programs.
Support Expenses
Support expenses, on the other hand, include costs that are necessary to fulfill organizational functions but do not directly relate to the provision of health and welfare services. These are usually subdivided into management and general expenses, and fundraising expenses.
Management and General Expenses
These are necessary for the overall operation and administration of the organization and not directly tied to a specific program.
Examples include:
Salaries and benefits of the executive director, finance staff, HR, and other administrative personnel.
Office rent, utilities, and maintenance for the headquarters.
General office supplies not used directly in programs.
Accounting, auditing, legal, and other professional services.
Information systems and technology that support the administration.
Fundraising Expenses
These costs are related to activities that raise funds necessary to finance the organization’s programs and operations.
Examples include:
Salaries and expenses of fundraising staff and consultants.
Costs of fundraising events, marketing, and advertising.
Production and distribution of fundraising materials.
Postage and handling for fundraising solicitations.
Reporting and Importance
For VHWOs, it is crucial to maintain a transparent distinction between these expenses in their financial statements. Accurate reporting:
Helps in demonstrating to donors and funders how efficiently resources are being utilized toward mission-critical activities versus overhead costs.
Ensures compliance with regulations and standards set by bodies like the IRS and GAAP.
Enhances credibility and trustworthiness among stakeholders and the general public.
Strategic Considerations
While donors often prefer to see a higher portion of their donations go directly to program expenses, it’s important for organizations to invest adequately in management and fundraising. These support functions are essential for sustaining the organization’s capacity to deliver its mission effectively over the long term.
In practice, VHWOs should strive for a balanced allocation that maximizes program delivery while maintaining effective management and fundraising capabilities. This balance is often scrutinized in donor decisions and rankings by charity watchdogs, making it a strategic consideration for such organizations.
#cpaexaminindia #cpareviewcourse #cpaexam
Негізгі бет Expenses Not for Profit Voluntary Health and Welfare Organizations VHWO CPA Exam FAR
Пікірлер: 3