Yet another query in NPO(supplemental-Becker)

Is the depreciation accounted as an expense in public and private non profit colleges?

Answer is yes for private and NO for public colleges.Explanation says that public  college might follow properietary fund model(full accrual) but may also follow government fund model that precludes recognition of depreciation.

I can't understand the above explanation.

Any ideas?

Per my understanding, the answer for public colleges should have been "may be yes/may be no" because public colleges and universities may be governmental entities or non-governmental entities, depending upon whether the college or university is financially accountable to a primary government...

We know that in governmental entities following the governmental fund model do not carry any fixed assets. Fixed assets are reported as current expenditures (modified accrual)

whereas, governmental entities following the proprietary fund model use full accrual method, thus, reporting fixed assets in BS and depreciation in IS.

Hope I have not confused you !

I am not really sure about how to explain, however, let me try...

Per my understanding, a member of NFP is different from a donor.

The nonprofit may also be a trust or association of members. The organization may be controlled by its members who elect the Board of Directors, Board of Governors or Board of Trustees.

The members may or may not donate for raising of any funds.... There would be membership dues, but that would be considered a part of membership development....

On the other part, a donor voluntarily donates to NFP. And, NFP usually maintains (adds, changes) it donor mailing list to send out appeals to these donors during fund raising campaign. Thus, cost of maintaining donor list - salary/expense of the person who is maintaining it would be considered a fund raising expense.

Hope this helps!

Thanks Divya, I totally understand your explanation with regard to the public university. Infact there is a single line in page F8-55 , which quotes public university under Enterprise fund, but also says that it might follow the government model as well.

But the answer given in Becker is still not appropriate right? When there are 2 alternatives and so 2 answers, how are we to get it right?

With regard to the "donor mailing list"-thanks for taking so much effort. I understand inclusion of donor mailing list as fund raising expense. But at the same time , the other expenses seem to be fund raising as well. Am I right?

sanju06 wrote: But the answer given in Becker is still not appropriate right? When there are 2 alternatives and so 2 answers, how are we to get it right?

In that scenario, you would go for the best possible option, eliminating all the odd answers...

For example, in this case :- options b.) and d.) are eliminated as they have "No" as the answer for private colleges which is not possible. You would be recognizing depreciation for private NFP colleges.

Now, we are left with options a.) and c.). Since we are aware that public colleges can either opt for governmental model or proprietary fund model, the answer can't be always "yes" so option c.) is eliminated.

so, the best option available is option a.)

I know it's sometimes tricky and little illogical, but this is the best way :( Hope that helps!