Article Summary for Non-For-Profit Accounting
Brief Summary of Main Points of Article: Non for Profit Organizations were owed more than $200,000 for services provided to state governments during 2012, and almost a third of these non for profit organizations received late payments from governments. Also, about half of the nonprofits that were affected by this said that these late payments that they were receiving from governments created problems for their organizations. During the recession, nonprofits had trouble with the five following areas: complex application processes, burdensome reporting requirements, payments not covering the full cost of services, changes to government contracts, and late payments. However, “From the perspective of human services nonprofits, little improvement has been made in the past three years in streamlining the application and reporting processes to reduce the cost and burden of applying for and reporting on government contracts and grants…Almost 40 percent of nonprofits in the survey reported continued struggles in the wake of the Great Recession and ended the year with a deficit…Approximately 15 percent reported deficits of 10 percent or more at the end of 2012. Almost half reported decreased government revenues from 2011 to 2012” (Hrywna). An important fact from the article was that late payments were frequent among all levels of government, but state agencies had the highest average owed to nonprofits--“…significantly more than the average owed by federal agencies ($108,500) or local governments ($84,899). The median amounts owed were smaller, but still highest by the state ($40,000), followed by local ($30,000) and federal ($26,808)” (Hrywna). Late payments were a problem for 45% of nonprofits with almost half of medium and large nonprofit organizations. Among these organizations that said that late payments were a problem said that almost half were likely to draw down reserves, about a third would reduce employee salaries and a quarter would increase lines of credit. “Only 15 percent would affect the number of programs or services and less than one in 10 would reduce the number of offices or program sites” (Hrywna). Also, the article stated that, “Local, state and federal governments worked with nearly 56,000 nonprofits in 2012, with contracts and grants ranging from $1,000 to $325 million…In terms of dollars, human services (59 percent) and health (27 percent) organizations dominated as well, gobbling up 86 percent of funds, with the average $5.5 million for health and $2.8 million for human services. Governments more frequently had agreements with large nonprofits, nearly half (48 percent) with operating budgets of $1 million or more, and 36 percent with budgets of between $250,000 and less than a million. Only 17 percent of organizations with budgets of $100,000 to less than $250,000 received a contract or grant” (Hrywna). Therefore, government agencies aren’t providing nonprofits with their payments on time, which is causing decreases in their funding, decreases in their resources, decreases in their cash, and it is causing major problems to the nonprofit organizations. Critical Evaluation/Opinion on the Article: The immediate accounting impact for the nonprofit organizations is that they are losing revenues and contributions because state governments and other governments are giving the nonprofit organizations late payments, which is dramatically affecting the organizations in many categories such as administrative purposes, funding, services, etc. Not providing the nonprofit organizations with their payments on time goes against accounting principles, and affects the organization drastically. Some other areas that were affected dramatically in the nonprofit organizations from governments not paying the nonprofits on time are: complex