GNP Exam 3

false

A state has the obligation to monitor and regulate a not-for-profit (NFP) organization because it granted the NFP tax-exempt status through the not-for-profit corporation laws.

false

The federal government's primary objective in regulating not-for-profit organizations through the income tax laws is to limit the number of exempt organizations that operate at any one point in time.

false

Not-for-profit corporations cannot lobby or attempt to influence legislation or politicians.

true

The not-for-profit organization applying for tax-exempt status determines the appropriate subsection under IRC Section 501 for which it wants to be considered and the Internal Revenue Service then approves or denies the application.

true

The unrelated business income tax could be a significant cost and therefore should be of concern to tax-exempt organizations.

true

If a tax-exempt organization dissolves and goes out of business, it must distribute its assets to another tax-exempt organization or a governmental entity.

true

Board members of a not-for-profit organization have a fiduciary responsibility to provide fiscal guidance and ongoing governance over the not-for-profit organization to ensure that its exempt mission is carried out as described in the incorporating documents and exempt application.

false

All officers of a not-for-profit organization have the same responsibilities to the organization and its constituents.

true

Not-for-profit organizations risk loss of their tax-exempt status if they participate in a political campaign on behalf of a candidate for public office.

true

One of the limitations of financial ratio analysis for not-for-profit organizations is that donors may incorrectly assume that there are federal or state laws that govern the percentage of annual revenues that a charity must spend on its programs.

false

A 501(c)(3) organization must provide donors with a written disclosure for all donations received.

false

Only 501(c)(3) organizations receiving at least 50 percent of their support from the public at large rather than a few individual donors can be considered public charities.

true

Political parties and campaign committees can qualify for tax-exempt status.

false

All not-for-profit organizations are required to file some type of Form 990 with the Internal Revenue Service.

false

Unrelated business income tax is reported on the Form 990.

true

A not-for-profit typically has gross receipts of $4,500 or less each year. According to the IRS it would not have to file with the IRS to be considered tax-exempt under Sec. 501(c)(3).

If they are not a religious organization, and have gross receipts of $5,000 or more each year.

A nongovernmental tax-exempt organization must complete a Form 990 and send it to the Internal Revenue Service:

Survivors of Breast Cancer Club.

Which of the following not-for-profit organizations is most likely to be tax-exempt under IRC Sec. 501(c)(3)?

Fringe benefits comparable to those given to all employees.

The Internal Revenue Service may impose intermediate sanctions on all of the following transactions between a not-for-profit organization and its executive officer except:

Propaganda.

The term that means information skewed toward a particular belief with a tendency to have little or no factual basis is:

Public charity.

A tax-exempt organization that receives its support primarily from a large number of individuals or corporations and a relatively small amount from investment income is called a:

Make available a copy of its Form 990 to the public for a period of up to three years.

Public disclosure rules require that a tax-exempt not-for-profit organization:

Percentage of unrestricted net assets to average monthly operating expenses.

A good measure of whether a not-for-profit organization is a "going concern" and can sustain its operations into the future is:

Current assets divided by current liabilities.

A good measure of whether a not-for-profit organization is "liquid" and can meet its short-term obligations is:

Grass-roots lobbying.

Which of the following defines an appeal to the public to take action on a legislative matter?

All of these ratios are included in the CFI.

The composite financial index (CFI), a measure of financial health for colleges and universities, includes which of the following ratios?

An expense titled Institutional Support Expense.

How would a private college or university report its estimate for uncollectible tuition and fees on its statement of activities?

$300,000.

Briar State, a public college, provided tuition waivers of $500,000. Of the amount, $200,000 was for students teaching courses as graduate assistants and $300,000 was simply an award for scholastic accomplishments. Another $100,000 was given for tuition refunds. What amount would Briar State record as Tuition and Fees Discounts and Allowances?

Composite financial index.

Which of the following measures may be useful to decision makers evaluating the financial condition of a college or university?

Institutional support.

Which of the following is a typical classification of a functional expense in a college or university?

Nonoperating revenue.

State educational appropriations received by a public university are classified as which of the following on the statement of revenues, expenses, and changes in net position?

Sporting events.

Which of the following is not a classification of revenues for a college or university as recommended by the National Association of College and University Business Officers (NACUBO)?

B. $ 0$ 700,000

During the year ended June 30, 2023, Thompson College, a private college, received a federal government grant of $800,000 for research on the role of music in improving math skills for students. Expenses that were not capital in nature for this research amounted to $100,000 during the same year. Under FASB standards, which of the following best represents how Thompson College would report this nonexchange transaction in the net assets section for the year ended June 30, 2023?

Both I and III are correct methods of reporting estimated uncollectible tuition and fees.

How would estimated uncollectible tuition and fees be reported on the financial statements of a university?

I. It would be reported as part of net revenue by a public university.

II. It would be reported as an expense by a public university.

III. It would be reported as an expense by a private university.

$100,000.

During the years ended June 30, 2023 and 2024, Main University, a private university, conducted a cancer research project financed by a $1,000,000 gift from an alumnus. The entire amount was pledged by the donor on July 10, 2022. The gift was restricted to the financing of this particular research project. During the two-year research period, Main's gift receipts from the alumnus and research expenses related to the research project were as follows for each fiscal year (FY):

FY 2023FY 2025

Gift receipts$ 200,000$ 800,000

Cancer research expenses$ 100,000$ 900,000

What amount of net assets was released from restriction in 2023?

Net assets with donor restrictions.

An alumnus donates securities to a private college and stipulates that the principal be held in perpetuity and income from the securities be used for faculty travel. Dividends received from the securities should be recognized as increases in:

Statement of cash flows.

Which of the following statements is required for both a private university and a governmentally owned public university engaged only in business-type activities?

A receivable.

Colleges and universities often make loans to students. How would these loans be reported on the financial statements?

Statement of revenues, expenses, and changes in net position.

Which of the following is required as part of a complete set of financial statements for a public college or university engaged only in business-type activities?

A current liability.

A college has collected returnable dormitory room deposits from students. How would these deposits be reported by the college?

A statement of activities.

The FASB requires that private colleges and universities prepare which of the following financial statements?

Student tuition and fees.

Which of the following receipts can properly be accounted for as an increase in net assets without donor restrictions by a private college?

Intangible assets.

A private college would report which of the following assets differently than a public college?

Private colleges and universities.

What type of college or university must report expenses by both natural classification and functional classification?

Sustainable funds.

The most common funds used by private colleges and universities include all of the following except:

true

Colleges and universities can be evaluated utilizing both financial and nonfinancial performance information.

true

An example of a college outcome performance metric would be performance on nationally ranked exams such as the CPA exam.

true

The college scorecard allows students and parents to assess colleges' and universities' performance based on metrics such as affordability and graduation rates.

false

Only public colleges and universities are subject to the federal single audit requirements.

true

Colleges and universities will report tuition waivers as either a contra-revenue account or an expense, depending on the purpose for which the waiver is given.

false

Financial reporting standards for all hospitals are established by the FASB.

false

Patient service revenues and related receivables include charges for charity care services.

false

In accounting for government health care entities, the account Provision for Bad Debts should be reported as an expense, rather than as a contra-revenue.

true

An implicit price concession exists if it is likely the not-for-profit health care entity will accept an amount from the customer that is less than the contractually stated amount.

false

Not-for-profit hospitals are encouraged but not required to conduct and report on a community health needs assessment every three years.

true

Not-for-profit hospitals risk losing their tax-exempt status if they fail to provide an adequate level of charity care.

true

Payment methods, such as capitation fees in prepaid healthcare plans, pose a financial risk to hospitals if the fixed amount of revenue does not cover the costs of providing services.

false

Under GAAP, both governmental and nongovernmental not-for-profit health care entities are required to identify operating and nonoperating activity on their operating statements.

true

A governmental not-for-profit health care entity would report the net asset categories unrestricted, restricted, and net investment in capital assets.

false

All health care organizations report investments at fair value and report unrealized gains or losses on the statement of operations.

true

Assets limited as to use are assets without donor restrictions whose use is limited by parties other than donors or grantors.

Statement of revenues, expenses, and changes in net assets.

Which of the following is not a financial statement prepared by nongovernmental not-for-profit health care entities?

Deductions from gross patient revenue in arriving at net patient revenue.

Contractual adjustments that arise from differences between the gross charge for patient services and the amount paid by a third party payor are reported as:

A DRG is a case-mix classification scheme that is used to determine the payment provided to the hospital for inpatient services, regardless of how much the hospital spends to treat a patient.

Which of the following statements is true about diagnosis-related groups (DRGs)?

Exchange transactions, such as fees for services.

Which of the following is a primary source of revenue for most hospitals?

$195,000.

A hospital originally recorded all patient services it provided as a $500,000 debit to accounts receivable. Upon review the hospital determined that a contractual adjustment of $200,000 needs to be made, and estimated bad debts of $5,000 need to be recorded. In addition, at the time the receivable was recorded the hospital did not realize $100,000 should be considered charity services. Based on the information provided, what is the net amount of accounts receivable that the hospital would report on its financial statements?

Reported differently, with charity service disclosed in the notes to the financial statements and bad debts reported as a deduction from revenue.

Charity service and bad debts in a government hospital that follows business-type accounting are:

Gain on sale of equipment.

Which of the following could be included in the performance indicator measure provided by a nongovernmental not-for-profit hospital?

A contra revenue.

Contractual Adjustments is properly characterized as:

Other Revenue.

In accordance with the FASB Codification, donated medicines that normally would be purchased by a hospital should be recorded at fair value and credited to which of the following?

Investing activity applying FASB standards.

How would the cash acquisition of equipment be reported on a health care entity's statement of cash flows?

Service revenue.

Where would a capitation fee be reported on a health care entity's financial statements?

Healthcare Fair Reporting Act.

All of the following laws were instituted by Congress in part to aid in detection and punishment of fraud and illegal acts except:

Implicit price concessions for individual payors.

Which of the following reduce net patient service revenue for not-for-profit hospitals?

Capitation fees received from a health maintenance organization.

Which of the following would be considered service revenue of a health care entity?