Financial Statements and Audit Report for World Vision Canada (WVC), Year Ended Sept. 2016
Analysis of Financial Statement to Determine Conformity to FASB Guidance
The accounting and the financial reporting for the governmental and not-for-profit firms are governed by the Government Accounting Standards Board (GASB). In contrast, the accounting and financial reporting for the no-governmental and not-for-profit organizations are governed under the Financial Accounting Standards Board (FASB). The FASB guidance in statement number 117 requires that the not-for-profit organization financial statements must have a statement of their financial position, statement of activities and statement of cash flows (Becker and Terrano, 2008). The financial statements of World Vision Canada follow the FASB guidelines. An analysis of the audited financial report for the year 2016 reveals statement of financial position, statement of revenue and expenditures, statement of cash flows and the statement of net changes in revenues (Charity Intelligence, 2017).
Read also Full Disclosure in Financial Reporting Assignment
The conformity of the WVC financial statements to the FASB can also be seen in the company’s classification and its use of net assets, revenues, expenses, gains and losses. The classification in the organization financial statements was based on the existence, absence and the use of restrictions imposed by donors as outlined in the FASB provisions. The organization has three fund categories as outlined in gifts, non-sponsorship roles and child sponsorships (Charity Intelligence, 2017).
The investors are often interested in programs that not-for-profit organizations undertake to fund its activities. The organization employees have interest in the organization investment income as a way of determining the stability and ability of the organization to pay them. The government is interested in the projects that are outlined by the organization as a way of determining the allocation of grants and loans. While donors are interested in the organization activities, administration and extend of their support, as a way of determining whether to join and offer full support to the organization.
Read also Intermediate Accounting – Financial Reporting And Generally Accepted Accounting Principles
Analysis of Statement of Cash Flows of WVC
The WVC statement of cash flows extends its provisions and expands the descriptions of cash from financial activities to include donations restricted as cash, which are generally required to serve the organization long term purposes. On the other hand, the expenses that are meant for welfare and health purpose are identified in the statement of functional expenses report.
The examination of the organization statement of cash flows shows that WVC employs cash flows as direct cash flows in each of the listed operation sections (Charity Intelligence, 2017). The rationale is that the organization believes the method is reasonable and understandable for use by the not-for-profit organizations. The cash flow statement lists the cash flows in the following sections: cash flows from operating activities, cash flows from financing activities and cash flows from investing activities (p. 4).
The cash flows from operating activities include expenditures over revenues, items not involving cash and change in non-cash operating working capital (p.4). The financial activities are mainly the endowment contributions and increase in social investment note payable. The investing activities include, change in investments, proceeds of sale of capital assets, purchase of capital assets, increase/decrease in cash and short-term investments and cash and short-term investment at the beginning of the year.
The direct method used in the WVC statement of cash flows resembles the direct method used in GAAP, with the only difference arising due the way in which operating activities, financing and investing activities are defined in the WVC statement of cash flows. The differences in presentation of statement of cash flows between for-profit and not-for-profit organizations arise mainly because the not-for-profit organizations do not make profit adjustments because they do not have cost of goods sold and the net sales. Instead, operation is based on government grants and loans, donations, gifts, disposal of fixed assets, miscellaneous expenses, fundraisings and programs implemented.
Comparison of WVC Reporting of Pledges and Contributions to Reporting of Exchange Transactions
The pledges and contributions are recorded by World Vision Canada in the financial activities section of the organization statement of cash flows, while the exchange transactions are recorded on the operating activities section (Charity Intelligence, 2017). Also, the pledges and contributions form part of the revenues in the revenue and expenditure statement, while the exchange transactions form expenses in similar statement. The exchange transactions are part of the assets in the statement of financial position, while contributions and pledges form part of capital for the financing of the programs and meeting the organization expenses.
Read also Development of Generally Accepted Accounting Principles (GAAP)
The funds that are utilized by the organization are the child sponsorship, investment and implemented programs. The grants from the government and other contributions are used by the organization to fund projects and payment of miscellaneous activities that are incurred in the course of operations and program implementations. The organization investment income are employed in re-investment and in the remuneration of top executives and workers responsible for the running of the organization.
The Fiscal Condition of World Vision Canada
The determination of the fiscal condition of the organization, an assessment of fundraising analysis, program reviews, revenue analysis, and grant and contributions analysis of WVC will be done.
The financial year 2015/2016 there was a decrease in the fundraising by about $4,916,264, which represents a decrease of 8% in funding (Charity Intelligence, 2017). The results shows that the organization had a poor funding in 2016 compared to 2015.
Program Review Analysis
The company undertook varied programs as indicated from the statement of revenues and expenditures. The investment programs were undertaken in international levels, within Canada and in education and public awareness (Charity Intelligence, 2017). The costs of the programs for the fiscal year 2015/16 are as follows.
2016 ($) 2015 ($)
International programs 354,183,515 345,661,111
Canadian programs 2,150,026 2,427,738
Education and awareness 5,663,088 5,251,252
The figures shows that the costs rose in 2016 compared to the figures of 2015, which could be due to the expansion programs intended to diversify source of revenues and create a better financial position in 2016.
Grant Revenue Analysis
The grants received by the organization in 2016 reduced by $ 12,974,664, which represents a decrease of about 23% compared to the year 2015. This had a negative implication on the ability of the organization to finance its programs. The corporate gifts in kind also decreased in 2016, while the multilateral gifts increased. The net changes in gifts in kind represented an increase of about $ 1,190,686 compared to the year 2015, which stabilized the financial position of the organization.
Order Unique Answer Now