Nonprofits: How to report collaborative activities
By Lauren Kreutzinger, manager, VonLehman CPA & Advisory Firm
A collaborative arrangement may be the simplest relationship between nonprofits for accounting purposes. These are typically contractual agreements in which two or more organizations are active participants in a joint activity.
One example would be a private school that’s jointly operated by two religious organizations. Another would be a nonprofit that provides free clothing and operates a shop at the local homeless shelter.
It is important to note that the financial reporting rules in these arrangements depend on the type of collaborative relationship entered into by the parties.
Reporting costs and revenues
In any collaborative arrangement, the nonprofit considered the “principal” for the arrangement should report costs incurred and revenues generated from transactions with third parties on a gross basis in their statement of activities.