Charities tread lightly with new statement.

A new, stricter Statement of Position, Aaccounting for Costs of Activities of Not-for-Profit Organizations and State and Local Governmental Entities That Include Fund Raising, is already arousing the ire of not-for-profit organizations. Although the SOP, issued by the American Institute of CPAs accounting standards executive committee, hasn't taken effect yet, some are offering gloomy predictions on what the statement will do to charities' financial statements. (For details, see "AcSEC Becomes Strict on Fundraising" and "New Role for NPO CPAs," jofA, May97, page 14.)

"Implementing this SOP will be like walking through a minefield," said Robert H. Frank, CPA. Frank's firm, Frank & Co., P.C., in McLean, Virginia, has a lot of NPO clients that he handles personally. He also sits on the board of directors of the D.C.-based National Federation of Nonprofits (NFN), an advocacy organization in postal, regulatory, legislative and accountability issues for its 400 members. The NFN wrote a protest letter to Securities and Exchange Commission Chairman Arthur Levitt, Jr., shortly after the statement was approved, complaining about a number of issues in the statement.

"Any affected organization will require a lot of CPA help to navigate the new standard," Frank continued. "NPOs will not need just a CPA -- they'll need one very knowledgeable in cost allocations and NPO fundraising and multipurpose costs -- a real specialist" He said that, personally, he should be thrilled with the new standard because "it will generate consulting work. But I think the new statement is inconsistent with recent accounting theory, and I don't agree with its thrust." He said under the old standard, SOP 87-2, Accounting for Joint Costs of Informational Materials and Activities of Not-for-Profit Organizations That Include a Fund-Raising Appeal, some NPOs did take liberties with its fairly loose provisions but the new standard was too restrictive.

However, shortly after the statement was approved for issuance, members of the AICPA NPO committee defended it. Kenneth Williams, the committee's past chairman, said it made the rules less vague. "It provides specific guidelines but there is still some room for judgment." He noted that representatives from regulatory and watchdog groups lobbied for more rigid standards. And the current committee chairman, Gregory B. Capin, said the new statement was much clearer than SOP 87-2 in applying the criteria of purpose, audience and content.

At Journal press time, AcSEC had not formally responded to issues raised in the letter and was not expected to do so.