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Charitable Contributions and Debt: A Comparison of St. Jude Children's Research Hospital/ALSAC and Universal Health Services:

Requirement A, 1 to 4.

1.      What is meant by the reference in Table 5.3-1 to FAS 116 adjustments?

Basic purpose to issue the FAS 116 is to cover accounting and reporting by both for-profit and not-for-profit organizations and for contributions made and received during the financial year. When we analyze the FAS we found that FAS 116 defines the contribution in following words“Contributions are an unconditional, nonreciprocal transfer of assets between different companies or organization.”

In case donor impose any condition with contribution like condition for matching concept then we will not recognize such contribution, in second situation donor is not liable to receive anything  in exchange of contribution otherwise management will not treat his gift or contribution as contribution in the financial statement. That will be calculated as remuneration for the services rendered or to be rendered in future.According to me the reference in Table 5.3-1 to an FAS 116 adjustment means users of financial statement should be aware about the pledges made and the reason why these corrections were made.

2.      How are contributions recorded? Is there a distinction between pledges receivable and accounts receivable

This financial table is found in the information provide for this assignment (Stamp,1981, p. 21), the following entries show how contributions are recorded:

As evident from the table mentioned above that contributions are recorded in two separate lines/columns having difference between non-government and government contributions. In the bottom of table financial user can see that for pledges received there is only one found under the ALSAC column, it represents that that the hospital does not accept/recognize pledges, but only direct contributions from the donors and individuals.

The Accounts Receivable are shown in 2 columns has separate numbers for both charity organization and hospital. Both are significantly different we recognize pledge receivable if it is unconditional while account receivable have no such condition to be recognized in financial statement as it is always recorded. Pledge is promise to pay so accounting  recognize it in case it is unconditional.

3.      Are there circumstances when financial statements can quantify volunteers’ services?

When financial statement can qualify volunteers’ services, the following is stated in the given info provided for this assignment:

Unpaid volunteers have made noteworthy commitments of their opportunity, mainly in raising different sorts of fund. The estimation of these administrations is not perceived in the monetary articulations since it is not susceptible to a target estimation or valuation and in light of the fact that the exercises of these volunteers are not subject to the working supervision and control exhibit in a business/representative relationship

According to the FAS 116 “that a volunteers’ time should be recorded if the services were of a professional nature that would have otherwise must be paid if the volunteer built a physical asset” (FASB, 1993)St. Jude Children’s Research Hospital also observed that the volunteers were not employees of the hospital or subject to the requirements of that relationship.

4.      Can financial statement users of not-for-profit hospitals’ financial statements expect to be fully informed regarding affiliated parties, such as the linkages between St. Jude Children’s Research Hospital, ALSAC, and the foundation cited? Explain.

According to me the financial statement users of not-for-profit hospitals’ financial statements can expect to be informed regarding related parties. For this case study, the link between ALSAC and St. Jude is clearly visible to everyone. Time is changing and with time there are many things in the financial statement that are altered. While it is always possible that someone can alter filings, trades, or affiliations, when the information is filed correctly, viewers of the financial statements can expect that the information should be accurate in all material aspects.

If St. Jude would fail to report the linkage to the ALSAC or the foundation cited, for example the amounts presented in the financial statements would not be accurate because the amounts reflect the totals for St. Jude s whole, along with the separate amounts for the ALSAC and the foundation are different.

• Requirement B, 1 to 2.

1.      How does this revenue mix compare with the revenue blend of the not-for-profit entity, St. Jude Children’s Research Hospital (ALSAC)? Access the latest SEC filing and compare the reported revenue mix; has it changed?

The revenue mix analysis for St. Jude Children’s Research Hospital and the American Lebanese Syrian Associated Charities, Inc., based on annual report of 2008 (St. Jude.org, 2010), which was the latest financial report with all of the information (2009’s annual report is not taken for analysis as it did not contain a lot of information regarding financial amounts and contributions) and based on the Universal Health Services, Inc. 2008 report, includes the following information

2.      What does that imply as to the strategies of investor-owned hospitals in managing risk and ensuring adequate capital relative to not-for-profit entities? An opportunity exists to explore the greater social and political questions that are frequently debated about the compatibility of profit-oriented entities and quality of health care, relative to not-for-profit entities. As background, identify what the latest SEC filings report concerning charity care.

Trends revealed by the revenue mix given in the analysis show that in an investor owned hospital, management want to shift margin activities. For example if can analyze closely we will be aware by this fact that managed car was shifted away from low margin activities, for example Medicaid and Medicare reimbursable medical services. However it is very important to know that both hospitals and investor-owned hospitals have a responsibility to provide medical services to anyone at the time of need or emergency. At the same time the hospitals management has a responsibility to provide adequate return of investments to the investor as well as users of the financial statement. In short its management’s responsibility to not only provide healthcare to the needy but also protect the benefit of users and investors.

• How would your answers to Requirements A and B differ if the government owned and operated the hospital?

In case the hospital was owned and operated by government then we will not adjust the contributions and revenue. Government owned and operated entities record revenues when they can forecast a reasonable time frame in which the collection of revenues and contributions can be collected (usually within sixty days from the end of the reporting period). Other main difference found in Government entities is that they record contributions in fund accounts, which the contributions are assigned to be used for and those contributions that are doubtful in regard to collection never recorded.

In regard to the volunteers’ services, government entities can record the services in the financial statement to present true and fair view of the operation. Third main change that would occur was to use a Comprehensive Annual Financial Report instead of traditional financial statements.