Technological Institute of the Philippine

363 P. Casal St., Quiapo, Manila

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ACCTG 533

WRITTEN REPORT

Voluntary Health and Welfare

Organization

Agda, Kat
Alfonso, Jomari C.
Alvarez, Dharlon James
Dela Torre, Mary Anne B.
Enriquez, Kenneth O.
Francisco, Sean Ace M.
Mastura, Mcoy Y.
Penoliar, Hazel E.
Sagdullas, Jodie M.

Technological Institute of the Philippine

363 P. Casal St., Quiapo, Manila

AC51FB1

ACCTG 533

What is a voluntary health and welfare organization?

Voluntary health and welfare organizations (VHWOs) are those not-forprofit organizations that derive their revenue primarily from voluntary
contributions from the general public to be used for general or specific
purposes connected with health, welfare, or community services. There are
two separate parts to this definition:
1. the organization must derive its revenue from voluntary
contributions from the general public (which does not include
governmental entities), and
2. the organization must be involved with health, welfare, or
community services.
Many organizations fit the second part of this definition, but receive a substantial
portion of their revenues from sources other than public contributions. For example,
an opera company would not be a VHWO even though it exists for the common
good, since its primary source of income would be box office receipts. Likewise, a
community organization like the YMCA would be excluded because it normally
receives most of its revenues from dues and program fees. On the other hand, a
museum would be excluded even if most of its revenue came from contributions,
since its activities are essentially educational and not focused on the areas of health
and welfare.

Some additional examples of VHWOs are the following:

a.
b.
c.
d.
e.
f.

Salvation Army;
Red Cross;
Goodwill (local chapters);
United Way, Boy Scouts;
Girl Scouts, Boys & Girls Clubs;
nonprofit organizations whose purpose is to find cures for diseases
or to assist people diagnosed with diseases such as cancer,
diabetes, heart disease or muscular dystrophy

FASB ASC 958 differentiates between voluntary health and welfare entities and
other nonprofit entities. For example, only VHWOs are required to present a
statement of functional expenses as a basic financial statement. Therefore, it is
important to how your organization should be defined to know if this requirement
applies to your financial statements. But, as noted above, sometimes the
distinction can be difficult to make. If you are unsure, it is recommended to include
a statement of functional expense as a basic financial statement.
There is additional guidance available in a book titled Standards of Accounting and
Financial Reporting for Voluntary Health and Welfare Organizations, Fourth Edition,
1998 (also known as the Black Book). The Black Books objective is to attain

Technological Institute of the Philippine

363 P. Casal St., Quiapo, Manila

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ACCTG 533

uniform accounting and external financial reporting in compliance with GAAP by all
voluntary health and welfare organizations. The Black Book does not establish
GAAP but rather explains existing authoritative literature and gives illustrations
relevant to VHWOs.

Technological Institute of the Philippine

363 P. Casal St., Quiapo, Manila

AC51FB1

ACCTG 533

The Black Book expands on the definition and notes that voluntary contributions
from the general public may include the following:
- Direct gifts from board members
- Private foundations
- Corporations
- Allocations of contributions that federated fund-raising organizations or
affiliated organizations receive from the general public
Finally, the Black Book states that an organizations membership in, or affiliation
with, the National Health Council, Inc., the National Human Services Assembly, or
the United Way of America is usually an indicator that the organization should be
identified as a VHWO.

Accounting for a VHWO

-

Similar to other not-for-profit organizations except for special

financial statements that report on the important aspects of VHWOs

The accrual basis of accounting is required

VHWOs have been free to use fund accounting in their accounting

and reporting processes

Financial statements for a VHWO:

Statement of financial position
Statement of activities
Statement of cash flows
Statement of functional expenses
The statements are designed primarily for those who are interested in the
organization as outsiders
Statement of financial position for a VHWO
Major balance sheet accounts are as follows:
i. Pledges from donors
ii. Investments
iii. Land, buildings, and equipment
iv. Liabilities
v. Net assets

Technological Institute of the Philippine

363 P. Casal St., Quiapo, Manila

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ACCTG 533

Statement of activities
The overall structure of the statement of activities for voluntary health and
welfare organizations and other not-for-profit entities should be very similar
as a result of FASB 117
Public support
i. The primary source of funds is likely to be contributions
from individuals or organizations that do not derive any
direct benefit from the VHWO for their gifts
Revenues
i. Funds received in exchange for services provided or
other activities
Gains
i. Gain or loss on sale of investments and other assets
Donated materials and services
i. Should be recorded at fair value when received
Expenses
i. Information about the major costs of providing services
to the public, fund-raising, and general and
administrative costs
Costs of informational materials that include a fund-raising
appeal
i. Many VHWOs prefer to classify such costs as program
rather than fund-raising
Statement of cash flows
The format of this statement is similar to that for hospitals
Statement of functional expenses
Details the items reported in the expenses section of the
statement of activities
Summary of Accounting and Financial Reporting for VHWOs
Reporting requirements are specified in FASB 116, FASB 117,
and the AICPA Audit and Accounting Guide for Not-for-Profit
Organizations
The accrual basis of accounting is used
Primary activities are reported in the unrestricted asset class

Technological Institute of the Philippine

363 P. Casal St., Quiapo, Manila

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ACCTG 533

Resources restricted by the donor for specific operating

purposes or future periods are reported as temporarily
restricted assets
Assets contributed by the donor with permanent restrictions
are reported as permanently restricted assets