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Museum colleagues:

I hope you can help me with a vexing problem related to museum bookkeeping.

We have just completed our 1st year of operation and have over 1,500
memberships to date with many more coming in. That's the good news.

We record our revenues and expenses internally with QuickBooks Pro and use
an outside accountant to monthly check our financial statements and give us
adjustments as needed. Over the last year, we included the membership fees
as revenues recorded when they were received, e.g., in September 2003 if
that was the month it was received.

Earlier this year, we began our annual audit. Our auditor just told us that,
in order to be in compliance with the Generally Accepted Accounting
Principles (GAAP), we needed to record our membership revenues in a
different way. We need to take the membership fee received, distribute it
over 12 months, and record 1/12 of the membership fee for each of those
months.

This will require extra work each month for our in-house people and, in our
opinion, overly complicates what should be a straightforward issue.
Moreover, it skews the revenues that we record. We received $95,000 in
membership revenues in 2003 but could show only $47,000 of that in the 2003
financial statements according to the auditors.

If we continue booking membership revenues in the month received and do not
do what the audit company says, then they will include a strongly written
sentence on the front page of the audit document that the contents are not
consistent with GAAP criteria. Clearly we do not want potential donors to
read that!

The auditors says we can change to a cash basis accounting or modified cash
basis accounting that would not require the 1/12 rule, but our treasurer
insists that we use a GAAP compatible system to keep potential donors happy
with how we record and report our finances.

So my question to those museum staff who know of such matters:

Do you use GAAP accounting or what other form?

How do you record your membership fees? For example, if you received $100 in
September for an annual membership, how would you record this?

Any other insights would be much appreciated! (I wish I didn't have to worry
about such stuff and could concentrate on that neat magnet and magnetite
sand recently posted! I'm a physicist by training and these financial issues
are the pits!!)

Many thanks!

Cathy


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Catherine Olmer

Executive Director, WonderLab Museum of Science, Health and Technology
Street Address:
    308 West 4th Street, Bloomington, IN 47404
Mailing Address:
    P. O. Box 996, Bloomington, IN 47402-0996
(812)337-1337, X16
(812)330-1337 fax
[log in to unmask]

Professor of Physics, Indiana University
Swain West 117, Bloomington, IN 47405
(812)855-0173
(812)855-5533 fax

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