Accounting for Not-for-

profit Organizations (NPOS)

BY: ANGELITA B. BARCELONA, CPA, MPA,

MBA

RM 307 JUNE 19, 2017

Presentation Outline

Definition of NPO
The role of NPOs in Society
NPO Governance and
Accountability
What is a Non-Government
Organization?
Financial Reports for NPOs
Purpose of Financial Statements
Statement of Financial Position
Statement of Activities
 WHAT IS A NOT-FOR-PROFIT
ORGANIZATION (NPO)?
an entity that isoperated for the benefit
of society asa whole rather than for the
benefit of an individual proprietor or
agroup of partners or shareholders.

A not-for-profit organizationstrives only

to obtain revenue sufficient to cover its
expenses.
WHAT IS A NOT-FOR-PROFIT
ORGANIZATION (NPO)?
alsoreferred to as civil
society, third sector,
NGO sector, social
economy, voluntary
sector, and social
sector,
 sources of economic support

organization whose primary source of

revenue is made up of contributions
from the private sector
legal status

organizations that are exempt

from some, if not all, of a
countrys taxes.
purposes

organizations that are exempt from

some, if not all, of a countrys taxes.
five structural-operational features
1. Organized
have some structure and regularity
to their operations
2. Private
not part of the apparatus of the state
3. Not profit-distributing
they are not primarily commercial in
purpose and do not distribute profits to a
set of directors, stockholders, or
managers.
five structural-operational features
4. Self-governing
they have their own mechanisms for
internal governance

5. Voluntary
membership or participation in them is
not legally required or otherwise
compulsory
 EXAMPLES

1. Voluntary health and welfare

organizations
2. Schools, colleges and universities
3. Hospitals
4. Cooperatives
5. Labor unions
 EXAMPLES

6. Performing arts organizations

7. Foundations
8. Religious organizations
9. Country clubs
10. Professional associations
The Role of the NPOs in Society

include many groups and

institutions that are entirely or
largely independent of
government and that have
primarily humanitarian or
cooperative rather than
commercial objectives.
NPO Stakeholders

STAKEHOLDERS EXPECTATIONS(Social and Economic)

1. Members/Beneficiaries 1. Services, ROI, Social

Justice

2. Governing Board 2. Prestige, Self-reliance

3. Management/Staff 3. Better career

NPO Stakeholders

STAKEHOLDERS EXPECTATIONS(Social and Economic)

4. Donors 4. Attainment of the purpose/s of funds

Compliance with agreements

5. Government 5. Regulation; Partnership in Development

6. Volunteers 6. Contribution to the development of

specific concerns

7. General Public 7. Contribution to the development of

society, in general
NPO Governance and Accountability

Fairness - rights of stakeholders should be

observed and respected;
Accountability - Board and management should
be answerable on their performance to
stakeholders;
Transparency - timely, accurate and sufficient
information must be disclosed.
Differences of NPOs from Commercial Organizations

Fairness - rights of stakeholders should be

observed and respected;
Accountability - Board and management should
be answerable on their performance to
stakeholders;
Transparency - timely, accurate and sufficient
information must be disclosed.
Differences of NPOs from Commercial Organizations

1) NPOs do not operate primarily for profit but

for specific needs of a community, group,
organization or its membership.

2) Most of NPOs revenues come from funds

contributed, donated, granted or given as other
forms of support. Revenues from income
generating activities, if any, are eventually
plowed back to program operations.

Differences of NPOs from Commercial Organizations

3) NPOs have the responsibility to account for

these funds designated for a specific purpose
for a specified period of time. The nature of
the revenues received requires ensuring that
separate types of funds are properly tracked
and reported.
What is a Non Government Organization (NGO)?

Non Government Organization (NGO) as defined

in Section 34(H) 2(c) of the Tax Code of 1997,
means a nonprofit domestic corporation which

Is organized and operated exclusively for

scientific, research, educational, character
building and youth and sports development,
health, social welfare, cultural or charitable
purposes, or a combination thereof, no part of
the net income of which inures to the benefit
of any private individual;
What is a Non Government Organization (NGO)?

The level of administrative expenses of which

shall, on annual basis, not to exceed thirty per
cent (30%) of the total expenses for the taxable
year;
The assets of which in the event of dissolution,
would be distributed to another accredited
NGO organized for similar purpose/s, or would
be distributed by a competent court of justice
to another accredited NGO to be used in such
manner as in the judgment of said court shall
best accomplish the general purpose for which