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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