Audit in Non Profit Organization

References to Handbook — Accounting Part III apply to NPOs that have adopted accounting standards for not-for-profit organizations (ASNPO).

As for some nonprofit organizations, lack of volunteers is their biggest worry. To other NPOs who are privileged enough to get volunteers to fund their operations, their problem goes a notch higher to getting commitment from their funders. This aggravates the NPOs problems of paying for their most important expenses such as human resource, infrastructure and utility bills. As a result, this makes it difficult for them to meet the societal expectations leading to suspicion of poor management or worse still embezzlement of funds in the name of alienating poverty. Some NPOs spend the little finances they have in applying for funds. Others spend money trying to attain the thresholds set by the promising funders. This is the general scenario in voluntary organizations but the small organizations are affected the most by financial problems.

According to our text, “Not-for-profit organizations lack a residual ownership claim and the organization’s purpose is something other than to provide goods and services at a profit.” “Because significant resources are provided to governments and not-for-profit organizations, financial reporting by these organizations is important.” (Page 2).

In contrast to corporations serving stakeholders and customers; nonprofits are ultimately directed to serving the public or specific groups and audiences. Unlike corporations who distribute a product, nonprofits services are delivered in the form of intangible or tangible products. Boards of these organizations are not structured in the same preciseness as those of major corporations. Companies with large resources have the

It is the utmost concern of the leadership in the nonprofit to guide the organization through financial control. Through the guidance of the board of directors and officers, the organization aims to achieve its mission and vision. This accomplishment cannot be done without the strategic plan of financial control put into place by the leadership. It is important to set up internal controls and according to the Council of Nonprofits, financial management practices that are systematically used to prevent misuse and misappropriation of assets, such as occur through theft or embezzlement" (Council of Nonprofits, 2016). Leaders in the nonprofit world would do well to ensure they are following all the standards of best business practices and remaining accountable to the board, state, and

Nonprofit organizations have similar financial transactions and needs as for-profit businesses (Viader, & Espina, 2014). Their financial statements describe and summarize operating activities, obligations, and economic resources for a given period, usually one year (Viader, & Espina, 2014). A nonprofit is defined as a legal entity that does not conduct substantial commercial activity or earn a profit as its primary purpose (Viader, & Espina, 2014). The goal of the nonprofit is typically to provide services (Epstein, & McFarlan, 2011). In nonprofit organizations, management decisions are intended to result in furnishing the best possible service given resource constraints (DioGuardi, 2014). Basically, the success of a nonprofit entity is measured

All nonprofit organizations (NPO) are required, by law, to have a board of directors who act as the governing body of the nonprofit. Board governance is the overall responsibility for the performance of the organization. Boards exist to ensure that a NPO runs properly, has integrity, protects its stakeholders, and assures competent management with evaluations that provide accountability for their actions and performance. The basic structure of a nonprofit is divided into governance and administration. A nonprofit board chair serves as the executive leader of the organization’s board, while the Chief Executive Officer (CEO) is the top staff administrator

The journey toward updating nonprofit financial reporting began in 2011 when the accounting board met to analyze ways to implement reforms that would make the function of accounting in nonprofit organizations more transparent. The Financial Accounting Standards Board (FASB) hoped to cover many areas concerning access to funds by nonprofit organizations in order to give insight to the actual funds groups have at their disposal at any time. Public accountability and transparency dictates that the access to funds is a very major aspect of financial reporting for institutions. For instance, a group of university alumni may decide to donate funds for scholarships, whereas others could give money for the construction of a facility

A nonprofit organization (NPO), can be self-sustaining by adhering to some very simple rules. A nonprofit is described as an organization that “Operates for the common good and not for generating individual wealth: does not distribute its profits to individuals who control the organization such as its members, officers, directors, or trustees. While a non-profit organization can make a profit, the profit it earns must be used toward the core missions of the organization and not towards any personal benefits” (Bennett, 2013). One of the enormous challenges that a

NPOs are entities almost the same as for-profit organizations save for two distinct features of NPOs (Nolan, 2013). First, it is prohibited to distribute its profits to the public. The second one is that NPOs do not have shareholders; therefore, no one owns the entity. What it includes are the trustees who merely administer the organization and oversee its operations.

Stakeholders play a critical role in the management and decision-making process of an organization. An example of a stakeholder includes employees, managers, patients, vendors, suppliers, the community, creditors, customers and the government (Daft, 2013). Also, Daft (2013) says, “Stakeholders are groups “within or outside of the organization that has a stake in the organization’s performance” (p. 23). There are a few differences surrounding stakeholder expectations between non-profit and for-profit organizations. The differences in nonprofit organizations and for-profit business organizations are the direction of activities for the end goal (Daft, 2013). Although it is very difficult to measure the impact that a nonprofit has on society, community, or a particular group as opposed to evaluating an income statement from a for-pro-profit organization. The same level of attention should be paid to stakeholder for nonprofit organizations as stakeholders of for-profit organizations.

A non-profit organization cannot be effectively managed if it is not effectively planned. One of the challenges facing non-profit organizations has been long range, strategic planning. Long range, strategic planning in the non-profit sector is essential to the success of an organization. Long range, strategic planning encompasses broad policy and direction setting, internal and external assessments, attention to key stakeholders, the identification of key issues, development of strategies to deal with each issue, decision making, action and the continuous monitoring of results. (Herman, The Jossey-Bass Handbook of Nonprofit Leadership and Management, 154) While it is important to deal with the short term planning and activities of non-profits, managers or directors must consider the future of their organizations. Successful planning should be comprehensive, integrating all areas of responsibility of an organization.

In today’s world there are hundreds of thousands of non-profit organizations (NPOs) established at the local, regional, national and international level, and their influence is increasing. Non-profit organizations even considered the third sector of the economy (the first two is the public and private, or commercial). It is believed that they have a special role in development of civil society. In those countries, which have largely shaped the system of legislative regulation of the sector (USA, UK, Australia, etc); the state spends huge sums on research programs in the field of standardization of the NPO.

A nonprofit organization is an organization that does not distribute its surplus funds to owners or shareholders, but instead uses them to help pursue its goals. Therefore, people involved with NPO's do not make money for themselves. Any money made by an NPO in the U.S. can be viewed on the organization's 990 forms, which are required to be made available to public.

A not for profit organization is a corporation or an association that conducts business for the benefit of the general public without shareholders and without a profit motive (Legal, 2013).” There are immense community benefits as a not-for-profit generally accepts everyone regardless of ability to pay. Nonprofit organizations are granted tax-exempt status which helps them to provide services to the public and are expected to be effective managers of their finances as well as being efficient (Financial Management, 2010). In doing so, they can gain exemptions from federal and state incomes taxes and have the ability to solicit tax-deductible contributions (Financial Management, 2010). Organization must follow legal financial