Financial Accountability and Disclosure in the Public Sector

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).

Fraud is a problem that nonprofits must be prepared to prevent within their financial departments. Embezzlements and financial statement fraud can destroy the financial health of a nonprofit organization and undermine the organization’s mission. Skimming is particularly difficult to identify because the money is often taken off incoming funds before the donations are ever annotated or accounted for (Zack & De Armond, 2015). However, these financial woes can be easily avoided. Nonprofit Quarterly identifies the issue of financial fraud as a “people problem” (Zack et al, 2015). Financial departments within corporations are required to follow strict laws and regulations that are not required to be followed by nonprofit organizations. The Sarbanes-Oxley

In the health care environment financial practices and ethical care finance is very important to produce successfully organizations. In the health care industry and in any business ethical and financial practices are adopted to increase the organization value and consumer confident as well as protected the services or products provide by the organization and maintain the organizations brand name. In the health care industry no patient will want to attend a hospital in which the dead rate is above 50 percentages annually, it will

Research shows that mandating SOX requirements for non-profit organizations will reduce fraud and increase corporate governance. One of the goals of the SOX act was to create transparency. Many nonprofit organizations have adopted one or more provision from the SOX act (Nezhina & Brudney, 2012). Analysis shows that nonprofit organizations reap the following benefits when they adopt provisions related to SOX:

This paper was originally written for Financial Management for Nonprofits 380, taught by Professor Zelhart.

Guidance for financial statements for nonprofit organizations is provided by FASB Statement of Financial Accounting Standard 117 (FASB117). The goal of FASB117 was to “enhance the relevance, understandability, and comparability of financial statements” and “requires that those financial statements provide certain basic information that focuses on the entity as a whole and meets the common needs of external users of those statements” (FASB, 1993). FASB117 is considered important because it mandates functional reporting of expenses by nonprofit organizations. FASB117 requires a nonprofit organization to prepare 3 financial statements: a Statement of Financial Position, a Statements of Activities, and a Statement of Cash Flows. In the Statement of Financial Position, the nonprofit must categorize net assets as unrestricted, temporarily restricted

Copley, P. (2015) Essentials of accounting for governmental and not-for-profit organizations (12th Ed) New York, NY: McGraw-Hill Education

In addition to the significant financial challenges in obtaining funding and securing capital, the reputational risk is much greater for nonprofits than for-profit businesses (Jackson, 2008). He suggests that cases of fraud or misuse of funding can be especially damaging for nonprofits. Because nonprofit organizations are formed to provide a service to the community and are reliant upon outside donors to serve their mission, they must take certain precautions to safeguard their assets and maintain their relationships with the community. The purpose of this paper is to evaluate the financial health of The Assistance League of Bend.

1. The traditional business model of accounting is inadequate for governments and not-for-profit organizations primarily because businesses differ from governments and not-for-profit organizations in that

Prior to 2002, financial statement reporting for publically traded companies within the United States was overseen with far less oversight in comparison to current reporting standards and procedures. Appropriate financial reporting is merely one element that was not occurring prior to 2002. An element of corporate dishonesty and deception existed within some the largest publically traded companies and this idea of deceitfulness was perpetuated by the executive staff of the businesses. Enron’s financial disintegration became the facilitator for the need of more rigid financial oversight, but they were not the only company that added to the idea of corporate fraud.

When considering a budget, it is said that the value of money must play a significant role in this dialog. As money of one sum today will rise to a greater value tomorrow. Even if the nonprofit organization does not look at things from a stand point of inflation which is always in effect. Money is a tool that if we use it and the sooner we do in a productive way. The nonprofits money will produce value in the future. It is not by coincidence that the most successful nonprofit watches their finances very carefully. And often look at the progress of their financial goals (McLaughlin, T.A. 2002).

The most frequent causes of litigation against non-profits and their directors and officers are cases concerning employment, such as discrimination, wrongful termination, and other civil rights. This has been true in the past, and continues to be true even as the business world changes. In fact, it is this changing environment

Trust from the public can be generated through properly understood policies of enforcement and standardization. Instances where applicable laws and government regulation on non-profit organizations occur will usually stem from the violation of ethical conduct especially in the management of non-profit and public monies’ handling. Getting qualified individuals to serve within this committee can be difficult, but it serves as a great step in ensuring that any fundraising activity or fund allocations are carried out.

This paper will examine budgeting procedures for profit and non-profit businesses and compare similarities, and if they exist, differences in accounting practices. This paper will also attempt to review what is Generally Accepted Accounting Procedures (GAAP) for budgeting for any organization to be successful.

Financially healthy nonprofits use income-based, rather than budget-based spending which allows them to have income projections that are realistic and helps to determine realistic costs (Zietlow, Seidner, 2014). The most successful nonprofit should have an operating reserve to finance shortfalls and hopefully allows them to have a positive cash flow at the end of the year (Zietlow, Seidner, 2014). However, most nonprofit organizations fight to manage cash flow due to how income and the expenses often may occur at different times, so that there may not be enough cash to pay for the expenses as they become due and payable (Zietlow, Seidner, 2014).