Not-For-Profit Accounting

¶ … Gross, McCarthy and Shelmon's text, Financial and Accounting Guide for Not-for-Profit Organizations (8th ed.) (2008). All of the following summarized information refers to this specific chapter. Not-for-profit organizations range in size and scope but they are all defined by their mission and the board of directors and executive management are responsible for executing the mission.

Although the laws that govern the manner in which non-profit organizations oversee their fiduciary responsibilities vary from jurisdiction to jurisdiction, they all share the same types of oversight needs, including the need for a chief fiscal officer, treasurer or a director of accounting; some organizations also use a comptroller, business manager or accounting manager to serve as the chief fiscal office or treasurer.

Irrespective of the title that is assigned, the individual serving as treasurer may be a paid employee or a volunteer and is responsible for properly maintaining the financial records of the organization. In smaller organizations, the treasurer may supervise a part-time bookkeeper while in larger organizations there may be a large accounting staff involved (Gross et al., 2008).

Besides being accountable for the proper maintenance of the organization's financial records, one of the other main responsibilities of the treasurer is to prepare timely and accurate budgets and financial reports for management as well as regulatory authorities and donors. This is an important responsibility because donors want and need to know how their money is being spent by the non-profit organization. The treasurer is also responsible for explaining any variances against the budget during the period it covers (Gross et al., 2008).

In addition, the treasurer is ultimately responsible for providing physical safeguards for the organization's resources, ensuring that insurance coverage is adequate to its needs, that a system of internal controls is in place to prevent unauthorized use of organizational resources and ensuring that the special requirements for accounting for endowment fund assets are satisfied. In larger organizations, the treasurer also typically prepares periodic (monthly or quarterly) fiscal reports for review by the audit committee.

In sum, not-for-profit organizational treasurers are responsible for maintaining financial records, preparing accurate and meaningful financial statements, implementing the organization's budget and foreseeing financial problems before they occur, safeguarding the organization's financial assets and implementing effective internal controls, ensuring compliance with relevant state and federal laws, and communicating with the executive management and board of directors (Gross et al., 2008). Accounting for non-profit organizations is much the same as for their for-profit counterparts with the exception of unique accounting requirements for contributions, including pledges, restricted gifts, split-interest agreements and non-cash gifts.

Other key points made in this chapter include the requirement for non-profit organizations to report their fundraising expenses which are closely scrutinized by stakeholders to ensure the organizations is a good steward of scarce resources (Gross et al., 2008). There are also three categories of endowment funds that must be managed: true or permanent endowments (these cannot be spent in perpetuity), term or temporarily restricted endowments (these can.