A Primer on the Accounting and Reporting Requirements for Not-for-Profit Organizations

Abstract

Over the past 20 years, not-for-profit organizations (NPOs) in the United States and across the globe have become increasingly entrenched in the market economy. NPOs conduct business, employ individuals, and compete in the global marketplace. The federal government, institutions of higher education, and health care organizations are three primary examples of NPOs. Each has much in common with business entities. However, the differences between them have profound implications for financial reporting. This is primarily because they are all required to follow complex accounting and reporting requirements that fall under the jurisdictions of various governing bodies. First, this article explores the establishment of an NPO, discusses the generally accepted accounting principles (GAAP) followed in preparing financial statements, and summarizes the differences between the not-for-profit and for-profit environments. Second, this article explores the accounting and reporting requirements of the federal government, colleges and universities, and health care organizations.