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NGO-Key Features, Accounting and Compliances

♦NGO Meaning and Key Features

  1. NGO stands for “Non-Governmental Organization.” It is a term used to describe organizations that are independent of government control or influence. But in real term NFO( Not for profit Organization) is called NGO. Hence an organization which operates on non-profit and/or charitable is called NGO.
  2. Status of NGO: NGOs are typically registered as non-profit or charitable organizations. Status of NGO can be Society, Trust or Section 8 Companies.
  3. Fundraising: NGOs rely on fundraising efforts to secure financial resources for their operations. They engage in various activities to raise funds, such as soliciting donations from individuals and organizations, organizing fundraising events, applying for grants, and launching crowdfunding campaigns.
  4. Collaboration and Partnerships: NGOs often collaborate with other organizations, both within and outside their sector, to leverage resources, share expertise, and maximize their impact. Partnerships can include alliances with other NGOs, government agencies, corporate entities, academic institutions, and community-based organizations.
  5. Monitoring and Evaluation: NGOs engage in monitoring and evaluation processes to assess the effectiveness and impact of their programs. They collect data, measure outcomes, and evaluate the progress made towards achieving their goals. This information helps NGOs refine their strategies, improve their interventions, and be accountable to their stakeholders
  6. Transparency and Accountability: NGOs place a strong emphasis on transparency and accountability in their operations. They strive to maintain open communication with their stakeholders, provide regular updates on their activities and finances, and ensure that resources are utilized in a responsible and accountable manner.
  7. Community Engagement: NGOs often work closely with the communities they serve. They involve community members in decision-making processes, consult with them to identify needs and priorities, and empower them to participate in the organization’s activities. This community engagement fosters ownership, inclusivity, and sustainability in the NGO’s work.

♦Accounting of NGO:  Accounting for NGOs, depends upon its key features and accounting policy  should be designed to address the specific needs and requirements of NGOs,. Here are some key features of NGO accounting and reporting:

  1. Accounting for Grant, Donations etc.: NGOs typically receive funds from various sources as grants, donations, and government assistance. Accounting treatment is given on the basis of nature of the grant. There may be two types of grant, Donation and Assistance, revenue or capital. Where Revenue is charged directly to income and expenditure A/c where as Capital grant is credited to fund balances. Capital grant given for specific direction will be credited to that particular fund. For example if Capital grant, donation, assistance is given for construction of building then that grant will be credited to Building fund. 
  2. Variance Analysis: NGOs need to carefully track and report their fund inflows and outflows, with respect to their already allocated budget either set by the management or donor. Variance reporting enables the organization to demonstrate how funds are being allocated and used, which is crucial for maintaining trust with donors and stakeholders.
  3. Management of Grant: NGOs often rely on grants to fund their activities. Effective grant management is vital for tracking the receipt and use of grant funds, complying with donor requirements, and ensuring proper financial reporting. Accounting systems for NGOs should have features to manage the entire grant lifecycle, from application and approval to reporting and compliance.
  4. Donor Reporting: NGOs depend on the support of donors, both individuals and institutions. Donor management features in accounting systems help track and manage donor information, including contact details, donation history, preferences, and acknowledgments. This allows NGOs to maintain strong relationships with their donors and provide them with accurate financial reports.
  5. Reporting and Compliance: NGOs are often subject to specific reporting and compliance requirements, both internally and externally. Accounting systems should support the generation of financial reports tailored to meet these requirements, including statements of financial position, income statements, and cash flow statements. Compliance features may include tracking and reporting on tax-exempt status, adherence to specific accounting standards, and regulatory compliance..
  6. Budgeting and Financial Planning: NGOs need to create and manage budgets for their programs and projects. Accounting systems for NGOs should have robust budgeting and financial planning features that allow organizations to set budgets, track actual expenses against budgeted amounts, and generate reports on budget variances. This helps NGOs make informed financial decisions and ensures effective resource allocation.

 

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