Governmental and not-for-

profit organizations
ECSU 2021

1 yabib F. 2013
 Chapter-one
2

Financial Reporting Governmental and NFP

Entities
1.1: Types of Gov’t &NFP:
1. general purpose governments:
• General gov’t provides many categories of services to their residents
like
 States, counties, municipalities, village, and townships
 police and fire protection;
 sanitation;
 construction and maintenance of streets, roads, and bridges; and
 health and welfare).

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2. special purpose governments:

Gov’t provides limited types or number of functions
such as:
education,
drainage and flood control,
irrigation, soil and water conservation,
fire protection, and water supply).
They have the power to levy and collect taxes and to
raise revenues from other sources as provided by
state laws to finance the services they provide.
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What are not-for-profit organizations?

 NFP organizations are identified because of the following
reasons;
 Usually exempted from federal, state and/or local Gov’t taxes:
These includes:
 Governmental units (state & local)
 Colleges and Universities
 Hospitals
 Voluntary Health and Welfare Organizations
 Others
Trade & Professional associations
Performing arts associations
Religious organizations
Museums and art districts yabib F. 2011

Research & Scientific organizations

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How differentiate Governmental entities from NFP

Entities?
 Power ultimately rests on the hands of the people
 People delegate power to the public officials through the
election process
 Empowered by and accountable to the higher level of
government
 Taxation powers.

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Cont…
1.2: Distinguish characteristics Gov’t &NFP Entities from
Business Entities
(According to FASB)
• Resource providers do not expect to receive proportional
benefit.
• Lack of profit motives
• Absence of defined ownership interests that can be sold,
transferred, or redeemed, or that convey entitlement to a
share of a residual distribution of resources in the event of
liquidation of the organization
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1.3: Sources for Financial reporting Standards

Financial Accounting
Foundation

Financial Accounting Standards Governmental Accounting

Board (FASB) Standards Board (GASB)

Business (for-profit) Nongovernmental not- State and local Governmental not-

organizations for-profit organizations governmental for-profit
organizations organizations
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1. FASB: it is the standard stated for

 Business organizations like: trades, services and
manufacturing business types
 Non governmental not for profit organizations: charity
organizations, the red cross, volunteer organizations,
religious organizations, international AID providers, and
the like

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2. GASB:
• it set standards for State and local government
organization: zonal, woredas and Kebeles
financial reports.
• Governmental not for profit organizations:
municipal office, gov’t schools, gov’t hospitals,
high-ways, etc
3. FASAB:
• setting standards for
• Federal government and its agencies, and
• departments like; police, defense force, health,
educational offices, revenue and customs
authority, and many others. yabib F. 2011
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Gov’t financial reporting must differ from

business financial reporting
 Differentfinancial report users with different deeds
 Gov’t financial report focuses on stewardship and
accountability for how public resources are raised
and used to provide services.

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1.4: objectives of financial reporting/state and

local gov’t/
 Gov’t financial reports are primarily used to:
 To compare the actual resource utilization with the planned
budget
 Assess financial condition and result of operation
 Assist in determining complains with finance relate laws,
rules, regulations and manuals
 Assist in evaluation of efficiency and effectiveness

 Accountability: accountability rise from citizens the

‘right to know’ it imposes a duty on public officials to be
accountable to citizens for raising public money and how
they spent it
 It is also the foundation of gov’t officials reportsyabib F. 2011
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Objectives of financial reporting/federal gov’t/

Federal gov’t reporting should assist in
evaluating:
• Budget integrity
• Operation performance
• Stewardship
• Adequacy of system and control

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Objectives of financial reporting/NFP

organizations/
 Thistype of report should provide information
includes
 Making resources allocation decision
 Assessing services and ability to provide services
 Assessing management stewardship and performance
 Assessing economic resources, obligation, net resources
and change in them

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