Nonprofits were coined in the USA, b/c as the government expanded and they began raising
property taxes in the 1870’s, the government would tax exempt these foundations that worked for
the good of society.
Nonprofits proliferated substationally in the 30’s and provided a lot of the
Financial Management is comprised of highly technical subfields, including accounting, auditing,
purchasing, budgeting, cash management, and risk management.
It ensures that funds are well
spent in the amounts and accounts budgeted, accounts for transactions, invest cash, purchase
goods and services, manage inventories, borrow monies for short-term financing and long-term
capitol projects, and manage risks to persons and properties by means of safety management
and insurance coverage.
In large organizations the CEO (Chief Executive Officer) rely on specialists, but in small local
governments and nonprofits: the finance director is the one responsible.
After the fiscal year begins, the budget is executed: purchasing, cash management, debt
management, risk management take place.
After the fiscal year ends an independent Certified Public Accountant conducts an audit of
Both local governments and nonprofits perform all the financial management functions, but to
different degrees and in different ways.
Differences Btw Governments and Nonprofit Financial Systems:
they are subject to different accounting standards and use different metrics to measure
govern financial systems are usually more professional b/c:
state laws regulate the financial management practices of local governments, i.e.
investment instruments, conditions under which they can debit, accounting and
balancing practices, and governments are required to do an annual post audit
thru a independent CPA (Certified Public Accountant). Nonprofits are not subject
to statewide regulations.
City and county managers r more professional b/c they have more education and
Local government officials belong to statewide professional associations that
provide training, technical assistance, and peer support.
No such affiliations are
available for nonprofit managers.
Nonprofits r not offered the range of technical services or assistance
3) The accounting practices of both governments and nonprofits are regulated by
national accounting standards., but those standards do differ.
these standards are set by the Financial Accounting Standards Board
For government these standards are set by The Government
Standards Board (GASB). A fundamental difference between the
two, can be
seen in the differences of standards in “fund accounting”.
GASB requires that the government accounting system by organized around the