Non-profit making organizations

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Federal jurisdictions have authorized and approved artificial legal organizations to exist within the borders of the federal state. The artificial institutions have one unique form of legal organization that is registered not to make a profit, but rather to investigate ways to enhance the social security of people in that federal jurisdiction. The company that fits the term is referred to as a not-for-profit organization.

These entities file financial statements in the same way as any other artificial legal body does. The key distinction is that profit-making organizations compile income returns, while non-profit organizations prepare a declaration of surplus or expense statistics. Additionally, profit-making entities prepare the statement of financial position which is a similar item to not-for-profit organizations as for the case of my organization of choice which is World Health Organization.


The sources of revenue for the institution is through donations and all other well-wishers contributions. The funds are categorized into different categories that are always required to be disclosed and reported in the financial statements as a prerequisite to bidding to the government’s policies and guidelines (Drucker 89). In World Health Organization, the firm discloses three type of funds where it goes further breaking it down to other classes within the funds. The following are the funds that have been disclosed and reported in their financial statements:

General funds

Funds received for the day to day operations in the organization. The funds are only used to ensure that the regular budgets are met, and also the developed programs are also appropriately serviced. The fund is not holistically categorized to regular budgets but also divided into Voluntary funds (Drucker 91). Voluntary funds were making the following headline.

Voluntary Funds

One of the sources of funds that World Health organization receives comes from institutions and individuals who barely have the jurisdiction of supporting the organization. The contributors do it from their willingness and the like. Voluntary funds have always been coming from volunteers who do it out of corporate social responsibility and the like. The voluntary fund has been categorized Voluntary core contributions funds, Voluntary specialized funds, Stop TB fund, etc

Member states funds

The second funds received by the institution is member states funds. The funds come from the states who are the supporters of the organization. The member states funds are consolidated to perform different duties, and as indicated on the financial statements, the organization receives; common fund, Enterprise fund and special purpose funds in this category.

Fiduciary Funds

Another type of fund the organization receives revolves around the agency assets which are termed as fiduciary funds. The funds are received to control assets that cannot be in use in favor of the government.

Potential area of interest to stakeholders

The use of revenue, Voluntary donors, and contributors, this is one of the groups who fund the organizations in its day to day operations and also the long-term goals of the organization. They quickly check whether the monies they contributed went to the correct area they were funding. Voluntary donors and contributors will always check whether the purpose of the funds was accomplished. They will mainly countercheck specific projects if they are running and if running in the right direction.

The surplus or excess of expenses over revenue, the federal government is another stakeholder. The government was having no interest in taxing the non-profit-making organization; they will emphasize to countercheck whether the revenue and expenses met are solely on the reasons of uplifting the living standards of people or not (Drucker 91). If not, the government may rule them out of the category and ask them to pay taxes.

GAAP Perspective

In not-for-profit making organizations, the Organizations use the cash basis of recognizing revenue and expenses not using the matching concept. That means revenue received this year may end up being utilized for years to come. Unlike GAAP supported financial statements, this institution uses the basis of surplus and excess expenses over revenue while the others use the basis of profit or loss.

The financial health of the Organization

The financial statement analysis in 2013 and 2014 compares to 13.5% in 11.9% of the surplus revenue of expenses. As profitability organizations consider increasing this profitability status, WHO is continuously trying to reduce the percentage as it is not legal to have a surplus, in fact, it is supposed to be nil if possible.

The ratios above show that the revenue generated for both years is enough to sustain the projects they have underway. The condition of financial statements is okay for operating, but when it is considered by how the donations, contributions and other sources of funds are used, the organization should try to have a nil amount as the balance after expenditure.

Current ratio, the organization in question do not follow the principle of breaking down the statement of financial position. Like that of the profit-making organization thus it is hard to tell exactly what the current ratio is, but then they proceed and give a review on the growth of cash overtime which shows that the organization has increasingly had a positive change in the element.

Though the organization does not seem to have a strong basis of reporting cash and cash equivalents as part of the statement of financial position, they also report the breakdown of the cash flow performance they have had so far. World Health organization shows how every penny they receive from the donors and contributor is used.

Works Cited

Dougherty, D. C. Strategic organization planning: Downsizing for survival. Quorum Books, 1989.

Drucker, Peter. Managing the Non-Profit Organization. Taylor and Francis, 2012.

November 09, 2022

Government Economics

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