The FBook

Financial Practice Standardization for nonprofits?

In Discussables, News on September 25, 2009 at 7:50 am

Recently, UConn University came under criticism for their financial practices with the UConn Foundation. Unfortunately, this isnt the first time nonprofit organizations have been questioned or targeted for scrutiny of their financial accounting and use of donor funds. Mostly it appears to come from a lack of standard reporting and accounting practices across the industry.  Many groups have long been trying to “‘follow the money”.

In many cases it is merely a practice of unclear or complicated accounting and reporting practices. Groups such as Guidestar.org and the IRS, whose quest has recently brought about a reframing of the 990 form for all nonprofit organizations, have devoted countless hours and resources to this complicated matter.

Most recently, hospitals have been under attack, concerns arising around their use of funds in charity care and other program needs.  Many critics, such as the Washington Post,  claim the IRS rule implementing the law is “so vague that nonprofit hospitals have been able to exploit it by offering some free services but often little aid to the poorest people in their communities.”

In the search for transparency, some universal laws should be considered:

1. Not all charities are alike

2. Nonprofits are predominately run by the very community which supports them financially.

3. Too often the ones raising the funds and the ones spending the funds have competing goals

So a short poll:

Given the recent dramatic increase in new not for profits organizations, the continued increase in philanthropic revenue overall and the increased call for transparency, has the time come for a set of uniform financial accounting and reporting standards to be followed?

1.Yes, it will allow for donors to understand across the board how the money is being received and spent.

2. No, each charity is unique and should account and report specific to its own needs

3. Possibly, but more study is needed.

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