Accounting Principles and Reporting Practices for Certain Nonprofit Organizations

Date of Submission


Document Type


Degree Name

Master of Science in Accounting




Michael Rolleri


Nonprofit organizations--Accounting

Call No. at the Univ. of New Haven Library

AS 36 .N29 Acc. 1987 no. 3


Since investors and creditors have a direct interest in the economic success or failure of profit business, the primary focus for the development and standardization of accounting principles has been the profit sector of the U. S. economy. Nongovernmental nonbusiness accounting has been relatively unaddressed, since the resource providers (donors, contributors, etc.,) are generally not looking for a profit and many times do not benefit from the services provided.

Besides the differences in resource providers' motivations and the absence of a bottom line orientation, nonprofit organizations also have to struggle to exhibit their worth to potential supporters through products or services that are not purchased by the recipients and which are delivered by personnel, who volunteer or donate their time and effort. Therefore valuation of the cost of doing business and market valuation of the product are difficult to determine.

As the U.S. economy.progressed through one of its worst inflationary times (1970s-1980s) and several governmental nonbusiness entities (New York City, being the most infamous) suffered severe financial difficulties, not only was governmental accountability challenged, but all nonbusiness organizations were questioned about their stewardship of the resources entrusted to them. The increased interest was created by several factors. First, the financial accounting practiced by state and local governments had allowed very serious financial situations to develop. Obviously, items of a material nature were being omitted from these financial reports, and therefore, other nonbusiness entities were suspect. Secondly, the Federal government was eliminating welfare type programs and a reduction in Federal assistance meant that the resources needed to continue these programs had to be replaced by inflows from nongovernmental sources. These resource providers demanded more and better financial statements to clarify organizational priorities, stewardship and efficiency.

This thesis investigates the current accounting practices of certain nonprofit organizations. The investigation has been accomplished by means of a survey. The analysis of the survey responses provides an indication of nongovernmental nonbusiness compliance with GAAP. Compliance is not expected, since the accounting profession's statutory bodies, AICPA and FASB, have not issued standards or required compliance with published principles.

The responses to the survey do not positively confirm that nonprofit organizations are not in compliance with GAAP. However, the variety of principles followed and practices used indicates that there may be a lack of standardization. The responsibility for assuring standardization rests with FASB, which is slowly advancing in the development of standards to guide business and nonbusiness accounting.