Nonprofit Finance

Non-profit organizations are those organizations that in the course of their activities do not pursue the goal of making profit and making it. In the event that commercial profit is still received, then it is not distributed among the participants in the organization. A legal entity, which is a non-profit organization, can carry out any type of entrepreneurial activity only when it will serve the achievement of those goals for which it, in fact, was created and to which it corresponds.

Such organizations can be created in one form or another, which are provided for by law. For example, it can be a consumer cooperative, a public association or a religious organization , a charitable foundation, or a state or municipal unitary enterprise.

Non-profit organizations carrying out such activities serve to provide the following services:

  • Various social services
  • Management Services
  • The country's defense
  • Law enforcement services, including the protection of public order.

The finances of non-profit organizations are the material carrier of the diverse financial relations into which these organizations enter in the process of their activities. Financial relations arise with a team of workers of the organization itself, with any other persons or organizations, as well as with state institutions regarding the payment of taxes and mandatory contributions to the budget.

The finances of non-profit organizations are money that is mobilized from various sources, both for the implementation of the enterprise and for its expansion. The sources of the formation of this financial resource are the services provided by the enterprise, which in turn directly depend on what type and nature of the service will be provided (paid, free, mixed).

Full self-sufficiency or financing based on the approved estimates, these are the ways to mobilize and use those financial resources that make up the finances of non-profit organizations. One way or another is used depending on the methods of managing the enterprise.

Estimated funding is the use by an organization of budgetary funds at various levels so that it can cover its costs, guided by an approved estimate. With this method of financing the organization, it provides its services to consumers for free. Those budget funds that are provided for in the income-budget estimate will be the main part of the financial support that forms the finances of non-profit organizations.

Financing based on approved estimates is applied in the socio-cultural sphere. For the most part, these are budgetary institutions that provide the population with educational services, health services and social services. Likewise, financing is provided for organizations providing the rule of law and defense, as well as state security bodies and various bodies of both state power and local self-government.

Although the main source of financial support for non-profit organizations consists of budgetary funds, nevertheless, there are a number of reasons forcing such organizations to search for an additional extrabudgetary source of financing. This is due to a decrease in the quality of life of the population, an increase in social problems, an increase in the consumer level of both social and material benefits, an increase in the budget deficit, and the like.

Based on this, we can conclude that the features of finance of non-profit organizations can be determined by the specific focus of their activities. In addition to budgetary funds, the sources of financial support for non-profit organizations may additionally be contributions from enterprise participants and donations. In the event that a non-profit organization makes a profit as a result of any entrepreneurial activity, by law, it should serve for the target costs of the organization itself. However, you can use this income in accordance with the goals of the organization only after paying income tax.


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