Research On Non-Profits Organisations' Financial Reports And Information Disclosure

In 1994, the well-known management guru Peter·Drucker suggested that modern society include three major sectors:The first sector is the government. Government exercises rule, legislation and management functions, including central and local government, administrative organs, public security, judicial and procuratorial organs, etc.; the second sector is the enterprise. Enterprises are for-profit organizations, including private enterprises, partnerships, limited corporation, stock limited corporation, etc.; the third sector is the non-profit organization (NPO), including universities, hospitals, charities, foundations, associations, religious organizations etc. Due to government failure and market failure, NPOs can be more efficient and effective than the government and enterprises.NPOs are not only an organizational structure, but also a new social value. Non-profit charitable organizations can disseminate culture, promote volunteerism, take care of vulnerable groups and promote social justice, balance social distribution through public service activities, ease social conflicts, and establish a mutual aid, mutual reciprocity, and mutual trust social system. More and more rich people began to turn business operation into charities, and pursue social interests.NPOs have non-profit objectives and public property rights, and distribution of profits is strictly pohibited, and widespread sources of funding, and tax benefits, and independent on voluntary contributions from donors and volunteers of voluntary service. NPOs have the right of public resources, so they must undertake public accountability. NPOs need prepare and publish financial reports and disclose information to reflect the fulfillment of public accountability due to information asymmetry.NPOs'financial accounting conceptual framework is the basis and guidance for financial reporting standards. The main objectives of NPO's financial report are to help donors, governments, beneficiaries, the public and other information users to understand the organization's financial position, operating performance and cash flows, evaluate the quality and continuity of products or services, and evaluate the fulfillment of public accountability, in order to make reasonable donations. Many NPOs use dual accounting basis including cash basis and accrual basis. I believe that, in order to truly reflect the true performance of NPOs and the future development. NPOs should adopt accrual accounting basis. NPOs don't have profit and owners' equity element. NPOs should present net assets according to the restriction of the donors. Thus, the NPOs' financial accounting conceptual framework both has similarities and personality comparing whith corporations. I believe that, due to differences, NPOs should consider the nature and structure of the product characteristics to determine the financial accounting conceptual framework.Whether or not to develop separate financial reports standards has not yet reached a consensus, so many countries have not established a specific NPOs' financial reporting standards. I believe that the NPOs and corporations financial reporting standards have a consistent trend, but we should develop specific standards for NPOs due to the special nature of NPOs. Because NPOs do not have profit elements, and do not use the "bottom line accounting", they should prepare statement of activities to reflect the revenue and expenses of different activities. Because the donors concern about the amount and item of expenses, NPOs should prepare statement of functional expenses, in order to facilitate the supervision by the donors. The major feature of NPOs' financial reporting is using fund accounting and budget accounting to control the proper uses of resources.Comparing with corporations, NPOs' financial reports more focused on non-financial information disclosure. Shareholders concerned about the company's profitability, growth prospects and risks. Similarly, donors also very concern about the performance of NPOs. The research found that the donors most concern about the efficiency and effectiveness of NPOs. I believe that NPOs should disclose related information to help users in analyzing organizational expenditures for services, staff salaries, administrative costs, financing costs proportion on revenue to determine the efficiency; and prepare SEA to reflect the effectiveness. Moreover, NPOs can apply the Balanced Score Card with the core of organization's vision and strategy, and disclose information from the organization's customers, management, performance and growth dimensions.China has a long history of charity culture. In recent years, charitable organizations developed rapidly. In 2010, there were more than 2000 foundations, and donations exceed 70 billion CNY. NPOs have significant impact for the economic development and social improvement. With the improvement of public charity enthusiasm, questioning voice arisesd. Due to the "dual management" system, it is difficult to get a legal status by a NPO. And dependence on government, aging employee, low efficiency are other problems. Some NPOs have emerged fund management confusion, changing the use of funds, high administrative fees for products and services, excessive wages and benefits and so on. The recent incident of Red Cross Foundation, the Youth Development Foundation and Song Qingling Foundation make public doubt with the GONPOs. Lack of regulatory system, financial reports standards and information system are the main reason.Charity is a love-based, faith-based, and characterized by broad public participation, and to promote the harmonious development of society. NPOs, government play an extremely important role during the process of NPOs healthly and orderly development. With the market economy transferring, the government should actively change their roles, to encourage the development of market-oriented NPOs, to improve the efficiency of non-monopolistic public services. Goveranment should gradually change from public charity organizers to regulater, supervisor and server of charities. I believe that the government should speed up the construction of NPOs laws, to achieve "goverment-community separation", and introduce market competition, and establish an independent regulator for NPOs to implement comprehensive and professional supervision and management.The soul of NPOs is credibility. Good internal governance structure and transparency of information disclosure is an important guarantee. NPOs should establish a sound internal governance structure; and establish self-regulatory mechanism, and implement corporate management through an independent board and professional management team. Many donors of NPOs are successful companies and managers, who are very familiar with about the importance of GAAP and financial reporting standards. So they have the same needs for NPOs'financial reports and information disclosure. Therefore, China should actively promote the NPOs' financial reporting standards development, announce the financial reports to the public, and disclose related information mandatorily, to help donors to evaluate the organization's efficiency and effectiveness properly.Private capital investment joining in social welfare can solve the financial problems of NPOs, and optimize the allocation of resources and safeguard social stability and harmony. As governments due to the financial crisis decreased the grant to NPOs in recent years, more and more NPOs began to take part in various business activities, which can raise funds for the development of the organization. The spirit of the NPOs world does not exclude for-profit business practices. However, excessive commercial activities will affect the non-profit purposes, but also lead to breed corruption, and turn the interest of NPOs and public into individuals. Thus, I believe that we should establish criteria to judge the reasonableness of NPOs' business activities, and fully disclose related information, especially the information of related party transactions, to help the government and the public to understand the circumstances surrounding the NPOs of business activities and supervise the whole courses. In this thesis, from the perspective of financial reports and information disclosure, it explores how to establish the values of accounting integrity through public and transparent information disclosure, and how to rebuild the credibility of NPOs for social harmony and sustainable development.