Question

You have been hired as a CPA to perform an audit of an entity. You do not have any evidence that suggests the organization is a government organization. No evidence suggests that the government has the power to dissolve of the entity. All net assets are allocated to among different entities, which do not revert to a government. Additionally, it does not seem that the organization has the power to enact a tax levy. Analyze the organization to determine if it is governmental not-for profit entity or nongovernmental not-for-profit entity. To which standards should the financial statements adhere and why?

Answer 1

Difference between Governmental not-for profit entity or nongovernmental not-for-profit entity- Are as following:

1. Government is a sovereign or prime entity in the country while nongovernmental not-for-profit entity is not a prime one.
2. Government's main motive is to serve whole country and its people while nongovernmental not-for-profit entity works for some specific purpose or on some particular subjects.
3. Central Government is one in the country while  nongovernmental not-for-profit entity are the social welfare society, foundations and charitable trusts.
4. Government accounting is done based on "Government accounting standard board" (GASB) while nongovernmental not-for-profit entity's accounting is done based on "Financial accounting standard board" (FASB).
5. Government has to prepare these three financial statements: Statement of activities, statement of cash flow and statement of net assets while nongovernmental not-for-profit entity has to prepare; Statement of activities, statement of cash flow and statement of financial position.