Accounting for NGOs, Compliances and Deviations
Dr. P. Laxmikantham

For ensuring true and fair view of the financial position of NGOs, there is a need of proper accounting. The NGOs in Ethiopia are lacking standardized and harmonized accounting system. Some NGOs are to a large extent follow the GAAP as far as possible within the legal requirements. Over the years, the legal frame work in Ethiopia evolved through the provisions of Civil Code 1960 and the related proclamations, legal notices and the periodical rules and regulations, and the code of conduct issued by the RoA, the DPPC and the CRDA. All these regulations are meant to ensure true and fair view of the financial position. Apart from these legal aspects, there are a few external reporting stipulations that are applicable to the NGOs. They are given by the FASB since 1983 and over the years they are reviewed and revised. To ensure full disclosure of the financial operations and also to be highly transparent, the FASB suggests to follow the Accounting Standards No. 93 & 99, 116, 117, 124 and 136 that are directly applicable to NGOs. A field investigation as to the compliance of the NGOs of Ethiopia with the GAAP locally enforced legal stipulations and the FASB Standards reveals that there are many deviations. The nomenclature of the Statement of Activities as adopted by the NGOs are varied and rarely uniform. Further, the field investigation reveals that out of 31 NGOs only 12 prepare Balance Sheets and even the balance sheets prepared by them are not containing the vital information about depreciation in case of 4 NGOs. With regard to the Statement of Cash Flows (FASB Standard No.117) none of the 31 NGOs prepare them. Thus, the field survey reveals that there are significant deviations when compared with the accounting standards resulting a poor disclosure and transparency. To ensure fair disclosure with in the framework of FASB Standards, local accounting requirements in line with the Civil Code, and the regulations of DPPC, there is a need to develop an internationally oriented and locally developed accounting principles and an appropriate package of three Annual Financial Statements for the NGOs in Ethiopia.

Full Text: PDF     DOI: 10.15640/ijat.v6n1a7