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What are the major differences between for-profit and not-for-profit accounting?

I am a CFO considering a not-for-profit company for the first time in my career. I'm not a CPA but have always been very much up on the necessary GAAP regs for any business I have been in. But having never done a NFP I'm wondering what to expect. Is it close? Are there significant differences? Is there comparative guidance out there somewhere for further study? Thank you.


Frank Pasacreta
Title: Assurance and Advisory Partner
Company: Frank, Rimerman + Co. LLP
(Assurance and Advisory Partner, Frank, Rimerman + Co. LLP) |

There are significant differences in accounting and reporting for not-for- profit entities. These differences range from revenue recognition for pledges to "net asset" reporting of the entity's equity. My experience working with NFPs show a clear and strong commitment to its mission statement by the Board and entity personnel. A well run NFP will have an active Board and a hands on audit or finance committee. Also, finance personnel are quite active in the entity's fund raising and special events.

My recommendation is to read the AICPA's A&A Guide for not-for-profit entities and the current AICPA risk alert for the NFP industry to get familair with the industry's special accounting and reporting rules. It is a good read and will clearly lay out the industry diffferences you are interested in.

Good luck!

Patrick Duff
Title: Principal
Company: Duff & Associates, LLC
(Principal, Duff & Associates, LLC) |

I made the transition from for-profit manufacturing to Goodwill Industries -- a social service organization that uses thrift retail stores to fund the job training and placement programs for disabled and disadvantaged people.
As CFO at Godowill, it was a shock how much work falls on the accounting department of a NFP. The regulatory reporting, governance and compliance issues, combined with the tracking of restricted and unrestricted funds, add significant complexity for a $30M revenue operation. Budgets are tight and erery penny must be carefully tracked. We keep in mind that some elderly person on a fixed income sends us a $20 donation and expects us to use it wisely.
You must be committed to the mission to stick with it. In addition to Frank Pasacreta's suggestions, I recommend the following:
- review the IRS Form 990 instructions to get a sense of everything that must be tracked.
- review GAAP accounting for NFP entities. There is a good publication by the AICPA on Not-For-Profit Organizations.
- meet with some other cfo's of NFPs, especially within the segment that you are considering.
Good luck with your research. The job is challenging but it can also be very satisfying to know that you are making a difference to peoples' lives.

Patrick Duff
CFO, Morgan Memorial Goodwill Industries, Boston

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