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Canadian Non-Profit Organizations Analysis

CanadianNon-Profit Organizations Analysis

CanadianNon-Profit Organizations Analysis

Non-for-profitorganizations are companies, which are operated and organizedexclusively for educational, social, professional, health, religious,charitable or any other purpose, which is Non Profit. The ownershipinterests in these organizations are not transferable as theyare for charitable purposes only. Examples of Non Profit entitiesinclude art galleries, museums, referral hospitals, politicalparties, professional associations, and universities. Themembers of a NonProfitorganization, thecontributors and other people who provide resources do not receiveany financial return directly from the organization in their capacityas owners (Davidson,&amp Chrisman, 2014).ThePublic Sector Accounting Board (PSAB) was established to serve thepublic interest by recommending standards that result in betterfinancial performance and information for government decision-makingand to ensure accountability and integrity of themanagers. It was enacted tooversee theactions and operationsof theNonProfitorganizations.This essay analyzes two Canadian NonProfitorganizationsby looking at thepurpose and nature of the financial reporting requirements in thefinancial reporting rules for NonProfit organizations. Second, the researchreviews the auditor’s report for 2013 and 2014 and determineswhether thetwo agencies adhereor follow the current financial reporting or accounting rules forNon-for-profitorganizations. Third, this paper provides abrief explanation of what the two charity organizations do, i.e.,what their primary purpose is. Fourth, theessay provides a brief summary of what the charitableorganizationsare doing to generate its cash that is their sources of money and thereasons for their major areas of spending or uses. Fifth, theresearchcomments on thelessons learned about each charityorganization,and how they are fulfilling theirmission or purpose and raising both awareness and funds for theircause(s). Lastly, theresearch concludes by determiningthe amount of the organizations` revenue and fees that are being usedfor specific programs and the cost that goes to pay foradministrative expenses.

Analysis

Purposeand Nature of the Financial Reporting Requirements in the FinancialReporting Rules for NonProfit Organizations

Useof the Financial Reporting Requirements

Financialreporting requirements are necessary forNon Profit organizationsto operate in a smooth and efficient way. They guide on how financialstatements should be prepared and presented toexternal users such as investors, shareholders, creditors, thegovernment, customers and so forth. Theyare also important as theyserve as a guideto theInternational Accounting Standards Board (IASB) in developing futureInternational FinancialReporting Standards(IFRS). Fourth, together with the PublicSector Accounting Board (PSAB), theyhelp in resolving accounting issues (Richardson,2009).Fifth, the Financial Reporting Requirements lists what should beincluded in a company`s annual report. This means that it states thatthe financial reports of Non Profit Organizations should include cashflow statements, Non Profit operations, income statement, statementof financial position and the overall condition of the charitableorganizations (Richardson,2009).Lastly, the purpose of the financial reporting requirements is toenable companies to uphold the interests of the shareholders byensuring that they follow proper reporting frameworks to account forthe shareholders’ funds. The managers of the Non Profitorganizations can do so by making sure that they use the principlesand rules of fund accounting.

Natureof the Financial Reporting Requirements

Thefinancial reporting requirements shouldinclude the scope, timing, and extent of the financialreporting framework (Rixon,2007).This implies that the elements of the annual reports of charitableorganizations are the auditor`s report whether qualified orunqualified, the basis oftheauditor`s opinion and the scope of his idea and the recommendationsof the auditors to the company. The requirementsalso state that the annual reports should contain the financialstatements of the charitableorganizations as well as the notes to the financial statementsproviding a detailed description of the amounts that have beenincluded in those reports(Rixon,2007).Lastly, the annual reports need to report the directors of the NonProfit organizations and the positions they hold.

Whetherthe Two NonProfit OrganizationsAdhere or Follow the Current Financial Reporting of Accounting Rulesfor NonProfit Organizations

Thepresentfinancial reporting of accounting standards for NonProfit Organizations state that Non Profit Organization`s financialstatements should communicate the reliable information to the needsof the users of those financial statements (Cherry,&amp Post, 2013).This means that the financial statements ought to be prepared in atransparent, understandable, timely and consistent manner. Second, itis a rule that the reports should contain financial statements thatprovide an accounting of the full nature and extent of the financialaffairs of the Non Profit firms (Cherry,&amp Post, 2013).Third, it is a requirement that the annual reports should containfinancial statements that demonstrate the accountability of theresources and the financial affairs entrusted to it (Cherry,&amp Post, 2013).Fourth, it is a rule that the financial statements should account forthe sources, allocation and use of the resources in that accountingor report period (Cherry,&amp Post, 2013).Finally, the annual reports should present information concerning thenon-profit organization`s financial condition as well as how theyfinanced their activities and how they were able to meet theirliabilities and commitments.

Basedon these rules of financial reporting and accounting, the CancerResearch Society adhered to the current financialreporting of accounting standards for NonProfit organizations as the auditor gave an unqualified opinion(Cherry,&amp Post, 2013).However, the Amyotrophic Lateral Sclerosis (ALS) Society of Canadadid not follow the current financialreporting of accounting rules for NonProfit Organizations (Cherry,&amp Post, 2013).This is because the auditor gave a qualified opinion on the basisthat the verification of receipts from their sources was limited tothe amounts recorded in the files of the society. They were alsounable to determine whether any adjustments were necessary tocontributions excess (deficiency) of revenue over expenditures,current assets, net assets and fund balances.

Explanationof What the CancerResearch Society (CRS)Does and its Main Purpose of Being

TheCancerResearch Society is a Canadian Non Profit organization with a solemission of funding research on all types of cancer, therebycontributing to advanced science aimed at detecting, preventing andtreating cancer before it becomes worse (Davidson,&amp Chrisman, 2014).It was incorporated under thePart III of theBusiness Corporations Act (Quebec) and is a registered charitableorganization under theIncome Tax Act (Canada). Its operations consist ofraising and distributing funds in the form of research grants andfellowships to promote the research of cancer. Itsprimary purpose of being is, therefore, to increase moneyfor research grants, charitable donations, and scholarships. As such,the profits from the continuing operations and the discontinuedoperations should not be taxed, but should be reinvested back intothe research society to fund further the research on cancer.

Explanationof What the AmyotrophicLateral Sclerosis (ALS) Society of Canada Doesand its Main Purpose of Being

TheAmyotrophicLateral Sclerosis (ALS) Society of Canada (“theSociety”)is a society that provides ALS information for patients, caregiversand professionals aiming to do research on theAmyotrophicLateral Sclerosis (ALS) condition. It was founded in 1977 andincorporated without share capital under theIncorporationsAct ofCanada and isa registered charitable organization under theIncome Tax Act (ITA). Thesociety supports direct client services for individuals living withAmyotrophic Lateral Sclerosis (ALS) in Ontario, funds research tofind prevention, treatment, and cure for Amyotrophic LateralSclerosis (ALS) and raises public awareness for their cause. Itsprimary purpose of being is, therefore, to raise fundsthrough research loans, charitable donations and fellowships for theresearch on possible treatment, prevention, and cure for theAmyotrophic Lateral Sclerosis (ALS) condition.

ABrief Summary of What the CancerResearch Society (CRS)is Doing to Generate it’s Cash and the Reasons for its Major Areasof Spending

TheCancerResearch Society (CRS) mainly gets itscash from donated services. It derives significant benefits from timeand services donated by volunteers and well-wishers (Crs-src.ca,2014).Because of the difficulty in determining their face values, thesevaluable contributions are not included in the financial statements.It`s cash, therefore, comprises of deposits with major financialinstitutions and cash balances with thetrustee (Dwivedi,&amp Halligan, 2013).The society also gets its money from significantinvestments, which are recognized when earned and not when received.Thesesources of investmentsinclude themoney market denominated in US dollars, the equities denominated inUS dollars and denominated in Canadian dollars. They also includebonds denominated in Canadian dollars, the face value of $ 7,394,000($ 6,831,000 in 2013), interest rates ranging from 1.25% to 9.98%(1.33% to 9.98% in 2013), maturing from September 2014 to June 2108.Its sources of cash also came from investmentincome (Crs-src.ca,2014).In 2013, the CancerResearch Society (CRS) had investmentincome, comprising of $ 331,475 interest,$ 247,817 dividends, and $ 336,024 realized gain on disposal ofinvestments (Crs-src.ca, 2014). In2014, on the other hand, the CancerResearch Society (CRS) had investmentincome comprising of $ 369,366 interest,$ 192,569 dividends, and $ 454,845 realized a gain on disposal ofinvestments (Crs-src.ca, 2014).

TheCancer Research Society (CRS) used its cash in annual campaigns,research grants and fellowships, fundraising projects andpartnerships, and major gifts and employee funds (Crs-src.ca, 2014).In 2013, $ 148,383 was used in annual campaigns, $ 48,899 was used inthe major gifts and employee funds, $ 108,190 was used in fundraisingprojects and partnerships and $ 86,255 was used in research grantsand fellowships (Crs-src.ca, 2014). In 2014, $ 148,527 was used inannual campaigns, $ 51,754 was used in research grants and awards, $69,304 was used in fundraising projects and partnerships, and $75,071 was used in the major gifts and employee funds (Crs-src.ca,2014).

ABrief Summary of What theAmyotrophic Lateral Sclerosis (ALS)is Doing to Generate it’s Cash and the Reasons for its Major Areasof Spending

TheAmyotrophic Lateral Sclerosis (ALS) sources of cash came from bonds,guaranteed investment certificated and equities. The society alsobenefits from volunteer services in the form of volunteer time tofulfill its mission (Als.ca,2014).Since these valuable services are not purchased by the society and areasonable estimate of their value cannot be made, theyare not recorded in the financial statements. Its cash would,therefore, comprise of short-term investmentssuch as general fund and the Tim E. Noel Endowment Fund and long-terminvestmentssuch as general fund, the research fund and the Tim E. Noel EndowmentFund as shown in the tables below (Als.ca,2014).

Short Term Investments

General fund

&nbsp

2014

2013

RBC investment savings

$ 172,397.00

$ 467,487.00

RBC guaranteed investment certificate

$ 35,000.00

$ 35,000.00

Bank of Nova Scotia bond

$ –

$ 401,560.00

Bank of Nova Scotia shares

$ 18,567.00

$ –

Insurance policy

$ 200,000.00

$ 200,000.00

Tim E. Noel Endowment Fund

Province of Ontario

$ 509,997.00

$ –

Total short-term investments

$ 935,961.00

$ 1,104,047.00

Theshort-term investmentshad a cost of $ 934,639 (2013- $ 1,100,505) in the form of interestat the year-end.

Long-term Investments

General fund

&nbsp

2014

2013

Metropolitan Toronto

$ 308,476.00

$ 323,588.00

Ontario Savings Bond

$ 503,966.00

$ 503,505.00

Royal Bank of Canada

$ 504,445.00

$ 504,445.00

Enbridge Income Fund

$ 111,162.00

$ 107,032.00

Pembina Pipeline Corp

$ 208,445.00

$ 196,419.00

Canadian Utilities Ltd.

$ 260,224.00

$ 237,757.00

Sun life Financial Inc.

$ 357,763.00

$ 358,523.00

Bell Canada

$ 254,872.00

$ 233,770.00

TELUS Corporation

$ 303,214.00

$ 276,900.00

Research fund

Royal Bank of Canada

$ 424,406.00

$ 424,845.00

Bell Canada

$ 259,773.00

$ 250,138.00

Tim E. Noel Endowment Fund

Province of Ontario

$ –

$ 1,053,505.00

National Bank of Canada

$ –

$ 322,176.00

Ontario Savings Bond

$ 503,505.00

$ –

Total long-term investments

$ 4,000,251.00

$ 4,792,603.00

Thelong-term investmentshad a cost of $ 3,877,928 (2013- $ 4,714,276) in the form of interestat the year-end (Als.ca,2014).

TheAmyotrophic Lateral Sclerosis (ALS) used $ 1,462,667 research grants,$ 456,348 in other research support, $ 245,373 in national federationservices, $ 1,431,777 in Ontario client support services, $ 402,904in public awareness, $ 264,795 in volunteer and organizationaldevelopment, $ 152,668 in project grant costs, $ 1,749,726 infundraising, $ 621,348 in administration, and $ 176,933 in governancein 2013 (Als.ca,2014).In 2014, ALS spent $ 1,170,000 of its cash in research grants, $381,313 in other research support, $ 228,573 in national federationservices, $ 1,393,944 in Ontario client support services, $ 433,061in public awareness, $ 153,204 in volunteer and organizationaldevelopment, $ 105,531 in project grant costs, $ 2,717,972 infundraising, $ 553,447 in administration, and $ 177,322 in governance(Als.ca,2014).

Lessonsfrom Each Organization

TheCancer Research Society (CRS)

Fromthe Cancer Research Society (CRS), I learned many lessons. The firstlesson is that as a Non Profit Organization, it raised and receivedfunds from well wishers, volunteers, and donors, which it used tofund or finance research projects on cancer. The second lesson Ilearned is that the Cancer Research Society (CRS) followed theInternational Financial Reporting Standards (IFRS) set forth by theInternational Accounting Standards Board (IASB) and the PublicSector Accounting Board (PSAB). The main aim of the Public SectorAccounting Board (PSAB) in the business operations ofthe Cancer Research Society (CRS) was to oversee the works ofauditors and accountants in that charitable organization and tomanage the operationsto prevent and detect the existence of loopholes within theCancer Research Society (CRS). The third lesson I learned from theCancer Research Society (CRS) is that a company must have a clearlydefined mission, vision, objectives and core values to thrive in anyparticular industry. Lastly, from the Cancer Research Society (CRS),I learned charitable organizations do not operate for profits, butrather their primary intent is to ensure that they achieve what theywere meant to meet or their reason for being formed (Dwivedi,&amp Halligan, 2013).

TheAmyotrophic Lateral Sclerosis (ALS)

Fromthe Amyotrophic Lateral Sclerosis (ALS), I have learned variouslessons. The first lesson that I have learned from this charitableorganization is that the management of the Amyotrophic LateralSclerosis (ALS) did not maintain proper books of accounts. This isevident where the auditors who audited the Amyotrophic LateralSclerosis (ALS) gave a qualified opinion (Dwivedi,&amp Halligan, 2013).An opinion, which is qualified, is given when the auditor hasencountered one or two types of situations where the company has notcomplied with the acceptable accounting standards. In this case, Ilearned that the Amyotrophic Lateral Sclerosis (ALS) did not complywith the acceptable accounting standards or principles (GAAP). Thesecond I learned was that the presentation and disclosure of theAmyotrophic Lateral Sclerosis (ALS) were guided by the financialreporting requirements or rules (Dwivedi,&amp Halligan, 2013).The third lesson I learned was that the Amyotrophic Lateral Sclerosis(ALS) had a clearly defined mission, vision, goals, and core values.Lastly, I learned that from the financial statements of theAmyotrophic Lateral Sclerosis (ALS) one could determine the financialcondition of the charitable organization.

HowI feel Organizationsare Doing at Fulfilling its Mission or Purpose and Raising both Fundsand Awareness for its cause(s) in the Public Domain

TheCancer Research Society (CRS)

TheCancer Research Society (CRS) is fulfillingits mission and purpose of raisingand distributing funds in the form of research grants and fellowshipsto promote the research of cancer. It is doing so by accounting forall the money received from volunteers and well-wishers and the moneyspent on day-to-day expenditures. I feel that the Cancer ResearchSociety (CRS) is raising awareness of the causes of cancer in thepublic domain by holding fundraising campaigns in the form of walksand marathons to create awareness of cancer and teach people how toprevent and treat cancer.

TheAmyotrophic Lateral Sclerosis (ALS)

TheAmyotrophic Lateral Sclerosis (ALS) is fulfillingits mission and purpose of raising funds through research loans,charitable donations, and fellowships for research on the possibleprevention, treatment, and cure of the AmyotrophicLateral Sclerosis (ALS) condition (Dwivedi,&amp Halligan, 2013).I, therefore, feel that the Amyotrophic Lateral Sclerosis (ALS) israising the required funds through conducting a fundraising. Throughthe fundraising committee, they can explain to people, volunteers,well-wishers, contributors and members about the signs, symptoms,causes, prevention, treatment and cure of the Amyotrophic LateralSclerosis (ALS) condition.

Reasonfor Your Conclusion

Thereason why the Cancer Research Society (CRS) and the AmyotrophicLateral Sclerosis (ALS) were creating awareness through fundraisingis that the two firms incurred fundraising and administrativeexpenses.

Calculationofthe Amount of the Organizations’ Revenue or Fees that is used forspecific Programs and the Amount that Goes to Pay for AdministrativeCosts as a Percentage (%) of Total Revenue or Fees for the Period

TheCancer Research Society (CRS)

TheAmyotrophic Lateral Sclerosis (ALS)

Conclusion

Inconclusion, the Cancer Research Society (CRS) and the AmyotrophicLateral Sclerosis (ALS) are Non Profit organizations, which meansthat they are charitable organizations and they are established toperform their designated purpose, rather than for profit purposes.The main aim of the Cancer Research Society (CRS) is to provide fundsfor the research of cancer while the purpose of the AmyotrophicLateral Sclerosis (ALS) is to provide funds for the research of ALS.According to their annual reports, the auditors provided anunqualified report on the Cancer Research Society (CRS) whereas theyprovided a qualified report on the Amyotrophic Lateral Sclerosis(ALS). The reason why they provided a qualified report on ALS was onthe basis that the verification of receipts from the sources waslimited to the amounts recorded in the books of accounts and theywere unable to determine whether any adjustments were necessary tocontributions excess (deficiency) of revenue over expenditures,current assets, net assets and fund balances. Both the CancerResearch Society (CRS) and the Amyotrophic Lateral Sclerosis (ALS)raised their funds` fundraising events, and most of this money wasused to finance the fundraising campaigns and administration costs.Finally, it is evident that in 2013, more revenue was used and morefees were incurred on special programs than in 2014 in the CancerResearch Society (CRS). However, administration costs incurred weremore in 2014 than in 2013. On the other hand, it can be noted that in2013, more revenue was used for special programs and more fees wasincurred administration costs than in 2014 in the Cancer ResearchSociety (CRS). However, prices on special programs born were more in2014 than in 2013.

References

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Als.ca(2014). TheAmyotrophic Lateral Sclerosis (ALS) Annual Report. Retrievedon 29thNovember 2016 fromwww.als.ca/sites/default/files/files/2014-Audited_Financial_Stmt-Signed.pdf/

Crs-src.ca(2014). The Cancer Research Society (CRS) Annual Report. Retrievedon 29thNovember 2016 from http://www.crs-src.ca/document.doc?id=380/

Gaa,J. C. (2007). The place of Canada in global accounting standardsetting: Principles versus rules approaches.&nbspGlobalizationof accounting standards, hrsg. Von Jayne M. Godfrey and KerynChalmers, Cheltenham (UK) ua,81-97. Retrievedon 29 November 2016.

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Cherry,P., &amp Post, F. (2013). Canadian GAAP is hardly collapsing: Afocus on principles rather than detailed rules has made the CanadianAccounting Standards Board an international leader.&nbspNationalPost.Retrievedon 29 November 2016.

Dwivedi,O. P., &amp Halligan, J. (2013). 6. The Canadian public service:balancing values and management.&nbspCivilService Systems in Anglo-American Countries,148.Retrieved on 29 November 2016.