Financial Accounting in Not-for-Profit Organizations in Qatar - Essay Example

Finance and accounting due: This paper will explore accounting in non-profit organization inQatar and how the non-profit accounting organizations are practiced. In particular, the paper will discuss Qatar Computing Research Institute (QCRI). It is a national research institute that was established in 2010 by Qatar Foundation for Science, community development, and Education. The Qatar Foundation is non-profit organization that supports Qatar conversion from carbon economy to knowledge economy. The Qatar Computing Research Institute implements Qatar Foundation mission by assisting create Qatar’s technology and innovation ability. It mainly deals with large-scale computing difficulties and is concerned with national goals for development and growth (Qatar Computing Research Institute, 2014). The organization carries out high-class studies in the field like Arabic language technology, cyber security, social computing, computational science and engineering, data analytics and distributed systems. The organization performs the research according to Qatar National Research strategy and bears the strategic goals highlighted in Qatar National Vision 2030. It is a non-profit organization because it relies on partners for funding to serve the citizens of Qatar. The QCRI partners with labs and academic institutions worldwide and prime research institutions. The organizations include Google, Purdue University, Massachusetts Institute of Technology, Microsoft, MEEZA, and Al Jazeera. The others are Wikimedia Foundation, Boeing, Qatar Statistics Authority, World Bank, Development Gateway, AidData, Plantet Labs and DIGILE. In addition, other organizations included are Qatar Foundation International, UJpest FC, Qatar Mobility Innovations Center and Supreme Education Council. Moreover, the QCRI partners with Carnegie Mellon University-Qatar, Q-CERT National Information Security, Unicef, The Rockefeller Foundation and OCHA- united Nation (Qatar Computing Research Institute, 2014). The QCRI accounting process that I will explore is based on revenue and expenditure statements. The not-profit organization is required to submit its statement to the Secretary of State, design articles of incorporation, pay a charge, call for frequent meetings and fulfill other duties to attain and maintain corporate position. The QCRI does not work for profit; therefore, the shareholders are not given corporate income. The money pooled by the institution is put in the corporate account to pay for activities of the institute, salaries and expenses. The organization is exempted from income taxes because the business conducted is for the welfare of the citizens (HG.org - HGExperts.com. 2014). The QCRI is subject to accounting standards (Peer Review Report, 2010). For example, QCRI is exempted from tax under (Income Tax Law, art2) of Qatar (p.29). Jurisdiction must make sure that reliable records of account are provided by the relevant organizations. According to Qatari Law (Commercial Law, art.27), the not-profit organization are required to maintain accounting records for ten years and underlying documentation for five years (p.30-31). As reported by the Peer Review Report no.84, all accounting data should be persevered in all organizations according to tax law, anti-money laundering law and commercial law requirements (p. 33). The Qatar Computing Research Institute does not reveal the revenue of the organization. However, liabilities, net assets, and assets are financial figures in a non-profit organization. The nonprofit’s statement is a financial position recordings of the assets and liabilities in the order of how easily the assets can turn into cash and the urgency of the liabilities that require to be paid in a non-profit organizations. In the non-profit organization, assets are defined as the properties owned or owed by the company. For instance, in the category of items owned include vehicles, short and long term investments, furniture and cash. In the group of owed assets, they are the accounts receivable that is the cash that will be received in future. A good example of the owed assets in this institution is cash that is assigned to the research, but has not been received yet. There is also the prepaid expense that is recognized as an asset. The prepaid expense is where the nonprofit institution pays for services that are delivered in future (p.6). Liability is defined as the cash that the non-profit organization is let by others and is commonly referred to as accounts payable. In this situation, the cash is paid out in the future. A good example of liability is the money owed for stationery and the money not paid that is withheld from staff’s pay cheques to be deposited in the government. The other liabilities include mortgages and bank loans. Net assets are calculated from the assets owned by the organization and what they owe. If a form of equation, it is equated: Net Assets = Assets – Liabilities. The net assets are the amount of money available for the organization to use in future for smooth operation and assist in attaining its objectives. The financial figures obtained from assets and liabilities that are of value are put in different categories. To start with, the current assets are the kind of assets in the form of cash, or anticipated to become money in the course of the next year (The Chartered Professional Accountants of Canada, 2013). This comprises of accounts receivables, prepaid expenses, bank balances and short-term guarantee investments (p.7). In long-term assets which are also referred to as ‘other assets’ or ‘capital assets’ include assets that are not due to become cash in a year. This constitutes vehicles, furniture, buildings and equipment. All these assets fulfill the needs of the organization for several years. The long-term financial investments that are to produce a return on investment over time are also under the category of long-term investment. The current liabilities consist of the liabilities that are to be settled in the next year. It consists of all amounts that are due in a year that include mandated money withheld from staff salary and the payables that are due to suppliers. On the other hand, long-term liabilities are the responsibilities to pay in the future in a time span that is beyond a year. This includes mortgage balances and outstanding loans, and if they are to be settled in the course of the next year, they are referred to as current liabilities (p.7). The working capital derived from current assets and current liabilities. In a form of equation: Working capital = Current Assets – Current Liabilities. The working capital is normally a positive number. From this perspective it is thought as a short-term ‘cushion’ that is available to the non-profit organization in the oncoming year that reflects the surplus of current assets compared to what is necessary to fulfill the current liabilities. In other words, a positive working capital implies that the organization is able to settle its bills when due. The working capital ratio is another method of examining the organization’s capability to settle their bills on time. The formula is: Working Capital Ratio = Current Assets / Current Liabilities. If the ratio value is more than one then, the organization is a position to settle all current liabilities from the current assets available (The Chartered Professional Accountants of Canada, 2013). An example of a not-for-profit Organization statement of financial position is provided in appendix 1. In conclusion, the financial accounting in not-for-profit organizations is of great essence to the partners and funders because they are interested in the financial concerns of the organization. The areas of concern include the security of the assets that is under the care of the organization and the effective and efficient utilization of the organization’s money to the intended use. The non-profit organizations give their financial reports through its management, and this is achieved through audited annual financial statements reinforced by the annual report. It is, therefore, paramount for the not-for-profit organizations to have their accounts in order to show their level of transparency. Appendix 1 Sample of a Financial Statement of Not-For-Profit Organization Source: The Chartered Professional Accountants of Canada. (2013). A Guide to Financial Statements of Not-For-Profit Organizations. Retrieved November 25, 2014, from http://www.cica.ca/focus-on-practice-areas/governance-strategy-and-risk/not-for-profit-director-series/npo-briefings/item65428.pdf References HG.org - HGExperts.com. (2014). Non-profit Law. Retrieved November 25, 2014, from http://www.hg.org/nonprofit-organizations.html Peer Review Report – Phase 1: Legal And Regulatory Framework – Qatar. (2010). Global Forum On Transparency And Exchange Of Information For Tax Purposes. Retrieved November 25, 2014, from http://www.oecd.org/tax/transparency/46103327.pdf Qatar Computing Research Institute. (2014). About QCRI. Retrieved November 25, 2014, from http://qcri.com/about-qcri/about-qcri-ar Qatar Computing Research Institute. (2014). Partners and Collaborators. Retrieved November 25, 2014, from http://qcri.com/about-qcri/partners-and-collaborators The Chartered Professional Accountants of Canada. (2013). A Guide to Financial Statements of Not-For-Profit Organizations. Retrieved November 25, 2014, from http://www.cica.ca/focus-on-practice-areas/governance-strategy-and-risk/not-for-profit-director-series/npo-briefings/item65428.pdf Read More