The finances of nonprofit organizations are represented by a variety of financial relations that develop regarding the formation and use of monetary funds for various purposes. Here is more about it.
The peculiarities of financial policy for NPO
Nonprofit organizations (NPOs) represent a fairly significant sector of the economy. If a non-profit organization is financially unstable, it will not be able to fulfill the social tasks facing it. Of particular importance is the search for the optimal ratio of various sources of financing for a non-profit organization. At the same time, it should be emphasized that at present the issues of the influence of the external environment on the structure of funding sources for a non-profit organization have not been sufficiently developed. Endowment as a source of funding is most often ignored by managers of NPOs. Although it is the effective management of endowment that guarantees the viability of the company for a long period of operation. These questions are currently extremely relevant for such organizations.
The nonprofit organization sector includes all institutional units engaged in the provision of non-market services intended for collective consumption. The main resources of these units come directly or indirectly from payments made by units in other sectors of the economy.
Financial resources of NPOs
The material carriers of financial relations in NPOs are financial resources. The financial resources of organizations are a set of cash income, receipts, and savings used for the current maintenance and expansion of the activities of these organizations. Sources of financial resources, the principles of their formation and use depend on the type of services provided by organizations and the nature of their provision.
Despite the structure of the organization, financial activities are an integral part. The first step in managing it is financial planning. It includes setting financial goals and increasing the growth of a particular organization. Financial planning for NPOs should be based on an analysis of the market and the needs of the target group. The main tasks of financial planning are as follows:
- Form the sources of financial resources necessary for the functioning of the organization;
- Create special monetary funds, as well as determine the ways of their formation and directions of use;
- Distribute financial resources in order to ensure the necessary pace and proportions of social and economic development;
- Control the production and financial activities of the organization.
For budgetary institutions, the main method of managing the economy is estimated financing. This method is used in such sectors of the socio-cultural sphere as education, health care, social security, as well as in the financing of public authorities and local governments, defense, law enforcement, and state security organizations.
The state support of NPOs
The essence of targeted financing lies in the property and financial support of non-profit organizations provided by the state, citizens, commercial and public structures. There are the following forms of state financial support for NPOs:
- Grants are targeted funds provided free of charge and irrevocably to NGOs for the implementation of specific programs. These projects should be aimed at creating public goods, providing social support, and realizing the professional and public interests of certain groups of the population.
- Subsidies – funds that are allocated free of charge by the state to budgets of another level, legal entities (NPOs are among them), as well as individuals on the basis of shared financing of targeted expenses.
- Contractual relations – the supply of goods, the provision of services, the performance of work for public needs.
- Providing benefits. Benefits are provided both by the NPO itself and by persons (individuals and legal entities) making donations in their favor.