The nonprofit accounting mess

It is argued that the FASB standards of financial accounting in nonprofit organizations are incredibly poor, and if implemented, nonprofit accounting will take a giant step backward. Governing boards of lenders to and contributors to the 1.2 million nonprofit organizations need information about the financial performance and status of these organizations. In particular, they need information about the operating performance at least as much as directors and investors in profit-oriented companies. Incredibly, SFAS 117, Financial Statements of Not-for-Profit Organizations, does not require a report of operating performance. The FASB should issue Exposure Drafts for: 1. an amendment to Concepts Statements No. 6, restoring the operating -nonoperating dichotomy that is required in Concepts Statement No. 4, and 2. a new standard on financial accounting in nonprofit organizations. The new standard should have 3 sections: a statement of objectives, standards for operating transactions, and standards for contributed capital transactions.