MEANING

Fund Accounting is generally based on the activities and objectives as specified by the Donors or Management. A separate funds based on regulations, restrictions and limitations are required to be set up. Each fund must be treated as a separate entity and should have its own individual receipt and payment account, income and expenditure account and balance sheet.
The individual funds should be consolidated and reflected in the overall statements of the entire organization.

FEATURES OF FUND ACCOUNTING

Books of Accounts are broadly divided into 3 categories:

• Tracking and reporting accounting records separately for different funding sources, grants, programmes etc. and being able to allocate expenses across these group of records
• Tracking and reporting across different time periods frequently, which may extend to multiple fiscal years
• Keeping funds separately according to donor’s restrictions
• Measuring and analysing the success or failure of each programme or fund individually
• Tracking the ratio of overhead to programme expenses
• Producing specialised and specific reports for internal and external purposes

ADVANTAGES OF FUND ACCOUNTING

• It helps in meticulous analysis of each independent activity separately
• It provides precise information with regard to each and every project at any point of time
• It enhances the financial transparency as well as decision-making.
• It helps in understanding the inter-project fund transfers and recoveries thereof

PURPOSE OF FUND ACCOUNTING IN NGOs

Commercial Organisation has a different approach towards finance and activities. It does activities to maximize its capital or profits. All their energies are spent in maximizing the profits.
On the Contrary, NGOs by their inherent constitution do not have any profit motive. All their energies are channelized in maximising the quality of the programme or activities irrespective of whether they are making profits or losses
In the commercial world if the profit and loss account is showing losses it would surely be considered as a failure or negative sign. However, if an NGO is showing excess of expenditure over income it may be a positive sign.
Hence NGOs maintaining their books as per the Fund Accounting, helps a lot in their growth and sustainability

How can Peaksphere help you

Peaksphere is an Accounting & HR Services Consultancy backed by a team of in-house professionals to facilitates NGO Sector by building meaningful solutions that add value and drive agility into processes. Our association helps you to new level of value and productivity. Our dedicated expert will handhold you throughout the journey to ensure your GROWTH