What are the NFPs and how are they regulated

Definition of NFP Organisations

The term ‘not-for-profit’ organisations (NFPs) can incorporate a range of different types of entities, which varies between jurisdictions. This section focuses on the terms and structures used by different countries to define those organisations or bodies that are considered as NFPs for the purpose of financial reporting.

Regulation of NFP Organisations

NFPs can be subject to the requirements and regimes of national regulators. This section also focuses on the regulatory arrangements which exist within different jurisdictions.

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Australia

How are Not-for-Profit organisations (NFPs) defined in the jurisdiction?

There is no legislated definition of a NFP organisation in Australia.

However, the Australian Taxation Office (ATO) and the Australian Charities and Not-for-profits Commission (ACNC) have extensive guidance on their website on what a NFP organisation could be. Central to that guidance is that a NFP generally applies any funds it receives to its objectives/purpose. Those objectives or purpose should be in the public interest.

How are NFPs registered and regulated?

Are NFPs required to register with a regulatory body?

Charities must register with the ACNC.

Other NFPs may register with a regulator depending on the legal structure of the NFP.  For example, incorporated associations register with their respective State or Territory regulator whereas companies limited by guarantee register with the Australian Securities and Investments Commission if they don’t register with the ACNC.


Is financial information required to be provided to this regulator?

This depends on the amount of revenue a NFP generates in any given year.  The most predominant threshold is revenue over AUD 250,000.  If a NFP earns revenue in excess of that amount it is required to prepare general purpose financial statements prepared in accordance with Australian Accounting Standards (AASB) and lodge them with the relevant regulator.  The GPFS (general purpose financial statements) might not be public information.


Does the standard setting body have any role in the regulation of NFPs?

The AASB sets Accounting Standards for GPFS, however other regulators can determine the requirements for financial reporting by their subject NFP entities, including whether GPFS and compliance with AASB Accounting Standards are required.


Does the taxation authority have any role in the regulation of NFPs?

No – those responsibilities were transferred to the ACNC in 2013 for charities, many of which are entitled to a range of special tax rules, e.g. personal deductibility for donations by donors.

Other NFPs are not required to register with the ATO (Australian Taxation Office).


Canada

How are Not-for-Profit organisations (NFPs) defined in the jurisdiction?

The CPA Canada Handbook – Accounting defines not-for-profit organisations (NFPOs) as: “entities, normally without transferable ownership interests, organized and operated exclusively for social, educational, professional, religious, health, charitable or any other not-for-profit purpose. A not-for-profit organization's members, contributors and other resource providers do not, in such capacity, receive any financial return directly from the organization.”  These entities are not public sector “government NFPOs”.

  

CPA Canada Public Sector Accounting (PSA) Handbook defines a government NFPO as: “a government organization that has all of the following characteristics: 

  • It is a separate entity with the power to contract in its own name and that can sue and be sued. 
  • It has counterparts outside the “public sector”, which term is defined as referring to governments, government components, government organizations and government partnerships. 
  • It is an entity normally without transferable ownership interests. 
  • It is an entity organized and operated exclusively for social, educational, professional, religious, health, charitable or any other not-for-profit purpose.
  • Its members, contributors and other resource providers do not, in such capacity, receive any financial return directly from the organization.


How are NFPs registered and regulated?

Are NFPs required to register with a regulatory body?

Charities, which are considered 1 type of private or public sector not-for-profit organization for accounting purposes, must register with Canada Revenue Agency (taxation authority). 

Not-for-Profit Corporations must register with Corporations Canada (federal authority) first and then register provincially in whatever province(s) it is going to operate in.  This means that the requirements, including required filings, may be different in every province.

Please note that public sector NFPOs have varying legislative requirements, which may vary by province.


Is financial information required to be provided to this regulator?

Yes - charities must file a special form T3010 (which is unique to Canada Revenue Agency).

NFP Corporations must prepare annual financial statements in accordance with Canadian GAAP as set out in CPA Canada Handbook- Accounting. There are also additional filing requirements which vary by province.

Public sector not-for-profit organizations have various legislative requirements, which may vary by province.


Does the standard setting body have any role in the regulation of NFPs?

No.


Does the taxation authority have any role in the regulation of NFPs?

Yes, for registered Charities. The CRA (Canada Revenue Agency is the taxation authority) administers tax laws for the Government of Canada and for most provinces and territories, and administers various social and economic benefit and incentive programs delivered through the tax system.

Colombia

How are Not-for-Profit organisations (NFPs) defined in the jurisdiction?

A guide issued by the CTCP, national standard setter, adopts the definition of System of National Accounts, issued by UN. The only term used in the country is Non for Profit Organisations.


How are NFPs registered and regulated?

Are NFPs required to register with a regulatory body?

Some of them yes. But specially most of foundations do not have to do it.


Is financial information required to be provided to this regulator?

Yes.


Does the standard setting body have any role in the regulation of NFPs?

Yes. The accounting regulation is the same for any private entity according the classification in one of three accounting framework groups.


Does the taxation authority have any role in the regulation of NFPs?

For tax purposes only.


France

How are Not-for-Profit organisations (NFPs) defined in the jurisdiction?

There are two primary legal forms of not-for-profit organisations: associations and foundations.

The first article of the Law of 1 July 1901 defines the association contract as "the convention by which two or more persons put in common in a permanent way their knowledge or their activities with an aim other than that of sharing profits”.

According to the article 18 of the July 23, 1987 Development of Philanthropy Act, “a foundation is the deed by which one or several persons decide to assign irrevocably some goods, rights, or resources to the fulfillment of a public interest and not-for-profit purpose.” 

How are NFPs registered and regulated?

Are NFPs required to register with a regulatory body?

An association can be created and function in France without being declared. In this case, it does not exist as a legal entity. This is a rare case.

To get the legal personality, the association must be declared at the territorial office of the Interior Ministry so that it can have a bank account, it can collect membership fees or arrange fundraising, or the members can undertake any legal action or buy or sell on its behalf.

Foundations are required to ask the Interior Ministry for either an official recognition of public interest or an administrative authorisation.

For more information (only in French):
  • the website of the French Interior Ministry
  • the website of French administration.


Does the standard setting body have any role in the regulation of NFPs?

ANC, the French accounting standard setter, is in charge of the accounting standard for NFPs via is accounting regulatory general responsibilities


Does the taxation authority have any role in the regulation of NFPs?

No.

In France, NFPs may be subject to taxation: in this case, they are required to fill in a tax return. However, the tax administration has no role in the regulation of NFPs.


New Zealand

How are Not-for-Profit organisations (NFPs) defined in the jurisdiction?

The term NFP is commonly used and widely understood in New Zealand to refer to non-profit-distributing organisations, such as charities, charitable trusts, certain incorporated societies, etc. 

New Zealand legislation that forms the statutory reporting framework does not formally define not-for-profit (NFP) organisations. However, for a particular sub-set of NFPs, being registered charities, it does contain a definition of “charitable purposes” (defined in Section 5 of the Charities Act 2005). 

Under the accounting standards framework, NFPs are defined as entities that:

  • meet the definition of a public benefit entity (PBE)
  • do not meet the definition of a public sector PBE.  


See section 3 below for the definition of a PBE.

Public sector PBEs are public entities (as defined in the Public Audit Act 2001) and all Offices of Parliament.


Background

The New Zealand financial reporting framework is made up of two frameworks:

  • the statutory reporting framework 
  • the accounting standards framework.

Together, these frameworks form the reporting and regulatory framework.

The statutory reporting framework determines which entities need to prepare general purpose financial reports. The accounting standards framework sets out the accounting standards that those entities need to apply in preparing general purpose financial reports.


How are NFPs registered and regulated?

Are NFPs required to register with a regulatory body?

Not-for-profit entities that wish to receive charitable status need to register with Charities Services.

Not-for-profit entities may also have to register with a regulator (e.g. Companies Office, Financial Market Authority or Reserve Bank of New Zealand) depending on their legal form (i.e. type of entity) and/or their activities.  For example, companies, incorporated societies and charitable trusts need to register with the Companies Office.


Is financial information required to be provided to this regulator?

All registered charities must complete annual reporting to Charities Services. This includes completing an Annual Return and attaching financial statements.
The financial statements need to be prepared in accordance with accounting standards issued by the External Reporting Board (XRB).
Other NFPs (i.e. NFPs that are not registered charities) may need to provide financial information to a regulator depending on their legal form (i.e. type of entity) and/or whether they fall under the remit of a certain regulator.  For example:
  • Currently, there are no statutory reporting requirements for incorporated societies.  However, proposed legislative changes are likely to introduce requirements for these types of entities.
  • NFPs that are “FMC reporting entities”, as defined in the Financial Markets Conduct Act 2013, are required to register their financial statements (e.g. credit unions and NFPs that have issued debt securities to the public).


Does the standard setting body have any role in the regulation of NFPs?

The responsibility of the New Zealand standard setting body (The External Reporting Board and its sub-board, the New Zealand Accounting Standard Board) is to develop and issue accounting standards for entities in New Zealand with requirements to prepare general purpose financial reports. This includes developing and issuing accounting standards for charities registered under the Charities Act 2005 and NFPs with requirements to prepare general purpose financial reports.


Does the taxation authority have any role in the regulation of NFPs?

Registered charities are eligible for exemptions from income tax on all or some income. NFPs that are not registered charities are still subject to income tax.


United Kingdom

How are ot-for-Profit organisations (NFPs) defined in the jurisdiction?

In the UK, the term Not for Profit (NFP) includes a range of different types of organisations. The term can include commercial organisations which trade for social purposes and also those organisations which are part of government. Only certain categories of NFPs are required to comply with specific financial reporting standards and guidance.

NFPs includes charities, which are recognised in UK law as institutions which are established for exclusively charitable purpose for public benefit. Charities are regulated and must comply with specific reporting regulation, whereas other NFPs must comply with accounting rules applicable to either for-profits or public sector entities. The questions within this framework deal exclusively with charities.

Certain categories of NFPs can also exist as charities, including Registered Housing Providers and Further and Higher Education providers. Both these categories of NFPs are separated regulated and must comply with their own specific reporting regulation.


How are NFPs registered and regulated?

Are NFPs required to register with a regulatory body?

Yes.

Generally, when an organisations wishes to become a charity it is required to register with a charity regulator.

There are three separate charity regulators corresponding to the four UK jurisdictions: the Charity Commission for England and Wales (CCEW); the Office of the Scottish Charity Regulator (OSCR); and the Charity Commission for Northern Ireland (CCNI).


Is financial information required to be provided to this regulator?

Yes.

Financial information requires to be submitted to the regulator by registered charities. The type of financial information required depends on the charity’s level of income in the year and the regulator which the charity is registered with. The following provides details of the requirements for each of the four UK jurisdictions:

Charities will be either required to file their accounts and annual report with the regulator, and/or an annual return form which contains basic financial details.


Does the standard setting body have any role in the regulation of NFPs?

No.

Although the SORP-making body is currently chaired by two charity regulators (the Charity Commission for England and Wales (CCEW) and the Office of the Scottish Charity Regulator (OSCR)), they are not a standard setting body. The Charities SORP provides guidance for charities and is not a financial reporting standard.


Does the taxation authority have any role in the regulation of NFPs?

No.

In the UK charities are able to claim tax relief. To do so they are required to register with HM Revenue and Customs (HMRC). However, HMRC have no role in the regulation of charities.


USA

How are not-for-profit organisations (NFPs) defined in the jurisdiction?

In the US, nongovernmental NFPs follow US GAAP as promulgated by the Financial Accounting Standards Board (FASB). A nongovernmental NFP entity is defined as an entity that possesses the following characteristics, in varying degrees, that distinguish it from a business entity:

  • the entity receives contributions of significant amounts of resources from resource providers who do not expect commensurate or proportionate pecuniary return
  • the entity’s operating purposes are other than to provide goods or services at a profit
  • the absence of ownership interests like those of business entities.


NFPs that are part of a state or local governmental unit follow governmental accounting standards promulgated by the Governmental Accounting Standards Board (GASB) and are not part of this definition. Governmental NFPs are comprised primarily of public universities and governmental hospitals.

How are NFPs registered and regulated?

Are NFPs required to register with a regulatory body?

There are various regulators for NFPs. At a federal level, the Internal Revenue Service (IRS) requires informational filings in forms such as Form 990 for all tax-exempt organizations, other than religious organizations, that meet the specific filing requirements set forth by the IRS. Form 990 is optional for religious organizations. States require various filings based on certain thresholds, especially if contributions will be solicited in that state. Requirements for each state can be found on the National Association of State Charity Officials (NASCO) [LINK] website.


Is financial information required to be provided to this regulator?

IRS Form 990 is an informational return which includes certain financial information that may or may not be US GAAP-based. (Non-GAAP bases include cash basis and modified accrual basis.) State filings vary, but may also include audited or reviewed financial statements and/or the Form 990.


Does the standard setting body have any role in the regulation of NFPs?

Neither the FASB nor the GASB play a role in the regulation of NFPs or the enforcement of the related reporting requirements. The FASB and GASB provide financial accounting and reporting standards for nongovernmental and governmental NFPs, respectively, to follow if they are complying with US GAAP.


Does the taxation authority have any role in the regulation of NFPs?

The Internal Revenue Service (IRS) plays a central role in the regulation of NFPs and the enforcement of their corresponding reporting and compliance requirements. The IRS determines whether an entity qualifies for an exemption from federal income tax and monitors an NFP’s continued compliance with the basis on which that exemption was granted, including the avoidance of non-permitted activities. The IRS has the ability to revoke tax-exempt status and/or assess penalties. The Form 990 filing is one of the primary mechanisms used by the IRS to monitor NFPs.