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Not-for-profit activities make up a significant portion of the U.S. economy. All not-for-profit organizations provide services without the intention of realizing a profit. Such organizations are generally financed by contributions, earnings from endowments or other investments, charges for services, and government grants.
The AICPA defines a not-for-profit organization as an entity that (1) has significant contributions from resource providers who do not expect to get anything in return, (2) has an operating purpose other than to make a profit, and (3) has no owners.
Examples of not-for-profits include voluntary health and welfare organizations (VHWO) or human service organizations such as the American Cancer Society, American Red Cross, Girl Scouts, and Boy Scouts. Other not-for-profits have charitable, educational, or scientific pur-poses and can be classified as mutual not-for-profits. Examples are libraries and museums, performing arts and other cultural organizations, private elementary and secondary schools, private colleges and universities, not-for-profit health care organizations, public broadcasting stations, religious organizations, research and scientific organizations, cemetery organizations, civic and fraternal organizations, labor unions, political parties, private and community foundations, professional associations, social and country clubs, trade associations, and zoological and botanical societies.
External users of a not-for-profit organization’s financial statements have common interests in assessing (1) its services and ability to continue those services, (2) its creditworthiness, and (3) how its managers discharge their stewardship responsibilities and perform in other aspects.
