Nonprofits

MSM 515

Week 2 HW

Page 18 1-2,1-6,1-8, 1-10

1-2

The five environmental differences between governments and for-profit businesses are organizational purposes, sources of revenues, potential for longevity, relationship with stakeholders, and the role of the budget. The description of organizational purposes is that governments exist for the well-being by providing public services to the citizens. This occurs whether or not a profit is earned. Both types of organizations must report to its stakeholders to help them make decisions. Governments have creditors who are interested in making sure the government is spending their money wisely or help them obtain grants for more funding. Government organizations do have to report more information than for-profit businesses do.

Sources of revenue for for-profits organizations come from sales while sources of revenue for government organizations come from taxes. People willingly pay for the sales while they are basically forced to pay taxes or they will get penalized.

Potential for longevity refers to the fact that governments will rarely go out of business because of their ability to tax. Because of this, governments organizations may not depreciate some of their capital assets but instead expense improvements that extend an asset’s useful life.

Relationships with stakeholders are different from for-profits from governmental organizations. Citizens and businesses are required to pay their taxes and then the government uses these funds by demonstrating accountability for these public funds. On the other hand, for-profits can use their funds however they see fit. Governments also receive resources that are typically restricted to being used for a particular purpose and then they use fund accounting.

The role of the budget is to plan and control purposes of the organization. For-profits do not allow creditors or investors to see their budgets and can often be modified to fit the needs of the...