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Definition of Nonprofit Organization

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This lack of attention to the non-profit sector makes the actors engaged in these fields operate without sufficient guidance, and often causes organizations operating in the not-for-profit sector to become inefficient. They tend to be less concerned about the use of available funds. Even though this is quite important, because the funds are the result of donations from donors, who of course will expect their funds to be used properly for non-profit purposes. Inefficient management will have the effect of distrust for these donors which in turn can reduce donations that can be received in the future. And a reduction in donations means a decrease 5 ability to achieve organizational goals. This shows that the not-for-profit sector, even though it is not moving for profit, must still move efficiently. In addition, this non-profit sector is also often not managed properly so that it cannot achieve the desired growth.

This is where the important role of the management control system in nonprofit organizations. With a good management control system, it is hoped that non-profit organizations can maintain their existence and carry out their activities efficiently so that they can achieve the vision, mission and goals that have been set. This management control system is applied to the activities of strategy formulation, management control and task control in non-profit organizations, so as to achieve harmonization of objectives from all parts of the non-profit organization. This is important for the achievement of the objectives that have been implemented. So, this paper was made with the aim of knowing how to practice a good management control system in a non-profit organization in order to ensure that the organization can run to achieve its goals properly.

There are several definitions of not-for-profit organizations. Anheir (2005) says that there are several definitions of a non-profit organization when viewed from his point of view. These definitions include: ️ Legal definition Based on Internal Revenue Code sections 501 , a non-profit organization is an organization that cannot distribute its assets or income to or for the benefit of its employees, including its leaders and members, for services or products provided. ️ Definitions by function Some countries by law regulate the functions of a not-for-profit organization. But in general, it can be said that a non-profit organization is an organization that functions for the purpose or interest of the public/community at large. For example, it is aimed at the public good in material, spiritual, and moral terms; generosity in supporting and assisting those in need and unable to take care of themselves; and many more. ️ Definition based on economics From an economic point of view, a non-profit organization is an organization that has the largest share of profits through voluntary contributions and financial contributions from members and supporters, not through the sale of its services and products. This means that the proportion of contributions and voluntary contributions provides a larger portion of income when compared to the sale of products or services. ️ Definition based on operational structure Based on its operational structure, Salomon and Anheier (1992) require five criteria so that an organization can be said to be a non-profit organization, namely: 8 organized, private, manages itself, does not distribute income to its members, and has voluntary participation. Based on the definitions that have been put forward, non-profit organizations will have differences when compared to business organizations in general. Of course this difference will result in different management processes, including different management control systems.

This illustrates the importance of knowing the characteristics of non-profit organizations. Anthony and Govindarajan (2007) say that there are several characteristics that are only found in non-profit organizations, namely: ️ No profit calculation Unlike business companies in general which are more concerned with the profits that can be obtained, non-profit organizations usually pay more attention to whether or not the goals of the organization are achieved. ️ Contributed capital In contrast to companies in general, which are funded by debt and the sale of shares, non-profit organizations use voluntary contribution capital from members and donors.

This also makes financial reporting carried out by non-profit organizations into two parts, namely financial reporting related to their operational activities (B/S, I/S, and cash flow) and financial reporting related to its contribution capital, which is related to the entry and exit of contribution funds and reports on the use of these funds. ️ Use ” fund accounting” Another thing that makes a difference is that non-profit organizations separate accounts based on funding and allocation. ️ Different management Not-for-profit organizations are usually led by board of trustee who are often unpaid and do not have sufficient knowledge in the field.

This often makes the control system that is carried out weaker when compared to the control system that exists in business companies in general. In addition to the characters described above, non-profit organizations also have a character that is more labor-intensive than capital-intensive. This happens because of 9 some of the obstacles that limit the funds that can be obtained by nonprofit organizations, so they must be able to better empower the human resources they have. This special characteristic then distinguishes the control system that can be used in non-profit organizations. Therefore, it is important for us to know in advance the characteristics of non-profit organizations in general before deciding on the use of management control systems that will be used in non-profit organizations.

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