Use of Funds by International Quasi-Governmental Organizations

ABSTRACT This study examines the types of funds and fund categories used by UN-related organizations in their financial reports. The subject is timely, given that the UN General Assembly approved revised accounting standards for its agencies in October 1996. Requests for financial reports were sent to fifteen major UN agencies. Seven financial reports were received and analyzed for this study, including some well-known agencies such as the World Health Organization and UNESCO. Analysis of the seven reports received revealed a wide variety of fund types in use. The range was from no grouping of funds to seven groups in one report, along with a number of differences in fund names and types. UN accounting standards do not spell out fund types required, so the variety we encountered is not surprising. Comparability would be enhanced if future UN standards can provide more guidance in fund reporting. INTRODUCTION Fund accounting is used by many different governmental and nonprofit organizations to promote accountability and to meet legal requirements. A fund is defined by the Governmental Accounting Standards Board (GASB) as ...a fiscal and accounting entity with a self-balancing set of accounts...which are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations. Governmental and nonprofit organizations (G&NP) usually have as an operating objective providing some type of service, whereas for business organizations, the primary purpose is to make a profit. Business organizations rely on net income as a key measure of their operating success. GN&P must look to other reporting measures to demonstrate their successful operations. Fund accounting is one reporting tool that helps demonstrate accountability and legal compliance. In the United States, GASB sets accounting standards for state and local governments and the Financial Accounting Standards Board (FASB) is responsible for nonprofit organizations. GASB has issued standards related to fund types used by state and local governments. Although FASB's standards do not address fund accounting, fund accounting is used by many nonprofit organizations. The American Institute of Certified Public Accountants (AICPA) has addressed the types and nature of such funds in their Industry Audit Guides. The United Nations System contains a wide range of separate but related and affiliated organizations. These separate organizations issue financial statements based on their own organization's financial policies and regulations. In an effort to harmonize financial reporting by these organizations, a common set of accounting standards was adopted in 1996. These United Nations (UN) accounting standards are broadly based on International Accounting Standards (IAS). However, the UN standards contain several departures from the IAS. In addition, the UN standards do not address several accounting areas. For example, fund definition and fund types are not addressed by the standards. The purpose of this study is to determine the types of funds used by UN related organizations and how funds are grouped together for financial reporting purposes. The findings of this study may be useful in providing a foundation to further explore harmonization of financial reporting for international governmental and nonprofit organizations. UN RELATED ORGANIZATIONS The UN and its related organizations are international nonprofit organizations. However, these organizations have many similar characteristics with governmental organizations. Chase (1998) explored the similarities in financial reporting between UN organizations and nonprofit and local government in the United States. For the most part, UN organizations have member states (nations) that govern the organizations. Most UN organizations receive their operating support through an assessment process of member states and use an appropriation process to allocate funds. …