Definition Non-Profit Organization.
A Non-Profit Organization's purpose is the public benefit. The money earned by fundraising activities must remain at the organization and cannot be distributed to any members. It is supposed to be used for funding new programs as well as defraying any costs. Moreover Non-Profit Organizations are freed from taxation; 'If it is organized and operated exclusively for religious, charitable, scientific, public safety, literary, educational, prevention of cruelty to children or animals, and/or to develop national or international sports' (School, n.d.) purposes it is qualified for tax-exempt. Even though social security tax is optional most of the organizations choose to pay it. Further a Non-Profit Organization has to provide plenty of financing and operating information to the public in order to ensure that the donors' contributions are used effectively. Non-Profit Organizations can be churches, public schools, public clinics and hospitals, legal aid societies, or research institutes (Investopedia, n.d.-b; InvestorsWords, n.d.; School, n.d.).
Definition Internal Control.
Internal Control is a process affected by any person within an organization. It is a tool to ensure 'effectiveness and efficiency of operations, reliability of financial reporting, compliance with applicable laws and regulation, and safeguarding of assets'. (Delaware, n.d.) Internal control cannot guarantee total assurance but it can be improved by applying control to different divisions. Even though all systems of internal control are different, 'core philosophies regarding financial integrity and accounting practices have become standard management practices' (Commission, n.d.; Delaware, n.d.; Investopedia, n.d.-a).
The Sarbanes- Oxley Act.
Sarbanes-Oxley Act of 2002.
The U.S. nonprofit sector consisting of 1.8 million organizations employs 7% of the whole U.S. workforce. They control $8 trillion of assets and generate about $1.
