Social Enterprise Accounting versus Traditional Accounting in the Non Profit Sector

1. Social Enterprise Accounting versus Traditional Accounting in the Non Profit Sector A CPAs Perspective

2. What is Social Enterprise Accounting? • A social enterprise accounting system tracks social revenues and expenses in addition to the traditional revenues and expenses tracked in a non-social enterprise accounting system • A key output of a functioning social enterprise accounting system is financial metrics that facilitate the evaluation of an organizations social return on investment • The accumulation of additional key operational metrics is also facilitated through the social enterprise system

3. Thoughts on the Conceptual Framework of Social Enterprise Accounting • Summary thoughts from a “Beancounter’s” perspective • What does it bring to the table that traditional non-profit accounting methods alone do not? • Often considered a supplemental rather than a standalone means to evaluate financial performance

4. How does it Differ from Traditional Nonprofit Accounting? • Traditional nonprofit accounting is driven by the rules prescribed in Generally Accepted Accounting Principles (“GAAP”) • Social enterprise accounting incorporates both the traditional GAAP accounting measurements in addition to supplementing those measurements with additional social enterprise measurements • The result is a presentation that facilitates the analysis of both traditional and social costs and revenues

5. What are Some of the Challenges in Implementing? • Requires identification of social costs and revenues • May require modification to the organization’s existing accounting system or tracking outside of the system via spreadsheets such as Excel • Measurement of inputs, particularly indirect expenses requires effort and judgment

6. What are Some of the Benefits? • Facilitates the measurement of the organization’s social return on investment • Enhances the financial analysis process by incorporating measurement metrics that are unique to nonprofit organizations • Allows the nonprofit to grade itself against similar for profit enterprises by stripping out the identifiable social costs and revenues • Can be useful as a fundraising tool

7. Double Bottom Line Accounting – An Overview • A common method for measuring social costs and revenues • The result is an income statement that sums to a pre-social cost and revenue income (loss) (the first “bottom line”) and then incorporates the social costs and revenues to sum to a post-social cost and revenue income (loss) (the second or double “bottom line”)

8. Methods of Implementation • Online using existing accounting system • Offline using spreadsheets such as Excel and utilizing report writing software to create the double bottom line reports • Offline using spreadsheets such as Excel and a manual process to create the double bottom line reports

9. Online Implementation • Using your existing software • Implementation examples

10. What Questions Do You Have? We’re here to help!

11. Contact Us Armanino McKenna LLP Certified Public Accountants & Consultants p. 925.790.2600 e. info@amllp.com