What is Nepal Accounting Standard for Not for Profit Organizations (NAS for NPOs), and Why Does It Matter for Non Profits in Nepal?

Non-Profit Organizations (NPOs) play a crucial role in Nepal’s development sector, managing funds from various donors, government agencies, and international organizations.

Key Highlights

• NAS for NPOs is a mandatory accounting standard developed by the Accounting Standards Board (ASB), Nepal, tailored for non-profit organizations.
   
• Effective from 16 July 2023 for INGOs and from 16 July 2024 for NGOs, this standard mandates accrual-based accounting, standardized reporting formats, and clear fund classifications.
   
• Designed to promote transparency, accountability, and trust, it replaces inconsistent practices previously followed by NPOs.
   
• NGOs must update accounting policies before FY 2024/25 (Nepali FY 2081/82) to comply.
   
• Adopting NAS boosts donor confidence, ensures regulatory compliance, and simplifies audits.
   

 

A New Era of Accountability for Nonprofits in Nepal

Non-profit organizations (NPOs) in Nepal have long played a pivotal role in social development, disaster response, education, health, and poverty alleviation. Whether international NGOs (INGOs) or local grassroots NGOs, these organizations rely heavily on donor funding, grants, and government collaboration.

But here’s the real deal: financial mismanagement, inconsistent reporting, and weak accountability have plagued the sector for years. That’s where Nepal Accounting Standard for Not-for-Profit Organizations (NAS for NPOs) steps in.

In this blog, we’ll break down:

• What NAS for NPOs really is
   
• Why it’s important (especially now!)
   
• How it changes the game for NGOs and INGOs in Nepal
   
• Actionable steps to stay compliant and future-ready
   

Let’s dive in. 

 

What Is NAS for NPOs?

 

The Nepal Accounting Standard for Not-for-Profit Organizations (NAS for NPOs) is a nationally accepted accounting framework tailored specifically for nonprofits. It’s not just a tweaked version of commercial standards like IFRS or GAAP. It’s custom-built for the unique needs of organizations that serve communities rather than chase profits.

Core Objectives of NAS for NPOs:

• Promote accurate and standardized financial reporting
   
• Enable transparent fund management
   
• Ensure donor and stakeholder confidence
   
• Provide comparability across nonprofit entities
   
• Replace cash-based systems with accrual-based accounting
   

This standard now applies to:

• NGOs and INGOs
   
• Charitable trusts and foundations
   
• Non-profit associations
   
• Profit-not-distributing companies
   
• Any entity set up with a social service motive instead of profit
   

 

 

Why Was NAS for NPOs Introduced?

Before NAS came into the picture, Nepal’s nonprofit sector was a mixed bag. Some organizations used cash accounting, others relied on IFRS, and a few winged it with manual records. The lack of a unified system caused issues such as:

• Non-comparable financial statements
   
• Inaccurate grant usage tracking
   
• Audit difficulties and compliance risks
   
• Erosion of donor trust
   

So, what changed?

In 2018, the Accounting Standards Board (ASB) Nepal developed and released NAS for NPOs. But starting from 16 July 2023, implementation was made mandatory for INGOs, and will be mandatory for all NGOs from 16 July 2024.

 

NAS for NPOs: Compliance Timeline

 

 

Prepare now or risk non-compliance.

 

Key Features of NAS for NPOs

Let’s decode what this new standard actually requires.

1️⃣ Accrual-Based Accounting

Cash accounting is out. Under NAS:

• Transactions are recorded when they occur, not when cash changes hands.
   
• Requires double-entry bookkeeping for every transaction.
   
• More accurate reflection of financial health and obligations.
   

2️⃣ Standardized Financial Statements

Organizations must prepare the following:

• Statement of Financial Position (Balance Sheet)
   
• Statement of Income and Expenditure
   
• Statement of Changes in Reserves
   
• Statement of Cash Flows
   
• Statement of Accounting Policies
   
• Notes to Financial Statements
   

 Additionally, for donor-funded projects, the following two reports are mandatory:

• Fund Accountability Statement
   
• Statement of Budget vs Actual (Variance Report)
   

3️⃣ Fund Classification: Restricted vs Unrestricted

• Restricted Funds: Donations meant for specific projects (e.g., earthquake relief).
   
• Unrestricted Funds: Can be used for general operating expenses.
   

Proper fund classification ensures clarity and avoids fund misuse.

4️⃣ Recognition of Grants and Donations

Under NAS:

• Donations are recognized based on conditions, not just cash inflow.
   
• If a grant is conditional, it’s recognized as income only once the condition is fulfilled.
   

This approach improves matching of income to activities.

5️⃣ Disclosure Requirements

More transparency is expected:

• NGOs must disclose their accounting policies, grant utilization, fund restrictions, and project expenditures.
   
• Enhances stakeholder confidence and audit readiness.
   

How NAS for NPOs Impacts NGOs in Nepal

✅ Boost in Donor Confidence

With transparent reporting, donors can see where their money is going. This builds long-term relationships and opens doors for future funding.

✅ Enhanced Financial Management

Standardized systems help NGOs:

• Track multiple projects and budgets accurately
   
• Identify under/overspending
   
• Make data-driven decisions
   

✅ Simplified Audits

Auditors can easily verify financials due to:

• Clear fund classifications
   
• Consistent documentation
   
• Predefined reporting templates
   

✅ Regulatory Compliance

Staying compliant ensures:

• Renewal of registration/licenses
   
• Smooth interaction with Social Welfare Council and other regulators
   
• Avoidance of penalties and blacklisting
   

 

Challenges to Expect (And How to Tackle Them)

 

 

Practical Steps for NGOs to Get NAS-Ready

 

1. Conduct a NAS Compliance Audit
   Identify current gaps in your reporting system.
    
2. Update Financial Policies
   Shift from cash-based to accrual-based frameworks.
    
3. Train Your Team
   Organize workshops or hire consultants to train your finance personnel.
    
4. Adopt NAS-Compliant Software
   Use cloud-based platforms like SaralBooks that support project-level reporting and fund tracking.
    
5. Engage Auditors Early
   Bring in your auditor to vet your accounting transition plan.
    

 

Why NAS for NPOs Is a Game-Changer for Nepal

 

“Transparency breeds trust, and trust attracts funding.”

With over 50,000 NGOs registered in Nepal, and billions in aid flowing through INGOs annually, Nepal’s social sector needed an upgrade. NAS for NPOs is that upgrade.

It aligns Nepal with international best practices, and:

• Reduces fraud risk
   
• Creates a level playing field
   
• Attracts foreign donors who require transparent documentation
   
• Builds stronger governance for the entire nonprofit sector
   

 

Final Thoughts: Is Your NGO NAS-Ready?

 

July 2024 isn’t far away. If your organization hasn’t started the transition, now is the time. Whether you're a small local NGO or a major INGO, NAS compliance isn’t optional—it’s essential for survival and growth in Nepal's new nonprofit landscape.

 

Need Help Getting Compliant?

At SaralBooks, we help nonprofits:

• Transition to NAS-compliant accounting
   
• Set up project-level reporting
   
• Automate fund classification
   
• Get audit-ready with confidence
   

👉 Contact SaralBooks today for a free consultation and take the first step toward NAS compliance.

 

 

 

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Posted 1 month ago