A nonprofit organization is an entity established and dedicated to furthering or advocating for the social cause that provides a public benefit. Public sector institution, on the other hand, is an entity created and exists for purposes of managing policies and operational requirements that enable the government to achieve its goals and objectives, especially on public governance. Nonprofit and public sector organizations share a set of similarities and at the same time, display a sense of notable differences. A commonality between the two types of organizations is the characteristic of both of them having well-defined missions and goals that govern their practice. Like commercial entities, nonprofit and public sector institutions incorporate formal corporate structure that includes boards, management, and various levels of staff that enable smooth and efficient operations of the organization. Additionally, both the two types of organizations work to satisfy the needs and expectations of a diverse range of stakeholders.
The two types of organizations exhibit certain differences that usually narrow down to accounting standards and practice. For instance, although they both must adhere to principles and guidelines of Generally Accepted Accounting Principles (GAAP), there are additional standards that differ from each other. A good example is the Government Accounting Standards Board (GASB) that applies to public sector institutions and the Financial Accounting Standards Board (FASB) that applies to nonprofit organizations. Statement of cash flows and statement of activities are consistent in the two organizations. However, although it technically portrays the same information, the third financial statement used for financial reporting differ; it is referred to as the statement of net position for government agencies and statement of financial position for nonprofit organizations.
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