Accounting in associations
Learn all about payment transactions, mandatory records and accounting reports of associationsThe Register of Non-Profit Organisations is organised and kept by the Ministry of Finance in electronic format. The data from the Register are public and available on the website of the Ministry of Finance in accordance with the provisions of the Act on the Right of Access to Information (Official Gazette 25/13 and 85/15) and the Act on Financial Operations and Accounting of Non-Profit Organisations (Official Gazette 121/14).
Entry in the Register is mandatory for all legal persons that are, in accordance with Article 2 of the Act on Financial Operations and Accounting of Non-Profit Organisations, required to apply the said Act (domestic and foreign associations and their federations, foundations, trusts, institutions, arts organisations, chambers, trade unions, employers’ associations and all other legal persons whose basic aim of establishment and operation is not to make a profit, for which it follows from special regulations that they are of a not-for-profit character).
A non-profit organisation is to be entered in the Register of Non-Profit Organisations on the basis of an application submitted to the Ministry of Finance using the Register of Non-Profit Organisations Form (RNO Form) no later than 60 days after the entry in the main register. Form: is available in electronic format on the website of the Ministry of Finance, or it can be purchased at bookstores. With the Form: does not have to be accompanied by any kind of evidence of establishment for the purposes of entering the association in the Register of Non-Profit Organisations.
The RNO Form in electronic format can be found on the right, in the Documents section.
Giro accountAccording to the regulations governing payment transactions in the country, all legal persons are required to make their payments and collections through a giro account, opened with an organisation authorised to perform payment transactions in the country. Non-profit organisations registered as legal persons have the obligation to operate through giro accounts. According to applicable regulations, the organisations authorised to perform payment transactions are commercial banks, which means that a non-profit organisation has an obligation to open a giro account in a commercial bank.
A legal person may have one or more accounts through which it makes payments and collections. A non-profit organisation can open the following accounts in a commercial bank:
- regular business account - a business entity may have one or more regular business accounts, but only one regular business account and one account for the organisational part of a legal entity may be opened with one bank; if the business entity has more than one regular business account, it must determine which of them will be the account used for executing and recording outstanding payment liabilities
- account of an organisational unit of the business entity - part of the regular business account, opened with the authorised organisation holding the business entity’s regular business account
- special purpose account - an integral part of the regular business account, which the bank opens under the condition that the business entity has a regular business account opened in that bank; the business entity may have more special purpose accounts opened in one bank.
Documentation required to open a regular business account:
- request to open an account
- payment service contract
- decision on the entry in the register of the competent judicial or administrative authority (e.g. the Register of Institutions with the competent commercial court, the Register of Associations with the administrative authority in charge of general administrative affairs, etc.)
- notice on classification issued by the Central Bureau of Statistics
- registration of signatures of persons authorised to manage funds in the account
- written statement as to whether the account being opened is also an account that will be used for executing outstanding payment liabilities.
The funds in the giro account can be managed by the persons who have been authorised to do so by the competent bodies of the non-profit organisation (their signatures have been registered in the so-called signature form).
Maximum cash balanceThe maximum cash balance is the amount of cash that a legal person can keep overnight, without the obligation to deposit to into a giro account. According to the regulations governing the maximum cash balance and the possibility of making cash payments, each non-profit organisation is required to make a decision on its own maximum cash balance.
The decision on the conditions and manner of making cash payments no longer determines the amount of cash that a business entity may keep at the end of the working day (maximum cash balance), unless it deems it necessary, in which case it issues a decision on the maximum cash balance. The business entity is then required to adhere to the maximum cash balance determined this way, and it must deposit the cash in excess of the maximum cash balance amount into its commercial bank account on the same day or the next day at the latest. When making a decision on the amount of the maximum cash balance, the non-profit organisation should take into account the needs for cash in its regular operations, as well as its capacities and conditions for keeping cash.
International payments and collectionsIn accordance with the regulations governing international payment transactions, a non-profit organisation can make payments in foreign currency and receive foreign currency funds from abroad, through an account opened with a commercial bank. Exceptions are those organisations covered by a special regulation preventing them from operating through their own foreign currency account (e.g. certain state budget users).
The funds available to the organisation in the foreign currency account can also be used for payments within the country, by issuing to the commercial bank holding the foreign currency account an order for the sale of foreign currency and payment of the amount to the account held with the commercial bank.
Compensations, offsets and assignmentsLike any other legal or natural person, a non-profit organisation can perform its payments of liabilities and collection of receivables in the country and abroad also by compensation, cession, assignment, or transfer of debt, in addition to direct cash settlement. It is a matter of settlement of liabilities and collection of receivables prescribed by the Civil Obligations Act.
Non-cash settlement payments can be made under the same conditions in relation to foreign persons as well. Obtaining consent from the Croatian National Bank is not required for offset, cession, assignment or assumption of debt in international legal transactions.
Legal persons are not required to record non-cash settlement payments through regular business accounts. Collection and payments made using non-cash methods of settlement are recorded only in organisations’ business records on the basis of authentic instruments (statement, contract, etc.) used for their execution.
Preservation of accounts of a non-profit organisationAccount preservation occurs in cases in which a non-profit organisation fails to meet its monetary obligations in relation to creditors. Accounts can be preserved for a number of reasons, such as when a creditor preserves the account on the basis of an enforcement document, preservation on the basis of a final court judgement, preservation for the purpose of collecting public revenue based on decisions of competent tax authorities, etc. Pursuant to the Payment Transactions Act, a legal person whose account has been preserved is not permitted to make non-cash settlement payments. Acting contrary to the requirements of the regulations on payment transactions will be categorised and sanctioned as an offence.
Maximum cash balance does not apply to legal persons whose accounts have been preserved, but rather they are required to deposit all the money in a giro account opened with an authorised organisation.
Financial plansA non-profit organisation subject to the obligation of double-entry bookkeeping is required to prepare an annual work programme and a financial plan for its implementation.
A financial plan of a non-profit organisation consists of:
- a revenue and expenditure plan
- a borrowing and repayment plan
- explanations of the financial plan.
The financial plan is adopted by the supreme body of the non-profit organisation, i.e. the body authorised to do so by the statute or other general act of the non-profit organisation, no later than 31 December of the current year for the following year.
Redistribution of funds is carried out during the year, by which the amounts pertaining to the items of expenditure of the adopted financial plan are changed in such a way that the amounts of certain items of expenditure are reduced, while other items are increased by the same amount.
Amendments to the financial plan are implemented throughout the year according to the procedure for the adoption of the financial plan.
The legal representative of the non-profit organisation is responsible for the legal and proper execution of the financial plan.
Methodology for the preparation of the financial plan and the amendments to the financial plan, as well as the manner and conditions of execution of the financial plan are prescribed by
The Ordinance on the system of financial management and control, and the preparation and execution of financial plans of non-profit organisations.
Accounting recordsThe bookkeeping of non-profit organisations is based on the principle of double-entry bookkeeping and performed according to the schedule of accounts from the Accounting Plan for Non-Profit Organisations. Non-profit organisations are required to provide in their bookkeeping records individual data by type of revenue and expenditure as well as data on the position of assets, liabilities and own resources.
The following business records are required:
- journal - a book in which business changes are entered in chronological order
- general ledger - systematic accounting records of business changes pertaining to assets, liabilities, own resources, as well as revenue and expenditure
- sub-ledgers - analytical accounting records of business events that are presented in the general ledger in generic terms, and other auxiliary records on the position and changes pertaining to assets and liabilities for the purposes of supervision and monitoring of operations.
Non-profit organisations must keep the following sub-ledgers: ledgers related to non-financial fixed assets, non-financial current assets (inventories of materials, products and goods), and financial assets and liabilities, as well as imprest accounts (journal), records of given and received guarantees and warranties, records pertaining to travel orders and use of service vehicles, sales ledger, purchase ledger, and other supporting records in line with special regulations and their needs.
Special sub-ledgers and analytical records do not have to be kept if the non-profit organisation provides the necessary data using direct disaggregation of general ledger items.
The journal and the general ledger have to be kept for at least 11 years, and the sub-ledgers for at least 7 years. Payrolls and analytical records regarding salaries paid to employees are kept permanently.
Single-entry bookkeepingNon-profit organisations whose asset value in the previous three consecutive years amounted to less than 30.526,24 EUR per year and whose annual income in the previous three consecutive years amounted to less than 30.526,24 EUR per year, are not subject to the obligation of double-entry bookkeeping provided that they adopted the decision on single-entry bookkeeping. The decision is adopted within the deadline for submitting annual financial statements for the previous business year, and it is valid for as long as the non-profit organisation meets the conditions, or until revoked. The organisation notifies the Ministry of Finance about the change in the manner prescribed by Article 35 of the Act on Financial Operations and Accounting of Non-Profit Organisations
Such non-profit organisation is required to keep the following business records:
- imprest accounts
- ledger of accounts receivable and accounts payable - accounts receivable and accounts payable based on the payments received and payments made, including non-cash settlement payments, and pertaining to the business year, are stated in chronological order
- purchase ledger - data on all invoices received from suppliers in the business year are stated in chronological order, regardless of the method of payment (e.g. giro account payments, cash payments, non-cash settlement payments, etc.)
- sales ledger - data on all invoices issued to customers in the business year are stated in chronological order, regardless of the method of collection (e.g. giro account payments, cash payments, non-cash settlement payments, etc.)
- inventory of non-financial fixed assets - encompasses non-produced fixed tangible and intangible assets (land, patents, licenses, etc.), produced fixed assets (buildings, facilities and equipment, vehicles, books, works of art and other display items, perennial crops and livestock units, investments in computer programmes, etc.), precious metals and other stored values and small inventory items.
An association that did not have any business events during the business year, and does not have any data on assets and liabilities in its business records for that period, is required to submit a statement of inactivity for the previous business year to the Ministry of Finance within the deadline for submitting annual financial statements, using the IZJAVA-NPF Form available on the website of the Ministry of Finance
Statement of inactivity.
Report on the spending of budget allocationsAn association that receives funds from public sources, including funds from the state budget and the budget of local and regional self-government units, is required to submit a report on the spending of budget allocations to the competent state administration authority, local and regional self-government unit, or other competent public authority using the prescribed form.
The PROR-POT Form in electronic format can be found on the right, in the Documents section.
Competent authorities and units of local and regional self-government may perform on-the-spot controls regarding the use of funds from the state budget and the budget of local and regional self-government units. According to applicable regulations, on-the-spot controls for individual payments to non-profit organisations above 2.654,45 EUR constitute the standard for a good financial control system (an integral part of the Fiscal Responsibility Statement).
The Minister of Finance establishes the minimum content of reports on the spending of budget allocations, as well as the deadlines for their submission, by an ordinance.
IMPORTANT - Pursuant to the Regulation on the Criteria, Standards and Procedures for Financing and Contracting Programmes and Projects of Public Benefit Interest Implemented by Associations (Official Gazette 26/2015) and the interpretation of the Ministry of Finance of 17 February 2016, in case of a contractual obligation under which an association or another non-profit organisation has to submit a report to the provider of funds from public sources that is more detailed in content than what is required under the prescribed PROR-POT Form, it is not necessary to submit a completed PROR-POT Form.
Obligation to use audit servicesIn accordance with the rules on the audit of financial statements, an association which in the previous year had a total income of between 398.168,43 EUR and 1.327.228,08 EUR is required to disclose its financial statements once a year through a statutory auditor.
In accordance with the rules on the audit of financial statements, an association which in the previous year had a total income of over 1.327.228,08 EUR is required to revise its financial statements once a year through a statutory auditor.
Those associations will be required to publish on their websites the report on the performed audit of the annual financial statements for the previous year, or on the disclosure of those financial statements, by 30 June of the current year.
Publication of annual financial statementsNon-profit organisations operating a double-entry bookkeeping system are required to compile and submit the following:
- for the business year: balance sheet (using the BIL-NPF Form), statement of revenue and expenditure (using the PR-RAS-NPF Form), and notes to the financial statements (they do not have to be submitted, only compiled)
- for the period from 1 January to 30 June: statement of revenue and expenditure (using the BIL-NPF Form).
Pursuant to Article 28 of the Act, financial statements are submitted to the Ministry of Finance, or to another institution authorised by the Ministry of Finance to receive and process financial statements.
The content of financial statements is prescribed. They are submitted in electronic and paper format. Forms in electronic format can be downloaded from the websites of the Ministry of Finance and the Financial Agency (FINA). The financial statements in electronic format are filled in exclusively by using a computer and submitted to FINA in e-format on a CD or USB or via the internet. Forms in paper format can be purchased at bookstores. The aforementioned forms in electronic format can be found on the right, in the Documents section.
Other mandatory recordsDepending on the type and scope of their business activities, non-profit organisations are required to keep records prescribed by special laws governing the conduct of these business activities. The non-profit organisations that are subject to value added tax are thus required to keep purchase ledgers and sales ledgers prescribed by the Ordinance on Value Added Tax (for regular deliveries, for advances and for own consumption).
The organisations that have flows of payments to and from abroad are required to keep records thereof for the purpose of monitoring payments in foreign currencies, as well as all other records set out in the regulations on foreign exchange operations and international payment transactions. The organisations that have employees are required to keep a register of employees, as well as all records related to the salaries paid (tax cards) and to the exercise of other social rights of employees (right to pension insurance, right to sick pay in case of incapacity for work, etc.).
SupervisionThe Ministry of Finance supervises the financial operations, accounting matters and submission of financial statements (financial supervision) of non-profit organisations in accordance with the provisions of the Act on Financial Operations and Accounting of Non-Profit Organisations and other special regulations (such as the Act on Associations).
Supervision concerns the following:
- lawful obtaining of funds from public and other sources
- financial management
- determining whether the funds are being used to achieve the objectives for which the non-profit organisation was established.
Misdemeanour and criminal complaintsThe Act introduces fines for a number of offences, so an association will be fined in the following cases:
- if it does not draft and/or adopt financial plans
- if it does not apply double-entry bookkeeping
- if it does not keep a journal, general ledger and sub-ledgers / if it does not keep a ledger of accounts receivable and accounts payable, imprest accounts, purchase ledger, sales ledger and inventory of non-financial fixed assets for the prescribed periods of time
- if it does not keep accounting documents for the prescribed periods of time
- if it does not compile and submit financial statements in accordance with the Act
- if it does not publish on its website the report on the performed audit of the annual financial statements for the previous year, or on the disclosure of those financial statements
- if it does not register in the Register of Non-Profit Organisations
- if it does not report changes regarding the data entered in the Register of Non-Profit Organisations. Fines charged to associations vary according to the type of bookkeeping: an association that operates a double-entry bookkeeping system: from 663,61 EUR to 26.544,56 EUR, and for the legal representative of the association from 663,61 EUR to 2.654,45 EUR
- an association that operates a single-entry bookkeeping system: from 132,72 EUR to 6.636,14 eura, and for the legal representative of the association from 132,72 EUR to 1.327,23 EUR.