Essential Insights into NGO Accounting and Compliance in China

China will implement an updated accounting system for non-profit organizations starting January 1, 2026, to standardize financial reporting and enhance management practices. The changes address evolving challenges in the NGO sector, ensuring regulatory compliance and effective donor fund management.

China has recently amended its accounting system for non-governmental non-profit organizations, with the new provisions set to take effect on January 1, 2026. As the number of NGOs continues to grow in the country, understanding the existing and updated requirements is crucial for organizations seeking to maintain regulatory compliance and effectively manage donor funds.

On December 20, 2024, the Ministry of Finance (MOF) unveiled the updated Accounting System for Non-governmental Non-profit Organizations (hereinafter, the “NGO Accounting System”), set to take effect on January 1, 2026.

Among others, the revision of the NGO Accounting System is designed to standardize financial reporting, enhance management practices, and provide a regulatory framework to support the high-quality development of non-governmental organizations (NGOs). As the sector expands and diversifies, new challenges have arisen, such as increasingly varied donation methods, rising foreign investments, and the growing number of NGOs being established. In response to these developments, the updated system aims to address emerging accounting issues and reflect the evolving nature of the sector.

In this article, we provide an overview of the current accounting and compliance landscape for NGOs in China, explore the key provisions of the new NGO Accounting System, and highlight the significant changes introduced in the revision.

In China, NGOs encompass a wide range of organizations, including social service agencies, foundations, nonprofit schools, medical institutions, religious organizations (e.g., Taoist temples, mosques, churches), and various other social service providers. Much like their counterparts globally, NGOs play a crucial role in addressing social, environmental, and economic challenges. These entities, typically nonprofit, are dedicated to causes such as education, healthcare, environmental protection, and humanitarian aid.

China’s legal framework for NGOs is multifaceted, governed by several key laws and regulations:

Accounting for NGOs requires meticulous tracking of funds and compliance with specific regulations and reporting standards to ensure transparency and accountability to donors, stakeholders, and the public. Unlike the Accounting System for Business Enterprises (ASBE, commonly referred to as CAS), the Accounting System for NGOs imposes unique requirements for handling various types of donations, including asset and labor donations, as well as the management of entrusted agency business, where the NGO acts as an intermediary to transfer assets to a designated beneficiary. The system also differentiates between restricted and unrestricted net assets, outlines specific classifications for the costs associated with business activities, and includes additional disclosure requirements in the financial notes. As more NGOs establish a presence in China, these standards have gained increased attention in recent years.

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