Accounting for NGOs in Switzerland: Special Requirements and Standards

Non-profit organizations across Switzerland contribute tremendously through social services, humanitarian aid, and advocacy work. However, given their reliance on public donations, tax exemptions, and donor trust, these organizations face intense scrutiny and complex legal, tax, and financial obligations that often exceed those of for-profit companies.

This comprehensive guide explores the key aspects of Swiss NGO accounting, including legal audit thresholds, SWISS GAAP FER 21 reporting standards, fund accounting principles, and effective grant management practices to ensure compliance and maintain transparency.

All NGOs in Switzerland must comply with the general accounting requirements set out in the Swiss Code of Obligations (CO, Art. 957–963b), as well as additional provisions in the Swiss Civil Code (ZGB) for associations (Art. 69b) and foundations (Art. 83b). The exact obligations depend on the legal form, size, and whether the NGO engages in public fundraising.

Associations (Art. 69 ZGB)

Associations must maintain proper accounts that present the financial position, results, and cash flows in accordance with the CO (Art. 69a ZGB).

An ordinary audit is required if the association exceeds at least two of the following thresholds in two consecutive business years (Art. 69b ZGB):

1. Total assets of CHF 10 million
2. Annual turnover of CHF 20 million
3. Average annual total of 50 full-time employees

A limited audit must be conducted if:

• A member with personal liability or an obligation to provide further capital requests it (Art. 69b para. 2 ZGB), or
• The statutes or General Assembly (GA) decide so.

In all other cases, the GA and statutes are free to set audit arrangements (Art. 69b para. 4 ZGB), and any association member can propose more extensive audit arrangements at the GA.

Foundations (Art. 83 ZGB)

All foundations must prepare annual accounts in accordance with the CO, whereby the provisions on commercial bookkeeping and accounting apply mutatis mutandis (Art. 83a ZGB).

As a rule, the board of trustees of a foundation must appoint external auditors (Art. 83b para. 1 ZGB). However, the supervisory authority can exempt smaller foundations from this duty, and the Federal Council determines the conditions for such an exemption. This typically applies to foundations without public fundraising and below certain size limits.

If no exemption applies, the audit type (ordinary or limited) is determined using the CO thresholds for public limited companies  (Art. 727 CO):

An ordinary audit is required if at least two of the following are exceeded in two consecutive years:

1. Total assets of CHF 20 million
2. Annual turnover of CHF 40 million
3. An average of 250 full-time employees

Below these thresholds, a limited audit must be conducted. Even if a foundation only meets the limited audit criteria, the supervisory authority can require a full audit if it considers it necessary for a reliable assessment (Art. 83b para 4. ZGB).

Rules that apply to all NGOs

Regardless of whether your NGO is an association or a foundation, you must:

• Ensure financial statements are complete, accurate, and meet CO requirements
• Keep accounting records and supporting documents for at least 10 years
• Keep accounts in Swiss francs or your functional currency (if using another currency, you must disclose CHF equivalents)

Key takeaway

For associations, the CHF 10 m / CHF 20 m / 50 FTE thresholds in the ZGB determine when a full audit is needed. For foundations, the default is that an audit is always required unless you qualify for an exemption, and if not, the CHF 20 m / CHF 40 m / 250 FTE CO thresholds decide whether it’s a full or limited audit.

Knowing exactly where your NGO sits in this framework is key to staying compliant. Nexova provides comprehensive advice and support to ensure your organization meets all accounting and audit requirements while freeing up the time and resources to focus on your core mission.

FER 21 establishes clear distinctions between different types of capital to ensure transparency in the management of restricted and unrestricted funds.

The two primary equity categories are:

1. Fund capital

Fund capital comprises resources where third parties have imposed specific usage restrictions (FER 21 para. 8). According to FER 21, purpose-bound funds arise from:

• Explicit donor designation: Direct specification by the contributor (e.g., "this donation is for disaster relief in Haiti")
• Implied restriction from circumstances: When fundraising appeals create implicit purpose binding (e.g., funds raised during an "Emergency Earthquake Relief" campaign)

2.      Organizational capital

Organizational capital represents resources under the organization's own control, structured into three categories (FER 21 para. 10):

1. Basic capital: Founding capital or permanent organizational equity providing foundational stability
2. Restricted capital: Resources that the organization itself has internally designated for specific purpose (e.g. equipment replacement reserve) (FER 21 para. 9)
3. Free capital: Completely unrestricted resources available for any charitable purpose, providing maximum operational flexibility

Unlike fund capital restrictions imposed by external donors, organizational capital designations are self-imposed and can be modified by the organization's governing body.

Practical fund accounting example

A foundation donates CHF 75,000 to an educational outreach NGO to support a youth education program in Zurich.

• This is recorded as restricted fund capital and tracked separately
• If CHF 30,000 is used for workshop materials and instructor fees, that amount is released from the fund and recorded in the income statement
• The remaining CHF 45,000 is maintained as restricted fund capital for which there must be a clear audit trail

Required reporting elements:

• Statement of changes in capital showing all fund and organizational capital movements (FER 21 para. 17)
• Clear indication of each fund's purpose in accompanying notes (FER 21 para. 18)
• Individual disclosure and justification of transfers between funds (FER 21 para. 19)

Swiss NGOs face specific financial management challenges stemming from limited resources, evolving donor expectations, and FER 21 complexity. Understanding these challenges helps organizations proactively address potential issues.

Challenge 1: Fund misclassification

Problem: Incorrect donation recording undermines compliance and donor trust.

Solution: Implement clear internal guidelines, provide comprehensive FER 21 staff training, and review fundraising communications for clarity.

Challenge 2: Inconsistent donor reporting

Problem: Misalignment between donor reports and financial statements creates confusion.

Solution: Align accounting structures with donor requirements and involve auditors early in the reporting process.

Challenge 3: Inadequate internal controls

Problem: Limited segregation of duties increases risk of errors and fraud.

Solution: Implement basic controls including approval hierarchies, access restrictions, and regular reconciliation procedures.

Challenge 4: Knowledge management

Problem: Staff turnover results in loss of institutional accounting knowledge and new staff often aren’t trained on FER 21 standards.

Solution: Consider external fiduciary support or invest in continuous training and comprehensive documentation.

Challenge 5: Technology integration

Problem: Manual processes and poor integration across systems increase risk of errors.

Solution: Implement cloud-based accounting solutions supporting FER 21 and multi-project management with donor platform integration.