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Accounting

Accounting for NGOs in Moldova: accounting specifics for associations, PAs and foundations

Accounting for a non-governmental organization in Moldova differs from accounting for an ordinary commercial company. NGOs have a different purpose, different sources of funding, and a specific approach to recognizing income and expenses. While an LLC usually structures its accounting around sales, costs, and profit, an association, public association or foundation focuses primarily on earmarked funding, grants, donations, membership fees, projects, and evidence that funds have been used for their intended purpose.

In practice, this is where errors often occur. An organization receives a grant but does not separate expenses by project. It collects donations but does not document their intended purpose. It pays salaries from a project budget but does not link them to the approved budget. As a result, even when an organization operates in good faith, risks may arise in relation to donors, tax authorities or the organization’s members.

In this article, we explain how accounting for NGOs in Moldova works in 2026, what accounting specifics associations, public associations, PAs and foundations should take into account, what reports must be submitted, and why financial transparency is particularly important for the non-profit sector.

What is considered an NGO in Moldova

A non-profit organization is a legal entity whose activity is not aimed at generating and distributing profit among founders, members, employees or other related persons.
This does not mean that an NGO cannot receive income at all. It may receive funding, grants, donations, membership fees, income from events, or even carry out economic activities if they are connected with its statutory objectives.

In Moldova, non-profit organizations may be established in various legal forms. In practice, the most common include:

  • associations;
  • public associations / PAs;
  • foundations;
  • private institutions;
  • other forms of non-profit organizations provided for by specific legislation.

The main difference between an NGO and a commercial company is not the absence of money, but the purpose for which the money is used. Funds must be directed toward the organization’s statutory mission, projects, programs, public-benefit objectives or other non-commercial purposes.

How NGO accounting differs from accounting for a commercial company

NGO accounting is structured not around profit for owners, but around sources of funding and how those funds are used.

For a commercial company, the main question is: how much did the company earn, what expenses did it incur, and what financial result did it achieve?

For an NGO, the question is different: what funds were received, for what purpose were they provided, how were they used, and can the organization prove that the funds were spent according to their intended purpose?

This is why the following items are particularly important in NGO accounting:

  • grants;
  • donations;
  • membership fees;
  • earmarked funding;
  • project budgets;
  • program-related expenses;
  • administrative expenses;
  • balances of unused funds;
  • obligations toward donors;
  • project reporting.

If an organization receives funding for a specific project, these funds should not be mixed with other inflows without clear analytical accounting. The accounting system should show how much was received for each project, how much was used, which budget categories the funds were spent on, and what balance remained as of the reporting date.

Main sources of NGO funding

An NGO in Moldova may have several sources of income. Each source must be correctly classified in the accounting records.

The most common sources include:

  • membership fees;
  • admission fees;
  • donations from individuals and legal entities;
  • grants from international organizations;
  • funding from central or local public authorities;
  • sponsorship;
  • income from charitable events;
  • income from economic activities related to statutory objectives;
  • interest, foreign exchange differences and other financial income.

Each source may have its own conditions of use. For example, membership fees may be used for the organization’s general activities, while a grant may only be used for a specific project and within the approved budget. A donation may be unrestricted or earmarked if the donor has specified a particular purpose.

Therefore, it is important for an NGO not only to record the receipt of funds, but also to correctly determine their economic substance.

Earmarked funding: a key element of NGO accounting

Earmarked funding is one of the central elements of NGO accounting. It refers to funds received for the implementation of a specific program, project, mission or event.

For example, an organization may receive a grant for an educational project, a human rights campaign, an environmental initiative, support for socially vulnerable groups or a research project. In such cases, the accounting records must demonstrate that the funds were actually used in accordance with the approved objectives.

For this purpose, accounting by project and budget category is essential. Ideally, for each project, the organization should be able to quickly identify:

  • the amount of funding received;
  • the date the funds were received;
  • the donor or funding source;
  • permitted expense categories;
  • actual expenses;
  • the remaining balance;
  • reporting obligations toward the donor.

If an organization manages several projects simultaneously, the absence of analytical accounting can quickly create confusion. An expense may be legitimate in itself, but if it is allocated to the wrong project or does not comply with the grant budget, the donor may raise questions.

Grants and donations: how to avoid accounting errors

Grants and donations are often perceived as “tax-free income,” but this approach is overly simplistic. An NGO must be able to prove not only that it received the funds, but also their purpose, the conditions of use, and their connection with the organization’s statutory activities.

For proper accounting of grants and donations, organizations should retain:

  • funding agreements;
  • donor letters or decisions;
  • payment documents;
  • project budgets;
  • invoices, acceptance certificates and other expense documents;
  • internal organizational decisions;
  • reports submitted to donors;
  • evidence that project activities were carried out.

If a donation is received without a designated purpose, the organization should document how it will be used within its statutory activities. If the donor specifies a purpose, the funds must be used accordingly.

Special attention should be paid to cash expenses, representation expenses, business trips, equipment purchases and payments to individuals. These transactions most often require additional supporting documentation.

Can an NGO carry out economic activities

An NGO is not established for the purpose of distributing profit, but it may carry out economic activities if they do not contradict the law and are connected with the organization’s statutory objectives.

For example, an association may organize training events, publish methodological materials, provide services related to its mission, or implement projects that involve paid participation. However, income from such activities must not be distributed among founders or members of the organization. It must be directed toward the organization’s objectives.

From an accounting perspective, economic activities should preferably be separated from grant-funded and project activities. This helps determine income, expenses and tax consequences correctly and prevents commercial and non-commercial cash flows from being mixed.

If an NGO begins to carry out economic activities on a regular basis, it is advisable to assess tax obligations, VAT risks, contract arrangements and the potential impact of such activities on the organization’s status in advance.
For questions regarding the tax regime and potential risks, you can contact FlagMAN-D specialists for tax advisory services in Moldova.

NGO taxation: when income may be exempt from tax

NGOs in Moldova may benefit from a special tax treatment if they meet the conditions established by the Tax Code. It is important to understand that NGO status itself does not automatically exempt all income from taxation in every situation.

For non-profit organizations, the key rule is not the application of a separate reduced tax rate, but the possibility of income tax exemption. If an organization complies with the requirements of Article 52 of the Tax Code, uses its funds within its statutory objectives and does not distribute income for the benefit of founders, members of the organization, employees or related persons, the respective income may be exempt from income tax.

However, if an NGO receives income from activities unrelated to its statutory objectives, uses funds for purposes other than those intended, or breaches the conditions for exemption, tax liabilities may arise. In such cases, income may be taxed under the general rules applicable to the relevant type of income or activity.

It is also important to note that exemption from income tax does not eliminate other tax obligations. If an NGO pays salaries, fees, remuneration or other income to individuals, it is required to calculate, withhold and transfer the applicable payroll taxes, social security contributions, mandatory health insurance premiums and other payments required by law. An NGO may also have VAT obligations if it carries out transactions subject to the relevant taxation rules.

Therefore, a non-profit organization should maintain accounting records that make it possible to confirm at any time:

  • the source of funds received;
  • the intended purpose of the funds;
  • the connection between expenses and statutory activities;
  • the absence of income distribution for the benefit of private individuals;
  • compliance with agreements and legal requirements;
  • correct taxation of payments to employees, consultants and contractors.
More information about tax compliance and the consequences of missing reporting deadlines is available in the FlagMAN-D article: When do I need to submit tax reports, and what happens if I miss the deadline?.

Salaries, contracts and payments to individuals

Many NGOs work with small teams, project-based specialists, volunteers, consultants and external experts. This creates additional accounting considerations.

If a person works as an employee, an employment contract must be concluded, salary must be calculated, taxes and contributions withheld, and HR documentation maintained. If a specialist is engaged under a civil law contract, it is important to correctly define the subject of the agreement, the scope of services, acceptance documents and the applicable tax treatment of payments.

Errors in this area can have significant consequences: an incorrectly documented payment to an individual may raise questions from the tax authorities, the donor or the project auditor.

It is also important to distinguish between salaries, professional fees, expense reimbursements, travel allowances and other compensation. Each category requires its own supporting documentation.
If the organization has employees, proper HR administration is just as important as accounting. FlagMAN-D provides HR documentation management services in Moldova, including the preparation of employment contracts, orders, employee personnel files and other HR documents.

Financial reporting for NGOs

Non-profit organizations are required to maintain accounting records and prepare financial statements in accordance with the applicable rules. NGOs have specific financial reporting forms that differ from the standard forms used by commercial companies.

NGO financial statements should reflect not only assets and liabilities, but also sources of funding, funds, earmarked resources, income and expenses related to the organization’s activities.

Typically, reporting should correctly reflect:

  • cash balances;
  • earmarked receipts;
  • funds used;
  • accounts receivable and payable;
  • fixed assets and other property;
  • the organization’s funds;
  • the financial result for the reporting period.

Even if an organization is small and does not actively conduct commercial activities, the obligation to maintain accounting records and submit reports remains. The absence of transactions does not mean that reporting requirements can be ignored.

Reporting to donors

For NGOs, reporting to donors is often just as important as reporting to public authorities. A donor may require a separate financial report for a project, supporting documents, procurement reports, payroll reports, co-financing information or a project audit.

The accounting system should be organized so that a donor report can be prepared without manually reconstructing data for the entire project period.

For this purpose, it is recommended to:

  • maintain separate analytical accounting for each project;
  • align the accounting structure with the grant budget;
  • keep supporting documents for each expense category;
  • document budget reallocations only when donor approval has been obtained;
  • monitor financial reporting deadlines;
  • prepare project audit documents in advance.

If the donor requires reporting in a specific currency, foreign exchange differences and conversion rules must be accounted for separately. This is particularly relevant for international grants.

VAT and other tax risks

An NGO may face VAT obligations if it carries out activities that fall under the applicable registration and taxation rules. It is important not to assume that non-profit status automatically exempts an organization from all tax obligations.

VAT issues may arise if the organization:

  • provides paid services;
  • sells goods or materials;
  • charges participation fees for events;
  • imports services;
  • receives funding that is, in substance, linked to the provision of services;
  • conducts economic activities on a regular basis.

Each situation should be assessed individually. It is important to determine whether a payment represents a donation, a grant, payment for a service or reimbursement of expenses. Tax consequences may depend on this classification.
More information about VAT is available in the FlagMAN-D article: New VAT threshold in Moldova from March 1, 2026: what has changed for businesses.

Common accounting mistakes made by NGOs

The most common accounting mistakes in NGOs are related to the absence of a clear system.

Typical issues include:

  • receipts are not separated by project;
  • grant funds are mixed with the organization’s general funds;
  • expenses do not correspond to the approved budget;
  • primary supporting documents are missing;
  • acceptance certificates and contracts with consultants are not properly prepared;
  • payments to individuals are made without correct tax assessment;
  • analytical accounting of membership fees is not maintained;
  • internal decisions regarding the use of funds are missing;
  • donor reports are prepared manually at the last minute;
  • accounting records do not show the actual balance for each project.

For an NGO, such errors can be particularly risky. They affect not only taxation, but also donor trust, the organization’s reputation and its ability to obtain funding in the future.

How to organize NGO accounting properly

To ensure that NGO accounting is transparent and sustainable, it is important to establish the right system from the outset.

It is recommended to:

  • approve accounting policies;
  • separate funds by project and funding source;
  • maintain analytical accounting for grants, donations and membership fees;
  • monitor whether expenses correspond to statutory objectives;
  • retain a complete set of primary supporting documents;
  • regularly reconcile project balances;
  • prepare donor reports in advance;
  • monitor tax obligations;
  • ensure coordination between accounting, project managers and the organization’s administration.

Proper NGO accounting is not only about submitting reports. It is also a management tool: the organization’s leadership can see which projects are funded, which expenses have already been incurred, which obligations remain outstanding and which risks need to be addressed.
FlagMAN-D provides accounting services in Moldova and helps organizations build financial processes that are clear, transparent and compliant with legal requirements.

FAQ about NGO accounting

Does an NGO need to submit financial statements if it had no activity

As a general rule, reporting obligations remain even if there was no active activity during the period. In such a situation, it is important to verify the organization’s status, the applicable reporting forms and any obligations toward tax and statistical authorities.

How should a grant be accounted for by an NGO

A grant should be accounted for with reference to the funding source, project, budget and terms of the agreement. Grant-related expenses must be supported by primary documents and correspond to the purpose of the funding.

Can salaries be paid from a grant

Yes, if this is provided for in the project budget and permitted under the donor agreement. At the same time, salaries must be documented in accordance with labour, tax and accounting legislation.

Does an NGO need a separate bank account for each project

The law may not require a separate account for every project in all cases, but a donor may impose such a requirement. Even if a separate account is not opened, analytical accounting for each project remains necessary for internal control.

What is more important for an NGO: tax reporting or donor reporting

Both are important. Government reporting confirms compliance with legal requirements, while donor reporting confirms the proper use of funding. Errors in either area may create risks for the organization.

Conclusion

Accounting for NGOs in Moldova requires a specific approach. Associations, PAs, foundations and other non-profit organizations do not operate for the purpose of distributing profit, but to achieve their statutory objectives. Therefore, accounting should show not only the money available in the organization’s bank account, but also where it came from, its intended purpose, how it was used and the remaining balance for each project.

Properly organized accounting helps NGOs comply with legislation, meet donor requirements, avoid tax risks and maintain the trust of partners. It is particularly important to maintain analytical accounting for grants, donations, membership fees, salaries and project-related expenses.
If your organization needs support with bookkeeping, restoration of accounting records, preparation of reports or accounting support for grant-funded projects, FlagMAN-D specialists can help you build a transparent and reliable accounting system.
2026-08-14 12:14