Analysis Of Contrasting Ownership Structures: KPMG And The Red Cross

Introduction

Each organization may choose different ownership structures since they have totally different objectives. In this paper, KPMG and the Red Cross are two good examples to elucidate two different ownership structures – NPOs and for-profit organizations.

KPMG is a Swiss cooperative organization founded in Amsterdam in 1897. KPMG is a global network of professional services providing audit, tax, and advisory services. KPMG’s structure aims to produce high-quality services in keeping with agreed values that the member corporations operate.

The Red Cross America is an international charity that consists of 264 chapters and 36 blood service regions. The services contain disaster services, health and safety services, and blood services.

Goals and objectives

KPMG gain revenues through providing services of auditing, information risk management, taxation, and financial advisory services. However, NPO pays attention on improving social welfare cause rather than profits. The main functions of the Red Cross are divided into four areas: blood collection, disaster service, rescue of soldiers and victims, and community education.

Governance bodies/ Committees

KPMG international governance bodies are comprised of Global Council and Global Board. The Global Council emphasizes more on C-suite tasks and creates a platform for member firms to debate. The Global Board primarily governs and monitors KPMG international. The main responsibility of the Global Board is to approve strategy, protect the brand and reputation, and supervise the operation.

Similarly, the Red Cross has the Board of Governors to oversee and supervise the strategy. Moreover, there are more requirements for those who want to enter the council. Additionally, the Red Cross implements performance measurement, such as individual member self-assessment, peer evaluation for board members, to enhance their performance.

Both KPMG and the Red Cross have executive committee, governance committee, and risk committee. However, there are some variations in committees since these two organizations have difference goals and objectives. To illustrate, KPMG has Professional Indemnity Insurance (PII) Committee, whereas the Red Cross has Board of Trustees of the Endowment Fund (2). Hence, different organizations set up special committees based on different goals. FundingThe American Red Cross is a charitable organization that is completely independent of the government. It is funded by fundraising and the cost of providing certain services. In some cases, the US government will allocate funds to the Red Cross; however, it is not a direct grant, but a government fund for specific projects. However, for-profit organizations would like to fund themselves through bank loans and investment. For KPMG, the money earned by its service and sales could support its daily operations.

Budget and Cash Flow

Generally, for-profit organization like KPMG would love to make a yearly budget plan. For example, KPMG's budget introduced a new legal system for passive investment in private enterprises originally envisaged in July 2017. According to these proposals, if the company and its subsidiaries receive passive investment income of more than $50, 000 over a year, they will receive income in line with the small business tax rate to reduce the business limit to zero, or investment income of $150, 000. The Red Cross usually prepares cash flow statement to record and analyze changes. The statement reviews and records all inflows and outflows to satisfy its daily liquidity requirement. The American Red Cross consists of 990 district or municipal branches. Each branch is formally authorized by the National Council. The annual budget of the Red Cross is $4. 1 billion, which is allocated to the branches by the National Federation.

The budget plan of the for-profit organizations is to earn maximum profit with the lowest budget in the limited capital chain in the year, whereas non-profit organizations only cares about whether they have enough money/funds to support the organization to help others.

Expenses& Revenue

In 2018, the total expense of the Red Cross is about $457. 9 million. Among them, disaster management accounts for nearly half of the proportion. Additionally, community health and wellness and international operations accounts for 17. 9% and 17. 5% respectively. Since KPMG is a nationwide corporation, it is hard to find a comprehensive financial report. In 2018, KPMG Canada made a total revenue of $1, 445, 966, 000. However, most employees in KMPG is paid employees; hence, KPMG would cost more in human resources than the Red Cross.

Conclusion

In conclusion, both for-profit and non-profit organizations have their own objectives. NPOs need to control the revenue and expenses. The significance of the existence of the Red Cross is its responsibility to the country, the victims, the volunteers and the donors. In contrast, for-profit organizations like KPMG need to control their expenses, and improve their products and services to make more profits.