Ultra High Temperature Ceramics for Thermal Protection

Ultra High Temperature Ceramics for Thermal Protection Recent Developments in Oxidation Resistance and Fracture Toughness of Ultra High Temperature Ceramics for Thermal Protection Systems Katrin Abrahams (Dated: February 3, 2015) For safer and faster space vehicles a reduction of the tipradius of the leading edges is inevitable. This leads to temperatures exceeding 2200  °C which the used material has to withstand. ZrB2/SiC and HfB2/SiC have suitable properties, but the oxidation resistance and fracture toughness at high temperatures have to be improved. This review describes the recent approaches to handle these problems that base mainly on the addition of a third material (La2O3, Gd2O3 or graphite). The addition of either La2O3 or Gd2O3 led to increased oxidation resistance, but the processing, the amount of additive and the testing methods have to be improved. Due to the addition of graphite à ¯Ã‚ ¬Ã¢â‚¬Å¡akes the fracture toughness of ZrB2/SiC (20 vol%) increased from 1. INTRODUCTION The Thermal Protection System (TPS) of space ve ­hicles is one of the most important parts of the whole vehicle [1–3]. This protects it from the heating during re-entry. During this process the temperatures are very high, especially at the nose cone and leading edges as shown in Fig. 1. Figure 1: Temperature proà ¯Ã‚ ¬Ã‚ le of a space vehicle during re ­entry prepared by the NASA. The dark red colour represents the highest temperatures and the light blue regions are coolest parts (copied from [4]). The tip of the leading edge has a radius of 10 cm, but a radius in the range of millimetres is wished so that sharp leading edges instead of blunt leading edges can be used [5]. This would have the advantage to â€Å"help reduce the vehicles drag, enhance maneuverability and performance, and also improve safety due to an increased cross-range-capability† [5]. The problem of a smaller tip radius is that this leads to higher surface temperatures, which can exceed 2000  °C [6, 7]. Jin et al. [8] investigated the maximum surface tempera ­ture depending on the radius of the tip using an oxyacety ­lene torch. Fig. 2 shows that the temperature increases from 1930  °C with a radius of 1.5 mm to 2100  °C with the radius of 0.15 mm. Due to the high requirements for these materials only a few can be considered. Very good potential for the usage show Ultra high temperature ceramics (UHTC). These are ceramic materials with high melting points (> 3000  °C), good thermal shock resistance and chem ­ical and mechanical stability e.g. ZrB2, ZrC, HfB2 or HfC [6, 9, 10]. Although the carbides have a higher melt ­ing point than the diborides, their thermal conductivity is lower, which is very important because the heat on the surface has to be transported as fast as possible away [5]. Therefore the main focus of research is on ZrB2 and HfB2. The problem with these diborides is their brittleness and their oxidation at temperatures exceeding 1200  °C [11]. To fabricate a more ductile material SiC was added to ZrB2 or HfB2 [12]. Although ZrB2/SiC and HfB2/SiC are promising materi ­als for the usage in TPS, there are still two main problems which have to be solved. On the one hand side there is still the problem with the oxidation resistance at higher temperatures [11, 13]. On the other hand the fracture toughness decreases with the temperature to rather low values which also leads to mechanical problems [14]. This review gives an overview over solution attempts that have been made in the last years, with the main focus on ZrB2/SiC. 2. OXIDATION RESISTANCE The oxidation resistance of MeB2/SiC (Me = Zr, Hf) depends on the ratio of MeB2/SiC [10, 15], the pres ­sure [10, 16, 17], the temperature [18], the exposure time [19], on the processing [20, 21] and in case of the addition of additives also on their chemical structure and the amount of additive [22, 23]. Considering just ZrB2, the following happens during ox ­idation [24]: The liquid B2O3 forms a protection layer for the porous ZrO2 layer, where oxygen can dià ¯Ã‚ ¬Ã¢â€š ¬use very fast and easily through. But at 1100  °C this protective layer evaporates and cannot prevent the oxidation of the bulk material anymore. The addition of SiC leads to the following additional re ­actions [10, 25, 26]: During oxidation four dià ¯Ã‚ ¬Ã¢â€š ¬erent layers can form (Fig. 3). Above the bulk material the SiC depleted zone forms, where SiC oxidizes to SiO2 which forms a borosilicate (BS) glass on the surface. This layer is porous due to the formation and evaporation of CO (Eq. (2)). Above this layer there is the oxidized layer, which consists of porous ZrO2 and the upper layer is the Silica rich layer which consist of the BS glass, that also à ¯Ã‚ ¬Ã‚ lls partly the pores of the ZrO2 layer. Due to the evaporation of B2O3, the protection layer is shrinking over time and shows an oxidation resistance up to 1600  °C [24, 26]. In general the oxidation resistance is measured by the thickness of the reaction zone under the given parameters of the experiment. But also the dià ¯Ã‚ ¬Ã¢â€š ¬usion coeà ¯Ã‚ ¬Ã†â€™cient of O2 is important but rarely measured. 2.1. Ratio ZrB2/SiC The dependency of the oxidation resistance on the ra ­tio of ZrB2/SiC was investigated by many researchers [10, 12, 15, 27–29]. The addition of SiC led in all cases to a re ­duction in grain size, a homogeneous distribution of SiC, higher viscosity and higher density. Karlsdottir et al. [29] investigated not only the reaction Figure 3: Schematic demonstration of the dià ¯Ã‚ ¬Ã¢â€š ¬erent layers that form during oxidation of ZrB2/SiC and their arrangement. zone thickness but also the viscosity depending on the volume fraction of SiC. The results are shown in Table I and an increase in viscosity with the amount of SiC can be seen. This reduces the dià ¯Ã‚ ¬Ã¢â€š ¬usion coeà ¯Ã‚ ¬Ã†â€™cient of O2 in the layer. Seong et al. [10] compared ZrB2, ZrB2/SiC (20 vol%), ZrB2/SiC (30 vol%) and ZrB2/SiC (40 vol%) and mea ­sured the resulting thickness of the reaction zone. All samples were densià ¯Ã‚ ¬Ã‚ ed by hot pressing and exhibit a ho ­mogeneous distribution of SiC. The grain sizes were be ­tween 1.0  µm and 3.0  µm. They investigated the oxi ­dation under low and high pressure and the results are shown in Figure 4. The SiC depletion layer did not form and therefore the reaction zone consisted only of the Silica rich layer and the oxidized zone. In air (2âˆâ€"104 Pa) the thickness of the reaction zone was in ZrB2 the thickest due to the missing protecting silica layer and with increasing amount of SiC the thickness de ­creases. The problem with high amounts of SiC (30 vol%) is, that it does not form single grains anymore, but in ­stead a network, which leads to higher porosity. Under low pressure the behaviour is vice versa. Because the space shuttle has to deal with low and normal pressure ZrB2/SiC with 20 vol% or 30 vol% SiC is the best choice. Apart from the improvements of oxidation resistance due to optimization of the ZrB2/SiC ratio, at temper ­atures above 1800  °C active oxidation (Eq. (4)) of SiC takes place and this hinders the formation of the BS layer. 2.2. Additives To increase the oxidation resistance at higher temper ­atures transition metals were added to the ZrB2/SiC ma ­trix [21, 30–32]. They are suitable due to their high melt ­ing points and low reactivity with the environment [30]. The transition metal cations can be enclosed in the BS layer to form a higher viscous layer that decreases O2 dià ¯Ã‚ ¬Ã¢â€š ¬usion [11]. Furthermore this may lead to a higher evaporation point of the protective layer so that the ma ­terials are stable at T > 2000  °C. This is based on an assumption, the mechanism how the transition cations interact with ZrB2 and SiC is not understood yet but in general a positive trend to higher oxidation resistance can be seen [11]. Several attempts were made with many dià ¯Ã‚ ¬Ã¢â€š ¬erent transi ­tion metal oxides [9, 30], borides [11, 33], carbides [21, 31] and silicates [32]. This review focuses on La2O3 and Gd2O3 because they are the most promising additives and introduce two dià ¯Ã‚ ¬Ã¢â€š ¬erent processing methods that ef ­fect the properties [30]. 2.2.1. Addition of La2O3 The addition of La2O3 to ZrB2/SiC was investigated by several researchers and led to dià ¯Ã‚ ¬Ã¢â€š ¬erent results, espe ­cially various new phases were found [6, 9, 22, 23]. Ta ­ble II gives an overview over the composition, the pro ­cessing routes to densify the material and the new phases that were discovered. Although Table II shows many dià ¯Ã‚ ¬Ã¢â€š ¬erent results, gen ­eral trends due to the addition of La2O3 despite the usage of dià ¯Ã‚ ¬Ã¢â€š ¬erent processing routes (hot pressing, spark plasma sintering (SPS)) were observed [6, 22, 23]: †¢ Higher density Higher Vickers Hardness Reduction of grain sizes Besides the use of La2O3 leads to a more homogenized distribution of SiC, because it is always close to it and therefore prevents agglomeration [9]. In the case of fracture toughness there are contradictory statements: Li et al. [22] measured an increased fracture toughness compared to the material without additive and Guo et al. [23] published a lower fracture toughness due to the addition of La2O3. After hot pressing at 1900  °C for 60 min Li et al. [22] dis ­covered the formation of new phases: La2Zr2O7 (melting point: 2295  ± 10  °C [9]) and La2Si2O7 due to the follow ­ing reactions: 2ZrO2(s)+ La2O3(s) → La2Zr2O7(s) (5) 2SiO2(s)+ La2O3(s) → La2Si2O7(s) (6) La2Zr2O7 was also observed by Zapata et al. [6] and Jayaseelan et al. [9] but no other working group detected the formation of La2Si2O7. The addition of 10 wt% La2O3, densià ¯Ã‚ ¬Ã‚ ed by SPS and oxidized for 1 h in air at 1600  °C led to the formation of two dià ¯Ã‚ ¬Ã¢â€š ¬erent oxidized layers [9]. On the surface a La ­BS-glass formed (Eq. (7)), below it two oxidized layers, one consisting of La2Zr2O7 (Eq. (5)) and the other one of ZrO2. SiO2 + La2O3 → La − BS − glass (7) The large expansion coeà ¯Ã‚ ¬Ã†â€™cient of La2O3 causes à ¯Ã‚ ¬Ã‚ lling of the pores that appear after the evaporation of B2O3 and therefore still protects the bulk material. The same composition and the same processing was used by Guo et al. [23] but they could not detect the new phases. Instead they found out that La2O3 reacts Table II: Overview over the composition (always ZrB2/SiC (20 vol%) + the given amount La2O3), the processing route and the new phases that formed. amount La2O3 processing new phase 5 vol% hot pressing La2Zr2O7 (1900  °C, 60 min) La2Si2O7 3 vol% hot pressing La2O3-SiO2 (1900  °C, 60 min) 10 wt% SPS La2Zr2O7 oxidized (1600  °C, 1 h, air) La-BS-glass 2 wt% SPS La2Zr2O7 oxidized (1400  °C, 16 h, air) La-BS-glass with SiO2 to form La2O3-SiO2 as a protective layer. Further studies were made by Zapata et al. [6] who used less La2O3 (2 wt%). Due to the proximity of the La2O3 particles to the SiC particles they are also included in the BS melt whereby this results in a higher viscosity, a higher thermal stability and in general a better protec ­tion against O2 dià ¯Ã‚ ¬Ã¢â€š ¬usion. The oxidation tests show that at 1400  °C the sample with La2O3 has a better oxidation resistance but at 1500  °C and 1600  °C it is worse. The reason is that because of the addition of La2O3 the BS layer has a higher viscos ­ity and therefore the ZrO2 particles cannot precipitate directly to the top of the surface layer. This leads to a more homogeneous mixing with the BS melt. The oxy ­gen dià ¯Ã‚ ¬Ã¢â€š ¬usion through ZrO2 is much easier than through B2O3 and therefore a homogeneous distribution of ZrO2 makes it easier for O2 to dià ¯Ã‚ ¬Ã¢â€š ¬use through this layer, al ­though the La-BS-glass has a higher viscosity due to the addition of La2O3. Mo reover at 1600  °C ZrOxCy and SiOxCy form with dif ­ferent O/C ratios which were found in the BS melt and in the oxide layer [6]. This can be seen as another pro ­tection layer because when O2 dià ¯Ã‚ ¬Ã¢â€š ¬uses into the oxidation layer it will react with ZrOxCy or SiOxCy, so it can be seen as a puà ¯Ã‚ ¬Ã¢â€š ¬er zone and it takes longer until the oxygen reaches the bulk material. HfB2 dià ¯Ã‚ ¬Ã¢â€š ¬ers from ZrB2 because the formation of HfO2 is more dià ¯Ã‚ ¬Ã†â€™cult [6]. Therefore a smaller amount is formed which leads to a lower amount of B2O3 and therefore a thinner protection layer compared to ZrB2. But it has the advantage that the dià ¯Ã‚ ¬Ã¢â€š ¬usion coeà ¯Ã‚ ¬Ã†â€™cient for O2 through HfO2 is smaller. Another problem in the case of HfB2 is that SiC is not as homogeneously distributed as in ZrB2 and it forms large agglomerates. When these agglomerates become oxidized they leave behind a highly porous material where O2 can easily dià ¯Ã‚ ¬Ã¢â€š ¬use throug h. This shows that further improvements are inevitable in a more homogeneous distribution, further analysis of the new formed phases must be made and the C/O ratio can Figure 5: Topview (a) and sideview (b) of the surface with the dimensions of the cavities for Gd2O3. oxidation layer was 15  ± 3  µm and formed in accordance with the following reaction equation [9]: 2Gd2O3(s)+2ZrO2(s) → Gd2Zr2O7(s) (8) Gd2O3(s)+ SiO2(s)+ B2O3(l) → Gd − BS − glass (9) The thickness of the layer below it was 160  µm and consisted mainly of porous ZrO2 due to the oxidation and evaporation of the glassy phase. The advantage of Gd-BS-glass compared to BS glass is the higher viscosity and therefore the reduced dià ¯Ã‚ ¬Ã¢â€š ¬usion of O2 through this coating. At higher Gd2O3 fractions Gd stops ZrO2 particles at the glassy phase and they cannot dià ¯Ã‚ ¬Ã¢â€š ¬use further. This leads to O2 vacancies which is the driving force for inward O2 dià ¯Ã‚ ¬Ã¢â€š ¬usion. Using a distance of 20  µm between the cavi ­ties, the Gd2O3 fraction is high enough to get a higher viscosity in the BS melt but ZrO2 can still precipitate so that no O2 inward dià ¯Ã‚ ¬Ã¢â€š ¬usion occurs. 3. FRACTURE TOUGHNESS In 2009 the à ¯Ã‚ ¬Ã‚ rst tests were made to include graphite in the ZrB2/SiC matrix [34, 35]. Hu et al. [34] investigated the fraction of additive graphite to ZrB2/SiC (20 vol%). They found out that the addition of graphite led to a 1high dense material with an increasing fracture toughness be optimized. But the addition of La2O3 is already a from 4.5 MPam (ZrB2 + SiC (20 vol%)) to 6.1 MPam1 22 very promising approach for a better oxidation resistance although further research is necessary. 2.2.2. Addition of Gd2O3 For an improved surface and at the same time un ­changed bulk material a new processing method was in ­vented [11]: At à ¯Ã‚ ¬Ã‚ rst the sample was prepared and densi ­Ãƒ ¯Ã‚ ¬Ã‚ ed using the bulk material ZrB2/SiC. Afterwards they used a laser to make equal sized cavities on the surface that were à ¯Ã‚ ¬Ã‚ lled with Gd2O3 nanopowder. The dimen ­sions of the best sample can be seen in Fig. 5. Due to this new processing it was possible to create only a thin protection layer that consisted of BS mixed with Gd2O3 ( Eq. (9)). After 1 h in air under 1600  °C the thickness of the outer (ZrB2 + SiC (20 vol% + graphite)). The dià ¯Ã‚ ¬Ã¢â€š ¬erences be ­tween 10 vol% and 15 vol% graphite were negligible small. Moreover there were investigations about the inà ¯Ã‚ ¬Ã¢â‚¬Å¡uence of the diameter size of the graphite à ¯Ã‚ ¬Ã¢â‚¬Å¡akes [36]. They found out that in the range of micrometres the diameter size does not change the fracture toughness. Asl et al. [14] used soft graphite nano-à ¯Ã‚ ¬Ã¢â‚¬Å¡akes. They found out that ZrB2 + SiC (20 vol%) + graphite (10 vol%) showed a higher density than the samples without graphite. Furthermore the addition of graphite led to a decrease in grain size from 6.9  µm to 3.2  µm. The reason is the homogeneous distribution of graphite which stopped grain growth. Because of the reactions of graphite with the surface impurities the addition of graphite results in higher dense samples: ZrO2(s)+ B2O3(l)+5C(s) → ZrB2(s)+5CO(g) (10) The particles that form due to this reactions can à ¯Ã‚ ¬Ã‚ ll the pores in the ZrB2/SiC matrix and therefore lead to a higher density. The resulting fracture toughness can be seen in Fig. 6. An increase in fracture toughness due to the addition of graphite is obvious. The following mechanisms led in this case to a higher fracture toughness: nano-à ¯Ã‚ ¬Ã¢â‚¬Å¡akes pull-out, crack bridging, branching and deà ¯Ã‚ ¬Ã¢â‚¬Å¡ection. 1 Figure 6: Fracture toughness depending on the composition of the sample at RT [14]. Wang et al. [37] investigated the dependency of the fracture toughness of ZrB2 + SiC (20 vol%) + 1 graphite (15 vol%) on the temperature in vacuum and in air (Fig. 7). Over the whole temperature range the fracture toughness in air was higher than that in vac ­uum. In vacuum the fracture toughness decreases from This oxidation layer densià ¯Ã‚ ¬Ã‚ es with higher tempera ­ture and yields in higher fracture toughnesses than with ­out this layer. That is the reason why there is nearly no decrease in fracture toughness between 1200  °C and 1300  °C. Moreover crack deà ¯Ã‚ ¬Ã¢â‚¬Å¡ection which absorbs the energy leads to higher fracture toughnesses at higher temperature. These mechanisms all result in a slower decrease in frac ­ture toughness in air than in vacuum. Figure 7: Fracture toughness depending on the environment and on the temperature [37]. 4. CONCLUSION The recent developments to improve the oxidation re ­sistance and the fracture toughness based mainly on the addition of a third component (La2O3, Gd2O3 or graphite). Concerning the oxidation resistance, the best matrix composition is ZrB2/SiC (20 vol%) because it shows the best oxidation protection over the whole range of O2 partial pressure. Above 1800  °C active oxidation of SiC begins and oxidation resistance is not given anymore. at 1300  °C because The approaches for a better oxidation resistance at higher ual thermal stresses between the ZrB2/SiC matrix and temperatures due to the addition of La2O3 or Gd2O3 arethe graphite inclusions are released. The residual stresses very promising, but more research to understand the real acted at low temperature as toughening mechanism and function of the additives and the interaction with the ma ­with the release of these stresses the fracture toughness trix is necessary. Furthermore there are many parameecreases. At 1300  °C the group observed a brittle to ductile trans ­formation which leads to a slight increase of fracture toughness. But afterwards the fracture toughness de ­creases further due to the distorted graphite and the larger ZrB2 grain sizes. In air at higher temperature the material starts to ox ­idize and a oxidation layer forms on the surface due to ters that have to be optimized, e.g the amount of ad ­ditive, the processing route and especially the analytical approaches. Due to the varying experimental parameters and insuà ¯Ã‚ ¬Ã†â€™cient analytical tests it is dià ¯Ã‚ ¬Ã†â€™cult to compare results. To solve this problems standard tests have to be introduced and a wider temperature range for oxidation has to be investigated. The fracture toughness increased due to the addition of Eq. (1), (2) and the following reaction: graphite from 4.5 MPam to 7.1 MPam creases, but also this is slowed down due to the graphite tives, because extensive testing of the dià ¯Ã‚ ¬Ã¢â€š ¬erent samples à ¯Ã‚ ¬Ã¢â‚¬Å¡akes. is missing. Especially tests under real atmospheric and Taken into account the oxidation resistance and the frac-re-entry conditions are important but not done yet. ture toughness it is dià ¯Ã‚ ¬Ã†â€™cult to announce the best addi ­

Portrayal of Women in Fiction Essay

Girl by Jamaica Kincaid is one of the world’s most popular feminist pieces of literature despite its unorthodox style of narration. The Storm by Kate Chopin, on the other hand, is also a prominent feminist work about women independence in marriage. Girl seems to be a story about a mother preaching to her daughter about how to do things â€Å"properly. † The Storm, meanwhile, is a slice-of-life story about women independence in light of married life. Girl is rather pessimistic in its portrayal of women, as the entire short story draws a picture of an overworked woman that has to be conscious in everything she does, while The Storm portrays women’s seemingly inferior role in marriage and at the same time, their desire and capability to be independent. The Housewife Even to this day, there are still cultures in the world that only see women as a housewives whose only purpose in life is to tend to their husband’s needs and bear him children. This negative portrayal of women is evident in both The Storm and Girl. In The Storm, Calixta, the main protagonist of the story, is left alone by her husband Bobinot and son Bibi. The opening scene of the short story mentions only the presence of one man and his son. This suggests that Calixta was left home to tend to the house, to do whatever it was that wives do during the setting of the story. Even Bibi, described as wise, (presumably wiser than her mother) as young as he is, somewhat belittles her own mother. â€Å"Bibi was four years old and looked very wise. â€Å"Mama’ll be ‘fraid, yes,† he suggested with blinking eyes (Chopin I). Back at their home, the extent of the role attributed to women through Calixta is described. Calixta is introduced to us immediately as a working housewife just when the storm is approaching. â€Å"She sat at the side window sewing furiously on a sewing machine† (Chopin II). As the storm approaches, more work that she does is revealed. â€Å"Out on the small front gallery, she had hung Bobinot’s Sunday clothes to dry† (Chopin II). Calixta is a princess compared to what â€Å"the girl† in the Girl have to do. The entire story in fact is a list of either chores for the girl to do, or restrictions on her actions so she would do things properly. There is not even an introduction to the narration, it starts immediately with the â€Å"commandments† of the mother: â€Å"Wash the white clothes on Monday and put them on the stone heap† (Kincaid). This straight and non-stop work approach of Kincaid is the author’s way of expressing her message — that women are being treated merely as the house workforce. As mentioned before, almost the whole short story is composed of the dictations of the mother to her daughter on what to do, so it is not hard to find another example that highlights the negative portrayal of women. Just to show another example that shows women as laborers, the mother demonstrates, as it were, how to set the table during different circumstances: â€Å"This is how you set a table for tea; this is how you set a table for dinner; this is how you set a table for dinner with an important guest†¦ † (Kincaid). Everything from washing clothes to acting in public, and even how to love a man, is taught to the girl . This suggests that women have to do a bit of everything even if they are not treated as equals. Independent Women  In a more positive side of the short stories, they show women as independent individuals, strong enough to stand on their own without the aid of their spouses and do whatever they please when given the chance. In The Storm, women are left alone. First is Calixta when her husband and son go out before the storm strands in a store, while Clarisse, the wife of Alcee, is asked by her husband to take more time in enjoying her and their children’s vacation. It is during these times when they are away with their families that the women feel more independent. Thus, they exploit the absence of their husbands to do whatever they please. While Calixta is all alone in their house during the storm, Alcee, who appears to be a former lover of hers, gets caught in the storm and seeks shelter in her household. The combination of the rainy weather and an inherent desire to rekindle an old affair causes the old lovers to take a stroll down memory lane and do things that are not supposed to be done by people when they are already married to another person. Thus, Calixta is independent in a sense that she has chosen what to do and that she is able to take care of the house and do all those chores. Clarisse meanwhile also becomes independent but at the cost of her husband cheating. Alcee asks her to extend her vacation which she gladly accepts, and as the narration itself shows, it gives her a sense of independence that she used to have when she was single: â€Å"the first free breath since her marriage seems to restore the pleasant liberty of her maiden days† (Chopin V). Finally, the girl in Kincaid’s story, in spite of all her work, gains some independence ironically through her work — she is able to do all those things by herself, making her independent. This portrayal of women by Kincaid is very feminist, as Kincaid is able to find the positive side of the hard labor done by women. Conclusion In classic literature, women are portrayed as inferior to men, doing only what men want them to do or what is expected of them even in the works of Chopin and Kincaid, though shown as a form of protest, women are portrayed as housewives who work at home. However, despite this sad notion in literature and even in reality, women are sometimes portrayed positively as well, just like the independence shown by the women in the short stories of Kincaid and Chopin.

First Amendment and Right to Privacy - 1586 Words

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Major Differences Between Profit And Nonprofit Organization Finance Essay - Free Essay Example

Sample details Pages: 27 Words: 8243 Downloads: 1 Date added: 2017/06/26 Category Finance Essay Type Analytical essay Did you like this example? There are several elements that obviously distinguish nonprofit organization from profit organization. Through the understanding of these differences will enable people to identify the nonprofit organization easily. These differences can be classified as significance, sources of fund, ownership and control, human resources management, accounting, assets distribution and used of profit of an organization. 4.1.1 Significance The main difference for a profit and nonprofit organization is their significance. Significance can be defined as the importance of something, especially when this has an effect on what happens in the future (Hornby, 2005). On the other way round, it can be explained as the importance of an organization, the affection of an organization or the purpose of its existence. Every organization is formed with a certain purpose or objective to be achieved. A profit organization exists mainly to generate profit which means to earn more money than those have been invested in. Profit organization aims to maximize profit and increase business owners wealth. Therefore, profit organizations usually come out with products or services that are offered at certain price level in the market to generate income. The income will then be distributed to the owners of the organization. It is the right of owners to decide whether to keep all profit themselves or reinvest parts or all of the profits into the b usiness. Don’t waste time! Our writers will create an original "Major Differences Between Profit And Nonprofit Organization Finance Essay" essay for you Create order On the other hand, nonprofit organizations are generally formed to promote social welfare and fulfill societys needs like for some specific religious, humanitarian, charity purpose, educational purpose and environment protection. According to Prugsamatz (2010), the main objective of nonprofit organization is to provide services to people by bringing people together and help them through improving the level of societies, economic and social situations; responding to various foreseeable and unforeseeable challenges encountered by society; environmental preservation; and other humanitarian efforts geared toward growth, development, and preservation. Besides Weerawardena, McDonald and Mort (2010) also said that nonprofit organization exists to provide services to fulfill the needs that will not be satisfied by both private and public sector. Therefore, nonprofit organization plays vital roles in organizing activities that will help in meeting nations needs. All the activities perform in nonprofit organization must consistent with the purposes as stated before. The intention of a nonprofit organizations operations is to manage and distribute fund into programs and activities that would assist in meeting societys needs. Hence, proper fund management is became the fundamental element to success the organization. Nonprofit organizations are concerned with proper fund management to minimize the operating costs in order to maximize the usage of fund for social welfare. 4.1.2 Sources of Fund Fund is the fundamental element for the survival of an organization. It is defined as an amount of money that has been saved or has been made available for a particular purpose (Hornby, 2005). Fund is required to finance the activities run in an organization and the activities include operation activities, administration activities, development activities and investment activities. Therefore, it is very vital for an organization to obtain sufficient fund from various sources to maintain the organizations functionality. In profit organizations, sales revenue include cash sale and credit sale are the main sources of fund to the organizations. Profit organizations rely mainly on the income generated from normal business activities and the credit arrangements from the suppliers and creditors to finance their operation. Besides that, profit organizations are allowed to raise fund from public at large through issuing of companies shares. The investors will be offered certain percentage of ownership in accordance to the capital invested or fund injected into the organization. Profit organization can also obtain fund through employment of loan. Loan will provide the organization an amount of money that is required to finance organizations projects. The organization will then repay the loan after a certain period of time with certain percentage of interest with the earning obtains from the businesses. On the other way round, a nonprofit organization can obtain fund through variety of sources. The funds can be gathered from fee for services, special events, donations and grants from individuals, government agencies and other organizations. Among these sources of fund, donation will contribute to major part of the fund received by the organization. As nonprofit organization is only able to collect fund from the donors solely based on the trust of donors toward the organizations, nonprofit organizations have to ensure the proper management of fund to maintain their reputation and gain donors confident toward the organization. Thus, nonprofit organization must be very conscious in the usage of the money to ensure that the benefits given to targeted recipients will be maximized. In the context to get donation from others, special event would be the most suitable ways to attract the donors and get donors acknowledgements. Grant is another good alternative to obtain fund, however, this s ource is inconsistence and therefore cannot rely too much on it. Whereas, fee for services is often an uncommon used alternative. 4.1.3 Ownership and Control Another significant different of profit and nonprofit organization is related with the ownership and control over the organization. The ownership and control of a profit organization will often refer to which type of organization that the profit organization is. As an owner managed organization which is either sole proprietorship or partnership, the owner retains two principal powers in which the owner makes managerial decisions of the firm and entitles to the profits of the firm (Marks, 1999). In simple words, the owners own the company and having control on the operations and managements of the company. However, for large public held corporation, the owners remain their claim on the profit but do not having the direct control over the entire corporation (Marks, 1999). The owners of the big corporation which also call as shareholders, are having right to receive profit in the form of dividend annually from the organization. However, shareholders do not have right to make decision fo r the organization. This responsibility is eventually placed on the manager, who has been appointed by the board of director, who is formed by the shareholders of the organization. According to Marks (1999), managers have control on the organization but possess relatively small or no residual claims. On the other hand, a nonprofit organization does not have an owner to control over the organization. Hence, there are no shareholder exist in a nonprofit organization. As said by Glaeser (2003), even those who have funded the nonprofit organization through donation cannot obtain the control over the nonprofit organization. Therefore, nonprofit organization is existed as an independent body that is not owned by anyone. However, nonprofit organization is officially controlled and managed by its board of director. The board of director of a nonprofit organization is usually formed by some of the major donor or their representative. Although the board is having authority to make decision and manage the organization, they do not own the organization. The organization itself is independent from anyone including those managing it. Therefore, board members are not able to sell or transfer their control rights to other and they do not own any valuable that will contribute to organizations suc cess (Glaeser, 2003). In short, the board of director controls over nonprofit organization yet does not own and entitled to the profit distribution. 4.1.4 Assets Distribution As provided by the Public Sector Accounting Standard Board of the Australian Accounting Research Foundation and Australian Accounting Standard Board (1995), asset can be defined as the future economic benefits that controlled by the organizations due to past transactions or other past events. This means that it is something that will benefit the organization for achieving the organizations objectives. This is due to in achieving their objectives; both profit and nonprofit organization use assets to provide goods and services that will satisfy people needs and wants. In profit organization, the assets are used to provide goods and services. Organizations objective to maximize profit is achieved through the benefits received from the sale of these goods and service. Besides, the sale of the assets can also benefit the organization toward achieving profit maximization. In profit organizations, all the assets in the organizations belong to the business owners as the assets are bought by using the capital contributed by the owners. Therefore, while a profit organization is dissolved, organizations assets or the money from the sale of assets will be distributed to the organizations owners in accordance to the proportion of shares owned or the percentage of their ownership in the organizations. However, in nonprofit organization, assets are used to provide goods or services to fulfill the needs and wants of the needy without charges rather than to receive profit. In nonprofit organization, all the assets are belongs to the organizations. No personal is entitled to claim for the assets in a nonprofit organization. When a nonprofit organization is being dissolves, all the assets will be transferred or donated to another nonprofit organization. Therefore, one who is likely to earn money will invest in profit organizations rather than nonprofit organizations due to the restriction of nonprofit organizations in handling their assets. 4.1.5 Profit Distribution The next difference between profit and nonprofit organization is in term of profit distribution. The business owners in a profit organization are entitled to realize gains from their organization. When a profit organization has good performance or has surplus of money from sale for current period, the excessive gain is allowed to be distributed to the owners of the organization. In general, the business profit is going to be distributed in three ways as corporate profits taxes, corporate profits and dividends. According to commercial law, portion of the business profit would be charged as taxes and collected by Inland Revenue Board to finance the operation of government. Whereby, part of the business profit will be distributed to business owners or shareholders in the form of dividend in accordance to the percentage of ownership or shares own by them. The dividend will be given annually, for every six months or for every quarter depending on the practice of the organization. Whereas, the remaining undistributed profit will be classify as retained earnings. The retained earnings will neither be paid as company tax nor be paid to shareholders as dividends. Indeed, they are the income earned but not received by shareholders. On the other way round, there is no practice of profit distribution occur in any nonprofit organization. This is because the profit earned by nonprofit organization is not subjected to any person and therefore will not be distributed instead of retransfer back to the organizations. These profits are then being used to pay for the operating expenses incur for the organizations like salary of employees, utilities and other administrative expenses. As mentioned by Glaser (2003), nonprofit organization cannot disburse profits to its members either board of director or employees as this constraint prevent nonprofit organization to cheat on customers and workers. It is very important that all funds raised by nonprofit organizations remain in the organization. This is because nonprofit organization only acts as the agent to help in managing the public money for welfare purpose. All the funds are needed for accomplishing the specific organizations objectives to meet societys needs rather tha n for other purposes. 4.1.6 Human Resource Management Employees are essential asset for all organizations and are categorized as organizations human capital. Employees help in running organizations daily operation, improving organizations efficiency, promoting organizations growth and development and achieving organizations success. Hence, it is very important for organization to hire good and suitable employees to the organization. However, in current situation, both profit and nonprofit organizations are dealing with pressure in hiring diverse employees. Profit organizations usually found to be easier in recruiting employees. This is because profit organizations would normally have sufficient resources to attract talent people to work for them. They can afford to pay high salaries, bonuses and offer other benefits to employees like equity in the companies, authority and other monetary and non-monetary benefits. On the other hand, in current funding environment, nonprofits are especially hard pressed to fund operating expenses. In order to maximize the usage of fund for social welfare, nonprofit organizations are required to minimize their operating cost. Therefore, nonprofit organizations are very difficult to afford to attract employees through monetary incentives. Therefore, with limited resources, nonprofit organizations cannot attract and retain employees easily. Furthermore, nonprofit organizations do not have shares and thus unable to offer share option to their employees. Hence, most of the employees in nonprofit organizations are the people who have passion and willing in helping and serving the nations. They work for their inspiration instead of money return. However, in reality, it is very difficult to search for these volunteer to work in the nonprofit organization. 4.1.7 Accounting Treatment 4.1.7.1 Tax Profit organizations are registered as the business entity and required to pay taxes on their net income from business. Different types of organizations are subjected to different kind of tax and tax rates. For instance, owners of sole proprietorship and partnership are subject to personal tax instead of corporate tax for owners of companies. On the other hand, nonprofit organizations have tax privileges (Glaeser, 2003). Nonprofit organization may be exempted from tax if the nonprofit organizations objectives are to promote social welfare. Government would intend to help those nonprofit organizations to minimize their costs through tax exemption. Therefore, donations given to nonprofit organizations are tax deductible (Glaeser, 2003). This is because government hopes that by doing so, nonprofit organizations would free from tax burden (Glaeser, 2003) and have more funds to be allocated to activities for the social welfare and helping the country to serve and develop the nations. Howe ver, nonprofit organizations will still being assessed for taxes for those that are not in the main organizations scope such as real estate tax and sales tax. Different in tax treatment for profit and nonprofit organizations have led to different accounting treatments for these two organizations. Furthermore, these tax benefits are at the heart of nonprofit status and these tax deductibility allows nonprofit organizations owes its strength and to be more compatible (Glaeser, 2003). 4.1.7.2 Balance Sheet Every registered organization in Malaysia is required by regulations to prepare balance sheet at least once in a year. A balance sheet is a summary of an organizations accounts. It consists of assets (everything owned by organization), liabilities (everything owed by organization to others) and equity (everything owed to shareholders include both common and preferred stock). Balance sheet provides an overview to the statement users on the organizations financial position. Nonprofit organizations do not use balance sheet instead they are using statement of financial position in which current FRS has also required all the companies to change the term from balance sheet to statement of financial position in their annual report. Nonprofit organizations statement of financial position is only emphasized on the assets and liabilities of the organizations. As there are no owners, the statement of financial position of nonprofit organizations does not include equity part. 4.1.7.3 Income Statement Beside balance sheet, profit organizations are also required to prepare income statement yearly. An income statement consists of organizations revenues, expenses, profits and losses. Income statement allows statement users to understand the financial performance of an organization on how the organization generates income and manages the operation and administration cost. The profit organizations value and share price will be affected by the result of assessment on income statement. On the other way round, nonprofit organizations do not produce income statement. Nonprofit organizations prepare a statement of activities for each quarter that shows the organizations revenue, expenses, plus net asset. 4.2 The Issues Faced by Nonprofit Organization It is always not an easy task to manage an organization especially a nonprofit organization. This is because there are many matters and issues need to be considered deeply before making decision for the operation of an organization. Once any significant terms are not taking into account, the decision made may lead the organization to poor condition, facing legal obligation and even liquidation. Therefore, it is important for a nonprofit organization to know about the issues that they need to deal with in order to come out with suitable solution that can lead the organization for continuous growth. The following are some issues that require further consideration. 4.2.1 Fundraising Funding is an important element for both profit and nonprofit organizations for sustain and survival (Werosh, 2008). This is because the operation and administration activities of an organization require fund to process. Without sufficient fund, many organizations especially nonprofit cannot maintain their operations to provide necessary services to our society (Werosh, 2008). As nonprofit organizations are not aimed to generate profit to the organizations, they obtain fund through fundraising activities in order to finance their operations and activities. However, due to the rapid growth of the number of nonprofit organizations in seeking the limited financial resources, the competition is increase intensively and cause nonprofit to be harder in achieving long term financial stability (Frumkin and Kim, 2001). Fundraising by nonprofit organization is challenging during the good economic condition and especially more challenging during economic downturn (Kurre, 2010). At the same time , the success of a nonprofit organization in raising fund will enable the growth of the organization and effective fundraiser will increase the networking and relation with donors. Thus, most of the nonprofit organizations now seek fundraising as the critical activities in their organization. However, this trend has become the concern of public on nonprofit organization as they worry that nonprofit organization may spend more resources on unproductive fundraising activities in order to attract more donations in which the used resources can otherwise be spent productively in delivering goods and services to public (Yurenka, 2007). People are concern with the focus of a nonprofit organization will be twisted when the organization is too emphasis on fundraising activities and neglect its main duties for the society. Undeniable the main purpose of a nonprofit organization is to provide goods and services that will fulfill the needs of society which will not be satisfied by other parties. At the same time, the important of fundraising activities cannot be denied as they actually act as the supplement or support for the organization to provide goods and services to meet societys needs. Therefore, both of them are remain equally important. The nonprofit organization is responsib le to balance itself among both of these efforts. Furthermore, the worried of more resources will be allocated to fundraising activities rather than to meet organizations objectives can be vanished. From several previous researches including research done by Yurenka (2007), they had shown that fundraising and donation tend to have a positive relationship. This means that the fundraising activities can generate more donations and eventually the expenditure of fundraising activities can be cover up by these additional donations. Therefore, there will be more fund can be utilized in order to achieve organizations objective to fulfill the needs of society. Fundraising expenses are only a small portion of donations received. Besides that, Yurenka (2007) have discovered that the demands for donation are downward sloping. This is because the more amounts the organization has to pay for a single donation, the fewer donations will be demand. Hence, a nonprofit organization will only search for the donations within the limit that the organiza tion can afford. Thus, a nonprofit will not continuing financing the fundraising activities till the main objectives of the organization be abandoned. Moreover, some nonprofit organizations are also facing problem in identifying suitable sources of funds in the fundraising activities for their organizations. This is because they are uncertain on which sources are more appropriate and more reliable to depend on. Some sources are reliable but not easy to obtain and difficult to maintain continuous funding. Some cannot be relied on but are able be obtained easily as long as fulfilling the requirements. Therefore, nonprofit organizations need to investigate and analyze carefully for the most suitable sources of funds for their organization to ensure their organizations sustainability. There are some common sources where the nonprofit organizations can obtain funding for their operation. Nonprofit organizations can collect fund from donors, grants, fee for service, special events and in kind donations. 4.2.1.1 Donor Appeals Donor appeals are the main sources of fund for most of the nonprofit organizations. Therefore, it was found that nonprofit organizations tend to focus on donors motivation in their fundraising activities (Frumkin and Kim, 2001). It is very important for a nonprofit organization to identify the interested donors who care about the same things as the organization does and persuade them to donate or contribute to the organizations fund. Donor appeals can be taken in several alternatives like campaigns, direct mail solicitations, telemarketing, door to door distribution, direct response press advertisement and newsletter appeals. This path is easier compare to other alternatives in obtaining fund as donors can be found anywhere. However, it is also difficult to maintain the donation from one donor because this is influence by the donor management of the organization. 4.2.1.2 Grants Grant is another important source of revenue for some nonprofit organizations. However, nonprofit organizations cannot rely too heavily on this source as it is not a stable financial resource. Besides, it is not easy for an organization to obtain a grant. The nonprofit organizations are required to compete with each other to win the willingness of foundations to fund their organizations. Sometimes, organizations even need to compete with each other intensively for only a limited fund. Therefore, there is no guarantee that the organizations will obtain fund successfully through this way. Hence, it is better for the nonprofit organizations to think out of other sources for fundraising rather than sole focus on this path. 4.2.1.3 Fee for Services Some nonprofit organizations carry out some suitable fee-for-service arrangement in order to collect fund for their operations and activities. The funds can be obtained through collection of participation fee or registration fee for some campaigns and programs organized by the organizations. This method is easy to be operated but cannot be relied on as members participation cannot be guaranteed. 4.2.1.4 Special Events Special events are another useful mechanism for raising fund by nonprofit organizations. This is because through special events, nonprofit organizations have the opportunity to get free advertising to attract more potential new donors. Events like banquets, parties and balls are organized and some individuals are invited to the events. Individuals would normally require to pay to attend the events and the payments would consider as the supports contributed to the organizations. The nonprofit organizations would usually invite their supporters to the events with the hope that they would invited or bring along potential new donors to this events and enable them to learn about the organizations objectives. 4.2.1.5 In-Kind Donation Non-monetary donation can help the nonprofit organizations as well. The donation of goods and services by individuals or businesses can reduce the need of nonprofit organizations to purchase those products with cash reserves. Therefore, those saved money can be used for social welfare programs and activities and thus achieve the organizations objectives better. 4.2.2 Donors Management Even there are many ways in obtaining fund, nonprofit organizations are still facing great challenge in attracting the potential donors and maintain the existing donors. This is because the nonprofit organizations do not employed useful steps in acquiring and serving their donors. Some nonprofit organization lack of ability in creating attention and attract donors to finance them. Even they have successfully attract some donations, they loss the donations in later time due to their poor donors management. In the effort to attract donors, nonprofit organizations would need to know about the appropriate and effective ways to attract a donor. This is because donors are rarely come on their own instead of successfully being persuaded by the organizations. Therefore, in order to attract donors successfully, nonprofit organizations would first need to communicate with the donors about the organizations purposes and objectives. People would not simply donate to an organization based on ones saying. Donors intentions to donate to the organization are usually due to their belief on the organizations objectives and the ability to meet the objectives. The simplest way to inform them about these is by communication either orally or through documentation. The organizations need to tell about the organizations objectives, the ways on how the organizations achieve their goals and how successful the organizations can do. This is because donors will consider about the financial report of performance and financial information as important element to make their donation decision on which organization is to be supported (Zainon et al., 2011). Besides the financial elements, other non-financial factors such as the efficiency of the organization, the nature of activities and work carried out by the organization are also other important element to be considered for (Zainon et al., 2011). The information delivered is needed to be repeated frequently so that the audients or readers would remember them. Besides that, quality supporting materials are also needed to help to provide evidence on the saying and impress the donor. According to Zainon et al. (2011), based on the assessment of sufficient information on the organization, the willingness and decision to support the organization in the future will be made by donors. Therefore, nonprofit organization would need to provide and deliver adequate information to donors as the basis for their decision. Besides that, fundraising activities should be continue and carry on after a particular donation is received. In order to maintain donors to become a repeat and continuous donor, follow up actions after donation are very important. After the nonprofit organizations receive donations from donors, the organizations should at least convey their thanks in writing and send to the donors. Besides, personal contacts through phone or in person are necessary to the generous donor. This effort will cause the donors to feel their contributions to the organizations are being appreciated. Moreover, the organizations need to tell and inform the donors on how they spend the money. The purposes and impacts on the use of money needed to be explained to the donors to enable them to understand the entrusted money are used in the proper ways. The demonstration of donor implication enhance the donors confident toward the nonprofit organizations. Moreover, build a great and firm relationship between the nonprofit organizations and the donors is also take an important part. Donors usually do not like to just contribute to the organizations financial. They are likely to be more involved in the organizations and feel more connected to the organizations. As the donors feel being parts of the organizations, they are more willing and passionate in helping the organizations. Thus, personal contact with donors is necessary to discuss together about the organizations goals and future plans. Through better understanding on the organizations, donors would usually giving additional contributions to finance more activities in the organizations. Donor achievement recognition is additional effort to encourage the donors to increase their contribution. Like usual people, donors would be happy when they being recognized and being appreciated. Therefore many nonprofit organizations have classified their donors into various levels like silver, gold and platinum donors. This provides an opportunity to the donors to increase their levels and recognition through more funding. Appropriate recognition make donors feel their contribution is notified and taken care of by others. Thus, these enhance the relationship between the organization and its donors and ensure long run moral and financial support from the donors to the organization. 4.2.3 Ethic in Nonprofit Organization Nonprofit organizations are the agencies being entrusted to manage funds and donations from the donors. The purpose of their existence is fulfilling the social needs and promoting social welfare. In this context, the board members will act as the trustees, who have the legal duties to make use of these assets for accomplishing their organizations goals. In order to achieve objectives of the organization, capital is required to finance activities in the organization. Thus, different amount of funds are channeling from various paths, various sources and multiple locations to the organization for supporting organizations operation. The accumulated funds that reach to the organization are usually in a huge amount and can be million or billion dollars. At this moment, it becomes a great challenge to the members of the organization to be ethic in handling this great amount of asset. When associates with this huge amount of funds, the members of the organization have to ensure that they can behave in the truthful and honest manner. They have to prevent their greed to override their mind so that they would not cause unwanted event to happen. It is the responsibility of the members to ensure that they are ethic in all the games and make all their jobs transparent and ready for inspection at all time as they choose to be part of the nonprofit. It is very important for a nonprofit organization to be ethical. By being ethical and integrity allows the organization to earn trust of donors for more financial and moral support. This is because donors need to make sure that the nonprofit organization is using the resources for the proper purpose and is financially efficient in using and allocating the resources (Zainon et al., 2011). Donors will be more generous to donate to a trustable and good reputation organization with the belief that the organization will use their money properly in the correct way. Besides, the donors are also likely to reinvest and recommended to others an organization when the organization has shown that they can be believed on and accountable for their actions. Hence, nonprofit organization is responsible to manage the resources entrusted to them by means of accountability (Zainon et al., 2011). In addition to that, the most serious threat to nonprofit organizations is the disappointment of public confidence and betrayed of public trust. They can lead to very serious consequences to the organization and eventually liquidation. However, over the years, there are still so many cases about unethical behavior of the managing people in nonprofit organization are arisen. Those entrusted people have stepped down the trust putting on them by public at large for managing the fund as they misuse their authority for their self-interest. It is common to heard that those involve in the unethical issues are came from higher management of the nonprofit organization like chief executive and board of directors. Due to their high position in the organization, they can manipulate the money without realize by other members. Even worst in some organizations, all the members in the board make collusion to misappropriate the monies. Therefore, the integrity of the nonprofit organizations is very s ignificant. The organization itself should have some rules that would govern and guide the members in the organization so that they are working in the proper way and in accordance to the rules. Codes of ethic should be implemented in the work place to provide employees, volunteers and board members with guidelines for being ethical in conducting their works on behalf of the organization. Honesty, integrity, fair and truthful is the basis requirements to earn public trust. A code of ethics is then a tool to help the members to express these values in their works. Furthermore, inspections should be carried out periodically by authorized officers to check on the operation of the organizations and the activities of their members when associate with the assets of the organizations. Frequent checking will aware and remind the members to behave properly in their works on behalf of the organization as they are being guarded for every act they have done. Most importantly, every members of the organizatio n should have self-awareness, self-conscious and instill ethical values in their minds. As being an ethical person in jobs, the person will eventually be ethical in his or her living. 4.2.4 Litigation Being an organization which operates based on the public trust, nonprofit organizations need to understand the potential risk that will be faced by the organization and possible claim that will be made against the organization. There are several legal claims that have frequently troubles the nonprofit organizations. These claims are usually the lawsuits that related with the contract dispute, employment claims and personal injury. The lack of clear and specific regulations that spell out how should the nonprofit organizations operate and being managed have created a lot of argument and misunderstanding among various parties such as donor, public officer, members of organizations and others related parties. Therefore, nonprofit organizations need to obtain sufficient and useful information regarding those legal matters to enable them to perform better in dealing with these kinds of problems and prevent these problems to happen. 4.2.4.1 Contract Dispute Among the common problems that result in lawsuit against a nonprofit organization, dispute over an agreements or contracts are most frequently happen. This is because contracts or agreements will often being made as transactions occur in every day. Transactions like hiring contractors, purchase of assets and the renting of business space for operation will require both parties to take and hire a legal binding contract. According to Pakroo (2011), a legal contract is created after the organization sign a lengthy document or just makes an oral agreement with a handshake. Once the contract or agreement exist, one party will probable being sued by another party for failing to fulfill the contract conditions or break of contract at any time. The party that being taken legal action of will usually be required to perform the duties or tasks that have been promised during making the mutual contract or in some situation paying a big sum of money damages to the other party to recover their los s. When the other contractual party has proven the existence of the agreements and the action of nonprofit organization had has that jeopardize the conditions in the contract, then the nonprofit organization will be in a deep trouble. While the lawsuit incur, nonprofit organization not only need to perform what they should be in breach of the contract, at the same time will face the doubt of losing its donors trust and confident toward the organization. This is because the donors may be dubious on the organizations management strategy, policies and ability to achieving the organizations objective and hence influence their future donation decision. Thus, it is better for a nonprofit organization to consider all the detail of the contract carefully before enter into a legal agreement or deal in order to safeguard itself from future unnecessary claims. The nonprofit organization should also anticipate with any single confusion or disagreement before they turn into worsen situation (Pak roo, 2011). 4.2.4.2 Employment claim Employees are often the valued human capital to nonprofit organization. This is because beside helpful and contribute to the organization, employees in nonprofit organization often have more passion in their work and share common value for achieving organizations objective. Moreover, the employees work in nonprofit will usually realize on their duties that carry great responsibility to the society. However, nonprofit organization will also need to be especially careful when dealing with the employees because employees will also be one of the risks that will put the organization in danger position. Similar to the profit organization, the most common employment claims that faced by nonprofit organization are wrong termination, discrimination, wage and hour dispute and sexual harassment. Most of the employees especially nonprofit organizations employees are usually being hired at will, in which the employees can choose to leave or being dismissed by the employers at any time for any legal reason (Pakroo, 2011). Besides, the employment contract is often been made under the best interest for both parties. However, the recruitment will eventually lead nonprofit organizations into nightmare when wrongful termination lawsuit comes around. As profit organization, a nonprofit organization is not allow to terminate its employees without propel and legal reasons or else the employees can file a lawsuit against the organization (Pakroo, 2011). Termination due to the reasons of employees gender, race, religious and other protected characteristic are strictly prohibited. Other than that, in some termination, the employees will take advantages on the organization to earn up extra benefit before leaving the organization. Therefore, it is important for nonprofit organizations to wa tch out carefully and be detail in arranging the employment contract to prevent this kind of trouble in the future. In Malaysia, federal law has giving the protection to employees in order to protect them for not to being discriminated in their employment based on races, gender, religion, age, citizenship and physical health condition (Pakroo, 2011). Therefore, nonprofit organizations should be very careful in handling its workers in this multi ethic country. This is because a slight misstep may raise sensitive issue among different ethic and cause the organization to be claim for discrimination against the employees. Thus, the matters like hiring, firing, salary payment, job or shift assignment should be provided fairly among the employees based on their ability and the chances of promotions and training opportunity should be given to employees equally with no self-sided feeling. Moreover, wages and hours claim is another fundamental matter to deal with especially for nonprofit organizations where the wages paid to employees are already lower than other sectors. Therefore, the employees will tend to taken care of their well benefits more. In legal aspect, nonprofit organizations are also required to compile to the rule for rewarding their workers. Hence, nonprofit organizations are reminded to be extra cautious in classifying part time and full time workers, paying overtime wages and pay leave of their employees. Last but not least, sexual harassment is another type of employee-related claim that will put the nonprofit organization at risk. According to Pakroo (2011), sexual harassment is undesirable sexual conduct on the job that creates an unapproachable, unfriendly or offensive work environment for one or more employees. Quid pro quo which means deals, is one type of sexual harassment where a worker is asked to comply with some sex-based request or face negative consequences like termination, punishment or others. When the worker is scare of the negative consequence to happen, she will force to agree with the deal to safeguard herself from the negative consequences. In some situation, even though there is absence of such demands in the organization, sexual harassment litigation will still be created if the working environment creates an uncomfortable atmosphere to the other gender in which sexual jokes, pictures, allusions, or comments are allowed to continue in the organization. Therefore , as an entity that is responsible to protecting the social welfare, this kind of litigation is especially harmful to a nonprofit organization. This is because the nonprofit organization will fail to convince others about its roles in helping the nation and promoting social well-being if itself does not show the good and appropriate practices internally. 4.2.4.3 Personal Injury Lawsuit Litigation about personal injury is no common but still potentially occurs in nonprofit organizations. As long as people are employed for work in nonprofit organization or people are around the nonprofit organization, then the organization will incur a risk of personal injury for these people. The injury claim not only cover up the physically injury but also including the financial loss incur, emotional distress or damage to others reputation. As far as any of these injuries occur, no matter it is happen intentionally or unintentionally, the nonprofit organization is still liable for the harm caused to other. The organization will need to compensate the people involved in the injury or their family financially. For instance, one of the workers in a nonprofit organization leaves a toolbox at the side on a table and a visitor comes and is hit by the tools which are dropped due to the sudden fallen of toolbox, then the visitors may filed a personal injury lawsuit against the nonprofit o rganization to recover his medical bills and compensate for his pain and suffering. Other than that, the untrue information reveal by a nonprofit organization unintentionally against someone may also cause the related person to file a lawsuit on the organization for ruining his or her reputation. Therefore, nonprofit organization should be extreme careful in every single things that it deals with in order to prevent the future unproductive obligation that will lead to the consumption of nonprofit organizations resources. 4.2.4 Restriction of Laws In most countries, nonprofit organizations would normally being encouraged and supported by their government. This is because nonprofit organizations have given big contribution in developing the nations. Their roles in promoting social welfare, enhance social stability and lessen social difficulty have built up better living to the people. However, even government has giving support to nonprofit organizations that promote social welfare, some laws and regulations may still be the obstacle for nonprofit in fully achieving their aims. 4.2.4.1 States Law All states are governing by state government through state laws and these state laws are different for each state. Hence, nonprofit organizations have to obey the laws enacted in the state that they incorporated. In some states, the state laws have specifically required nonprofit organizations to show their accountability and transparency through fulfilling the requirements specified in the laws. For instance, nonprofit organizations need to register their organizations by following the conditions and have to conduct annual reporting according to standards. Besides, nonprofit organizations may have to disclose several documents to the public or make the documents available or accessible by the public online as mentioned in state laws to ensure their financial transparency. These requirements specified in state laws make the formation of a nonprofit organization harder. Moreover, nonprofit organizations may suffer for complicated accounting and reporting procedures as they need to inquire more steps and additional efforts in preparing their financial statements. The sophisticated process not only causes higher cost for disclosing their financial result and is time consuming for nonprofit to prepare their accounts. However, nonprofit organizations have to look into other perspective. Even though these strict requirements have caused burden to nonprofit organization, but through these legal requirements the accountability of nonprofit to donors can be improved and more disclosure of information to public can be achieved (Zainon et al., 2011). The transparency of a nonprofit organization may increase public trust and confidence toward the organization and thus improve the receipt of donation in the future. Although most of the state laws have required nonp rofit organizations to present themselves in most of the aspects, the state laws do not specifically require the nonprofit organizations to have code of ethic for their organizations which will be the most vital element for a nonprofit organization to ensure their integrity. 4.2.4.2 Sarbanes Oxley Act 2002 Currently, one of the most influential laws that affecting nonprofit organizations is Sarbanes Oxley Act 2002, which strictly require the accountability of public listed organizations. The two influential provisions to nonprofit organizations are a) prohibition against destruction of documents that are tied to a criminal investigation and b) a prohibition of retaliation against whistleblowers. The following are some requirements of this act and are relevant to nonprofit organizations. Independent and Competent Audit Committee The Sarbanes-Oxley Act requires that every members of the organizations audit committee must be the members in board of directors, not involved in the organizations management and not receiving fee for auditing. One of the members in the audit committee has to be the financial expert. However, there are no standard requirements saying that nonprofit organizations should carry out full audit for their accounts. Therefore, it is the responsibility of the nonprofit organizations to consider whether to conduct audit to provide assurance for their financial statements through cost and benefit analysis. As the cost of audit is quite expensive, those affordable to conduct audit would normally the medium or large nonprofit organizations. For those nonprofit organizations that conduct annual audits, it is necessary for the board to ensure the independence of the audit committee. Besides that, it is important to make sure that the members of the committee have financial competency to understan d and evaluate the financial statements, audit the accounts and make suitable financial decision. The decision made should then be review periodically by the board. For those nonprofit who do not conduct audit, the boards have to establish at least the financial committees. Besides, they should at least choose a review for their financial statements or hire professional accountant to manage their financial statements. Responsibilities of Auditors As provided in Sarbanes-Oxley Act, all organizations include profit and nonprofit organizations should change their audit partner for every five years to ensure proper financial practices and prevent collusion among the organizations to counterfeit the accounts. Besides that, the nonprofits organizations should not employ the same auditing firm for undertaking other non-audit services such as bookkeeping, financial information systems, consultation, and other expert services on behalf of that organization. Moreover, the significant accounting policies and practices and discussion with management should be disclosed to organizations audit committee by the auditing firm. This will enable the committee to oversee the organization more effectively and provide higher transparency. Certified Financial Statements According to Sarbanes-Oxley Act, the chief executive officer (CEO) and the chief financial officer (CFO) must certify on the appropriateness of financial statements and fair presentation of the financial condition and operations of the company. They are liable for the certification and will be penalty for impropriate and false certification. This provision is to ensure that the members of the organizations will carry out their duties to ensure proper preparation of financial statements and check those statements for accuracy before publish them out. Likewise, a nonprofit organizations CEO and CFO should certify the financial statements. However, they will not liable for the accuracy of their financial statements. On the other way round, they sign-off to show they understand on the organizations financial condition. The CEO must acquire the knowledge related with the organizations field, excel in raising fund and equip with other related skills that will help him or her to understand the financial statements. If he or she lack of financial ability to do so, he or she must then hire a qualified personnel as CFO to assist this task. Even the CEO and CFO of nonprofit organizations do not liable for their certification on financial statements; their signs give assurance that they have checked the statements with due care and the statements are free from material misstatements. Beside financial statements, Form 990 or 990-PF is another important financial document to a nonprofit organization. This document must be filled completely and accurately, checked, reviewed, signed off and approved before sent to the related agency. Insider Transactions and Conflicts of Interest The Sarbanes-Oxley Act completely prohibits the insider transactions that involve loans to the organizations members. This is because it will usually generate further problems related with conflict of interest. Even nonprofit organizations do not have the practice to give loan to insiders; this provision is still applicable to nonprofit organizations to prevent any occurrence of this activity. If such loans are given, the nonprofit organizations must first receive the approval by the board and document the processes, values and terms of that loan clearly. Besides, the organizations must then have the conflict of interest policy with disclose to guide the board and members of the organizations for making decision independently. As nonprofit organizations financial transactions are highly controlled for transparency, insider transaction is strongly not recommended. Disclosure Even many of the requirements of Sarbanes-Oxley Act on the disclosure of organizations do not apply to nonprofit organizations; they are required to fill Forms 990 or 990-PF and make it available for access by everybody. The purpose of this law is to request nonprofit organizations to provide their donors, clients, public and others with a precise picture of their financial condition. However, the weakness of this law is that the form is usually not filled accurately and completely and is not received timely. This is due to lack of strict enforcement of this requirement and thus provides the opportunity to some organizations to play trick on this. Whistle-Blower Protection Sarbanes-Oxley Act provides new protections to whistle blowers and gives punishments to those taken action to whistle blower to prevent them to reveal the true. The protections apply not only to the whistle blowers job, safety and life; it also extends to the whistle blowers family when necessary. This provision applies to both profit and nonprofit organizations to prevent anyone in the organization to take action against other that unseal their mistake. As profit organizations, nonprofits should develop a formal procedure to handle employees complaint and avoid reprisal. The complaints must be taken into consideration seriously, being investigated, being justified and solved effectively. Moreover, a confidential mechanism must be developed to encourage those witness the irregulaties to make a report. This effort is to protect the person who reveals the true from any harm and punishment. At the same time, nonprofit organizations will start to protect themselves by eliminating any car eless and irresponsible practices that will be revealed by other. Through the protection of this Act that encourage disclose of improper conduct, the transparency and integrity of nonprofit organizations increase. Document Destruction According to Sarbanes-Oxley Act, the destruction which includes alter, cover up, falsify or destroy the litigation-related documents to prevent its use in an official proceeding is an offend. The Act gives great attention on document destruction and seems it as a process that must be monitored, justified, and carefully managed. Therefore, like profit organizations, nonprofit organizations also have to maintain appropriate records and documentations for their operations. The necessary documents include records for financial transactions, contract, fundraising obligations, employment file and others influential information. In order to prevent document destruction, nonprofit organizations should enforce their own policy to guide and regulate their members to ensure proper dealing with the documents. False documentations will be a serious crime to nonprofit organizations.