Is Your Non-Profit's Accounting Up to Par? Five Important Areas to Evaluate

Learn how to ensure your non-profit’s financial health with our expert audit process.

We often get asked by non-profits how we assess the quality of their accounting and reporting functions. Here’s a quick overview of how we audit the quality of their accounts:

1. Chart of Accounts Layout and Grouping: The Foundation of Financial Clarity

The overall structure and organization of the Chart of Accounts provide the first indication of the accountant's experience with non-profits. A well-structured chart reflects an understanding of non-profit accounting requirements.

2. Status of Account Reconciliations:Ensuring Up-to-Date Financial Records

Reviewing the current status of all account reconciliations helps us determine how up-to-date the accounting records are. Timely reconciliations indicate diligent accounting practices.

3. Class Tracking: A Key Indicator of Non-Profit Accounting Expertise

Effective class tracking for Admin,Program, and Fundraising Expenses is crucial. This is often the biggest indicator of the accountant's familiarity with non-profit requirements, as Form990 mandates proper allocation of income and expenses by class. Experienced accountants will have set up their accounting software to facilitate this tracking.

4. Customized Reports: Essential Tools for Financial Transparency

The presence of specific customized reports signifies an experienced non-profit accountant. These reports include:

• Statement of Financial Position (monthly)
• Statement of Activities (by class)
• Donor Contribution Summary
• Budget vs Actual Report

Regular and easy retrieval of these reports is essential for effective financial management and transparency.

5. Timely Filing of Form 990:Maximizing Funding Opportunities

The filing date of Form 990 is critical. Experienced non-profit accountants understand the potential opportunity costs associated with late filings, such as lost grants, larger donations, or contributions from Donor-Advised Funds(DAFs). Prompt filing can have a significant impact on the financial health and funding opportunities for the non-profit.