If you’re the executive director of a non-profit organization, you’re likely tasked with keeping all the initiatives moving forward, planning for future campaigns, and managing the business aspects of the organization. But a non-profit isn’t a standard business. There are many objectives, strategies, and processes that differ for 501(c)(3) and 501(c)(6) organizations, compared to the standard, for-profit business. When it comes to effectively managing Non-Profit Accounting practices throughout the year having a knowledgeable partner by your side can make all the difference.
Is non-profit accounting different than standard business accounting?
In many aspects, non-profit accounting is similar to standard business accounting. The biggest difference is that non-profits have specific reporting requirements and are required to file an annual Form 990.
Throughout the year Non-Profit organizations account for expenses on a functional basis, typically classifying items into these categories:
- Program expenses
- Fundraising expenses
- Management and general expenses
When tracking revenues and expenses throughout the year non-profit organizations should be careful to track based on donor or third-party designations, if applicable.
Keep an Eye on these Ratios
Throughout the year you’ll want to keep an eye on the NFP’s operating reserve ratio and functional expense ratio. These two ratios can help you keep a pulse on the overall financial health of your organization.
What does a Non-Profit Accountant do?
A trusted non-profit accounting partner allows you to stay focused on the business, while your accounting team keeps an eye on the ratios and reporting to ensure you can fulfill your missions throughout the year.
At SME CPAs our team of experienced, qualified accountants is here to help our non-profit partners with a variety of planning, auditing and filing needs.
Non-Profit Financial Audits
Uniform Guidance Audit: SME is available to assist South Carolina and Georgia-based non-profits with single audits. For any NFP that receives grant funds from the federal government and expends more that $750,000 of federal dollars in a single fiscal year, a single audit of those funds will likely be required.
Government Auditing Standard: The purpose of this audit is to provide an opinion on the financial statement of the non-profit in accordance with GAGAS. For organizations using federal funds, audits must be conducted according to the “yellow book standard” or the Generally Accepted Government Auditing Standards.
Compliance Audits & HUD Consolidated Audit Guide: For Profitentities that receive funding from the U.S. Department of Housing and Urban Development (HUD) must follow compliance requirements outlined in the HUD Consolidated Audit. These compliance requirements apply to Uniform Guidance Audits, Single Audits, or the GAGAS category mentioned above.
For organizations not in need of a full audit, an examination engagement offers an opportunity to fine tune the financial processes, as opposed to auditing the financial statements. The examination helps to ensure accountability and compliance across processes and minimize the opportunity for error and fraud.
An internal audit provides a level of risk management in that it evaluates the effectiveness of an organization’s internal controls, corporate governance and accounting processes. This type of audit provides Executive Directors and Non-Profit Board of Directors with an opportunity to identify and correct procedural flaws prior to external audits.
Non-Profit Consulting and Advising
Conducting audits and examinations is just a small part of overseeing the financial obligations of a Non-Profit. To get a more wholistic view, SME offers a variety of other consulting services related to governmental and Non-Profit audits including:
- Non-Profit Accounting Services
- Financial Projections and Forecasting Studies
- Form 990, Form 990PF, Form 990T planning and compliance
- Grant Accounting and Management
- Operational and capital budgeting
Why Your 501(c)(3) or 501(c)(6) needs a specialized Non-Profit Accountant
As a non-profit, you are a fiduciary for funds that have been gifted or granted to the organization and it is crucial that those funds are handled in a prudent manner. Non-profit organizations follow specific reporting standards that are unique to their structure, including management of restricted funds and functional allocation of expenses.
Non-profit organizations are also responsible for being able to provide accurate reporting on funds and expenses to the public upon request and an experienced non-profit accountant can work alongside you to ensure your reporting is always accurate and up-to-date according to GAAP and federal requirements.
What to look for when hiring a Non-Profit Accountant
An experienced accounting firm with knowledge of Non-Profit Generally Accepted Accounting Principles (GAAP), such as SME, can be a critical player in the long-term success of a non-profit.
When dealing with funds specifically allocated from the federal government, having an accounting partner that understands best practices and federal requirements for tracking, reporting and auditing can alleviate some of the burdens of managing non-profit financials and also helps your organization avoid costly reporting errors that may jeopardize future funds.
Additionally, a qualified non-profit accountant will understand appropriate management of funds (restricted and non-restricted) and the uniqueness of tracking revenues and expenses based on donor and grantor designations.
For almost 70 years, SME has been partnering with organizations across the Aiken-Augusta area to provide qualified tax planning, accounting and auditing services. If your non-profit is ready to streamline your internal accounting practices, our experienced, non-profit accountants are here for you. Get in touch with one of our experts today, and let’s get to work to help you better serve your mission.