CPA For Nonprofits | The challenges posed by running a non-profit organization are, understandably, many. Non-profit organizations need to ensure the efficient running of day-to-day operations to meet the needs of ever-changing regulations, and in terms of finances, a company can struggle to keep its head above water, whether it's in terms of allocating costs or segregating donor funds. So what is the solution to this issue? This is where a CPA can be invaluable to help organizations to reach their goals in a number of areas, not just financial. How can a CPA help non-profit organizations?
The Unique Accounting Needs of Non-Profits
It's important to have a CPA For Nonprofits that understands the unique position a non-profit needs to be in to carry out its mission. A non-profit organization needs to maintain a tax-exempt status which involves relevant IRS reporting. Every year, the IRS will require many tax-exempt organizations to submit Form 990, which stipulates nonexempt charitable trusts to provide the IRS with the information required by Section 6033. These include some of the following:
- Income statements. This includes very specific expensive revenue categories, for example, donations and postage.
- Balance sheet. This includes specific categories, for example, accounts receivable and accounts payable.
- Functional expense statement. This would include the expenses allocated to operations fundraising or program services.
- Individual program expense statements. This reports the expenses for each service, for example, seminar programs.
- Revenue support schedules. This will detail the sources of income in specific categories, such as investment income membership fees, and donations.
These are very specific IRS parameters to determine if a non-profit organization can retain its tax-exempt status. Therefore it is vital to have a solid accounting system around these classifications.
Running a non-profit organization requires spinning a number of plates to maintain effectiveness. In order to be classed as a nonexempt charitable trust, there are a number of classifications that need to be complied with, which is why accounting for non-profit organizations can be a fine art.
The Role a CPA For Nonprofits
A CPA For Nonprofits will work with a non-profit organization and provide a number of services to facilitate their needs. While the numerous services offered by a CPA relate to finance, they can spill over into a number of operational aspects.
Many CPAs specialize in tax and non-profit accounting, but they can also be heavily involved in a number of practices, including donor database management, managing inventory, and implementing an effective accounting system.
A CPA worth their salt will go beyond the stipulated job role and are usually considered trusted advisors. Using a CPA specializing in non-profits can help take the organization to the next level. Some of the specific issues relating to non-profits can include the following:
- Federal and state regulatory requirements that impact the organization.
- Meeting the demands of public and legal requirements.
- Segregating donor-restricted funds from unrestricted funds.
- A sound methodology to allocate costs between different aspects of the organization.
The Hallmarks of the Right CPA
There are many challenges non-profit organizations face. While every non-profit organization will have its own unique set of challenges, this is where a CPA can provide considerable value. Because a CPA For Nonprofits is more than an accountant but is more akin to a trusted advisor for the business, a CPA can play a number of roles within the organization.
While many organizations will use an in-house CPA or a Chief Financial Officer (CFO) or controller to help with cash flow and accounting practices, if you are considering a CPA to help your business, it's important to address some of the following aspects when factoring in your decision:
Certifications
A CPA will meet the requirements for certification and must take continuing education courses so they remain licensed and certified.
Industry Expertise
It's crucial to look for a CPA that has expertise in your industry. Choosing a CPA that is highly awarded is one way to ensure that you are dealing with the right person for your needs. When it comes to finding a CPA specializing in non-profits, the true benchmark is experience within the industry.
Level of Involvement
As a non-profit, it is your prerogative as to the involvement of the CPA within your business dealings. Perhaps you may only require a CPA to help with end-of-year statements and prepare your tax return, but if you also want additional financial planning it's important to seek somebody that has a variety of qualifications and appropriate background.
What Are the Ways a CPA Can Help a Non-Profit?
A non-profit organization is going to face a tumultuous amount of regulations and accounting requirements. Understanding what is required of you in relation to the industry is one task, but managing everything is another problem entirely. Having a CPA specializing in non-profit companies means they are familiar with industry-centric problems and can provide a solid starting place for improvement.
A CPA For Nonprofits is a licensed accountant which means they need a four-year degree and are committed to developing education. A CPA can help a non-profit in the following ways:
Standard Bookkeeping
While many organizations believe that a bookkeeper would be a more effective option, it's important to recognize that in an organization where there is already an established bookkeeper, having a CPA guarantees that expenses and revenues are entered correctly and promptly.
Preparing Financial Reports
The five vital reports for non-profit organizations include the following:
- Statement of Financial Position (or Balance Sheet)
- Summary of Activities (or Income Statement/Profit & Loss)
- Statement of Cash Flows
- Budget to Actual
- IRS Form 990
Every financial report needs to be consistent, accurate, and timely. As non-profit organizations struggle to get reports that look consistent, this is where a CPA can provide vital inputs.
Providing Accountancy for Grants
Non-profits, whether small or mid-sized, need to track the grant funds separately to their main accounts. It's important for any organization to report to the grantmaker how the expenses are being used. In many cases, you are not allowed to use the grant funds to cover standard operating expenses, which is where a CPA for non-profits can provide support.
Liaising With the Board of Directors
Something many non-profits need to do on a regular basis is deal with stakeholders. A non-profit relationship with a board of directors is a tricky one. Reporting and accounting are vital components in a solid relationship, which is where an experienced CPA For Nonprofits provides clear guidance to help with these interactions. A certified CPA that comes highly awarded has significant experience in these areas, where a small non-profit may find themselves in over their heads due to this intimidating environment.
Providing Invaluable Support to Maintain Compliance
Non-profits have to keep everything out of the open when it comes to their bookkeeping. This means having established procedures to maintain solid controls over the organization in order to comply is vital.
Helping With the Audit Process
Audits are one of the biggest and most intimidating areas a non-profit can encounter. Preparation is vital and if a non-profit waits until they need to start preparing for an audit, this is way too late and could cost a lot of money and months of work. To pass a non-profit audit, organizations need to comply with generally accepted accounting principles (GAAP) which include standards for robust internal controls and financial statements.
How Non-Profits Benefit from the Input of a CPA
Non-profit organizations can benefit from a variety of inputs from a CPA. These include the following:
Provides Books Ready for Audits When You Need Them
It's important to have an effective system to maintain your non-profit status and meet the requirements of your donors.
Saves You Time and Effort
Non-profit accounting can be a very time-consuming practice if there is no training in place. Ensuring that a CPA For Nonprofits who is experienced in non-profits can help you to look after everything for you, which saves you time and energy.
Allows You to Focus on the Things That Matter
If you are trying to spin many plates, such as managing your team, your staff, and fundraising, there's a lot more on your plate that you can offload to a CPA. It's important that non-profits build solid relationships rather than focusing on crunching the numbers. This means you'll be able to guide your volunteers and employees more effectively as you are not preoccupied with processing receipts and paying vendors.
Understanding Which Finances You Can and Cannot Use
It's important to use donor contributions and grant funds in the right areas. But it can be difficult to understand how much of a donation should go towards certain programs and operations. Whatsmore, it can be more difficult to keep track of these aspects. This is where a CPA is invaluable.
Do You Need a CPA For Nonprofits?
There are so many aspects a CPA can cover. This is why Ash CPA can help you achieve your goals. Non-profits shouldn't have to focus on finances and having an award-winning CPA that is able to help non-profits carry out their mission is invaluable. Allowing a CPA to work with an organization to develop a robust approach to managing finances makes for an effective and efficient organization. Put simply, a CPA For Nonprofits can make a massive difference. New clients are welcome.