Non-Profit Financial Statements
A non-profit organization doesn’t encounter less bookkeeping difficulty than a business, which may seem surprising given the aim of the organization. In fact, because most non-profit organizations accept public funds in the form of contributions and grants, they have a higher responsibility to produce reliable and accurate financial statements. Supporters often wish to be assured that their donations are used as efficiently as possible. Detailing the history of donations and their use in the financial statements allows current donors to remain confident that their continued support is well earned, and encourages prospective donors that the non-profit organization is in good hands and deserving of more support.
Some of the most complex bookkeeping and accounting issues I face are from Non-Profits. Non-Profits have different accounting rules than businesses do. From fund accounting and restricted accounts to the manner in which they book receivables and income, Non-Profit accounting can be quite challenging. On top of all of this, we advocate that non-profits use Class reporting in their data entry and financial statement preparation, which adds another level of complexity. Class accounting allows for separate Profit & Loss Statements for all of the individual Events and Programs the Non-Profit runs. Running after-the-fact reports, by class, for Grant purposes is easy when the bookkeeper enters in appropriate classes when entering transactions.
Most non-profit organizations are not solely financed by donations. Their other ventures to gain capital can complicate non-profit accounting. Not only must all streams of revenue be accounted for, their usage must be carefully documented so as to avoid misallocation of funds – or the appearance thereof. They must also pay sales tax on many of their other operations.
We have a unique way in which we account for Restricted Funds on a Balance Sheet, or Statement of Financial Position. We present them in a way that allows Management and the Board of Directors to see how the Restricted Fund Balances are changing. It is very educational and gives Management and the Board greater clarity on how Restricted Fund accounts are being used.
Along with a Balance Sheet, we prepare a number of financial reports monthly for Non-Profits, including a Statement of Activities. Because there are so many moving and interconnected pieces in Non-Profits, their financial statements are often complex and lengthy. Because of this, we usually attend Board Meetings so we can help management explain the financial statements to the Board.
Budgets are another item that we help Non-Profits with. While budgets are not used exclusively by Non-Profits, they are unique in that 3rd Parties are often shown the budget. We have extensive experience in creating budgets and in tracking them. We usually prepare a monthly report showing actual activity vs budgeted activity for our Non-Profit clients.
Non-Profit Audit Preparation
Audit preparation is an important responsibility of your accountant. We have a good working relationship with several of the better-known Non-Profit auditing CPA firms in South Florida. Being ready for your audit not only makes the audit run smoother but gives the auditors more confidence in the organization’s books. This hopefully leads to a shorter audit and most importantly, a favorable rating, known as an unmodified opinion, from the audit firm.