If you were seeking a divorce, you wouldn’t call an entertainment lawyer. Similarly, nonprofits need to work with consultants who are familiar with accounting issues specific to the nonprofit world. Here are a few examples of the kinds of things you may need assistance with.
Determining Fundraising Percentages
It can be difficult for donors to evaluate a charity that they’re unfamiliar with. While many nonprofits do great work, there are also disturbing scandals that sometimes make the news and undermine public confidence. Checking the percentage of funds that a charity spends on fundraising is one criterion some people use, and many watchdog groups suggest that fundraising expenses be kept under 30% to 35% of funding. Since this is also a figure that gets reported on Form 990 that nonprofits submit to the IRS, an accountant specializing in nonprofits can help you determine your ratio and discuss any changes you may want to make to lower it.
Tracking Grant Spending
If your nonprofit receives grants that are restricted to certain projects, you’ll need to track those expenses to remain compliant and prepare reports. Indeed, your funders will need this information for their own program and tax purposes. This can be especially demanding if you receive government funding, so many nonprofits rely on skilled financial and accounting services.
Staying Updated with FASB Requirements
The Financial Accounting Standards Board (FASB) promotes accuracy in accounting for nonprofits and other organizations. For fiscal years starting July 1, 2018, nonprofits need to deal with implementing a significant update known as ASU 2016-14. Further, this includes new disclosures related to liquid resources and new functional expense presentation requirements. You may need an advisor who can help you understand the implications of this update for your accounting systems and processes.
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