Whether in-house or an external firm, CPAs provide immense value to nonprofit organizations. They go beyond just “the folks who keep the books” and are often considered trusted business advisors.

Nonprofit teams work hard to collect donations to help achieve their mission. 

Financial Reporting

Nonprofits must prepare and analyze financial data regularly for compliance and decision-making. While bookkeepers can sometimes handle some of these duties, the accountant you hire must have the skills and education to provide a more comprehensive set of services.

An accountant will help you complete tax forms for the IRS and state registration agencies (if required). They’ll also review your operating budget to ensure it meets Generally Accepted Accounting Principles. They’ll compare income and expenses against your annual budget to identify improvement areas. They’ll also compile a statement of functional expenses, which is unique to nonprofits and helps donors understand how a proportion of your organization’s overall expenses are related to the specific programs you run.

A CPA will also help you plan for upcoming initiatives, such as new programs or fundraising campaigns. They’ll use your financial data to predict whether a project or campaign will be financially feasible and recommend strategies to minimize risks and costs. While financial data analysis may seem mundane, it’s crucial to achieving your organization’s goals and maintaining compliance with essential statutory requirements. When choosing a CPA for nonprofits, it’s important to consider their experience working with nonprofits of your size and scope and their expertise in fund accounting.

Audits

A CPA provides a wide range of services that can help nonprofit organizations improve financial reporting and efficiency. These may include audits, reviews, and compilations. An audit involves the most thorough examination of financial records and is generally more costly than a review or a compilation. During an audit, the CPA evaluates internal controls, analyzes financial data, detects misstatements and errors, ensures compliance with Generally Accepted Accounting Principles, and generates accurate reports. Financial reviews and compilations are less expensive but offer lower assurance. The CPA gathers documentation and examines the financial statements during a financial review. This includes analyzing internal control systems and cash management practices. They also assess risks and identify areas that require improvement based on the results of their work.

In addition to helping nonprofits meet legal requirements, these services can enhance transparency and build trust with donors. For example, state sunshine laws often require nonprofits to disclose information, including specific tax forms and financial documents. Having a CPA who understands these requirements can be invaluable for ensuring compliance and keeping financial information private.

Taxes

Becoming a CPA is one of the most highly recognized professional designations in business. It’s also well-known that the career offers many benefits, including job security and financial benefits. However, not all CPAs are the same, and it’s important to take time to select one with various skills and experience in the industry.

For example, many CPAs specialize in nonprofit accounting and have experience working with organizations of varying sizes and complexity. This means they can help your organization understand what it takes to achieve its goals in various areas, not just finances. In addition, a CPA can ensure that your company complies with all the rules and regulations associated with being tax-exempt. The IRS holds nonprofits to a particular standard and will review records of those organizations that have been filed each year to determine whether they are maintaining compliance. If you are still determining if your organization meets these standards, a CPA can help resolve the issue quickly and easily. Lastly, many nonprofits must conduct an annual audit of their financial statements. This can be a lengthy process and requires the expertise of a CPA familiar with the process’s intricacies. The CPA can assist with the audit and provide a copy of the audited financial statements to any state or local agencies that may request them.

Financial Planning

While most people who work at nonprofit organizations aren’t accounting experts, it is still essential for their missions to have impactful and effective financial management. With it, they may be able to allocate funding properly to maximize their programming and reach their goals. Fundraising teams put much effort into bringing in donations to pay for a nonprofit’s expenses. But more than merely collecting funds is needed; these gifts must be allocated to various aspects of the organization and reported on according to Generally Accepted Accounting Principles. Nonprofit accountants help with this allocation and reporting by reviewing and reconciling both sides of transactions, compiling statements and reports, and interpreting financial data. Another special aspect of nonprofit accounting involves what is known as “restricted funds.” Because donors often set restrictions on their gifts, keeping track of these contributions and ensuring they are being used as the nonprofit intends is crucial. A CPA can use software and management practices that allow for this to be accomplished.

Finally, an accountant will also be able to assist the nonprofit in filing tax forms. This is especially important for smaller, less established nonprofits that don’t have the manpower to hire a full-time accountant.