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Internal Control Best Practices for Nonprofits

Internal controls are the accounting and financial business processes and procedures that help to protect your organization’s assets. Regardless of the size or mission of a nonprofit, it is necessary to establish policies and procedures that prevent misuse and misappropriation of assets. These internal controls will ensure that all staff or volunteers, who have access to spending or collecting monies, understand their fiduciary responsibilities, all assets are properly managed, and the primary purposes of the nonprofit are carried out. When these criterion are not met, it results in a breach of fiduciary duty and financial liabilities.

The most effective procedures are those that have the greatest segregation of duties. This is the concept of having more than one person required to complete a task. The separation by sharing of more than one individual in one single task is an internal control intended to prevent fraud and errors. The more people involved in the process, the less likely it is that an error will occur. For example, the person who writes checks should not be the person signing them. The person who orders the service or product should approve the invoice. The person with budget responsibility should also approve the expenditure and code the invoice.

Typically, internal controls are written policies that detail agreed-upon procedures that the nonprofit will adhere to, as well as outlining who the responsible parties are. The goal of internal controls is to create business practices that serve as “checks and balances” on staff or outside vendors in order to reduce the risk of misappropriation of funds.

The following are examples of some basic internal controls:

Requiring two signatures on a check.
Establishing safety protocol ensuring all doors are locked when no one is monitoring the entrance.
Preapproving spending, as a prerequisite to guaranteed reimbursements.
Requiring multiple persons to be present when collecting and counting cash donations.
Regularly reviewing vendors who are receiving money from the nonprofit for services or supplies.
Ensuring that the same person isn’t authorized to write and sign a check.
When opening mail, endorsing or stamping checks “For Deposit Only,” listing checks on a log before turning them over to the person responsible for depositing receipts, and periodically reconciling the incoming check log against deposits.
Requiring that cash be stored in a locked drawer or safe.
Requiring background checks for employees or volunteers who handle money.

Another facet to consider is the actions of executive staff and leadership to adhere to internal controls. Leading by example is the best way to ensure compliance of rules by the rest of your staff and volunteers. Additionally, acknowledge that these controls are being implemented as a measure to protect the staff and organization and not due to mistrust. If you are wondering where to begin establishing internal controls for your nonprofit, a good place to start is with:

Any person who has access to your bank accounts or
Any person with permission to spend money on your organization’s behalf.

Without establishing these procedures, your nonprofit is vulnerable to misuse and misappropriation of assets. At Beck and Company Certified Public Accountants and Business Advisors, we are an accounting and consulting firm delivering specialized expertise, creative thinking, and unsurpassed service to ensure that our clients’ financial endeavors flourish.

Serving small and mid-sized organizations and individuals, we provide audit, tax, accounting, and consulting service that address all aspects of your business with one goal in mind – exceeding your expectations. We are able to do this by drawing on our combined business backgrounds and experience in public accounting to help you in virtually any area of your business. Contact us for more information on our accounting and consulting services that can help you.

What to Look for When Preparing Financial Statements for a Nonprofit Audit

There are a number of steps your nonprofit can take to ensure you are prepared for a smooth audit. One of those things is collecting necessary documentation and getting them ready for the auditors. Unfortunately, this can take days, weeks, even months. Creating an audit process can ease the burden of preparing for an audit and buy back valuable staff hours. With time saved, you can spend your time on what’s most important to your nonprofit organization.

It is a risky effort to attempt to gather information from a variety of disparate sources and systems. Working with data stored in too many different systems typically creates inconsistencies in reporting and makes it very difficult (if not impossible) for an auditor to follow audit trails and replicate reports on a consistent basis.

In the long run, disjointed and inconsistent reporting and data can cost your organization money, extend audit time, increase risk for mistakes, and raise possible compliance issues for your organization. Worst of all, a troubling or failed audit can put an organization at further risk of losing important board and donor trust.

It is possible to avoid this nightmare by being proactive. Better non-profit financial management, tracking, and reporting across the entire organization that ensures you’re always audit-ready is just a few steps away. Take a good, hard look at your accounting software to ensure it’s built to meet the needs of your nonprofit organization and offers true fund accounting capabilities.

Ask yourself:

• Does my current system provide the flexibility needed in the chart of accounts?

• Am I able to track and report out on spending and revenues associated with each of our programs? How much time am I spending in my current system to do so?

• Could my auditor easily review the creation and approval process of any requisition in my system?

• Does my current system allow me to track and allocate revenues and expenses to the right funds?

• Can I be sure that I have maintained financial data that allows me to easily prepare recurring or ad-hoc reports for internal audits, external audits, or board member reviews?

• Do I seek to show accountability and transparency through reliable data and consistent reporting?

When dealing with public funds, accountability and transparency are critical. Organizations have to be able to account for every dollar or risk losing trust from donors and constituents. But, if your reports aren’t consistent, at best it may show an apparent lack of oversight. At worst, your auditor may determine the financial health of your organization is at risk.

An organization’s inability to accurately and consistently produce financial statements and reports that are the same EVERY time is problematic. If you and your team cannot consistently duplicate reports, neither can your auditors.

The risk for exposure is tremendous and can lead to a lack of apparent oversight for the handling of finances, increased potential for mistakes that can cost time and money, misrepresentation or inaccurate portrayal of the organization’s financial health, and greater exposure to potential fraud.

Follow these steps for better nonprofit financial management, tracking, and reporting across the entire organization.

• Take an honest assessment of your current accounting software:

Does my software offer true fund accounting capabilities?

Does my accounting solution offer access to a custom report writer and standard reports that are designed for nonprofits?

Can I produce reports consistently and accurately each and every time with little to no fuss?

Can my auditor easily recreate reporting to ensure accuracy in our organization’s financial statements?

Ensure you can produce financial reports that are accurate, timely, in context, and readily available on a monthly or quarterly basis. They should include a configurable chart of account, year-end donor summaries, and other standard reports.

Evaluate your ability to create reports that match the purpose. Most boards look at financial reports for these reasons:

• To comply with financial standards

• To evaluate effectiveness

• For forward planning

These tips for preparing for an audit will make the audit process more successful and smooth. To find the right auditor for your organization and take advantage of the many audit services Beck and Company Certified Public Accountants and Business Advisors provide, contact us.

Nonprofit Changes Coming Following Updated FASB Accounting Standards

In an effort to increase transparency and continuity in the preparation of financial statements, the Financial Accounting Standards Board (FASB) has proposed significant changes for nonprofits. In the past 20 years, generally accepted accounting practices (GAAP) have not clearly specified a way of reporting performance. That is all going to change. Nonprofits can be optimistic that these changes will have great benefits for them. They will allow nonprofit organizations to become more comparable, generating easier-to-interpret financial statements that will aid in the evaluation of financial statements for the purposes of obtaining stakeholders and loans.

Changes to net asset classification

The proposed Accounting Standard Update (ASU) changes the nonprofit accounting requirement for what information must be presented in the statement of financial position. The current three classes of net assets (unrestricted, temporarily restricted, and permanently restricted) will now be reduced to two classes of net assets (net assets with donor restrictions and net assets without donor restrictions). This change is intended to simplify financial reporting.

In addition, the FASB has revised how underwater donor restricted endowment funds are to be classified. They believe it is confusing to classify the spending from underwater endowments as unrestricted, and thus, the FASB has proposed that underwater amounts be classified in net assets with donor restrictions. The FASB is also now requiring disclosure of the combined amount of funds that are underwater and the original endowment amount, along with any rules or restrictions on spending from such funds.

Statement of activities

Along with the changes to net asset classification, a corresponding change to the statement of activities has been proposed. Now, all nonprofits are required to report income or losses from operating and non-operating activities separately. This is because certain non-operating activities, like investment earnings or losses, can affect the operating bottom line. The FASB believes this will help to clearly show both income and costs that are related to accomplishing the nonprofit’s mission.

Presentation of Cash Flow

Changes to the statement of cash flows have been proposed in order to provide more useful information to key stakeholders on the overall operating performance of the nonprofit. First, the board is proposing the use of the “direct method” of reporting cash flows from operating activities. The second change will realign the reporting of certain items to be consistent with how items in the statement of activities are being reported. Items such as operating, financing, and investing categories will be affected. The FASB believes these changes will result in easier-to-read financial statements which will prove to be more useful for the average user of financial statements.

Assessment of liquidity

The FASB has also proposed changes they hope will result in a clearer picture to stakeholders of an organization’s liquidity. Donor-imposed restrictions and confusion about how they affect the availability of assets have caused a lack of clarity regarding the assessment of liquidity. The proposal requires both qualitative and quantitative information regarding the liquidity of assets and cash demands as of the reporting date. Along with the changes to net assets, classification of this information should allow users to assess the liquidity risk of the nonprofit.

Impacts

As with any change, an investment of time for nonprofits and their accountants will be necessary to implement the required changes. The FASB’s proposal will allow stakeholders to better examine financial performance as well as the need for funding and overall stewardship of donor funds. In the end, the nonprofit should experience significant benefits from the extra work as better information is provided to decision makers

At Beck and Company Certified Public Accountants and Business Advisors, we would love to be of service to you as you consider implementing these required changes for your organization. We are a certified public accounting firm serving the Greater Washington D. C. metropolitan area with clients also along the Eastern Seaboard. Our firm has been built upon a tradition of service, technical expertise, and creative thinking. Our services are highly personalized, cost effective, accurate, and dependable. Our commitment to excellence is demonstrated in our team’s understanding of your business and personal financial objectives and then delivering innovative solutions to achieve them.

How Often Can I Revise My Nonprofit Budget?

A budget is a financial plan and should be a simple tool which helps you detail unique categories of income and expenses necessary to your nonprofit. Typically a business will create an annual budget, however, it is also necessary to regularly evaluate the budget in turn providing the freedom to make necessary adjustments. Having a budget revision process will help you cut down on unnecessary spending, redirect funds and create space for unplanned expenses.

Looking back and looking ahead

Taking account of the current budget and comparing its allocation against actual spending is a great first step in the revision process. You will begin to see patterns in your monthly assessments. Certain areas that consistently fall short and others that show a surplus are ripe for revision. With this information you are then able to reallocate funds from surplus line items to the line items showing a consistent deficit. The most efficient and effective budget revision process include multiple people within the staff. Department heads and team leads will need to be invited into the budget revision process. They should be speaking into their departments spending habits and revenues in order to maximize bottom line potential for the overall organization.

Short-term Projects

There are other great reasons to make monthly budget revisions. For instance, a short term project develops and is estimated to take 2-3 years to complete. This new venture will require regular budget checks to account for unplanned expenses and delays. Once the project is complete you may be able to slide right back into a fixed budget. Additionally should you introduce a new product or service your budget would require regular revisions until you uncover actual numbers to substantiate the new endeavor.

One of the benefits of the budget revision process is to create space for one-time events that have affected the budget. A set-back, delay or unexpected cost could throw an entire year’s budget off if adjustments are not made.

The Goal Is Zero

The ultimate goal of a zero based budget is to ensure that your income and expenses equal zero at month’s end. Should you cover all of your expenditures and still have income left over at the end of the month your budget process is not done. Allocate those additional funds somewhere, tell it where to go. Skipping this step compromises your chance to make that variance work for you.

Utilizing this strategy within your budget planning process can help you get out of debt, increase annual bottom line revenue, and/or invest back into your company so that your overall potential and effectiveness is maximized.

Keep it up

It is a smart move to continually look at the budget and the budgeting revision process. This isn’t a one-time project. With each change in process or budget be sure to evaluate the effectiveness of the revisions and efficiency of the process. Ultimately you want to increase profits while maintaining the excellent standards and quality your customers have come to know and love about your organization.

At Beck & Company, Certified Public Accountants and Business Advisors, we want to help you. We are an accounting and consulting firm delivering specialized expertise, creative thinking, and unsurpassed service to ensure that our clients’ financial endeavors flourish. Ultimately we want to see your nonprofit reach its goals and we would love to help you. Contact us to learn more.

Accounting For Corporate Sponsorships

Many nonprofits receive donations from corporations wanting to support their endeavors. These “corporate sponsorships” have been in question by the IRS as to whether or not they would be subject to certain taxes. The IRS released regulations concerning these corporate sponsorships in 2002 prompted by several rulings in court cases. The core of these rulings identify whether donations will be considered “corporate sponsorships” which are excluded from unrelated business income or considered advertising which would be subject to unrelated business income tax. The IRS would see advertising to be a “substantial return benefit”.

The bottom line is an exemption from the unrelated business income tax (UBIT) for donations that qualify as a corporate sponsorship. Income generating activities for Exempt organizations such as a trade or business which is regularly carried on; and unrelated to their exempt purposes will be subject to UBIT.

However, exclusions from UBIT do exist such as “corporate sponsorships” and provide guidelines for activates and/or actions for which taxes will not be incurred. The final rulings declared six elements of corporate sponsorship that would not be considered “substantial return benefits”.

Listing the name, logo, or product line of the sponsor;
Awarding exclusive sponsorship
Providing logos or slogans that do not contain any qualitative language or comparative description of the products;
Listing the payer’s locations, addresses, phone numbers, and Internet addresses;
Providing value-neutral descriptions of the sponsor’s product display; and
Listing the sponsor’s brands or trade names.

On the other hand, there are also four things that would be deemed substantial return benefits, including “advertising.” They are:

Advertising;
Designating a sponsor as an exclusive provider;
Providing facilities, services, or other privileges to the sponsor unless they are of “insubstantial value;” and
Granting either exclusive or nonexclusive rights to use the sponsor’s intangible asset (e.g., name or logo).

Let’s take a look at a hypothetical situation. The local little league, an NPO considered exempt is given a $2,000 donation from the local sporting goods store. In return a banner is created to display on the outfield fence of the home field. This banner contains the name of the store, its logo, and website address.

According to the regulations this banner would not cause the sporting goods store to be taxed and would qualify as a “corporate sponsorship”.

There are a few areas within the rules that can be tricky and cause problems:

Substantial return benefits
Services provided
Internet issues

Substantial Return Benefits

The question of what is a substantial benefit can cause some confusion. According to the rule, if a sponsor receives anything in return for their donation it must have a value of 2% or less of the sponsorship payment. Should its market value be more than 2% then the entire value of the return benefit would be subject to UBIT.

Example 2:

A music teacher donates $500 to the local community theater. The teacher receives a notation in the program with her name and website listed. In addition she receives 2 season tickets to the three productions for that year. The market value of these tickets is $120. Given that the value of the tickets is more than 2% of the $500 donation, the $120 “return benefit” would be considered the value of the advertising and subject to UBIT.

Services Provided

Should a sponsor make a donation and in return require the beneficiary to provide a service, the value of that service may be considered return benefit and be subject to UBIT. Once the services are rendered, the fair market value of those services would be considered unrelated business income. It can be tricky to accurately assess the value of said services.

Example 3:

Remember the little league team from Example 1? Let’s say that same situation occurred however in addition to the banner the sporting goods store agrees to provide the entire little league team with one specialty coaching session. The fair market value of the coaching session is $500.

Because services are required as part of the sponsorship agreement, the $500 fair market value of the training received is considered unrelated business income.

Internet Issues

Although the IRS has not released specific protocol in the area of internet promotion it is important to also consider the following. Should a sponsor require a hyperlink to their website is included on the organization’s website you will need to be sure unrelated business income is not generated. Up until now hyperlinks to a sponsor’s website are not supposed to result in unrelated business income providing the tax-exempt organization is not endorsing the sponsor’s products.

Example 4:

The same little league from Example 1 includes the sporting goods store logo on its team website, along with a hyperlinked logo to the sponsor’s website. As long as the team website only includes the sponsor’s logo with a link to the website – and does not have any promotional language or endorsements no unrelated business income should be generated from the linked logo.

Recent Tax Reform

In early 2014, the House Ways and Means committee released a draft with several proposed changes to the tax code. This draft includes revisions specifically to how sponsorships are treated for UBIT purposes. Based on the proposal should an organization use the name or logo of a sponsor’s produce line, then that sponsor’s donation would be considered unrelated trade or business income.

It is expected more information will be provided regarding these potential changes in the coming year. Here at Beck & Company, Certified Public Accountants and Business Advisors, we want to help you. We are an accounting and consulting firm delivering specialized expertise, creative thinking, and unsurpassed service to ensure that our clients’ financial endeavors flourish. Ultimately we want to see your nonprofit reach its goals and we would love to help you. Contact us to learn more.

Securing Your Data from Misfortunate “Cookie Crumbles”

With the rise of mobility solutions, home and smaller regional office spaces are on the rise. With that comes increased risk to the office data from a standpoint of security. While many are accustomed to sophisticated security features in their workplace, those same features may not be protecting you at home or in the smaller office environment. Aptly named, “Misfortune Cookie” is one of several vulnerabilities recently named that may be causing a security breach for millions of computer users. Others include Poodle, Shellshock, Heartbleed, and Freak.

Remote attackers will find these flaws within your router and use it to take control of your device and potentially steal valuable data. To avoid such a miss-hap a patch is necessary to download and install from an authorized vendor. It is all too likely that you are unaware of when and to what extent your router was updated. Like many others you rely on your IT department to manage your technologies. However, IT departments are in high demand and are not always focusing on proactive security measures and updates. Understandably, there are more pressing issues to solve such as installations, trainings, trouble-shooting etc. Security may be put off for another day or less demanding time. Additionally, new vulnerabilities are popping up daily and would be impossible to stay ahead of without a security protocol.

Maintaining a secure IT environment would require personnel dedicated to knowing when things like the router was last updated as well as making sure each piece of equipment and software being used is regularly monitored and up to date. Knowing you are at risk is the first step towards maintaining a secure data environment. Armed with this information you are poised to take steps that will ensure your data safety. This will require someone on your team is dedicated to mitigating your risk by employing cyber safety processes are regularly carried out.

You need only watch the news in the past year to have noticed the many multi-million dollar corporations who have allowed a fatal breach within their data security, resulting in job loss and bad press. And just because these stories have been featured in the news does not mean this story couldn’t be yours. This is just one reason why it is so important to stay informed about the risks and develop thorough strategies to provide a secure data environment.

Consider including the following elements to your data security strategy:

Stay up to date on current cyber vulnerabilities
Train employees on security processes and protocol
Ensure IT controls are strong
Don’t miss updates…ever!
Regularly asses your organizations security

Furthermore it is important to be prepared should you ever find yourself a victim of a security breach. Here is a suggested protocol

Create a written incident response plan
Communicate and Train all staff to know and report any incident
Establish a team with designated responders
Research where you will get help from
Learn from your experiences and those who have gone before you

You can become a leader in this area of your nonprofit business. This is an essential tool for all nonprofit leaders to ensure their companies and employees are safe from internet vulnerabilities.

Here at Beck & Company, Certified Public Accountants and Business Advisors, we want to help you. We are an accounting and consulting firm delivering specialized expertise, creative thinking, and unsurpassed service to ensure that our clients’ financial endeavors flourish. Ultimately we want to see your nonprofit reach its goals and we would love to help you. Contact us to learn more.

Maintaining New Governments Standards with Reporting Health Plan Coverage

2015 brought new standards of reporting Health Plan Coverage to both employees and the IRS. Although official reports won’t be due until January of 2016, there are several steps to take now to ensure you are prepared when the time comes. Depending on if you are a small or large employer, the requirements are as follows:

Small Employer: If you are an employer with self-insured health plans and are not considered a large employer (over 50 full-time equivalent employees), you are required to issue Form 1095-B to every covered employee, and file copies with the IRS.
Large Employer: If you are considered a large employer, you are required to issue a Form 1095-C to every employee and file copies with the IRS.

The following information will be required to report for each employee receiving a 1095-C

Health care coverage. You must report the health care coverage that was offered or not offered to the employee
Amount. You will need to report the amount that was paid by the employee for their portion of the lowest-cost monthly premium. This applies to self-only minimum value coverage.
Reasoning. Should an employee not be offered insurance at any time within the calendar year you must indicate the reasoning using the corresponding code. For instance, if the employee was not employed in that month (2A) or employed at a part time level (2B).

A list of codes is available at www.irs.gov/instructions/i109495c/index.html and should be reviewed to ensure all form requirements are begin met throughout the year.

Self-insured Employer Reporting

Any employer offering a self-insured health plan must provide the following information:

List of each employee, including spouse, dependents or others covered under the plan who was given coverage for a minimum of one month throughout the year.
Date of birth and social security number for each covered individual.
Each month for which the person was covered

Large Employers will report using Form 1095-C, part 3. If you are not considered a large employer you will want to use 1095-B.

See www.irs.gov/instructions/i109495b/index.html. For the comprehensive requirements of form 1095.

Transition Relief for Large Employers

Transitional relief has been provided by the IRS for a variety of employer and plan situations including penalties for incomplete or incorrect returns. Generally, the relief will provide extra time to develop processes for data collection in compliance with the new requirements. However, no relief will be extended to employers who can show a concerted effort to collect and provide required information. Transitional relief will be extended in specific circumstances, some of which are detailed below:

If by December 27, 2012, your health plan was not on a calendar you may be eligible for transitional relief for the first calendar months of 2015. Please note you must have offered affordable coverage providing minimal benefits by the first day of 2015.
If your company has wavered at the 50 Full Time Employee (FTE) mark you may be eligible for Transitional Relief. You may use a six consecutive month measuring period in 2014 to assess whether you are considered a Large Employer.
The requirement states that you must offer coverage for all days within the month, for January 2015 if you provided coverage before the first payday you will be considered as offering coverage as of January 1, 2015.
If you did not offer coverage in 2013 or 2014 for dependents you will not be subject to shared responsibility liability in 2015. However, you must prove that you are taking steps to offer dependent coverage.
Should you have more than 50 but fewer than 100 FTE, for 2015, you are not held liable for the shared responsibility payment. However, you must show that you
- Have fewer than 100 FTE employees
- has not reduced its hours of service or workforce between 2/9/2014 and 12/31/14
- Are maintaining previously offered coverage. Forms 1094C and 1095-C will verify these requirements.
An employer will have a reduced penalty if they have over 99 FTE employees and have offered affordable minimum coverage to at least 70% of its employees

The Affordable Care Act requirements have had their challenges. Concerns have been identified and requirement changes have been made. However, it is advisable to prioritize compliance and planning to adhere to these regulations. Reports to the IRS and employees are imperative to the compliance process and should be followed.

At Beck & Company, Certified Public Accountants and Business Advisors, we are an accounting and consulting firm delivering specialized expertise, creative thinking, and unsurpassed service to ensure that our clients’ financial endeavors flourish.

Best Practices For Planning Your Nonprofit Budget – part 2

Having a budget is essential for any company or individual who desires to have better control over their finances. The process by which that budget is developed is also important. Last week we looked a few overarching components that are essential to have in place before you begin the budgeting process. This week we will take a deeper look into key documentation and steps needed to complete the budget process.

Keep in mind that your organization’s mission and vision should drive the budgeting decisions along with fiscal accountability. A great budgeting process will include the input of those ultimately responsible for executing the company’s mission in conjunction with the finance team and senior staff. Identifying fixed costs and known revenue along with incorporating a plan for the year’s initiatives will be the primary data used to get started.

Follow these steps to develop a good budgeting process:

Document the process.

Put your budget process in writing. Doing this creates a measurable tool to reference as you go along. Having steps and checklists will keep the team accountable and productive throughout the planning. Additionally as the process evolves and changes from year to year, be sure to maintain current notes for reference in future planning seasons.

Identify stakeholders and assign the planning committee.

The finance team and senior staff will naturally play a significant role in developing the budget, but additional staff members whose responsibility is to be accountable to the budget should also play a role. Inviting the team to weigh-in builds buy-in and allows relevant feedback which could prove invaluable to creating an accurate budget. At minimum be sure to include a time period where other staff members are asked to review and speak into the budget in the draft stages.

Get out the calendar.

The early bird gets the worm – this is true in establishing the budget as well. Having a budget approved less than 30 days before the beginning of the fiscal year could severely compromise the success of the year’s goals. At the very least aim for budget approval 60 days before the new fiscal year begins and if possible complete it even earlier. Consider your natural rhythms and take advantage of non-peak seasons to work on it when staff and volunteers have ample time to focus on the numbers.

Assign tasks and a timeline.

As you are building the budget process define tasks and assign deadlines. Oftentimes multiple people will have responsibility over a line item – regardless you want to choose one person to be accountable for the task. Having a single person responsible for the task will increase the likeliness of it getting done and on time.

Match the financial statement to the chart of accounts.

Ensure that line items from the financial statements and charts of accounts are the same. This will eliminate guesswork from your administrative staff when matching the budget and actuals. Particularly where expenses are concerned when the financial statement does not have a corresponding line item within the budget it can result in mistakes or overages in line item balances.

Work the plan.

After carefully creating the detailed budget, the next step is to implement the plan. This may sound obvious, but setting clear expectations for how the budget should be executed is as if not more important.

At Beck and Company Certified Public Accountants and Business Advisers our Nonprofit Services team is committed to assist you with your back-office accounting and financial needs so you can focus on your mission. Contact us to learn more about our nonprofit specialists provide professional advice and assistance in a number of areas including business planning and budgeting.

Best Practices For Planning Your Nonprofit Budget – part 1

Top performing nonprofit organizations large and small have one thing in common, they are continually planning for their success. Creating a budget is a huge part of a successful plan, and it’s a tool that aids in the implementation of your organizations mission. When both management and your board of directions have this tool they are able to sufficiently oversee your organization’s financial health.

Having an operating budget approved in advance of the beginning of the fiscal year is a common best practice. Often times, in order to achieve this goal you must begin the process at least three months prior to year-end. In this blog we will address some general tips to help increase the effectiveness of your budgeting process. If you’ve already begun this will be a helpful tool to measure your current progress. For those of you that have yet to get started, now is a great time to begin.

Having a budget that actually works requires a little time and energy devoted to development and implementation and should include the following components:

Clearly defined and itemized objectives:

Most likely you have multiple projects and programs planned throughout the year. Each one should have its own budget and then once those have been completed, they should be compiled to complete the overarching operating budget.

Having defined budgets for each project allows you to see areas that may require additional consideration so that you can fully understand the financial implications of each objective and how it works together with the overall goal of the organization.

Clearly defined time period.

Although your budget will likely cover a one year period or fiscal year it is also helpful to further divide the budget into smaller portions such as months or quarters. In so doing, you will have the ability to be proactive with any variance as the year goes on. If you find yourself overspending in a particular quarter you will have the benefit of making necessary adjustments in the remaining quarters. This also provides you with a great tool to reflect on at years end and use to strategize for the future.

Realistic expectations.

Having a realistic estimate of revenue and expenditures is so important. All too often, expenses are underestimated which leads to overspending and improper allocation of resources. When this happens the budget fails to be a useful tool for your organization. Be sure to use last year’s actual numbers coupled with future predictions. Take the time to truly analyze expenses and income to help you create a budget that is based on realistic expectations rather than assumptions.

In addition it can be helpful to have a plan “B” with your board of directors in the event that something does not go according to plan you know exactly how you will handle it. For example, which initiatives can be bumped to next year or executed using a smaller budget.

Measurable goals.

Create your budget based on the same accounting method with which your books are kept and monitored. Doing so allows you to compare the predicted budget against actual income and expenses as they happen. When variances arrive, which is inevitable you must have the flexibility to make adjustments and address cash shortages and/or inflated expenses. Maintaining your budget this way will allow you to assess and correct your budget as needed, while flexibility will enable you to alter your budget when necessary.

At the end of the day the most important part to planning your budget is to ensure that you were able to move forward the mission of your organization. Keeping these helpful tips in mind as you begin the budget planning process will set your organization up for success.

In our next blog we will get into the budget process in further detail. Here at Beck and Company Certified Public Accountants and Business Advisers we are committed to assist you with your back-office accounting and financial needs so you can focus on your mission. Contact us to learn more about our planning and budgeting services.

Nonprofits Can Reap the Benefits of Cloud Computing

Miriam Webster defines Cloud Computing as the practice of storing regularly used computer data on multiple servers that can be accessed through the Internet. Contrary to popular belief this isn’t a new concept at all. In fact, the idea to combine hardware and software as a service dates back to the early 1960s. And the reality of such a service exists today. Cloud accounting is another tool for nonprofits to take advantage of as they pursue the vision and mission of their organization. Cloud computing can help by streamlining processes and making information readily available to its users.

Businesses are looking to the cloud to drive business transformation across the enterprise. They are looking for new ways to engage their clients in a digital economy and new ways to engage their employees to increase productivity and employee satisfaction. Employees today expect a mobile enabled work environment to connect with their digital savvy customers. Take a look at some of the many benefits of cloud computing for nonprofits.

Utilizing cloud storage saves time and money enabling you to grow as fast as your business without leaving you with the expense of equipment and staff in a downturn season.
Centralized access to data and reports means more efficient processes, easier telecommuting and less time wasted waiting for information stored on an individual’s hard drive
Ever changing technology mandates a sizable budget towards upgrades and repairs which can be avoided with cloud computing services
No more concerns about storage space or capacity with almost unlimited amounts available on the cloud
Rest assured that your data is backed on the cloud. Additionally your service provider will be skilled enough to handle recovery of information
Handpick the services that you need and don’t worry about software integration as this generally occurs automatically on the cloud.
No waiting! Cloud computing offers quick deployment once you decide to move in this direction.

Another benefit to moving to cloud technology is the flexibility to take on new projects. The availability of on-demand cloud resources allows new configurations to be set up and running in a matter of hours. And because you are partnering with a service you will only pay for the time that is actually used towards expanding your business tools. We know the biggest drawback to taking ground in a new territory is time and money, or the lack thereof. However, on-demand cloud resources could be the key to unlocking doors for your nonprofit.

Benefits aside there are still rainy day risks involved with cloud driven solutions. Confidentiality and security are among the top two risks facing organizations today. Some of this concern may stem from not being able to physically see the machine housing your data. In order to mitigate the risks be sure to do your due diligence when selecting a service provider. Be sure of their use of security tools including virus and hacker protection. In addition, hesitation may come from fear of change to well-known processes. Remember vision leaks. Communicate the benefits of the transition to the team – specifically time saving benefits such as fewer hours spent commuting to the office to obtain files that will be made available at the touch of a button.

As you adopt cloud technology it is important to look at how your business processes and technologies work together to ensure optimal results. Here at Beck & Company’s Certified Public Accountants and Business Advisors we want to help you succeed. Contact us today to see how a cloud computing solution can help advance the mission of your nonprofit organization.