Tag: Nonprofit Accounting

Here’s an update from the world of accounting for nonprofits on FASB Accounting Standards Update (ASU) No. 2014-09, Revenue From Contracts With Customers (Topic 606), perhaps the most comprehensive set of changes to accounting principles ever released by the organization. These changes in revenue recognition impact almost every company in the United States applying GAAP. In fact, any company with tax compliance requirements should consider themselves affected by Topic 606.

Find out how Beck & Company can help work smarter the easy way with Outsourced Accounting. Contact Beck & Company online for more information, or call us directly at (703) 834-0776 x 8001. We look forward to hearing from you.

Effective Date

If you handle accounting for nonprofits, you need to know the effective dates. These are the dates by which you should begin applying the changes in revenue recognition. The current dates are as follows:

• December 15, 2017: Public entitles, certain not for profits, and certain employee benefits plans.
• December 15, 2018: All other entities.
• Interim periods in fiscal years after December 15, 2019, will impact other entities.

Improving Transparency and Clarity

FASB launched these recommendations after lengthy consideration, considering feedback from many quarters in the world of accounting for nonprofits and for profits. The goals of Topic 606 are to improve transparency, clarity, and usefulness of reported accounting information.

The goals include the desire to:

• Streamline statement preparation
• Reduce essential guidance
• Offer a more robust revenue framework
• Improve comparability across entities
• Remove inconsistencies
• Fix and remove weaknesses in prior revenue standards

These sweeping changes were well received by most accountants, but as the date for implementation draws nearer, there are some concerns being voiced.

Over time, industry-specific revenue reporting nuances and eccentricities crept into accounting, until the actual revenue reporting became complex and difficult for people outside of the accounting world to understand. The new standard seeks to streamline reporting so that all industries report along similar lines.

Questions and More Questions

Those responsible at nonprofits for implementing Topic 606’s guidelines have voiced several important questions related to implementation.

FASB has, to date, released four sets of clarifications:

1. ASU No. 2016-08, addressing principal versus agent considerations;
2. ASU No. 2016-10, identifying performance obligations and licensing;
3. ASU No. 2016-12, a clarification of narrow scope improvements and practical expedients (directed at items such as the reporting of noncash consideration, contract modification and completed contracts at transition, collectability matters, and other concerns); and
4. ASU No. 2016-20, 13 specific corrections and/or improvements on an array of issues, including loan guarantees, contract costs—impairment testing, and provision for losses on construction-type and production-type contracts.

People responsible for accounting for nonprofits are encouraged to follow the FASB’s updates online in case additional clarification is released before the first date arrives.

Revenue Recognition and Accounting for Nonprofits

Revenue recognition is one of the biggest areas impacted by Topic 606. The new guidelines request that nonprofits recognize revenue when they reasonably expect to receive it. This may impact donations, such as donations made in wills or trusts bequeathed to a nonprofit. In the past, it was up to the nonprofit to decide when they chose to recognize the revenue. Now, FASB recommends as part of GAAP, that nonprofits only recognize the revenue when they have a reasonable chance of receiving it.

Let’s assume that someone leaves $100,000 in their will to the local animal shelter, a nonprofit organization. The animal shelter should wait until the will is in probate and the executor announces all debts have been settled and there is $100,00 left to give to the shelter before recording it.

Accounting for Nonprofits and Tax Implications: Call Beck & Company

Beck & Company is a Washington D.C. area nonprofit accounting firm with a team of expert auditors, accountants, and advisors available to help nonprofits of all sizes. We provide a variety of consulting and accounting services to help you improve operations and efficiency. For more information, please contact us at 703-834-0776 x 8001.

It’s hard to imagine it, but accounting for nonprofits can be even easier and better when the right software is in place. The right software facilitates communications among departments and fosters trust and collaboration. This is especially true with fundraising and accounting.

The fundraising and finance or accounting departments in your nonprofit organization often seem like two sides of opposing football teams. Each one wants “the ball” or the forward momentum on a project, and neither understands why the other doesn’t want to give it up and play along with them. Eventually, frustrations develop, and groups may back into their silos until communications improve.

It doesn’t have to be that way. Accounting for nonprofits works much better when both finance and accounting work together towards mutual goals and with equal respect and understanding. That begins with clear communications.

Causes of Miscommunications

Anytime you have two people speaking, there’s a chance for a miscommunication. Whether it’s in the message, the medium, or how it is delivered, miscommunications happen all the time. They are quite common between finance or accounting and fundraising.  Some of this stems from not understand what each party does in the organization at large. There are some things that each group would like you to know about their work.

The fundraising group wishes that finance could…

• Understand how challenging fundraising can be.
• Acknowledge that to make money for the organization, you must spend money.
• Trust the process of donor relationships to come to fruition and provide funds for the organization
• Offer flexibility with deadlines, requirements, and requests.
• Appreciate the effort that goes into fundraising.

And finance wishes that the fundraising team could…

• Respect that their job is complex and demanding, often dictated by legal requirements that have no flexibility.
• Ask for their expertise and help in accounting and finance matters.
• Provide information proactively so that finance can do its job easily.
• Understand basic accounting practices so that we “speak the same language.”
• Adhere to deadlines.

It’s easier to come to consensus when mutual respect underscores the relationship. Knowing what the other party needs, why they need it, and how your actions impact their work can go a long way towards creating mutual respect and clear communications.

Similar Challenges Face Fundraising and Finance

Although the fundraising and finance teams each perform different functions in an organization, they face similar challenges. Data, provided by the right accounting for nonprofit software and systems, can create a shared understanding upon which clear communications rest.

The right software can provide data to both groups so that they cannot back into their own silos and retreat with their information. Information is easier to share, and easier to use for collaboration. Both groups must trust and depend upon one another to complete projects and tasks.

Some areas where this shared data can make a big impact include activities that:

• Collaborate on budgets and tracking.
• Improve reports and reconciliation of financial information.
• Jointly plan and set goals.
• Establish frequent, timely communications.
• Identify ideal processes and procedures.
• Integrate fundraising and accounting software.

Resolving the Challenges

Fundraising and finance may often feel like competing teams, but they should be both rooting for the home team, or working towards their company’s overall goals. By understanding one another’s work, sharing data, and experiencing the benefits of shared data and systems, the two teams can work more effectively and help your nonprofit achieve its mission.

Beck & Company

If you struggle with your accounting for nonprofits, Beck & Company can help. We are a CPA and business advisory firm dedicated to the nonprofit sector. Our many years of experience can help you update your financial compliance or handle all types of accounting for nonprofits. Please contact Beck & Company today for further details.

Accounting for nonprofits must include clear, transparent reporting in order to paint an accurate picture with their numbers for members, donors, and the public. Although most nonprofits strive to do this, the Federal Accounting Standards Board (FASB) made some changes to enhance clarity and transparency on their annual reports. These changes, known as Accounting Standards Update No. 2016-14, change a model that has been in existence for over 20 years.

Here’s a rundown of the changes in accounting for nonprofits according to the new ASU 2016-14:

• Reducing the number of net asset classes from three to two;
• Continue allowing preparers to choose between the direct and indirect method for presenting operating cash flows;
• Eliminating the requirement for those who prefer the direct method to perform reconciliation with the indirect method;
• Reporting by nature and function, as well as reporting on liquidity risks and liquid available resources, as discussed in the ideas shared here.

While these changes may not seem earth-shattering, they do help you communicate better with others reading your financial statements and clear up several misunderstandings and points of confusion in nonprofit accounting statements. The goal of the FASB efforts it to make murky areas clear and the new standards seem to do just that.

Numbers Tell a Story

The numbers that your nonprofit organization shares with the public tell an important story. They relate how your organization gathers resources, accepts donations, and spends its money. People who donate or join your organization need to understand that story in order to make smart decisions about their money.

In recent years, many nonprofit organizations have come under fire for what is perceived to be excessive spending. Lavish entertainment, trips, and unnecessary meetings (especially in exotic locations) are red flags to donors who want to be sure that their money goes to the activities the nonprofit supports, not to someone’s trip.

Although nonprofits remain free to spend their resources as they see fit, the new ASU guidelines will make it clear how they have spent their resources. Their ‘stories’, so to speak, will now be told loud and clear.

Additional Qualitative Information

Additional qualitative information about how nonprofits manage liquidity and liquidity risks can also enhance your communications with others on your finances. The updated regulations also require reporting of expenses by both function and nature. These two areas can be used to share more information with constituents about how money is spent, thus clarifying the information and enhancing transparency

Reporting expenses by both function and nature enable you to tell people more about the work that you are doing.  The functional areas can help them understand the areas of your organization. Additional details can be provided to help donors understand the various activities supported by these funds.

When Do the Changes Take Effect?

The changes recommended in ASU 2016-14 take effect in financial statements issued for fiscal years starting after December 15, 2017. They also take effect for interim periods within fiscal years beginning after December 15, 2018. Application to interim financial statements is permitted, but it is not required in the initial year of application. Early application of the standard is also permitted.

Accounting for Nonprofits with Beck & Company

The new accounting standards for nonprofits may seem confusing to apply to your organization. If you have any questions, Beck & Company is here to help. We are a CPA and business advisory firm dedicated to the nonprofit sector. Our many years of experience can help you update your financial compliance or handle all types of accounting for nonprofits. Please contact Beck & Company today for further details.

Accounting for nonprofits should including setting fair transfer pricing policies for organizations that buy and sell goods or services internally.

Transfer pricing is simply the price set for one division of your company to charge another in the event that it must ‘sell’ or set a price for its goods or services to another group internally. For example, if your creative services department is paid by members for graphic design services, you may also set an internal transfer price for their services so that if your membership division requests graphic design work, the number of hours spent on an internal project can be on the books in a similar way to an external paid request.

The problem with many transfer pricing situations is that the internal department selling the goods or services has an incentive to change the full amount, while the group purchasing it has an incentive to seek lower costs. The two may have difficulty negotiating prices since negotiations do not serve either party’s best interest. Instead, the purchasing group usually capitulates and pays more than it should for a service internally than they could get from an external source.

In order to make transfer pricing work, as part of accounting for nonprofits, the following tips and strategies may be helpful.

1. Enable better decision-making on internal pricing transfers: Smart accounting for nonprofits starts with accurate data. To make better decisions around setting prices, you must first have an accurate depiction of the costs that go into the goods being priced. This is where having a good nonprofit financial accounting system helps because it is easier to extract data from such systems and analyze it to build price points.
2. Build fair transfer-pricing policies: Written policies prevent miscommunications and mishaps during transfer policies. They also help organizations and companies set fair prices for all. A written policy can clarify how transfer pricing agreements can be reached and how to conduct internal transfers.
3. Assess autonomy levels: Some companies do well with a high degree of autonomy granted to both parties during a transfer negotiation. Assessing and understanding how much autonomy is healthy for your organization is an essential part of setting transfer pricing policies.

Why Bother with Transfer Pricing?

Accounting for nonprofits must include accurate depictions of both revenues and expenses, as well as labor costs, in order to make fair calculations. Without knowing what your transfer costs are, you could miscalculate and under- or over-estimate costs for your organization. Transfer pricing makes things fair, balanced, and transparent in your financials.

Recently, the IRS has also stepped up its review of nonprofit compliance with transfer pricing rules. Organizations that do not have documentation regarding their transfer pricing policies and rules may come under additional IRS scrutiny. Adjustments, penalties, and loss of tax-exempt status may result if the IRS investigates and finds your organization’s transfer pricing inadequately documented or handled. It pays to be proactive and take steps now to create the rules and documentation necessary to clarify how it is handled.

Although transfer pricing is most often thought of as a way to improve tax tracking and reporting, especially in cross-border transfers, it is also an integral part of accounting for nonprofits. Understanding and managing transfer pricing can help your nonprofit improve its financial management and compliance with taxation and financial rules and guidelines.

Accounting for Nonprofits with Beck & Company

If transfer pricing and other accounting for nonprofit topics are confusing for your organization, or you require audit assistance or other nonprofit accounting services, contact Beck & Company.

Beck & Company can help with your nonprofit financial management needs. We are a CPA and business advisory firm dedicated to the nonprofit sector. Our many years of experience can help you update your financial compliance or handle all types of accounting for nonprofits. Please contact Beck & Company today for further details.

Accounting for nonprofits changes as times change. Nowhere is this more apparent than in how people shop. Since many nonprofits also sell goods, it’s important to know how shopping patterns are changing and how your nonprofit can keep up to date.

The past decade has seen a complete change in the way people shop for goods and services. Less than 100 years ago, people shopped at multiple, local single stores for items like clothing, shoes, furniture, groceries and more. Then came the big shopping malls, department stores and supermarkets, which promised convenience by gathering many goods in one location.

But the internet changed everything. Now you weren’t just limited to what you could find locally or through mail order catalogs. A virtual world of good was available at the touch of a button. E-commerce was born, changing how people shopped forever.

Because the only thing that’s constant is change, the world is undergoing another shift today: mobile commerce. Like its predecessor e-commerce, mobile commerce relies upon online transactions. Instead of logging in through your desktop computer, however, mobile commerce uses the smartphone or a mobile device to facilitate the transaction.

Mobile Usage Growing

According to the Pew Center for Research, smartphone use is up again throughout the United States. Their research states that 95% of Americans now own a cell phone of some type. Among those who own cell phones 77% own a smartphone. That number has grown 35% since the first survey about smartphone use was undertaken by Pew in 2011.

Many smartphone users access their devices for everything, including internet use, banking, shopping, and phone calls. Some do not have broadband access but rely upon smartphones for internet connectivity. This trend is expected to continue to grow, with more people relying than ever before on their smartphones.

What does this mean for your nonprofit? It means that if you aren’t onboard with the mobile evolution, you may be left behind – and leaving behind those you serve, too.

Accounting for Nonprofits and the Mobile Evolution

As more people join the mobile evolution and become wedded to their smartphones, nonprofits must also keep pace with these developments. This includes:

• Opening mobile-optimized e-commerce stores: A website must be optimized for mobile viewing so that it changes it loads more quickly and with less data usage on a mobile device than it does on a laptop or desktop. This “responsive” website may already be built into your current site, or you may need to update your site so that it is responsive. A responsive site will help your nonprofit sell more, interact better with members, and accept donations via smartphone.
• Create and launch mobile donation campaigns: Accounting for nonprofits includes fundraising. Campaigns aimed at mobile users include faster, shorter messages and other enhancements targeted at mobile users.
• Add apps: Larger nonprofits may be able to afford the development of apps for their constituencies. Apps provide shortcuts for mobile users to your site and may be a valuable addition for improved interactions.

Nonprofits must keep abreast of technology updates affecting their members, donors, and supporters. If not, they are at risk of being left behind and having followers turn to other groups. Having a practical understanding of technology isn’t just a nice thing now, it’s a must-have. And for those working with accounting for nonprofits, an important commitment to the financial health and success of your organization.

Beck & Company

If you struggle with your accounting for nonprofits, Beck & Company can help. We are a CPA and business advisory firm dedicated to the nonprofit sector. Our many years of experience can help you update your financial compliance or handle all types of accounting for nonprofits. Please contact Beck & Company today for further details.

Companies of all sizes have a written employee handbook that governs all aspects of employment. It doesn’t matter whether you have one employee or 100 employees – having a written handbook can help you avoid many common misconceptions that can lead to unpleasant employee relations and occasion more serious issues such as discrimination lawsuits. Among the many great ideas for accounting for nonprofits, creating an employee handbook can help everyone understand the company’s guidelines.

Five Points to Include in Your Employee Handbooks

A written employee handbook usually includes several points. Some are generic to most employers while others may be specific to your organization. The following five points are usually found within most documents of this type.

1. Anti-Harassment Policy: Every employee handbook should include an anti-harassment policy. Such a policy clearly states the definition of harassment, and states unequivocally that harassment within the organization isn’t tolerated. It should also include steps for handling harassment, who employees can report harassment to, and consequences for those engaging in harassing behavior.
2. Working Hours and Pay Practices: It is important to clearly state the hours your company is open and the hours employees are expected to work. Include information about scheduled breaks and meal times. Make sure that break and meal times meet federal and state guidelines for workers. The workweek should be fined, with overtime definitions explained. The pay scale for both regular and overtime work should also be defined. Such policies can help you avoid costly wage disputes later.
3. Leave of Absence: State whether employees are entitled to medical leave under the Family Medical Leave Act. Include details on how employees can request such leave, how much notice is required, reasons that qualify for leave under the act and other parameters for leave. If your company isn’t covered under FMLA but you do offer medical leave, include details on your company policy here.
4. Employees with Disabilities: State how employees with disabilities can request confidential accommodations for their disability under the Americans with Disabilities Act. Include details on who they should speak with and other information on how your company complies with the act.
5. Drug and Alcohol Policies: You should include information on your company’s drug and alcohol policies. In states where certain drug use is permitted, this is critical. Drug testing information should be included, and information on whether drug tests will be given prior to employment, at random, after an accident, etc. Additionally, you may also wish to include information on how to report potential substance abuse problems and what help is available for employees who may have a substance abuse problem.

Written Policies Prevent Misunderstandings

It’s surprising how often companies neglect to create employee handbooks, or they do not update what they have. As leaders in the accounting for nonprofits field, it is up to us to ensure that the organizations we work for have the best resources at hand to manage their finances wisely. An employee handbook can help with that in many ways.

• Clear, unambiguous policies are less likely to put your organization at risk for a lawsuit.
• Grounds for termination due to drug or alcohol violations can also be shared so that they are quite clear to all who work for the organization.
• Overtime pay rates are clear for all in the organization.

Employee manuals and handbooks can’t keep your organization from every potential pitfall, but they do go a long way to ensuring clear communications for all.

If you struggle with your accounting for nonprofits, Beck & Company can help. We are a CPA and business advisory firm dedicated to the nonprofit sector. Our many years of experience can help you update your financial compliance or handle all types of accounting for nonprofits. Please contact Beck & Company today for further details.

Do you have the ‘right’ relationships as part of your accounting for nonprofits?

We’re not talking about knowing the ‘right’ people – the smart people, the rich donors, or those who can provide services to your nonprofit, although such relationships are, of course, important.

Instead, we’re talking about a wide circle of relationships that provides feedback, including contrary feedback, a rich resource of new ideas, and the ability to introduce you to people beyond the scope of your existing work.

The right relationships are those that broaden your horizons, expand your work, and help you reach into new areas to improve, build, and develop.

Let’s take a look at the concept of relationships and how the ‘right’ relationships build your nonprofit’s work.

The Current Echo Chamber

If you’re like the majority of people, your connections on social media tend to fall into three camps: business associates, family, and friends. It’s the rare person who reaches outside of their immediate circle and seeks to connect with others.

Unfortunately, such a narrow circle of connections leads to the ‘echo chamber’ effect. People we know in daily life tend to reflect similar values and ideas back to us rather than confront and challenge us.

When you browse through your connections, if everyone in your immediate circle is connected somehow, or you spend a great deal of time with them daily, then you aren’t reaching out to people from whom you can learn. You’ve fallen into the echo chamber – and it’s time to climb out!

The Value of New Connections

It’s natural for people to be drawn to others with similar likes, dislikes, and interests. That’s how we initially learned to make friends, and similar interests bring people together over hobbies, social gatherings, church functions, and other places to meet people.

The problem with connections who share so many interests is that you never leave your comfort zone. If everyone in your immediate circle of friends is connected, there’s no one new who can reach outside and connect you to new networks of people.

New connections can help you…

• Open doors: Looking to connect with a specific donor? Seeking to broaden the geographic area in which you currently work? People in your network may be able to introduce you to the right donors, help you find good places to spread your nonprofit’s work, and expand into new areas. When you move outside of your existing network, new opportunities may be just around the corner.
• Seek new perspectives: When you meet new people, their viewpoints may contradict yours, but if you’re open to discussion they can help you see and understand new perspectives. This may give rise to a new way of looking at a project or different way of viewing the world.
• Find new vendors: Connections are a great source of information to find new vendors, consultants, and partners for your nonprofit. They may also be a good resource to check references on vendors you are considering for work.
• Hire new people: Another great way that a wider, different circle of associates can help you is by sharing job openings with their network to help you find the perfect employees for open positions. Many positions are filled today via word of mouth rather than through classified ads. Finding someone through your network has the added advantage of a personal recommendation from an associate, too.

Relationships matter. Even in today’s increasingly internet-driven world, where we often Skype, tweet, and comment rather than sit down over a cup of coffee with someone, relationships broker trust, enhance your knowledge, and help you and others in this world. Build the ‘right’ relationships by seeking new people with whom to connect, share, and network.

Beck & Company: Accounting for Nonprofit Success

If you struggle with your accounting for nonprofits, Beck & Company can help. We are a CPA and business advisory firm dedicated to the nonprofit sector. Our many years of experience can help you update your financial compliance or handle all types of accounting for nonprofits. Please contact Beck & Company today for further details.

It’s a document your nonprofit can’t live without.

Have you ever looked up during a meeting and had that distinct deja vu feeling? “We’ve had this discussion before. I know we’ve talked about how to set up the tables for the annual charity ball at least a thousand times before!”

Well, maybe it wasn’t a thousand times before, but if your charity ball is an annual event, you’ve had the discussion about where to set up tables and chairs before. Most organizations do have a routine, a structure, a rhythm to their annual activities. Like the changing seasons, the annual audit, the annual charity dinner dance, raffle, or carnival is something you know will come up each year in the same season.

Yet many nonprofits find themselves scrambling to re-create such events. It’s as if the memory of last year’s event has been wiped from the minds of those who ran it. Given the volume of tasks the average nonprofit employee undertakes each year, it’s no wonder that they can’t remember the details of every decision. Hence the endless planning meetings and the deja vu feeling is so common to longtime nonprofit employees.

There’s a way to capture the information from activities that are annual events, organize, and share it so that if people leave the organization or change jobs within the organization, the new person leading the tasks has an easy way to learn what needs to be done. A process roadmap is a document that outlines the necessary tasks, people, equipment, processes, and other pertinent information so that you can smoothly hand off the task to someone else or duplicate it in the future. All it takes is a few minutes to document the necessary information to create your very own process roadmap.

An Outline of the Process Roadmap

A process roadmap simply lists the tasks needed to accomplish a project, with a detailed resource list added to flesh out the project. A simple process roadmap outline may look like this:

• Name and title of the event or task
• Last date the process was outline
• Task owner (who manages the task)
• List of steps in sequence of how to do the task.
• Section that includes resources to complete the task
• Due dates and timelines.

For an accounting audit, the process roadmap may look something like this:

Annual Nonprofit Audit

January 15

Owner: Jim Smith, Accounting Department

Steps

1. Call the accounting firm to request dates for audit. Confirm audit dates.
2. Reserve conference room.
3. Contact building security for temporary building pass card and parking sticker for auditors.
4. Contact IT for WiFi access for the auditors.
5. Request all accounting documents for audit by [date]
6. Call auditors one week before audit date to make sure everything is set up.
7. Send company-wide email the week before the audit to remind staff that the conference room is in use and that the auditors should not be bothered while they are working.
8. Clear calendar and do not schedule meetings while auditors are here so you can help them with what they need.

Resources Needed

1. Auditing firm [list name and phone number]
2. Conference room
3. IT department – reserve WiFi password
4. Building security [name, phone number, email address]

Due Date/Timelines

• November – call auditing firm
• January – audit date
  • Two weeks before audit, reserve room and get parking spots.
  • Week before audit, request WiFi access and send companywide email.

An effective process roadmap should be succinct; one page is usually sufficient. Make sure you keep the process roadmaps in a place where all employees can easily access them.  The HR or accounting department are both great places to keep process roadmaps.

Make Accounting for Nonprofit Tasks Easier

Process roadmaps make accounting for nonprofits much easier. You can focus your time and energy on accounting when you don’t need to use it to figure out how to complete routine tasks.

Beck & Company: Accounting for Nonprofit Success

If you struggle with your accounting for nonprofits, Beck & Company can help. We are a CPA and business advisory firm dedicated to the nonprofit sector. Our many years of experience can help you update your financial compliance or handle all types of accounting for nonprofits. Please contact Beck & Company today for further details.

It seems like every time you turn on the television or browse the Internet, there’s word of another data breach. Even big companies who specialize in offering secure services like email aren’t immune. Hundreds of thousands of records are compromised each year, causing embarrassment to the companies affected by the data breach and heartache for those who are the victims of identity theft.

If you think your nonprofit is exempt from cyberattacks and data breaches, think again. Many nonprofits collect sensitive information that criminals would love to get their hands on: donor names and addresses, email addresses, credit card information. Passwords are also a hot commodity for criminals since they can be resold, and many people reuse their passwords across multiple sites. Any data that can be stolen from your organization puts you at risk, as well as your constituents at risk, for big headaches later.

There are many things that you can do as part of your accounting for nonprofits work that helps secure data and prevents theft. The following tips can help you manage the situation to stop problems before they start and handle them effectively in the unfortunate event that you do face a major data breach.

Tip 1: Find all your data sources.

You collect more data than you think. The first step to secure your data is to find and inventory all potential sources of data within your nonprofit.

Some of the more common areas where nonprofits collect data include:

• Account set up: Do you encourage members to participate in online forums or set up an account profile on your site? That’s an area that collects a great deal of data.
• Forums and chat rooms: Forums and chat rooms often require an account and these accounts collect more personal information from users during the set-up process.
• Membership purchases and renewals: If people can join your organization through the website and fill out a membership application form, that’s another data source. Credit card information may also be collected via such forms.
• Online stores: Member-only stores or online stores where your nonprofit sells items collect personal data, including mailing addresses, as well as credit card information and email addresses.
• Employee records: Employees records include social security numbers and other information that could lead to identity theft.

Once you’ve listed all the places where your organization collects data, it’s time to find the best ways to protect it.

Tip 2:  Create a data ethics policy.

A data ethics policy is an organization wide policy that spells out which data is collected, how it is stored and shared, and who may access it. Establish data-use goals and create a privacy policy for your organization. There are free privacy policy generators online that can help you easily and quickly set up an Internet policy for your website.

To create your data ethics policy, you can:

1. Establish guidelines for who can access data and how it may be accessed.
2. Create a shareable privacy policy and post it to your website.
3. Assess the risks after reviewing your data inventory. If there are any gaps in your online security, take steps now to fix them.
4. Add anti-virus software to your systems and servers.
5. Update your computer programs frequently. Companies issue patches and updates to fix problems and to close any gaps in the software’s programming that hackers have learned to exploit. Forgetting to update your programs leaves these gaps open to attack.
6. Perform due diligence on your data, especially if third parties have access to it. If you use an external fulfillment vendor or a drop shipping vendor for items ordered over your website, check on how they’re using and storing customer data. Make sure it aligns with your policies and directives.
7. Review mailing list protocols, especially if you use a list vendor or broker to mail our donation requests and other materials. Third-party mailing houses or email list vendors who send materials on your organization’s behalf should also be checked to ensure that data is being handled securely and carefully.

Tip #3: Create an action plan.

The last step is to create an action plan to manage your data security year-round as well as prepare for any potential data breaches. Although the IT department may be a good place to start with such a policy, accounting for nonprofits often means that the accounting department takes charge of such procedures. If so, your team should become well-versed in all the issues pertaining to data security and risk.

When it comes to preventing bad things from happening to good nonprofits, an ounce of prevention is always worth a pound of cure. Take steps now to prevent a data breach and ensure that the data your nonprofit collects remains safe.

Beck & Company: Accounting for Nonprofit Success

If you struggle with your accounting for nonprofits, Beck & Company can help. We are a CPA and business advisory firm dedicated to the nonprofit sector. Our many years of experience can help you update your financial compliance or handle all types of accounting for nonprofits. Please contact Beck & Company today for further details.