Jitasa Nonprofit Blog

What Does a Nonprofit Treasurer Do? The Complete Guide

2026-02-25T12:00:00Z

Financial oversight is an essential part of effective nonprofit management. Your organization has to remain accountable to donors and stakeholders who provide critical funding for your mission, and establishing oversight helps ensure you properly allocate and account for those funds.

Most forms of oversight lie with your nonprofit's board of directors, and the primary board member responsible for financial oversight is the treasurer. In this guide, you'll learn all you need to know about a nonprofit treasurer's role and duties, including:

Although the treasurer isn't the only person responsible for managing your organization's finances, they should be well-versed in best practices so they can develop high-quality reports and collaborate effectively with your nonprofit's financial professionals. Let's dive in!

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The Role of a Nonprofit Treasurer: Frequently Asked Questions

What is a nonprofit treasurer?

A nonprofit treasurer is a team member who provides financial oversight for a tax-exempt organization. In most cases (although not all), the treasurer is a member of a nonprofit's board of directors and serves as the financial liaison between the organization's board and staff.

To become a nonprofit treasurer, an individual usually needs to be nominated by a specialized committee, another board member, or one of the organization's leaders. Then, the board confirms the nomination, typically by voting.

What should a nonprofit look for in a potential treasurer?

To help your nonprofit choose a treasurer who will perform well in the role, look for these essential qualities in your nominee:

Leadership. A nonprofit treasurer will often chair a board finance or audit committee, so they need to be good leaders to be effective in the role.
Communication. Treasurers should be able to communicate clearly in both oral and written formats to work effectively with other board and staff members and create strong reports.
Organization. A treasurer usually needs to keep track of multiple financial projects and datasets at any given time while paying attention to detail to ensure accuracy in their work.
Financial expertise. The most important quality of a prospective treasurer is a background in finance, accounting, auditing, or other related fields, as well as knowledge of how those concepts apply to nonprofits.

Additionally, make sure to choose a trustworthy person for the treasurer role. They'll need access to sensitive financial information to complete their tasks, so it's important that they always take security precautions and fully commit to acting in your organization's best interest.

Learn financial basics in The Beginner's Guide to Nonprofit Accounting.

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Are nonprofit treasurers paid for their work?

Not usually. It's legal for nonprofits to pay their board members, but only about 3% do. Those who receive compensation usually serve organizations where the board is highly involved in daily operations, such as private foundations, universities, and healthcare organizations. But most of the time, treasurers and other board members work on a volunteer basis.

If your nonprofit pays its treasurer, you'll have to report their compensation on your annual tax return so the IRS can make sure you're paying everyone at your organization reasonably. Research market rates for part-time positions similar to that of your treasurer as a starting point for ensuring reasonable compensation.

If you don't pay your treasurer, consider adding a provision to your expense reimbursement policy so your treasurer can at least be reimbursed for any costs they incur while representing your organization. For example, if they schedule a meeting with a potential major donor at a restaurant in the next town over from yours, you might let them submit the receipt for their lunch and the number of miles they drove to and from the meeting for reimbursement.

Key Responsibilities of a Nonprofit Treasurer

Depending on your nonprofit's size, financial situation, and priorities, your treasurer may take on a wide range of duties. However, there are six main activities that most treasurers play a role in, which we'll walk through in more detail.

Strategic Planning

Developing a strategic plan to guide the next two to 10 years of your nonprofit's work is a major undertaking that involves collaboration between your entire board and leadership team. The nonprofit treasurer plays an important role in the financial aspect of strategic planning.

While your organization's chief financial officer (CFO) or another staff member with financial knowledge may take the lead on setting goals and metrics for your organization's revenue generation and allocation, your treasurer will often participate in the decision-making process. With their experience in governance, they'll make sure that the financial aspects of your strategic plan are attainable and in order before it's finalized.

Budgeting

Like strategic planning, creating budgets for your nonprofit is typically a team effort. Your treasurer will work closely with your fundraising and finance teams to create your annual operating budget, as well as more specific budgets for new programs or long-term projects. These staff members' inside knowledge of daily operations at your organization, combined with the treasurer's expertise and oversight, can result in more accurate, useful budgets.

Additionally, budgets typically require board approval before your nonprofit can start acting on them. Having inside knowledge of the budget, the treasurer can make the case to the rest of the board about whether they should approve it as is or request revisions before it's finalized.

Financial Policy Development

An essential area of financial management where your nonprofit treasurer will take charge is in day-to-day oversight. This primarily involves developing and implementing financial policies that guide your organization's use of funds, which may include:

A gift acceptance policy that defines the types of gifts (both monetary and in-kind) your nonprofit can and can't accept.
An expense reimbursement policy, which outlines when and how staff and volunteers can be reimbursed for spending their personal money on behalf of your mission.
A compensation policy to ensure all of your employees, and especially organizational leaders, are paid fairly but not excessively.

All of your nonprofit's financial policies should be compiled in a handbook to ensure they're easily accessible to anyone at your organization who needs to reference them. Your treasurer should at least have final approval over this handbook, if not be the one in charge of putting it together.

Risk Management

At most nonprofits, the people most involved in creating and executing a risk management plan are the board of directors. As the main financial expert on your board, your treasurer will be in charge of the identification, assessment, and mitigation of financial risks such as:

Fraud, whether it's committed intentionally or unintentionally.
Theft of your organization's money or equipment.
Non-compliance with federal and state regulations for nonprofit fundraising and reporting.

The treasurer might take on these responsibilities themselves, or they may delegate them to other board or staff members, especially if your organization forms a dedicated risk management committee. Either way, they have the authority to approve preventative measures and mitigation plans and oversee their execution.

Audit Preparation

Not all nonprofits are required to undergo external financial audits. But if your organization has to conduct one due to a stipulation in your bylaws, the amount of federal or state funding you receive, or a request by a grantmaker, your treasurer will be involved in:

Researching potential auditors and narrowing down your top candidates.
Gathering materials for the audit, such as bank reconciliations, investment statements, and details of grants received.
Reviewing the auditor's recommendations and overseeing their implementation.

If your nonprofit isn't required to undergo regular audits, your treasurer may provide a recommendation as to whether it would be beneficial to conduct one anyway to improve your organization's financial management practices. In this case, you might decide to conduct an internal audit instead, in which your treasurer will take the lead in the review and recommendation processes.

Reporting

While the responsibility of analyzing your nonprofit's raw financial data typically falls to an accountant, your treasurer also plays a key role in reporting: compiling the analyzed data into a report and presenting it to the board and other stakeholders. The combination of the treasurer's financial background and position within the board makes them the ideal person to summarize and format your data in a way that is understandable and actionable for leadership.

When creating their report, the treasurer will pull information from a variety of sources, including:

Financial statements like your organization's income statement, balance sheet, cash flow statement, and functional expense report.
Budget vs. actual comparisons of your nonprofit's revenue and expenses.
Bank account statements, along with relevant reconciliation reports.
Investment updates on endowments, donor advised funds, and brokerage accounts.

Your treasurer's reports may be presented either monthly, quarterly, or annually at board meetings or other major gatherings of stakeholders. This recurrence is another contributing factor in promoting financial accountability at your organization.

Additionally, an accountant is also usually responsible for compiling your financial statements and filing your tax forms each year. But the treasurer's position of oversight will also be useful in ensuring that your Form 990 and employer tax forms go out on time, as well as that your financial statements are accurate and properly issued according to your nonprofit's reporting procedures.

Nonprofit Financial Management Roles

In some ways, treasurers' duties and abilities overlap with those of other nonprofit financial professionals. Because of this, you may be thinking: If my organization is small to mid-sized and there are so many people who have the expertise to financially manage it, why do I need to work with more than one financial professional?

There are a few answers to this question. The first is that each individual involved in financial management at your organization has a unique role to play in it. Here is a basic breakdown of the differences between the four major nonprofit financial management positions:

Nonprofit treasurers focus on governance as members of the board of directors. While they're sometimes directly involved in the planning and execution of various financial activities, their main job is to provide approval and oversight. They're also the best equipped to report financial information to the rest of the board.
Chief financial officers (CFOs) approach financial management from a strategic and operational perspective. They take the lead on financial planning, budget creation, cash flow forecasting, and providing advisory support to other staff members. Larger organizations usually have a full-time CFO on their executive leadership team, while smaller nonprofits often rely on cost-effective (but still robust!) fractional CFO services.
Nonprofit bookkeepers take care of your organization's day-to-day financial needs. They're typically responsible for recording transactions in your nonprofit's accounting software, writing checks, making deposits, and processing payroll. Because bookkeepers don't require specialized certifications or degrees, your organization could delegate this responsibility to a knowledgeable staff member or even a volunteer.
Nonprofit accountants are responsible for analyzing and reporting your organization's financial data. They perform a wide range of tasks, from reconciling bank accounts to compiling financial statements and preparing tax forms. Because hiring a full-time Certified Public Accountant (CPA) can be expensive, many organizations choose to outsource this role to an accounting firm that specializes in working with nonprofits (like Jitasa!).

Besides the distinctions in roles and responsibilities, having multiple financial experts supporting your nonprofit puts you in a less risky position. Risks often arise when various individuals at your organization are too busy to check in with each other. When your nonprofit has at least three professionals—a CFO, a bookkeeper, and an accountant—actively working on different aspects of your finances while your treasurer provides oversight, you'll have a team that will collaborate more effectively without being overwhelmed.

Plus, a diversified financial management team is more sustainable. Although your organization might be on the smaller side now, you likely hope to grow in the future. Your treasurer will not only play an essential role in reviewing and approving your growth plans but may also work on developing a board finance committee that provides the necessary level of governance for a larger organization. Your accounting, bookkeeping, and fractional CFO services will also be able to scale with you on the day-to-day execution side.

If you'd like to test your knowledge of the different nonprofit financial roles, you can take our quick quiz below!

How Well Do You Know the Major Nonprofit Financial Roles?

Choose whether each of these financial tasks is most likely to be the responsibility of a treasurer, a CFO, a bookkeeper, or an accountant.

Question of Score: /

The core of nonprofit accounting is accountability, and your treasurer plays an important role in holding your organization accountable for how it uses its financial resources. As long as effective oversight accompanies transparent, efficient financial management processes, your nonprofit will be in a better position to retain support and further its mission.

For more information on how the nonprofit treasurer role fits into your organization's financial strategy, check out these resources:

Nonprofit Financial Management: Overview + Best Practices. Explore the core areas of nonprofit financial management that treasurers oversee, from budgeting to revenue generation to policy development.
What Is a Nonprofit Audit? Ultimate Guide + Checklist. Discover the ins and outs of the nonprofit auditing process, which treasurers play a key role in managing.
The Role of a Nonprofit Controller: Complete FAQ Guide. Learn about another nonprofit financial role that overlaps several of the others and focuses on compliance—the controller position.

Learn how Jitasa's nonprofit accounting team can work with your treasurer for improved financial management.

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Understanding Your Nonprofit NTEE Code: A Complete Guide

2026-02-17T12:00:00Z

Nonprofits exist to further a wide range of missions, from educational reforms to environmental preservation. However, the framework in which these organizations operate is critical to their success. A cornerstone of this framework is the effective and precise classification of an individual nonprofit's purpose and activities.

To help donors, nonprofit professionals, government entities, and other stakeholders categorize nonprofits, the IRS created National Taxonomy of Exempt Entities (NTEE) codes. Understanding and applying the correct NTEE code to your organization is crucial, as it influences funding opportunities, tax exemptions, and compliance with federal regulations.

In this guide, we’ll dive into the anatomy of an NTEE code, explaining its importance and how to apply it effectively. We’ll cover:

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NTEE Code FAQ

What is an NTEE Code?

An NTEE code is an alphanumeric identifier that the IRS assigns to a nonprofit. It’s designed to categorize that organization according to its primary mission, activities, and objectives.

An NTEE code typically consists of a single letter followed by two digits, with each element representing a specific aspect of a nonprofit. The initial letter categorizes the nonprofit into one of 26 major groups according to the organization’s primary field (e.g., 'A' for Arts, Culture, and Humanities; 'B' for Education; 'C' for Environment; etc.).

Following the letter, an NTEE code has two sets of two digits that classify the nonprofit into subcategories within each major group. The first two-digit number refers to the organization’s activity area, and the second denotes its function (monetary, research, etc.). This hierarchical structure allows for a nuanced understanding of an organization's focus and operational scope. For example, the code B1160 would break down as follows:

B: This first letter lets us know that the organization’s primary role is in the field of education.
11: This second part of the code means that the organization’s function is monetary support of a single entity.
60: This last number refers to the specific activity area of the organization—in this case, adult education.

Nonprofit professionals should have a firm understanding of NTEE codes, as they influence everything from funding opportunities to partnership possibilities.

How do I find my nonprofit’s current NTEE code?

When you register a new nonprofit, the IRS will assign it a code based on the description of its activities on its Form 1023. To find your nonprofit’s current NTEE code, follow these steps:

Ensure you have a program for viewing CSV files.
Navigate to the IRS’s website and the IRS 990 Business Master File.
Select the state or region where your nonprofit files its taxes to download the CSV file.
Search for your nonprofit in the file.

As of November 15, 2025, the IRS has 1,923,040 NTEE codes on file. When looking up your nonprofit, we recommend using search functions so you can find the information you need quickly.

How can I change my nonprofit’s NTEE code?

In some cases, particularly for nonprofits with complex or wide-spanning missions, the NTEE code the IRS assigns to your nonprofit may not be completely accurate. If this applies to your nonprofit, you can request a change to your NTEE code by following these steps:

Write a request that includes your nonprofit organization’s name, EIN, current NTEE code, new proposed NTEE code, and an explanation of why the change is necessary.
Include any relevant documents, such as an updated mission statement or description of programmatic activities.
Mail or fax your request to the IRS Correspondence Unit. Their mailing address is:

Internal Revenue Service
Attn: Correspondence Unit
P.O. Box 2508, Room 6403
Cincinnati, Ohio 45201

Additionally, referencing your code change request on your Form 990 is optional, but it can help attract the IRS’s attention to your request if you haven’t received a response.

Why Accurate NTEE Code Classification Matters

An NTEE code informs regulatory bodies about your nonprofit’s purpose and activities, facilitating appropriate oversight and compliance. Think of it as a regulatory passport, ensuring safe passage through the complex terrain of legal requirements and tax obligations. Accurate classification leads to streamlined reporting, enhancing transparency and trustworthiness in the eyes of authorities and the public.

One of the most tangible benefits of accurate NTEE classification is its influence on funding opportunities. Grantmakers, financial supporters, and government agencies often allocate resources based on specific categories and missions that align with their own objectives.

For example, consider a for-profit company building out a corporate philanthropy program. If one of that company’s core values is continued education, they might quickly scan a list of NTEE codes and look for nonprofits with the first initial “B” to include in their philanthropy program.

If your nonprofit is accurately classified under the right NTEE code, these entities are more likely to identify and support it, unlocking potential major streams of funding.

Tax exemptions, a critical aspect of nonprofit financial health, are also contingent upon your organization's alignment with certain mission-based criteria. Classifying the right NTEE code on your organization’s Form 1023 ensures it’ll be recognized for its tax-exempt status under the correct parameters.

How to Determine Your Nonprofit’s NTEE Code

Navigating the labyrinth of NTEE codes may seem daunting at first glance. However, with a clear roadmap and the right tools, pinpointing the appropriate NTEE code for your nonprofit can drive better financial results across the board. Follow these steps to get started:

Understand your mission and activities: Begin with a deep dive into your nonprofit's mission statement, goals, and primary activities. Knowing your organization’s core purpose and function is crucial before you even glance at the NTEE classification system.
Review the NTEE code list: Familiarize yourself with the NTEE classification system as described above. This hierarchical structure can also be found on the IRS website or other nonprofit resource platforms.
Match your activities to broad categories: Start by identifying which of the major NTEE categories best aligns with your overarching mission. Are you primarily focused on education, health, arts, or another field? Select the category that most closely reflects your nonprofit's primary focus.
Refine your classification: Once you've identified a broad category, drill down into the subcategories. Compare your specific activities, services, and programs against detailed descriptions of the subcategories to find the best match.
Consult with stakeholders: Engage your board, staff, and possibly an external financial advisor to review and discuss the most fitting NTEE code. A collaborative approach ensures a comprehensive perspective that takes into account all facets of your organization’s operations.
Validate your choice: Cross-reference your selected NTEE code with similar organizations and case studies. This validation step can confirm whether your choice aligns with standard practices within your sector.

By following these steps and using available resources, your nonprofit can navigate the complexities of NTEE codes with confidence. To start creating your code, explore the major groups below.

Each major group has several category-specific activity options to choose from, which will define the rest of its code. The National Center for Charitable Statistics provides a complete list of all unique code combinations for each group.

For example, let’s say your nonprofit is a social sciences research organization that primarily conducts advocacy work related to urban development. In this case, your code would be V (social science) 01 (alliance and advocacy organizations) 34 (urban studies). This number is technically two NTEE codes, V01 and V34, combined to make one code. A complete code offers a full picture of your nonprofit, but each individual code is acceptable.

NTEE Codes & Nonprofit Financial Management

Nonprofit financial management requires organizations to consider many components, including their overall mission, fundraising strategies, accounting procedures, and other operations. Among these components, an NTEE code might not stand out at first glance. However, it significantly impacts financial reporting, transparency, and strategic planning.

Accurate NTEE classification ensures that financial statements, tax filings, and donor reports align with the specific standards and regulations applicable to your sector. This alignment promotes transparency, which helps build trust with supporters, regulators, and the public.

Strategic Planning: NTEE Codes’ Influence on Financial Strategies and Funding Opportunities

Beyond compliance, the correct NTEE code opens the door to tailored financial strategies and funding opportunities. Different sectors attract different types of funding— for example, grants available to educational nonprofits may not be accessible to those in the health sector. By aligning your organization's classification with its primary mission, you ensure a better fit with potential funders' interests, leading to more successful funding applications and partnerships.

Moreover, your NTEE classification can influence budgeting and financial planning. Understanding the typical expenses, revenue streams, and financial challenges of nonprofits within your category can provide valuable benchmarks and insights. For example, nonprofits within the field of higher education may receive the majority of their revenue through tuition payments, while churches often rely more heavily on congregational tithing.

This knowledge enables more informed decision-making, from budget allocations to strategic investments, ensuring your organization’s resources go toward the most impactful activities.

Fostering Trust: How NTEE Codes Aid in Compliance for Financial Advantage

Adhering to compliance best practices can provide a financial advantage to your nonprofit. Plus, it shows supporters that your organization is trustworthy and will use their contributions to create the greatest impact for your mission. Here are some steps you can follow to ensure compliance regarding NTEE codes:

Regularly review and update your code: As your organization evolves, so should your NTEE classification. Regularly review your code to ensure it reflects your current operations and mission, and apply for new ones as is necessary to reduce the risk of missed opportunities or regulatory missteps.
Educate your team: Ensure your financial team understands the significance of your NTEE code and how it relates to your financial practices and reporting requirements. This shared understanding reinforces the importance of accuracy in all financial matters.
Integrate into financial processes: Embed your NTEE code into your financial processes and systems, from accounting software to internal reporting templates. This integration ensures that all financial activities are aligned with your classified mission.
Leverage for funding and partnerships: Use your NTEE classification proactively in grant applications, fundraising campaigns, and partnership pitches. Highlighting your alignment with specific sectors can strengthen your case for support and open new avenues for resources.

The best way to ensure compliance in all of your organization’s financial management activities, including NTEE classification, is to work with experienced nonprofit accountants like our team at Jitasa. We’ll not only help your organization determine the right NTEE code to describe its purpose but also work with you to configure your financial practices and tools, so they help you fulfill that purpose as effectively as possible.

In the grand scheme of nonprofit management, an NTEE code serves as more than just a label. It can be an integral component of your organization’s financial strategy and organizational identity. By understanding and leveraging these classifications, your nonprofit can not only meet compliance standards but also unlock new opportunities for growth.

If you’re interested in working with a nonprofit accountant to help your organization ensure transparency and accountability in its finances, contact our team at Jitasa to request a quote! In the meantime, here are some additional resources you can explore for more guidance:

12+ Top Nonprofit Accounting Firms & How to Choose One. Explore our top picks for outsourced nonprofit accountants who can help your organization determine and apply its NTEE code.
Nonprofit Bookkeeper vs. Accountant: What’s the Difference? Once your nonprofit has its NTEE code set, you can start applying for new funding. Ensure your nonprofit has a bookkeeper and accountant who can help.
What is a Fractional CFO for Nonprofits? The Ultimate Guide. Your CFO can help your nonprofit determine what its NTEE code should be. Discover how a fractional CFO can provide the support your nonprofit needs.

Work with Jitasa to get the financial insight you need to seek new funding opportunities.

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What Is Fund Accounting? A Guide to Basics & Best Practices

2026-02-15T12:00:00Z

Nonprofit accounting is a unique beast. Rather than tracking their finances to attempt to turn a profit like businesses do, mission-driven organizations like yours focus on the accountability side of accounting. Using a fund accounting system allows your nonprofit to do just that in its financial management.

In this guide, you'll learn all you need to know about fund accounting, including:

Before we dive into this system's nuts and bolts, let's make sure we're on the same page about what exactly fund accounting is.

Fund Accounting: Frequently Asked Questions

What is fund accounting?

Fund accounting is a system of financial management that tracks the amount of money allocated to various operations at a tax-exempt organization. It's designed to ensure your nonprofit uses funds productively and respects stakeholders' wishes regarding their gifts.

Dive deeper into fund accounting with our FREE online course!

What types of organizations use fund accounting?

Many different organizations track their finances via fund accounting, including:

Traditional 501(c)(3) nonprofits
Public, private, and family foundations
Professional associations
Healthcare organizations
K-12 schools
Colleges and universities
Churches and other faith-based organizations
Government agencies

None of these organizations focuses on earning a profit, and they're all exempt from federal income tax. To maintain that status, they need to reinvest all of their funding into their missions, and fund accounting helps them accomplish that goal.

How is fund accounting different from traditional accounting?

Although the core purpose of all accounting systems is to support organizations' financial health, fund accounting has several notable differences from the traditional method that for-profit businesses use that allow it to better meet nonprofits' needs. Here is a quick comparison of the two systems:

Fund accounting prioritizes accountability in financial management. In most cases, fund accounting systems deal with a wide range of funding sources, since your nonprofit likely brings in funding through some combination of individual donations, corporate philanthropy, earned income, investments, and grants. Among these revenue streams, fund accounting differentiates restricted and unrestricted funds (more on these later!)
Traditional accounting helps businesses maximize the profits they pay out to shareholders and investors. It typically deals with fewer revenue sources, since most companies make the majority of their money through earned income from selling products and services. With this setup, there is no need to manage funding restrictions.

These differences greatly affect accountants' on-the-job experience and training, which is why your organization should hire a team member or firm that specializes in nonprofit accounting and will understand your system of managing funds more deeply (like Jitasa!).

How can a fund accounting system benefit my nonprofit?

Besides the most notable benefit of a greater focus on accountability, your nonprofit can experience the following advantages by implementing a fund accounting system:

Ensuring compliance with nonprofit reporting requirements, particularly IRS Form 990 filing, which is critical for your organization to maintain its 501(c)(3) status.
Allocating resources effectively by letting you know how much funding has been designated for certain initiatives, so you can truly understand whether you have enough revenue to pay for all of your projects, programs, and overhead costs.
Honoring promises to stakeholders, which improves your nonprofit's reputation as an organization that respects its supporters and uses its funding wisely.

These benefits are only possible, however, if your nonprofit is transparent about its accounting activities. Keep your community updated on your financial activities and practices, and make reports publicly available (for example, you may post recent Form 990s on your website for easy access) so interested supporters can learn more about how you manage funds.

Types of Funds in Fund Accounting

The "funds" in fund accounting fall into three categories that your nonprofit needs to record, allocate, and report on separately. These groups are based on whether the contributing individual or organization has designated their gift for a specific purpose or made a general donation. Let's dive deeper into each category.

Unrestricted Funds

Unrestricted funding is just what it sounds like—revenue that your nonprofit can put toward any area of its budget. This includes:

Administrative costs, which make up one part of your organization's overhead and include many essential expenses that keep your nonprofit running day-to-day, such as staff compensation, utility bills, insurance, and office equipment purchases.
Fundraising costs, which are also considered overhead and encompass the upfront costs of revenue-generating activities, like fundraising consulting fees, event planning, marketing material creation, and software subscriptions.
Any program costs not covered by funds that are restricted to those mission-driven activities.

The majority of your nonprofit's revenue is likely unrestricted, as common sources of unrestricted funding include:

Most small and mid-sized individual donations
Fundraising event revenue
Most types of corporate giving (matching gifts, volunteer grants, etc.)
Earned income from membership dues, merchandise sales, and service fees
Interest and dividends from investments of your nonprofit's reserve funds

Even though unrestricted funds don't have to be used for specific purposes, it's still important to keep a tight grip on how they're being spent so your nonprofit can make the most of its funding and demonstrate holistic accountability to its entire community.

Permanently Restricted Funds

Permanently restricted funds most often take the form of endowments, which are large sums of money contributed by one or several donors. Your nonprofit isn't allowed to spend these funds directly—instead, you'll invest them and collect interest. Then, you'll typically put the interest toward an initiative agreed upon by the endowment fund contributor(s).

Universities frequently have endowment funds to pay for scholarships, fellowships, and certain faculty positions. However, they aren't the only tax-exempt organizations that can benefit from an endowment. For example, a museum might start one to provide consistent funding for new exhibitions, a hospital may have one to pay for a specific area of medical research, and a church could create one to support its missions and outreach work.

Temporarily Restricted Funds

Temporarily restricted funds come with a designation for a purpose that will eventually be fulfilled or a time period that will elapse. Once these conditions have been met, any remaining funding is released, so your nonprofit can treat it like unrestricted revenue.

These conditions most often apply to:

Major and planned gifts
Grants
Corporate sponsorships (which are often designated for fundraising events)

To see how this works in practice, let's say a major donor contributes $20,000 to a capital campaign to expand your nonprofit's facilities. Your contractor completes the project under budget, and you only spend $19,000 of that gift. The remaining $1,000 is then released from restriction, so you look at your budget and decide to put it toward new furniture for the additional space you now have in your building (which wasn't originally part of the campaign).

Note that temporarily restricted funding is often confused with another common term in nonprofit revenue recognition: deferred revenue. Deferred revenue refers to (typically unrestricted) funds that your organization has received but isn't allowed to spend yet, which usually happens when supporters pre-pay for a product or service that will be delivered at a later date. For example, a recreation center may ask its supporters to pay for a class a month in advance to hold their spots, but the center can't spend those funds until after participants take the class.

If you'd like to test your knowledge of restricted funds and see how prepared you are to properly track your nonprofit's revenue, we've put together a quick quiz you can take below!

How Well Do You Know Your Nonprofit Funding Restrictions?

Choose whether each of these nonprofit revenue streams is most likely to be unrestricted, permanently restricted, or temporarily restricted.

Question of

Fund Accounting Applications

Implementing fund accounting at your nonprofit most noticeably impacts how you organize your internal records. However, its implications extend to several key financial documents your organization creates, including your:

Chart of accounts. Because your chart of accounts is essentially a directory of your organization's financial records, it should reflect your use of fund accounting. Most nonprofits divide the net assets section, which shows what your nonprofit is worth, into unrestricted, permanently restricted, and temporarily restricted categories. Your revenue section should also include its own designations for different types of restricted funds (grants from different sources, sponsorships, planned gifts, etc.)
Operating budget. The impact of funding restrictions on resource allocation is never more clear than when your organization is creating its annual operating budget. During this process, first list where all restricted funds have been designated, then fill in the gaps in both program and overhead costs with unrestricted funding. This way, you can avoid accidentally spending restricted funds on the wrong initiatives or putting too much unrestricted funding toward a program or project that's already paid for.
Financial statements. The statement of activities (which details your nonprofit's revenue, expenses, and net assets) and statement of financial position (which outlines your assets, liabilities, and net assets) both separate restricted and unrestricted funds to provide a clear picture of your organization's financial situation for a given year. Your statement of functional expenses is also indirectly affected because fund accounting dictates which revenue goes toward program, administrative, and fundraising costs.
Annual report. The financial section of your annual report is one of the best places to communicate transparently about your nonprofit's use of funds with your community. Use the data in your fund accounting system to create charts and graphs that break down important financial information and demonstrate how you've allocated resources, especially restricted funds. Many organizations also attach their financial statements as appendices to their annual reports in case readers want to dig deeper.

If you need help setting up your organization's fund accounting system or applying fund accounting in any of these ways, consider reaching out to a nonprofit accounting firm like Jitasa. Our experts work exclusively with tax-exempt organizations, so we'll use our experience to ensure your system meets all of your unique needs and solve any problems that may arise. Plus, our outsourced bookkeeping and accounting services are affordable and cater to nonprofits of all sizes and missions!

Being transparent and following through on your promises to donors, grantmakers, and other stakeholders is critical to retain their support long-term. Now that you understand the basics of fund accounting, you should be well on your way to more effectively managing and reporting your finances for the benefit of your whole community.

For more information on nonprofit accounting, check out these resources:

How to Set up QuickBooks for Nonprofits: The Complete Guide. Learn how to configure your organization's accounting software to support fund accounting best practices.
Grant Management: How to Secure and Track Nonprofit Funding. Dive deeper into the process of allocating and reporting a common type of temporarily restricted revenue—grants.
12+ Top Nonprofit Accounting Firms & How to Choose One. Explore our top picks for outsourced nonprofit accountants who can help your organization get started with fund accounting.

Partner with Jitasa to develop your nonprofit's fund accounting system and implement best practices.

Request a Quote

Nonprofit Compensation Policy: What You Need to Know

2026-02-14T12:00:00Z

Nonprofits have a reputation for paying their employees less than for-profit organizations. However, even if your organization has limited resources, you can still provide fair and competitive nonprofit compensation. Doing so enables you to better retain employees, which saves money in the long run by decreasing recruitment and onboarding costs.

To offer fair compensation practices, you’ll need to implement a nonprofit compensation policy. In this article, we’ll dive into what this policy is and why it’s essential for your nonprofit to have one. Here are the general topics we’ll cover:

Before we dive into creating your organization’s policy, let’s make sure we’re all on the same page by answering a few commonly asked questions about nonprofits and compensation.

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Nonprofit Compensation Policy FAQ

Do nonprofit organizations have paid employees?

Yes! Any organization, including nonprofits, that formally employs individuals pays their employees.

When it comes to nonprofit compensation standards, there can be confusion over the difference between salaried employees and unpaid volunteers. While volunteers often perform many tasks that employees would, and some nonprofits are even entirely volunteer-run, these supporters aren’t formally employed. As such, they don’t receive compensation, but formal staff members do.

What is a nonprofit compensation policy?

Nonprofit compensation policies outline the process of how the organization determines staff salaries and other compensation benefits. Specifically, this policy outlines the procedure to decide executive members’ salaries.

At a for-profit business, sole proprietors are generally paid through draws on the company's income. The income generated through a business is considered to be an extension of the business owner, and salaries paid to employees are considered an expense.

However, nonprofits operate a bit differently. According to nonprofit accounting guidelines, as a registered 501(C)(3), nonprofits must reinvest the funds they earn back into the organization. That means the funds belong to the organization rather than to the executive. Therefore, the leaders and other staff members must take a salary that is agreed upon as part of the organization’s overhead expenses.

Asking the executive director to choose their own salary is obviously a conflict of interest, so a nonprofit compensation policy outlines a clear process for doing so fairly.

What is considered reasonable compensation for nonprofit staff?

Every nonprofit is different, and various organizations employ different workers with unique experience and skill levels. This means there is no standardized compensation policy across the nonprofit sector.

That being said, nonprofits looking to offer reasonable compensation can do so by working with an HR consultant to perform a compensation survey. Compensation surveys help all types of organizations offer competitive compensation by analyzing wage data related to their open positions.

These surveys primarily take the following factors into account:

Location. Different areas have different costs of living, and organizations operating in those areas are expected to offer accommodating salaries. For example, a small rural town in upstate New York likely has a significantly lower cost of living—and subsequently lower average compensation rates—than New York City.
Sector. When completing a compensation survey, ensure you’re looking at data specific to nonprofits. If possible, consider not just nonprofits in general, but also your individual vertical. For example, a nonprofit healthcare organization would likely consider other nearby healthcare facilities, while a university would look to other higher education institutions.
Organization size. A small business’s top executive likely has a lower salary than the CEO at a Fortune 500 company. This same principle applies to nonprofits, so ensure you assess organizations with similar resources to yours.
Role. In general, the more experience and expertise a role at your nonprofit requires, the higher the compensation will be. This is especially true for leadership roles—such as executives—where you may be competing with other organizations to attract a handful of qualified candidates’ attention.

Additionally, what is considered “reasonable” compensation today might be unreasonable in a few years due to inflation, changes in the job market, and other external factors. Perform compensation surveys whenever you plan to conduct a new round of hiring or at least every two to three years to ensure your nonprofit continues to offer competitive compensation.

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Requirements Regarding Compensation for Nonprofit Employees

501(C)(3) requirements mean that all of the organization’s funds need to be reinvested back into itself. The IRS has set specific requirements for nonprofit compensation policies to help determine salaries. It requires that salaries:

Are considered reasonable, but not excessive. Generally, this is the greatest concern for the executive director’s salary. Unfortunately, there are people who will try to take advantage of a nonprofit’s tax-exempt status and set up false organizations or manipulate the systems to earn additional money. This requirement prevents fraudulent behavior and preserves the integrity of nonprofits like yours.
Include benefits and bonuses as a part of overall compensation. When recording and reporting compensation, you need to do so in its entirety, including bonuses and benefits you provide for staff members. This holistic approach considers all organizational expenses relevant to compensation—such as insurance coverage and tangible gifts—to ensure everything is properly accounted for.
Are reported transparently on an annual basis. On your nonprofit’s Form 990, you must disclose the salaries of the five highest-paid employees to the IRS. Keep in mind that Form 990s are public documents, so the highest-paid employees’ salaries will be publicly visible for at least three years after you file your return.

It’s highly recommended that your nonprofit’s board of directors play a part in setting compensation for executives. Revisit this conversation on an annual basis to ensure continued governance. Then, the executive director can follow the guidelines in the compensation policy to set the salaries of other staff members.

Nonprofit executive compensation

Your nonprofit compensation policy should have provisions and processes outlined to ensure your executive director’s compensation is reasonable but not excessive.

The recommended process to determine the right compensation is to research other nonprofits’ executive compensation policies. Conduct a compensation survey specifically for an executive role, assessing executives who work with:

Similar types of organizations
Similar-sized organizations
Organizations in the same general region

If you need additional assistance completing this survey, factoring in benefits alongside monetary compensation, or considering unique circumstances, consider working with a nonprofit HR specialist.

Penalties for excessive compensation

When we hear about nonprofits paying their executives a high amount of money, our minds often immediately jump to stories of corruption in the sector. This corruption is precisely what the IRS and state governments are trying to prevent by creating compensation stipulations.

Your nonprofit compensation policy should help your organization remain compliant with these regulations and avoid any assumptions of corruption.

If the IRS finds that an organization has issues with excessive compensation among the highest-paid employees, that nonprofit may face heavy penalties.

Specifically, if the IRS flags potential violations related to excessive compensation, the organization may be required to undergo:

An official IRS inquiry or audit to further examine the situation
Additional investigation at the state level
Payment of heavy fines

To avoid these penalties, ensure the processes in your nonprofit compensation policy are clear, follow the rules, and leave a paper trail that you can use to back up your decisions to the IRS if necessary.

Penalties don’t only come from the IRS. If you overpay your staff members, you likely won’t have the funds to effectively run your nonprofit’s programming.

Calculating your nonprofit’s program efficiency ratio can help with this decision. Find your ratio with our calculator. If your ratio is below 75%, it’s a sign you might be paying your employees too much rather than allocating the necessary resources toward your mission and programs. Strike a balance between paying your employees what they deserve and ensuring you have the funds to continue pursuing your mission.

Elements of a Nonprofit Compensation Policy

Different organizations often have slightly different items in their compensation policies, but they generally observe a common outline. Most nonprofit compensation policies include the following information:

Overview or philosophy: The first section of a nonprofit compensation policy commonly includes an overview discussing the purpose of the document, how to read it, and sometimes the values the organization holds regarding compensation.
Information about who is affected by the policy: Some organizations’ compensation policies include information about compensation for all staff members, while others simply provide information about their executives. This section of your policy will explain which roles are covered by the policy process.
Compensation structure and elements: Because your Form 990 requires you to report all aspects of your compensation policy, your organization should discuss the various elements of your compensation plan in this section of the policy, including any retirement funds, paid time off, bonuses, other benefits, and, of course, salaries.
Procedure for approving compensation: Explain step-by-step how your organization determines compensation, including how board members are involved in setting executives’ salaries. For instance, if you take votes on final compensation decisions, you might require two-thirds of board members to agree or a simple majority.
Comparability data information: Discuss how you’ll use the data that you collect from other organizations regarding their compensation information. Sometimes this section is lumped into the “procedure for approving compensation” section, but other times, it’s noted separately.
Schedule of compensation deliberations: Create a general schedule for how often you’ll review compensation for relevant parties.

Generally, it’s best to contact a lawyer and a financial advisor to help you determine the best information to include in your compensation policy and to look over your policy after you’ve completed it.

Nonprofit compensation and conflict of interest policies

In addition to your organization’s nonprofit compensation policy, you should also make sure to have a conflict of interest policy. This policy has some overlap with your compensation policy, as both ensure your organization remains compliant and prevents fraud.

Conflict of interest policies establish rules to prevent leaders from gaining personal benefits from the organization’s public funds.

For example, an executive at your nonprofit might also work as a consultant for another company and sign the nonprofit up for services from that other company. If the executive gains financially from the agreement, it would likely be considered a conflict of interest.

If anything goes wrong or the IRS identifies a risk of overcompensation, the first thing they look for is any conflict of interest at a nonprofit. Having a clear policy for disclosing and managing conflicts of interest can reduce the risk of penalties in these situations.

Sample Nonprofit Compensation Policy

Now that you understand what is included in your nonprofit compensation policy, you might be asking, “But what does this document actually look like?”

Below is a template that shows the general outline of a nonprofit compensation policy. Keep in mind that this template shows your policy all on a single page, when they’re actually much longer in most cases. Don’t be surprised if you draw up a multi-page document for your compensation policy.

If you’d like to see other versions of nonprofit compensation policies, check out the following examples:

As you read through these samples and explore this template, keep in mind that all information in this article, images, and resources provided should not be considered legal advice or used as such. It’s always best to consult with a lawyer when compiling official policies and documentation for your nonprofit.

Setting strategic compensation plans for nonprofits

A 2023 study on the state of the nonprofit workforce found that salary competition is the greatest factor impacting retention and recruitment, with approximately 72% of nonprofits reporting struggles with this challenge.

As you’re considering your nonprofit compensation policy, don’t forget to consider your organization's overall staff retention strategy as well.

Remind staff members of your holistic approach to compensation, such as the benefits you offer, like paid time off and professional development, in addition to salaries. Make sure each element of your compensation packages is competitive with the other positions they may be considering.

In addition, when staff members do resign, conduct an exit interview so you can ask why they decided to leave. Include compensation questions in this interview so you can see where your organization’s approach falls in comparison to your competitors.

Effective compensation will factor into your employee retention rate and help save your organization money in the long run. However, it can be challenging to ensure you’re paying team members enough while preventing excessive compensation, especially when considering compensation for executives.

If you need help setting a compensation policy that is effective and compliant, consider discussing the matter with nonprofit finance professionals as well as a lawyer. The Jitasa team will be happy to help! We’ll help walk through what you need in your nonprofit compensation policy, as well as how to do the necessary research to determine the best holistic compensation plans for your employees.

To learn more about compensation and general nonprofit financial management, check out the following resources:

Nonprofit Financial Management: Overview + Best Practices to Know. Managing your finances can seem challenging, but this guide will walk you through the best practices that all nonprofit teams need to know.
How to Leverage Nonprofit Financial Ratios + Calculators. Financial ratios can help you assess your nonprofit’s spending, helping you set fair compensation. Leverage our calculators to determine your nonprofit’s ratios.
How to Set up QuickBooks for Nonprofits: The Complete Guide. Accounting software is essential for making smart financial decisions. Learn how your nonprofit can get started with one of the most popular accounting platforms.

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In-Kind Donations: The Ultimate Guide + How to Get Started

2026-02-08T12:00:00Z

Imagine you work for a nonprofit that provides natural disaster relief. You typically solicit monetary donations from supporters. Then, you use those funds to purchase bottled water, nonperishable food, batteries, and personal care items and distribute them to individuals in impacted areas. Eventually, you start to wonder:

What if we could get supporters to donate these items directly rather than going through the extra step of procurement that slows down our service delivery?

The answer is absolutely yes! In-kind donations, as these gifts are known, can help nonprofits of all sizes and in all verticals meet their programming and fundraising needs. In this guide, you'll learn everything you need to know to start collecting in-kind donations, including:

Let's begin by making sure we're all on the same page about what exactly these contributions entail.

In-Kind Donations: Frequently Asked Questions

What are in-kind donations?

In-kind donations include any and all non-monetary donations to nonprofits or charitable causes. They refer to the transfer of assets, usually goods or services, to your organization from an individual, company, or another organization.

When your nonprofit receives monetary donations, you spend that funding on various organizational expenses. For example, you might set aside $5,000 to spend on website design and development in a given year. However, if a web developer gave your organization an in-kind donation of free design services, you'd be able to reallocate that $5,000 to a different area of your budget.

What are the different types of in-kind donations?

As mentioned previously, in-kind donations typically take one of two forms: goods or services. Let's dive into each type in more detail.

Goods

An in-kind donation of goods refers to the contribution of materials or assets (typically physical) that nonprofits can use to enhance some aspect of their work. Some common examples include:

Supplies to distribute to beneficiaries, like the disaster relief items discussed in the introduction.
Items for organizations to keep and use when delivering services, such as used books for a library or sports equipment for a recreation center.
Office equipment, like computers and desks, to assist with administrative needs.
Materials for fundraisers, such as auction prizes or tables and chairs for a gala.

Although they aren't physical goods, contributions of stocks, real estate, and cryptocurrency are also considered in-kind donations because they involve the transfer of assets from an individual to your nonprofit.

Services

Rather than donating items, some individuals or organizations may choose to contribute their time and expertise to perform a service that your nonprofit would otherwise have to pay for. This type of contribution can be especially useful when your organization is first starting out and may not have the financial bandwidth to outsource or hire specialized professionals yet, although larger nonprofits can also benefit from outside help. These in-kind donations could take the form of:

Pro bono legal services from a licensed attorney.
Bookkeeping and accounting services from a CPA.
Web development or graphic design to help offset your marketing expenses.
Free catering or use of an event space for a fundraiser, meeting, or conference.

In some cases, a donor might decide to accept the bill for a service on your organization's behalf, which is also considered an in-kind donation.

What are the benefits of in-kind donations?

In-kind donations can help you further your nonprofit's mission and engage your supporters. Some of the benefits for your organization include:

Taking out the middleman. Rather than making the extra effort to purchase items with your nonprofit's financial resources, you receive exactly what you need up front.
Creating a quicker approval and delivery process. With in-kind donations, you don't have to wait for your organization's leadership to sign off on your purchases or for goods to arrive if you order them online. As a result, you can use the items right away.
Allowing for more financial flexibility. You can use the funding you would have spent on the goods or services contributed in-kind for other needs at your organization.

In-kind donations also offer advantages for donors, including:

An additional way to engage with your nonprofit. If donors aren't able to give money, they can contribute their skills or the appropriate items they already have on hand and still support your mission.
A way to live more sustainably. By donating the possessions they don't use rather than throwing them away, donors can positively impact the environment in addition to their communities.
A more concrete understanding of their impact. It's easier for donors to see the tangible effects that in-kind donations have on nonprofits—whether that's books becoming more accessible to children or well-designed marketing materials that drive conversions—than it is with financial contributions.

While your nonprofit may benefit from any and all donations, no matter the circumstances, in-kind donations are especially helpful during periods of economic turbulence, when donors are more strapped for cash and your nonprofit needs as much freedom as possible in allocating its funds.

Are in-kind donations tax-deductible?

In most cases, in-kind donations are tax-deductible for donors. However, for your supporters to receive their deductions, the IRS requires your nonprofit to provide written acknowledgments. More on what these should include will be discussed in a later section.

Do in-kind donations have to be reported on your nonprofit's Form 990?

In short, yes. The full Form 990, Form 990-EZ, and Form 990-PF all require your nonprofit to report your total revenue for the year, including the credit values of in-kind donations.

In-Kind Donations and Gift Acceptance Policies

The greatest challenge most organizations face with in-kind donations is this: What happens when you receive a gift you can't use?

Let's say an animal shelter requests in-kind donations of various pet supplies, such as dog beds, kitty litter, and pet food, from its loyal supporter base. Gifts begin to flow in, and the shelter's staff is excited about the improved level of care they'll be able to provide for the animals they rescue.

Then, the shelter receives a big container of contributions from a donor whose cat recently passed away. The staff is just thinking that the rescue cats will love the gently used toys and brand-new packet of catnip in the container when they encounter the bag of kibble—which is open and half empty. Giving this food to the rescue cats is a health and safety hazard, but this donor obviously meant well. What should the staff do in this situation?

The answer is to reference their gift acceptance policy, one of the core financial management guidelines every nonprofit should implement. This policy outlines:

The types of gifts (both monetary and in-kind) that your organization can and can't accept.
The circumstances under which you'll accept each gift.
The procedure for recording different types of gifts.

By showing the donor the official policy that states that all donated pet food needs to be unopened, the animal shelter in our example can politely decline the gift without coming off as ungrateful.

Additionally, if the shelter were to explain the policy in their supporter communications, they could encourage even more eligible in-kind contributions! Your gift acceptance policy not only tells supporters what not to give but also provides some direction as to what they can do to make the greatest difference for your mission.

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Recording and Reporting In-Kind Donations

Once your nonprofit starts bringing in useful in-kind donations, you'll likely encounter two additional challenges: how to correctly track these contributions in your accounting system and how to report them for tax purposes. Fortunately, the experienced team of nonprofit accountants at Jitasa has you covered!

Follow these steps to properly record and report in-kind donations:

Step 1: Determine the gift's fair market value (FMV).

Properly recording your organization's in-kind contributions is necessary not only for tax reporting, but also to comply with certain states' regulations and the Generally Accepted Accounting Principles (GAAP). Plus, if your nonprofit conducts an independent financial audit for any reason, your auditor will want to see a thorough record of all donations—monetary and in-kind.

When you go to record an in-kind donation, the first thing you'll need to do is figure out its fair market value (FMV). This is defined as the price you would pay for a good or service if you purchased it on the open market. There are a few ways to determine FMV depending on the item:

Goods with straightforward values: Look at the price tag on the item or search for it online and check the prices (without discounts) on major retail sites. For example, if someone donates a brand-new iPad to your nonprofit, the list price for that model on Apple's website is the FMV. Keep in mind that used goods may depreciate over time—ask your accountant for advice on specific items.
One-of-a-kind goods: This most often applies to unique auction prizes like custom artwork or signed celebrity memorabilia. In these situations, first check with the item's provider, but take their estimate with a grain of salt, as many owners of unique goods tend to overvalue them. Then, see if you can find comparable items for sale on websites like eBay or Etsy and compare their prices to the provider's estimate.
Services: Depending on the donor's fee structure, ask them how much they would usually charge to complete a project like the one they're doing for your organization, or find out their hourly rate and track the number of hours they spend working for you.

To figure out which approach you should use to determine FMV, check out our tool below!

Fair Market Value Calculator

Determine the FMV of your in-kind donation

Step 1 of 3

What type of donation is this?

Step 2 of 3

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Tip: Always consult your accountant for specific valuation advice, especially for high-value or complex donations.

Step 2: Record the FMV as a debit and a credit.

From there, record your in-kind donations in a separate revenue account as designated in your organization's chart of accounts. Since the amount of cash your nonprofit has on hand doesn't change when you receive an in-kind donation, the gift's net value should equal zero. Record its FMV as both a debit and a credit in your accounting system.

Step 3: Issue a written acknowledgment to the donor.

As we discussed earlier, in-kind donations are typically tax-deductible, but your organization must provide donors with written acknowledgments. These receipts should include:

Your nonprofit's name and employer identification number (EIN)
The date that you received the item or that the service was completed
A description of the goods or services contributed
A statement confirming that the supporter didn't receive anything in exchange for their gift

Unlike the donation acknowledgment for a monetary contribution, your organization isn't legally allowed to provide the value of an in-kind donation for the donor—it's up to them to provide it. Additionally, remember that this acknowledgment is a form of donor recognition, so you should also take the opportunity to show your appreciation for their gift.

Step 4: Report the gift with your total revenue on your Form 990.

Lastly, you'll report the in-kind donation on Form 990 with your total revenue. The IRS typically requires additional paperwork for a few types of in-kind donations:

Items worth more than $25,000
Historical artifacts or artwork
Vehicle donations worth $500 or more

If your organization receives any of these donations, double-check the regulations to ensure you file all of the forms you need to properly account for them. Additionally, follow all reporting requirements for the state in which your organization operates.

How to Solicit In-Kind Donations

Just like financial contributions, you can cultivate in-kind donations and tell supporters exactly what it is you need to further your mission. Consider asking for these gifts in the following ways:

Create a dedicated page on your website. If you need recurring items at your organization, add a permanent page to your nonprofit's website listing these items and providing drop-off instructions. This is most helpful for small-scale in-kind donations like the pet food or disaster relief supplies in our earlier examples.
Write individual letters asking for the in-kind donations you need. For larger gifts like technology or expensive services, look through your donor database to see who might be interested in making these contributions. Then, write a tailored letter to that supporter just like you would for a significant monetary donation.
Register for a wish list when starting new initiatives. If you're launching a new program or project that requires specific items, create a registered wish list using a platform like Amazon. Share the wish list with your supporters so they can each pick out an item that resonates with them and aligns with their budget.
Reach out to current and potential corporate sponsors. Especially if you're looking for in-kind donations leading up to a fundraising event, your sponsors may be happy to contribute items in addition to or in lieu of financial support. For instance, a nearby beauty supply store could donate a gift basket of their products as an auction prize, or a grocery store could contribute snacks and water bottles for participants in your 5K race.

Dedicated donors—both individuals and businesses—want to help your nonprofit by giving you gifts that will be useful for you. Make it easy for them by telling them exactly what you need and how to contribute those things.

If you're ready to start bringing in more in-kind donations, get your team together and brainstorm what types of gifts would be most helpful for your organization right now. Then, make sure they're covered by your gift acceptance policy and start reaching out to your individual and corporate supporters. Once you begin to receive donated goods and services, partner with nonprofit accountants like the team at Jitasa to help you record and report them correctly.

For more information on in-kind donations as they relate to nonprofit finance, check out these resources:

Nonprofit Budgeting: How to Get Started + Template. Learn how to create an effective budget for your organization while taking into account both monetary and in-kind gifts.
Nonprofit Form 990 Filing: FAQ Guide + How to Get Started. Dive deeper into the reporting requirements (for in-kind donations and otherwise) on your organization's annual tax return.
Working With a Nonprofit Accountant: What to Expect. Discover what it's like to partner with a nonprofit accountant to record donations, file tax forms, create reports, and more.

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Nonprofit Chart of Accounts: How to Get Started + Example

2026-02-03T12:00:00Z

The core of nonprofit accounting is accountability. Financial transparency and organization are especially important to your nonprofit's success, and there are a variety of reports and systems you can leverage to keep your nonprofit's financial information in order. The most foundational of these tools is a chart of accounts (COA).

Although it forms the backbone of your organization's accounting system, your COA can be a challenging resource to understand, create, and maintain. Fortunately, the experts at Jitasa are here to help! In this guide, we'll cover the basics of the nonprofit chart of accounts, including:

Let's begin with an overview of what your nonprofit's COA is and how it's structured.

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Nonprofit Chart of Accounts: Frequently Asked Questions

What is a nonprofit chart of accounts?

A nonprofit chart of accounts is a table-style list of all of your organization's financial accounts. It functions as a directory of your records, making it the cornerstone of all accounting procedures at your nonprofit.

Think of your nonprofit's COA like an extensive filing cabinet. It organizes all of your financial recordkeeping categories into a list format, helping you find information about everything from bank deposits to investment growth to payroll records.

What information is included on a nonprofit chart of accounts?

Most nonprofit COAs are divided into the following five categories:

Assets: This section lists what your nonprofit owns, such as cash, property, and accounts receivable.
Liabilities: This category encompasses everything your organization owes, including accounts payable, deferred revenue, and debt.
Net Assets: This equals the value of your assets minus your liabilities, which indicates how much your nonprofit is worth.
Revenue: This category includes all of the funding your organization brings in through individual donations, corporate philanthropy, grants, and other income sources.
Expenses: This section outlines all of your nonprofit's expenditures on mission-critical programs, fundraising campaign planning and execution, and administrative needs like utility bills and staff compensation.

Although most organizations use this basic structure, you should tailor your COA to your nonprofit's unique financial situation and needs so it can serve as an effective directory for your team.

What is the Universal Chart of Accounts for nonprofits?

The Unified Chart of Accounts (UCOA) is a standardized nonprofit chart of accounts that aligns with the reporting requirements on IRS Form 990. This resource is where the five sections above come from, which is why organizing your COA based on those categories is useful for compliance purposes.

However, for small to mid-sized organizations, modeling your chart of accounts after the highly detailed UCOA is comparable to killing a mosquito with a sledgehammer. It's much more efficient to follow other examples and templates available online as you customize your chart to include only the accounts your nonprofit actually needs (more on this later!).

Chart of Accounts Applications for Nonprofits

Your nonprofit's chart of accounts forms the foundation for all of your organization's reports that summarize your financial data, so it's easier to analyze and apply. The most notable of these are the four core nonprofit financial statements, which include your:

Statement of activities: The nonprofit parallel to the for-profit income statement, this report outlines your organization's revenue, expenses, and net assets to assist in the budgeting process.
Statement of financial position: Also called a balance sheet, this statement breaks down your assets, liabilities, and net assets to help you assess your organization's financial health and plan for growth.
Statement of cash flows: This report shows how cash moves into and out of your nonprofit through operating, investing, and financing activities to keep you on track with spending and fundraising throughout the year.
Statement of functional expenses: This statement divides your organization's expenses into the categories of program, administrative, and fundraising costs to show how your funding is being used to further your mission.

All of these reports provide essential information for completing your nonprofit's annual tax return. As you look back at your original financial records to prepare these reports, your chart of accounts can help you find the information you need—as long as you know where to find it.

Additionally, your COA will play an important role if your nonprofit undergoes a financial audit. A third-party auditor will use your chart of accounts to navigate through the various financial records they plan to examine. They'll also want to see the resource to make sure you keep your information organized in the first place.

CHEAT SHEET: COA & Nonprofit Financial Statements

Click on the name of one of the nonprofit financial statements below to see which categories from your COA you should reference while creating it.

Pro Tip: The nonprofit accountants at Jitasa can help you create your organization's COA and all of these financial statements!

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Nonprofit Chart of Accounts Template & Example

To begin creating your nonprofit's chart of accounts, we recommend starting with the UCOA to assign numbers to your organization's accounts. While you can create from scratch rather than using the UCOA, paring down this guide tends to leave more room for growth and flexibility in the future.

Here is a breakdown of some of the major accounts that your nonprofit's COA might include, organized under the five categories mentioned earlier. Remember that your organization might not need to use all of these numbers at all times—just include the accounts that are relevant to your current financial activities as you create your COA, either from scratch or using one of the many templates available online.

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Assets (account numbers beginning with 1000)

1100 - Checking
1200 - Savings
1300 - Investments
1400 - Accounts Receivable
1410 - Grants Receivable
1420 - Pledges Receivable
1500 - Property
1600 - Equipment
1700 - Petty Cash
1800 - Notes/Loans Receivable

Liabilities (account numbers beginning with 2000)

2100 - Accounts Payable
2200 - Accrued Salaries
2300 - Accrued Employee Benefits
2400 - Accrued Payroll Taxes
2500 - Accrued Property Taxes
2600 - Unearned/Deferred Revenue
2700 - Short-Term Notes & Loans Payable
2800 - Line of Credit
2900 - Government Owned Fixed Liabilities

Net Assets (account numbers beginning with 3000)

3100 - Unrestricted Net Assets
3200 - Temporarily Restricted Net Assets
3300 - Permanently Restricted Net Assets

Revenue (account numbers beginning with 4000-6000)

4100 - Individual Contributions
4200 - Corporate Contributions
4300 - Legacies and Bequests
4400 - Federal Grants
4500 - State Grants
4600 - Local Government Grants
4700 - Foundation Grants
4800 - In-Kind Contributions
5100 - Program Service Fees
5200 - Membership Dues
5300 - Investment Revenue
5400 - Event Sponsorships
5410 - Event Ticket Revenue
5420 - Event Auction
6100 - Net Assets Released From Restriction
6200 - Unrealized Gain
6300 - Miscellaneous Revenue

Expenses (account numbers beginning with 7000-9000)

7100 - Salaries and Payroll
7110 - Payroll Taxes
7120 - Health Insurance
7130 - Retirement Benefits
7200 - Depreciation Expense
7300 - Contract Services
8100 - Office Supplies
8200 - Rent
8210 - Utilities
8220 - Real Estate Taxes
8230 - Equipment Purchase and Maintenance
8300 - Travel
8400 - Fundraising Expenses
8500 - Marketing and Promotion
9100 - Fixed Asset Purchases
9200 - Payment to Affiliates

As you can see from these designations, it's helpful to assign numbers that are close together to similar accounts. That way, if you want to access multiple related types of financial data, you'll know exactly where to look.

For example, in the Expenses section, all personnel-related expense accounts have numbers that begin with 7000. Within that subcategory, expenses associated with salaried employees have account numbers that start with 7100, while other personnel expenses have the numbers 7200 and 7300. Later in that section, the accounts that pertain to facilities expenses—rent, utilities, real estate taxes, and equipment costs—all have numbers that start with 8200.

When you put all of this information together in a table format, your nonprofit chart of accounts should look something like this:

Tips for Maintaining Your Chart of Accounts

Developing a chart of accounts for your nonprofit isn't a one-and-done event. Your organization's financial situation and activities will change over time, and your COA needs to evolve in the same ways to ensure your financial data remains organized.

To effectively maintain your nonprofit's chart of accounts, try these tips:

Keep your accounts as simple as possible. For instance, rather than having separate expense accounts for graphic design, website development, and paid advertising, you could group these into a more general account for marketing costs. Your COA should contain enough detail to accurately reflect your organization's financial activities, but not so much that it becomes overwhelming to navigate.
Remove any unused accounts from your chart. In the vein of keeping your COA simple, delete any accounts that you haven't used recently and don't plan to use in the near future. For example, if your nonprofit hasn't secured any foundation grants in the past few years and you don't plan to apply for any this year, remove that account so you can focus on the other grant-related accounts you actively use. If you decide to pursue a foundation grant next year, you can always add that account back in when you need it.
Allow room for growth. As your nonprofit expands, you'll likely need to add data to your COA. Make sure you can easily edit the chart and organize new accounts under their proper categories. Also, double-check that you don't have an existing account that an activity could logically fall under before adding a brand-new number to the COA.
Leverage specialized accounting software. Although you might create your first chart of accounts in a spreadsheet, using an accounting platform like QuickBooks or Sage Intacct makes it easier to format and edit over time. Plus, you can view your COA, record transactions, and generate financial reports all in one place.
Work with a nonprofit accountant. The best way to produce an accurate chart of accounts that is tailored to your organization's needs is to partner with an expert who can review your account numbering, suggest helpful revisions, and correctly set up your COA within your accounting system.

Because hiring an in-house accountant can be expensive and time-consuming, many nonprofits choose to outsource their accounting services to an external firm like Jitasa. By outsourcing, your organization gets access to all of the financial support you need in a more cost-effective manner than bringing on a new staff member. And because Jitasa specializes in working with nonprofits, our team's expertise is tailored to your specific needs and COA structure.

Understanding, developing, and maintaining an accurate nonprofit chart of accounts is essential for effective financial management at your organization. Use the strategies in this guide to get started, and don't hesitate to reach out to Jitasa's team of expert nonprofit financial professionals with any questions or concerns that come up as you leverage this foundational resource.

For more information about your COA's structure and applications, check out these resources:

What Is Fund Accounting? A Guide to Basics & Best Practices. Explore the ins and outs of fund accounting, the system nonprofits use to track their finances for accountability.
Nonprofit Financial Statements: 4 Essential Reports to Know. Learn more about the creation and purpose of the financial reports your COA most directly informs.
Nonprofit Form 990 Filing: FAQ Guide + How to Get Started. Dive deeper into how to file your nonprofit's annual tax return and the role your COA plays in that process.

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How to Fill Out Form W-9 for Nonprofits: Complete FAQ Guide

2026-02-01T12:00:00Z

Contracting is common in the nonprofit sector, and it's especially useful when your organization needs to complete a specialized task but doesn't have the bandwidth or expertise on its existing team to do it in-house. But before you get started with a contractor, there are some financial management considerations that you should be aware of at the outset. One of these is the additional tax forms you'll need to complete, including IRS Form W-9.

In this guide, you'll learn all you need to know about Form W-9 and its uses in the nonprofit sector, including:

Form W-9 is closely connected to another contracting-related tax document, IRS Form 1099, so we'll mention both frequently as we walk through processes and applications related to W-9s. However, let's start by distinguishing the W-9 to help you understand its unique purpose.

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What is Form W-9 for nonprofits?

IRS Form W-9 is a document that both nonprofit and for-profit organizations use to request tax information from contractors. Also known as the "Request for Taxpayer Identification Number and Certification," it's necessary when your nonprofit has contracted work from someone else and when someone else has contracted work from you (more on this later!).

The purpose of Form W-9 is to provide necessary tax information for contracting organizations to complete IRS Form 1099, which the organization and contractor use to report miscellaneous income and non-employee compensation. The IRS uses W-9s to ensure contractors' individual tax returns match organizations' 1099 filings.

Form W-9 is six pages long when printed, although contractors only need to fill in information on the first page (the rest of the form contains instructions and notices). It should look something like the example below:

When do nonprofits need to complete a W-9?

There are two situations in which your nonprofit might encounter Form W-9: Either you need to request one from a contractor you hired, or you need to fill one out because another organization paid your nonprofit for contract work. Let's dive into both of these cases in more detail.

Requesting a W-9 From Contractors

If you've contracted someone to work for your nonprofit, you won't complete a W-9 yourself but instead ask the contractor to fill it out. Once they do, you'll file it and use the information to issue them a 1099, as long as the recipient of your payments:

Is not an employee of your nonprofit
Is an individual, partnership, vendor, or estate
Performed services in the course of your organization
Received at least $600 in total payments during one calendar year

If you anticipate that you'll need to issue a 1099 to a contractor based on these conditions (and it's likely that you will), request a W-9 early in your relationship with them to ensure you have it readily available when you complete your 1099s. For contractors you work with across multiple years—for example, if you pay the same freelance graphic designer to create your GivingTuesday marketing materials every year—you can reuse the same W-9 unless the contractor's information changes.

Filling out a W-9 for Contract Work

Other organizations may also pay your nonprofit to provide services to them based on your team's experience and expertise. For example, if a brand-new nonprofit in the same vertical as yours launches in a nearby city, they could contract your well-established organization for consulting services to help them get up and running. In this case, the contracting organization will request a W-9 from you and then use the information you provide to issue you a 1099.

How do I fill out a W-9 for my nonprofit?

If someone requests a W-9 from your nonprofit, it's relatively simple to complete, especially compared to most other tax forms. We've broken the process down into seven steps and provided a checklist to follow along the way, making it even easier for you to get started.

Steps to Fill Out Form W-9

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1. Write Your Nonprofit's Name

The first two boxes on the W-9 ask for your nonprofit's official and unofficial names, respectively. Your official name is the name listed on your organization's founding documents (articles of incorporation, Form 1023, etc.) and annual tax return. Your unofficial name is the name your nonprofit is generally known by, which may or may not be different from your official name.

For example, let's say your organization was incorporated as the Cat Rescue Society of Central North Carolina, but your team and community usually shorten its name to the Cat Rescue Society. You'd write "Cat Rescue Society of Central North Carolina" in Box 1 and "Cat Rescue Society" in Box 2 of your W-9.

2. Name Your Organization's Tax Classification

Box 3 of the W-9 asks your nonprofit to select its federal tax classification. Your options include:

Individual/Sole Proprietor
C Corporation
S Corporation
Partnership
Trustee/Estate
Limited Liability Company
Other

In most cases, you'll either check the C Corporation classification for your organization or check Other and write in "Nonprofit Corporation." If you were filling out this form as an individual (as many of your nonprofit's contractors do), you would check the Individual/Sole Proprietor box. Consult your organization's lawyer or accountant if you have questions about your classification.

3. Double-Check the "Exempt Payee Code" Box

Box 4 (the exempt payee code) of the W-9 indicates whether payments are subject to backup withholding. Types of payments that may fall under this category include:

Interest and dividend payments
Broker transactions
Barter exchange transactions
Patronage dividends

Your nonprofit will almost always leave this box blank, but double-check the requirements for backup withholding just in case.

4. Provide Your Nonprofit's Mailing Address

In Boxes 5 and 6, you'll write out your organization's mailing address so the requester of the W-9 knows where to send your 1099 when it's ready. This can be a physical address or a P.O. box, wherever your nonprofit primarily receives mail.

5. Fill in the Requester's Name and Address (Optional)

Next to the address box, there is an option to provide the requester's name and address. Although this is optional, it can help you keep track of who has access to your organization's information, especially if your nonprofit frequently completes W-9s for different contracting organizations.

6. List Account Numbers Based on the Requester's Directions

Some contracting organizations use numbered systems to track payments to their various contractors. If they ask that your nonprofit include its designated account number on its W-9 for internal reference purposes, list it in Box 7. If not, leave this section blank.

7. Write Your Taxpayer Identification Number (TIN)

Lastly (and arguably most importantly), you'll fill in your nonprofit's taxpayer identification number (TIN) in the designated area on your W-9. While individual contractors use their Social Security number, organizations like yours use their employer identification number (EIN).

If you haven't applied for an EIN yet, you'll need to do so before completing any W-9 forms and write "applied for" in the TIN section. Then, you'll have to submit your EIN to the requester within 60 days of sending in your W-9.

What should I do with a completed nonprofit W-9?

Once you've completed and thoroughly reviewed your nonprofit's W-9, all you have left to do is send it back to the requester. They'll use your information to complete your 1099 and send it to you by the January 31 deadline.

If you're on the receiving end of a W-9 from a contractor, your next step is to complete their 1099. For this form, you'll find some key information on the W-9 and other details in your nonprofit's financial records:

From the contractor's W-9: Their name, address, tax classification, and TIN.
From your nonprofit's records: The category of payments made to the contractor, federal and state tax withholding information, and their total non-employee compensation.

Make sure to file your nonprofit's W-9s in a safe place, preferably your accounting platform. This will help you maintain an organized system and ensure sensitive information remains secure. Keep W-9s on file as long as your relationship with a contractor is active and for at least four years after filing their 1099, and ensure this is reflected in your organization's record retention policy.

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Of the various tax forms your nonprofit may need to complete, the W-9 is one of the least challenging once you get started. However, like any other official document, correctly filling it out is critical. Keep the tips above in mind as you fill out or request W-9s for your organization, and don't hesitate to reach out to a nonprofit accountant (like the team at Jitasa!) if you need help or have any questions.

For more information on nonprofit taxes and record management, check out these resources:

Form 1099 for Nonprofits: How and Why to Issue One. Dive deeper into why and how your nonprofit should issue 1099s to contractors after receiving their W-9s.
Getting Started With Nonprofit Bookkeeping: A Complete Guide. Explore best practices for effective recordkeeping to properly organize your W-9 data.
How to Set up QuickBooks for Nonprofits: The Complete Guide. Discover the ins and outs of the best accounting solution available to store your nonprofit's W-9s and more—QuickBooks Online—and learn how to configure it for your needs.

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Cash vs. Accrual Accounting for Nonprofits: The Basics

2026-01-27T12:00:00Z

Key Takeaways

Cash accounting and accrual accounting are systems that organizations (both for-profit and nonprofit) use to track transactions.
Cash basis accounting acknowledges revenue when it's received and expenses when they're paid, while accrual basis accounting recognizes revenue when it's pledged and expenses when they're incurred.
Cash accounting is an easy starting point for small nonprofits, but growing, mid-sized, and larger organizations will ultimately benefit more from accrual accounting in the long run.

If you work at a nonprofit, you know how frequently money moves in and out of your organization through various spending and revenue-generating activities. It's essential to carefully track all these transactions to ensure you're using your funding effectively to further your mission, which is where a solid nonprofit accounting system comes in.

There are two main accounting methods you can choose from to keep track of your nonprofit's funds: cash accounting and accrual accounting. In this guide, we'll break down each of these accounting methods and compare them to help you decide which one your organization should use. Here is what we'll cover:

Let's dive in with an explanation of the basics of these accounting types.

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Cash vs. Accrual Accounting: What's the Difference?

Cash accounting and accrual accounting are both systems that organizations use to track their transactions. The difference is in the timing of when you recognize your revenue and expenses.

How Does Cash Accounting Work?

In a cash accounting system, your organization recognizes revenue when it's received and expenses when they're paid. Essentially, this method tracks the flow of cash in and out of your organization.

Example: If you buy a coffee today with cash, the money leaves your possession today. That's cash basis.

How Does Accrual Accounting Work?

With accrual accounting, you recognize revenue when it's pledged and expenses when they're incurred, regardless of whether you've received or spent the money at that time. This method focuses on your organization's financial commitments—both what stakeholders owe to you and what you owe to external parties.

Example: If you use a credit card to buy that coffee, you've "incurred the expense" today, even if you don't pay the bill until next month. That's accrual basis.

Illustrating Cash vs. Accrual Accounting in a Nonprofit Context

To understand the difference between these systems, let's say your nonprofit is planning its annual walk-a-thon fundraiser, which will be held next March.

Following past event timelines, you open registration and launch your peer-to-peer campaign this December so participants can start collecting pledged donations to be fulfilled after the walk-a-thon. You also put down a deposit to rent tents, tables, and chairs, and agree to pay the outstanding balance when you pick them up the day before the event.

If your nonprofit uses the cash accounting method, you'll wait to record all of the pledged donations from the peer-to-peer campaign until you receive the money in March, so they will all count toward next year's revenue totals. For the supply rental, you'll count the deposit toward this year's expenses and the outstanding balance toward next year's, depending on which year you make the payment.

If you use the accrual method, you'll record any peer-to-peer campaign pledges made in December under this year's revenue totals, and donations pledged from January onwards will count toward next year's. Since you committed to paying for the supplies this year, you'll record the full amount of the rental (including both the deposit and the outstanding balance) under this year's expenses.

This table illustrates how the "timing" of the Statement of Activities entry changes based on the method, which is the core difference between the two accounting systems.

Date	Event	Cash Basis Accounting	Accrual Basis Accounting
December	Revenue: Participants pledge $5,000 via the peer-to-peer site for the walk that will take place in March (unconditional).	No entry. (No cash received yet.)	$5,000 Revenue recorded with accounts receivable.
December	Expense: You pay a $200 deposit for tent rentals (Total cost $1,000) for the March walk.	$200 Expense recorded. (Only the cash actually paid.)	No expense recorded. $200 recorded as a prepaid expense.
March	Revenue: Walkers complete the event, and the $5,000 in cash pledged in December is collected.	$5,000 Revenue recorded.	No revenue entry. Cash is applied to accounts receivable.
March	Expense: You pay the $800 balance for the rentals and use the tents at the March walk.	$800 Expense recorded.	$1,000 expense recorded when tents are used ($200 prepaid and $800 paid).

What Are the Benefits of Cash Accounting & Accrual Accounting for Nonprofits?

Nonprofit accounting isn’t a one-size-fits-all situation, and different methods have their benefits and drawbacks. To help you figure out whether your organization would be better served by a cash accounting system or an accrual accounting system, let’s break down the advantages and disadvantages of each.

Cash Accounting Method

The main benefit of cash accounting is its simplicity. As previously mentioned, cash accounting is dependent on the cash flow in and out of your organization. So, the system already aligns with your organization’s cash transactions, making it easy to implement and understand even if you’re just getting started with nonprofit accounting. Plus, you can track cash transactions in a spreadsheet if your organization isn’t in a position to invest in accounting software yet.

However, there are several notable drawbacks to the cash accounting method, including that:

It doesn’t comply with nonprofit reporting requirements. If you fill out your nonprofit’s annual Form 990 based on data from the cash accounting method, you’ll need to note it in a disclaimer. Cash accounting also isn’t in line with the Generally Accepted Accounting Principles (GAAP).
It doesn’t include tracking for assets, accounts receivable, or accounts payable. These financials are associated with commitments rather than cash flow, so the basic cash accounting system doesn’t account for them.
It’s less useful for future planning. When you don’t have a record of expected revenue and outstanding liabilities, it’s difficult to pinpoint your exact financial position, which is essential to develop multi-year strategic plans for your organization.

Nonprofits that are just starting out may be able to get by on the cash accounting method. However, once their financial situations become more complicated, they’ll either need to modify the system to include tracking for assets, receivables, and payables or switch to the accrual method.

Accrual Accounting Method

Once nonprofits’ financial situations become complex in any way, they often find the accrual accounting method to be more suited to their needs. Some of its benefits include:

GAAP compliance. Because these standards call for transparency and full disclosure of financial information for organizations, a more thorough accounting system like the accrual method would be in line with them.
More accurate reporting. Besides not having to include the disclaimer on your Form 990, your nonprofit will also have a more complete picture of your finances to show grantmakers and auditors.
Better financial planning. This complete financial dataset will also be useful in creating budgets, setting financial goals, and developing long-term strategic plans for your organization.
Increased transparency. The core of nonprofit accounting is accountability, and accrual accounting makes it easier to be accountable to your supporters about how you plan to use all of their contributions (both realized and pledged) to further your mission.

The main drawback of the accrual accounting method is that it’s more complicated than the cash method. You’ll likely need specialized accounting software to correctly track all of the different accounts and transactions covered by this system, and it’s more difficult to navigate and analyze this information. Fortunately, there are plenty of resources available to help you get started.

Learn financial basics in The Beginner’s Guide to Nonprofit Accounting.

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Which Accounting Method Is Right for My Nonprofit?

In many cases, very small nonprofits find the cash accounting method to be a good starting point as they take their first steps into financial management. Even if you aren’t able to invest in accounting software yet, it’s still important to have some kind of system in place to track your organization’s early expenses and funds raised.

When your nonprofit acquires its first long-term assets like investment accounts or property, or payables and receivables start becoming part of your day-to-day operations, it’s a good idea to transition to a modified cash accounting system. This means that you’ll record assets, payables, and receivables similarly to the way you would in accrual accounting while still tracking daily transactions on a cash-flow basis.

However, once your nonprofit is considered mid-sized or larger, you’ll almost certainly need to switch to accrual accounting. Here are some of the signs that you may want to make the transition:

You’re dealing with a larger volume and wider range of transactions than you feel like you can accurately record in a cash accounting system.
You’re planning a long-term project like a capital campaign that will require you to track many types of expenses and contributions throughout its duration.
You’re required to conduct a financial audit and are trying to make the process go as smoothly as possible.
You’re considering applying for more competitive grants where the funders want to see accurate details of your organization’s financial situation.
You want to make better financial decisions as you plan for growth at your nonprofit.

Even if your nonprofit is still on the smaller side, you might go ahead and set up an accrual accounting system once you have the resources to invest in accounting software and professional help. Beginning to work with a nonprofit accountant on creating an accrual system early (such as the team at Jitasa!) can prepare you to manage more complex financial records as your organization grows.

If you're still uncertain about which direction to go with your nonprofit accounting, take this quick quiz to help determine which accounting method will work best for your needs!

Which Accounting Method Is Right for Your Nonprofit?

Answer a few questions to discover whether cash or accrual accounting best fits your organization's needs.

Question of

Whether you use the cash or accrual accounting system to track your nonprofit’s funds, remember that your ultimate goal is to ensure that your organization’s finances further its mission. Your operational efficiency, fundraising capabilities, and ability to deliver services to your beneficiaries are all dependent on having a well-organized accounting system. So, make sure to choose the right method for your nonprofit, and don’t hesitate to reach out to expert nonprofit accountants with any questions.

To learn more about getting started with nonprofit accounting, check out these resources:

What Is Fund Accounting? A Guide to Basics & Best Practices. Dive deeper into the complexities of fund accounting, the type of accounting unique to nonprofits that can be supported by either the cash or accrual method.
Nonprofit Chart of Accounts: How to Get Started + Example. Discover a key nonprofit accounting resource that is especially important for tracking all of the types of transactions involved in an accrual system.
12+ Top Nonprofit Accounting Firms & How to Choose One. Explore our top picks for nonprofit accounting firms that can help your organization set up its accounting system for the first time or make the switch from cash to accrual accounting.

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Nonprofit Statement of Financial Position: Guide + Template

2026-01-15T12:00:00Z

For your nonprofit to expand its operations and make a greater impact over time, it needs to be financially healthy and sustainable. One of the best resources you can use to assess your organization's growth potential is its statement of financial position. While you're required to compile this report for compliance purposes, it's also extremely useful for decision-making.

In this guide, you'll learn all you need to know about statements of financial position, including:

Before we explore how you can use your statement of financial position to make more informed decisions for your organization, let's review what this report is and its role in the greater landscape of nonprofit accounting.

Nonprofit Statement of Financial Position: Frequently Asked Questions

What is the nonprofit statement of financial position?

The nonprofit statement of financial position is an accounting report that provides a snapshot of your nonprofit's fiscal health and sustainability. It's one of the core nonprofit financial statements, and it summarizes key data in your organization's financial records so you can analyze it more easily and draw actionable conclusions.

The statement of financial position covers your nonprofit's assets, liabilities, and net assets (more on each of these sections later!). Most organizations compile this report annually, and many include year-over-year comparisons to allow for more granular analysis. When you put all of this information together, the completed report looks something like this:

Is there a difference between a statement of financial position and a balance sheet?

No. "Statement of financial position" and "balance sheet" are two different terms that refer to the same report.

Which one your nonprofit uses internally is up to you, but you should be aware of both terms because reporting organizations may ask for the statement by either name. Generally speaking, for-profit organizations often prefer "balance sheet," while nonprofits tend to use "statement of financial position" to align with the names of their other financial statements. These reports include the:

Statement of activities. As the nonprofit parallel to the for-profit income statement, this report summarizes your organization's annual revenue, expenses, and net assets.
Statement of cash flows. This statement, which is typically compiled monthly and goes by the same name for both for-profit and nonprofit organizations, shows how money moves in and out of your nonprofit through operating, investing, and financing activities.
Statement of functional expenses. The one financial statement unique to nonprofits, this report categorizes your organization's expenditures based on how each one furthers your mission (programs, administrative activities, or fundraising).

Each of these statements allows you to gain different insights into your organization's financial situation and promote accountability with supporters, stakeholders, and the government.

Why does my nonprofit need to create a balance sheet?

Even if your organization is fairly stable and not planning for major expansion, you're required to create a statement of financial position every year to comply with nonprofit regulations and to file your Form 990. However, many accountants (including Jitasa!) provide balance sheets as a monthly report as a part of financial packages for organizations. This allows your organization to review its financial standing regularly throughout the year.

The main areas of compliance that this report applies to include:

Aligning with the Generally Accepted Accounting Principles (GAAP): Several financial oversight institutions developed this set of guidelines collaboratively to standardize recordkeeping and reporting for all for-profit and nonprofit organizations, including requiring every organization to create an annual balance sheet.
Filing Form 990 with the IRS: Although your nonprofit is exempt from federal income tax, you still have to complete an annual tax return using data from your balance sheet and other financial statements to maintain that status.
Undergoing independent financial audits: All of your financial statements will likely be on the list of documents your auditor asks you to pull, but they may pay special attention to your statement of financial position so they can make stronger health and sustainability-related recommendations.

Additionally, your statement of financial position helps promote transparency with supporters and stakeholders. When compiling their annual reports, many organizations include high-level financial data in a dedicated section, using charts and graphs to make it easier to understand. Then, they'll attach their complete financial statements as appendices in case some readers want to dig deeper, especially potential major donors and grantmakers who might partially base their funding decisions on nonprofits' financial health.

Set guidelines for creating and distributing financial statements with our Nonprofit Financial Reporting Policy Template.

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Core Balance Sheet Sections

The sections of your nonprofit's statement of financial position correspond to three of the five divisions of your chart of accounts (COA), which is essentially a directory of your organization's financial records. This makes it easier for your accountant to pull the data and for your team to refer back to the source for more detailed information as needed. For now, here is an overview of each section as it appears in the report.

Assets

The assets section of your balance sheet outlines what your nonprofit owns. Depending on your organization's situation, the line items in this section might include:

Cash funds
Investments
Accounts receivable
Prepaid expenses
Property and equipment

Most organizations report their assets in order of liquidity—i.e., how easy it would be to turn them into cash if necessary. Therefore, cash is typically at the top of the list because it's already liquid, and property and equipment are at the bottom because you'd have to sell them for them to become liquid.

Liabilities

The liabilities category details what your nonprofit owes. Some potential subcategories for this section include:

Loans and other debt
Deferred revenue
Accounts payable
Unpaid expenses
Certain elements of employee compensation, such as accrued vacation time and pensions

The order of liabilities on your statement of financial position depends on their due date, with short-term obligations listed before long-term ones. For example, you'd likely put deferred revenue from advance registrations for an event that will happen two months from now close to the top of the list and the 10-year mortgage on your nonprofit's new facility near the bottom.

Net Assets

Your net assets (or equity) describe what your nonprofit is worth. They're calculated by subtracting your total liabilities from your total assets, which should be listed in the other two sections of your balance sheet.

Then, you'll categorize your net assets according to whether there are specific requirements for how to use them. Here is a quick breakdown of how these restrictions work:

Unrestricted net assets aren't designated for any specific purpose, so your nonprofit can put these funds toward any area of its budget. Most small to mid-sized individual donations, event revenue, and earned income (membership dues, merchandise sales, etc.) are considered unrestricted net assets.
Permanently restricted net assets typically take the form of endowments, which your nonprofit isn't allowed to spend directly. Instead, you'll place the funds in an investment account and use the interest they generate to pay for a donor-designated initiative.
Temporarily restricted net assets include most major and planned gifts, grants, and corporate sponsorship revenue. These funds come with donor designations that depend on a specific project or agreed-upon time period. Once the project is finished or the time period elapses, any leftover funding is released from restriction.

Your net assets are essentially the resources (which may or may not be monetary) you have available to fund your operations and mission-related activities. Separating out restricted and unrestricted net assets gives you a more detailed perspective on how much you can put toward each initiative and overhead expense you need to pay for.

Statement of Financial Position Applications

Now that you know the general purpose of your nonprofit's statement of financial position and the data included in it, let's discuss a few ways this report can be useful to your organization's financial management activities and operations at large.

Calculating Cash on Hand

There are two equations you can use to understand how much funding you have available to cover your nonprofit's routine expenses—especially overhead costs—from the data on your balance sheet.

The simpler of the two calculates your organization's months of cash on hand, which you can figure out by dividing your total cash and cash equivalents by your average monthly expenses. Try to have three to six months of cash on hand at any given time, aiming for the upper end of that range if you're planning for growth and the lower end to achieve stability and emergency preparedness.

The other equation calculates your nonprofit's months of liquid unrestricted net assets (LUNA), which is more complicated but also more accurate because it takes restricted funds into account. Follow these steps to determine your months of LUNA:

Find the total value of your nonprofit's property and equipment in the assets section of your statement of financial position.
Subtract that number from your organization's total unrestricted net assets.
Divide the result by your average monthly expenses.

Because this calculation is more precise, nonprofit accountants recommend having three months of LUNA to achieve financial stability and slightly more if you're planning for growth. A positive value of less than three months of LUNA is something to keep an eye on and try to improve in the near future, but a negative value is a major, immediate concern, because that means your nonprofit is spending more than it brings in every month.

If you want to try your hand at determining your organization's months of cash on hand or LUNA, you can enter your numbers into the calculators below. Of course, the best way to ensure accuracy and take action based on these numbers is to work with an accountant, but you can get started here!

Nonprofit Financial Health Calculator

Cash on Hand LUNA

Months of Cash on Hand Calculator

Determine how many months your nonprofit can operate using available cash reserves.

Your Months of Cash on Hand

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Months of LUNA Calculator

Assess your nonprofit's liquid unrestricted net assets to understand your financial flexibility.

Your Months of LUNA

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Informing Strategic Planning

Determining that your nonprofit has the cash on hand to grow is the first step in applying your statement of financial position to strategic planning. You can also use the data to evaluate:

Your organization's current trajectory for expansion and financial health (which is why year-over-year comparisons are so helpful).
What total and net assets you can increase to help fund your growth, such as applying for more grants or investing your reserve funds more efficiently.
What new liabilities and calculated risks you're willing to take on—for example, getting a new loan to finance a facility renovation and launching a capital campaign to pay it off.

Along with your other financial statements and the more granular data in your accounting software, your balance sheet can also be helpful for goal-setting and progress tracking over multiple years of carrying out a strategic plan.

Nonprofit Statement of Financial Position Template

To help you get started with creating your nonprofit's statement of financial position, here is a blank template you can fill in:

While online templates like this one can be helpful, the best way to create an accurate, useful statement of financial position is to work with nonprofit accounting professionals like our team at Jitasa. Our services are designed exclusively for nonprofits, so we have lots of experience compiling balance sheets for organizations like yours. We're also happy to help you apply the data in this report through audit preparation, tax filing, financial goal analysis, and various other activities to help your nonprofit achieve financial health and sustainability.

The statement of financial position plays many key roles in your nonprofit's accounting activities and operations, so it's important to create and analyze it accurately. Use the information and tips above to get started, and don't hesitate to reach out to an accountant if you have any questions or need help along the way.

For more information on nonprofit financial health and reporting, check out these resources:

What Is Fund Accounting? A Guide to Basics & Best Practices. Dive deeper into the recordkeeping system that forms the foundation of nonprofit balance sheets, particularly the distinction between restricted and unrestricted net assets.
How to Set up QuickBooks for Nonprofits: The Complete Guide. Learn how to configure the leading accounting solution on the market, QuickBooks Online, to accurately collect data for, compile, and store your nonprofit's statements of financial position.
Free Nonprofit Assessments by Jitasa. Test your knowledge of nonprofit finance and systematically consider your organization's overall health to supplement the insights from your balance sheet.

Let the experts take care of compiling, analyzing, and applying your statement of financial position by working with Jitasa.

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Nonprofit Net Assets: What They Are and Why They Matter

2026-01-13T12:00:00Z

A major aspect of effective nonprofit management is knowing whether your organization is financially healthy. After all, your organization’s financial health directly impacts its ability to fulfill its mission, plan for growth, and manage risks.

Nonprofit net assets are a key indicator of financial health. However, there are some complexities to be aware of in their analysis and application. In this guide, we’ll break down everything you need to know about nonprofit net assets, including:

While the basic calculation to determine this metric is fairly straightforward, determining and applying insights about your net assets to your nonprofit’s unique situation can be challenging. For best results, we recommend reaching out to nonprofit accountants like the team at Jitasa. Our expert financial professionals will help you calculate your net assets accurately and apply that calculation to inform your budget, chart of accounts, and financial reports.

Partner with the experts at Jitasa to properly track and report your net assets.

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Nonprofit Net Assets: Frequently Asked Questions

What Are Nonprofit Net Assets?

Nonprofit net assets are the financial resources your organization has available to fund its operations and mission-related activities. They include both monetary resources (e.g., cash and investments), as well as non-monetary assets that still have financial value for your organization (e.g., property and equipment).

The difference between your nonprofit’s assets and its net assets is that the term “assets” simply refers to everything your organization owns or controls, while “net assets” also takes into account your liabilities to show what your organization is actually worth. Anything your nonprofit owes—debt, payables, deferred revenue, etc.—is considered a liability.

Net assets are a more accurate measure of your nonprofit’s financial position than total assets because they reflect your obligations and commitments to external parties as well as your organization’s wealth. Reporting your net assets allows you to be more transparent with donors and stakeholders about your nonprofit’s financial situation and make informed decisions about how to allocate available funds at your organization.

What Is the Difference Between Net Assets and Equity for Nonprofits?

In a nonprofit context, “net assets” and “equity” refer to the same concept: the amount of available financial resources under the organization’s control. Your nonprofit’s net assets demonstrate its equity, or the ownership interest it has in financial resources. The main difference between the terms is semantic: nonprofits tend to use “net assets” more often, while for-profit organizations use “equity.”

What Are the Different Types of Nonprofit Net Assets?

Besides the terminology, a key difference between for-profit organizations’ equity and nonprofit net assets is that not all nonprofit net assets should be categorized the same way. In the system of fund accounting that nonprofits use, some funding has specific requirements for how it can be used. Your organization should reflect these restrictions in the way it reports its net assets to remain accountable to the donors who imposed those funding restrictions.

Let’s look at the three types of nonprofit net assets—unrestricted, permanently restricted, and temporarily restricted—in more detail.

Unrestricted Net Assets

Unrestricted net assets are financial resources that have no conditions attached to their use. Instead, your nonprofit can put these funds toward any of its expenses, whether they’re directly related to your mission or part of your organization’s overhead.

Some types of nonprofit revenue that tend to be unrestricted include:

Small and mid-sized individual donations
Investment interest and returns
Corporate giving revenue from programs like matching gifts, volunteer grants, and payroll donations.
Earned income from sales of merchandise, service fees, membership dues, or renting out your organization’s facilities or equipment

Although these are the most common types of unrestricted funding, be careful as you record and spend them to make certain that there are no obligations associated with them. You should track unrestricted net assets separately from net assets with restrictions so you know how much your nonprofit has to cover its expenses when paying bills or spending money.

Restricted Net Assets

Conversely, net assets with restrictions have to be used for a specific project, program, or other purpose at your nonprofit as stipulated by the donor or grantmaker who contributed the funding. Most restricted contributions are relatively large, and funders want to make sure that you use their money to further mission-related initiatives that align with their interests and values before agreeing to give a significant amount to your organization.

Within the category of net assets with restrictions, there are two additional designations to know:

Permanently restricted net assets most commonly take the form of endowments. Your nonprofit doesn’t spend these gifts directly but instead places them in an investment account. The money then generates interest, which you’ll put toward a specific program or annual initiative, such as a scholarship fund.
Temporarily restricted net assets often include grant funding, major and planned gifts, and corporate sponsorship revenue. These assets are restricted either for a specific period of time or until a designated project is completed, at which point any leftover funding may be released from restriction as long as the contributor agrees to it.

In addition to reporting restricted and unrestricted net assets separately, it’s important to consider them separately when creating your nonprofit’s annual operating budget. If you only look at your net assets as a whole, you might accidentally overestimate your organization’s spending capabilities or allocate restricted funds toward expenses they weren’t designated for.

First, exempt any permanently restricted net assets from your calculations, and ensure all projected endowment interest and temporarily restricted net assets are allocated toward the correct programs and projects.

Then, fill in the gaps by allocating your unrestricted net assets to cover your overhead expenses and any outstanding program or project costs. If you find that you don’t have enough unrestricted revenue for all of your expenses, it’s likely time to look for ways to cut costs or revisit your fundraising predictions to see if it’s possible to earn more.

Dive deeper into restricted funds with our FREE course!

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How Do I Calculate My Nonprofit’s Net Assets?

To determine your nonprofit’s total net assets, you just have to:

Add up your organization’s total assets.
Determine your total liabilities.
Subtract your total liabilities from your total assets.

From there, subtract the net assets with donor restrictions from your total to separate the two categories.

Use the calculator below to see this breakdown:

Nonprofit Net Assets Calculator

Measures the financial resources you have available to fund your operations and mission-related activities.

Total Assets*

Total Liabilities*

Restricted Assets*

Net Assets:

Unrestricted Net Assets:

Again, for support with net asset calculation and application, working with expert financial professionals like the team at Jitasa will be your best bet.

How to Report Nonprofit Net Assets

While your nonprofit’s net assets inform the creation of your annual operating budget, budgeting is an indirect application of net assets since you typically won’t use that exact term and number within the document. However, there are several nonprofit accounting resources in which you need to mention your organization's net assets directly, including your:

Chart of accounts. This document serves as a directory of all of your nonprofit’s financial records. One of the five major categories included in the chart (along with assets, liabilities, revenue, and expenses) is your organization’s net assets, which are broken down further based on restrictions. This chart makes it easy to find where you’re tracking your nonprofit’s net assets in your accounting system whenever you need to reference those numbers.
Statement of financial position. Also known as a balance sheet, this report is one of the four core financial statements nonprofits compile each year. It outlines your organization’s assets and liabilities before devoting an entire section to net assets (both restricted and unrestricted). By analyzing this statement, you can get an overview of your organization’s financial situation and compare numbers year over year.
Statement of activities. Another of the core nonprofit financial statements, the statement of activities summarizes your organization’s annual revenue and expenses. It then devotes a section to showing the change in your nonprofit’s net assets from the beginning to the end of the year, as the revenue you brought in will add to your net assets and the expenses you incurred will detract from them.
IRS Form 990. Whether your organization files its annual tax return using Form 990-EZ, Form 990-PF, or the full Form 990, you’ll need to report your net assets in a few different spots on the form. However, be aware that determining which version of Form 990 to file is based on your organization’s total assets, not its net assets. If your organization has $500,000 or more in total assets, you’ll need to file the full Form 990, even if your net assets are worth less than $500,000.

All of these resources are important for your organization to comply with the Generally Accepted Accounting Principles (GAAP) and government regulations for nonprofits. They’re also useful for internal decision-making, as they show where your organization stands and what it needs to do to achieve financial sustainability and growth. Lastly, when your nonprofit makes information about its net assets publicly available by sharing its tax returns, it builds trust with donors and stakeholders that can lead to increased support.

Your nonprofit’s net assets impact many financial management activities at your organization, so it’s important to understand the concept. Use the calculation and tips in this guide to get started, and don’t hesitate to reach out for professional help with any of the accounting processes that involve reporting your net assets.

To learn more about analyzing and utilizing your nonprofit’s net assets, check out these resources:

Nonprofit Financial Statements: 4 Essential Reports to Know. Dive deeper into the core nonprofit financial statements, several of which require you to report your organization’s net assets.
Restricted Funds: What Are They? And Why Do They Matter? Discover the ins and outs of restricted funds, including how to account for them and what challenges and opportunities they pose.
12+ Top Nonprofit Accounting Firms & How to Choose One. Explore our top recommendations for outsourced nonprofit accounting services to help your organization understand and apply the concept of net assets.

Work with Jitasa’s nonprofit accountants to understand and apply your organization’s net assets

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Nonprofit Budgeting: How to Get Started + Template

2026-01-03T15:00:00Z

If you’ve created a budget for your household before, you probably averaged your expenses, calculated your income, and determined how much you could save for the future. Nonprofit budgeting follows a similar process, except you’re projecting revenue and expenses for your entire organization.

Budgets are critical documents for effective financial management. In this guide, we’ll cover the essentials of nonprofit budgeting, including:

You don’t have to be an accountant to run a nonprofit (although it’s immensely helpful to work with one!). Still, you should have a general understanding of where your organization’s funding comes from and where it’s going to further your mission, which your budget will help you learn. Let’s dive in!

Nonprofit Budgeting: Frequently Asked Questions

What is a nonprofit budget?

A nonprofit budget is a planning document used to predict expenses and allocate your organization’s resources. It details the costs your organization will incur and the revenue you expect to receive over a specified period.

In addition to planning, budgets can help you monitor your nonprofit’s spending, fundraising, and general financial standing. So, you should treat your budgets as living documents and center them in your nonprofit’s financial activities throughout the year. (more on this later!)

Are there different types of nonprofit budgets?

Yes! While you probably use the term “budget” to refer to the master financial plan you create annually for your entire organization most of the time, there are several types of nonprofit budgets you should be aware of, including:

Operating budget: This is the master financial plan described above that outlines all of your nonprofit’s predicted revenue and expenses for a given year.
Fundraising campaign budget: These budgets help track upfront spending associated with revenue-generating initiatives, especially highly involved fundraisers like events or GivingTuesday campaigns.
Capital budget: This budget projects the expenses associated with multi-year, long-term projects (such as capital campaigns) and details the revenue you’ll use to cover those costs.
Program budget: Because launching new programs often causes your organization to incur many one-time expenses, you may create separate budgets for them while you get them off the ground.
Grant proposal budget: Grantmakers want to know that the organizations they award funding to will manage those grants wisely, so they may request that a proposed budget for grant funds be included in applications.

In this guide, we’ll focus primarily on operating budgets because of their central role in nonprofit finance. However, you can adapt some of these creation tips for other types of budgets.

Additionally, remember that any of the more specific budgets above should align with your operating budget, and sometimes the other types will need to coordinate with each other (e.g., if you’re planning to put a grant you’re applying for toward a program launch, your grant proposal and program budgets should line up).

Who is in charge of nonprofit budgeting?

The responsibility of budget creation typically falls to your nonprofit’s chief financial officer (CFO) or controller. These professionals focus on financial strategy and can use specialized tools to forecast your nonprofit’s cash flows for more effective resource allocation.

Other professionals who should be involved in the budgeting process include your:

Accountant, who is very familiar with your nonprofit’s day-to-day financial situation and can provide reports and analysis to inform budgeting decisions.
Board of directors, who need to approve all budgets before they go into effect.
Fundraising team, who can contribute their understanding of your organization’s revenue generation capabilities and should have input on what expenditures are necessary for the year’s campaigns to succeed.
Program or project leads, who should also have a say in the funding that goes toward their respective initiatives.

Because your annual budget touches every aspect of your organization’s operations, incorporating multiple perspectives into its creation makes it more actionable and helps everyone get on the same page about how your nonprofit’s funding is furthering its mission.

Do nonprofit budgets have to break even?

This question comes from a common myth about nonprofit budgeting—that because your organization can’t turn a profit by definition, your total predicted revenue for the year always has to equal your total expenses exactly. In reality, the term “nonprofit” simply means that your organization has to reinvest all of its funding into its mission rather than paying out any revenue that remains after covering expenses to investors or shareholders.

If your nonprofit has the financial flexibility to budget for a revenue surplus, you should! When your predicted income exceeds your projected expenses, you’ll be better prepared to course correct if you incur unexpected costs or a revenue source falls short of its goal. Plus, you can add any funding you don’t spend to your organization’s reserve funds, which contribute to long-term sustainability.

Elements of a Nonprofit Budget

The most effective nonprofit budgets feature three general characteristics:

Defined activities. Nonprofit strategic planning and financial planning go hand in hand. All of the expenditures you list in your budget should align with your organization’s major initiatives or cover the everyday expenses you need to keep your nonprofit running as you work toward those big-picture goals. Outline your revenue with your strategic plan in mind so you know how you’ll fund these expenses.
Specific time periods. While your operating budget will cover an entire fiscal year, it’s also important to note when you’ll bring in and spend certain funding. For example, charitable giving tends to peak at year-end, so you might launch new initiatives in the first few months of the year when you have more funds for them. Timing is even more important for other types of budgets—for example, to help keep capital campaigns on track and ensure you have everything you need for an event before it begins.
Realistic, measurable metrics. Be specific about the dollar amounts on both sides of your budget. When setting revenue generation goals, use past data to determine what your fundraising team is capable of, and choose targets high enough to push your team but not so far out of reach that they become discouraged. On the expense side, analyze each expenditure carefully to decide what spending is truly necessary for your organization to thrive and where you could reasonably cut costs.

With these features in mind, let’s dive deeper into the two sides of your nonprofit’s operating budget.

Revenue

Your nonprofit’s budget should be organized to align with other key financial resources, including your internal records, financial statements, and tax returns. Therefore, it’s most effective to categorize the revenue side by source.

Here is a quick breakdown of some common funding streams that fall into each of the five main categories of nonprofit revenue:

Individual donations: Small, mid-level, major, and planned monetary gifts; in-kind contributions of goods, services, and non-cash assets (e.g., stocks, real estate, and cryptocurrency)
Corporate philanthropy: Matching gifts, volunteer grants, sponsorships, internal employee giving campaigns
Earned income: Membership dues, merchandise sales, fees for services provided (e.g., museum ticket sales or animal shelter adoption costs)
Investments: Treasury bills, bonds, mutual funds, interest generated from endowments
Grants: Federal and state government grants; public, private, and family foundation grants

Note that some revenue sources bridge multiple categories and can be organized in different ways. For example, some nonprofits list corporate grants with their other grant funding, while others consider them a type of corporate philanthropy. You might also divide event revenue between the earned income and individual donation categories based on whether each aspect should be recognized as an exchange transaction (where the supporter received something in return for their gift, like admission to the event or an auction item) or a contribution transaction (an extra donation where nothing was promised in return).

Additionally, when forecasting the coming year’s revenue, it’s best to be cautious in your estimates so you’ll be more likely to have the funding you need to achieve your goals, no matter what external circumstances occur.

Expenses

Generally speaking, there are two ways to organize expenses in your nonprofit’s operating budget. The natural expense method categorizes costs according to the nature of payments made, while the functional expense method categorizes expenditures based on how they further your organization’s mission. Although considering natural expenses is helpful during the planning process, your final budget should use functional expense categorization to match your financial reports.

The three major categories of functional expenses are as follows:

Program costs. This category encompasses all expenditures directly related to furthering your nonprofit’s unique mission, so individual line items vary widely from organization to organization. For example, an animal shelter would put the costs of pet food and veterinary care under their program expenses, while a museum might include spending related to exhibit setup and maintenance in theirs.
Administrative costs. Sometimes called operating expenses or “management and general” costs, administrative expenses are essential for running your organization day to day. Some natural expenses that fall into this category include staff compensation, utility bills, rent or mortgage payments, insurance, and office equipment purchases.
Fundraising costs. This category describes the upfront expenses associated with revenue-generating activities. These often include event planning, marketing material creation, merchandise production, fundraising consulting fees, and purchases of specialized fundraising software, among other expenditures.

You may have also heard the term “overhead expenses,” which refers to your nonprofit’s combined administrative and fundraising costs. While this term often has a negative connotation because it’s widely believed that funding spent on overhead “doesn’t go toward your mission,” some overhead is essential for your organization to thrive. After all, to serve your community effectively, you need to raise the money to do so and keep your lights on!

However, this doesn’t mean that your nonprofit’s overhead spending can go unchecked or should be prioritized over program expenditures. In the past, the “rule” of nonprofit spending was that organizations should put at least 65% of their funding toward their programs and no more than 35% into overhead, but it’s now understood that the exact breakdown will look different for every nonprofit. Instead, treat this as a guideline to reduce overhead spending (within reason) before taking funding away from your programs if you need to cut costs.

To help you determine if your nonprofit has budgeted for a healthy ratio of program expenses to overhead, you can input your projected numbers into the calculator below.

Nonprofit Expense Ratio Calculator

Determine whether your nonprofit has struck a healthy balance between program expenses and overhead.

Your Expense Breakdown

Program Expenses

Overhead

Total Expenses

Pro Tip: Working with nonprofit financial professionals like the experts at Jitasa is the best way to find and stick to a healthy expense ratio for your organization.

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How to Apply Your Nonprofit Budget

While you’ll create your nonprofit’s operating budget from scratch once a year, budgeting shouldn’t be a one-and-done event. Instead, your budget should guide your organization’s spending, fundraising, and reporting throughout the year, so check in with it frequently.

At least once a month, meet with your financial professionals, organizational leadership, and board to revisit your budget, assess your progress, and make adjustments as needed. During these reviews, there are several resources you should reference to inform your decision-making, including:

Budget vs. actual comparisons. Typically created by your accountant, these reports show your actual spending and fundraising numbers alongside where you expected your revenue and expenses to be at that point in the year.
Treasurer reports. These documents list all of your nonprofit’s revenue and expenses for a given month, compare your cash balance at the beginning and end of the reporting period, and allow the main financial expert on your board to share their perspective on your financial situation.
Cash flow statements. One of the four core nonprofit financial statements, cash flow reports show the movement of cash in and out of your organization through operating, investing, and financing activities to provide a different perspective on your financial progress. These can be pulled monthly or annually, although many nonprofits choose the former so the report is more useful for recurring budget reviews.

During your last budget review meeting of each quarter, review your financial data more closely and take more time to visualize the current and future state of your organization’s activities. At the end of the year, use this year’s budget and review resources to inform next year’s budget, along with your statements of activities and functional expenses and any other cash flow forecasting tools your CFO has access to.

Nonprofit Budget Template & Example

If you’re ready to dive into creating budgets for your nonprofit, there are various templates available online to help you get started. Every organization’s budget will look slightly different, so make sure you can customize your chosen template to fit your needs and goals.

Use our flexible nonprofit budget template to start planning your organization’s finances.

Download for Free

To give you a taste of what your operating budget may look like when it’s finished, here is a partial example we’ve created:

The best way to ensure your budget is accurate and actionable is to have expert nonprofit financial professionals create it for you—like our team at Jitasa. We work exclusively with nonprofits, so we understand the unique complexities of your organization’s financial situation and can use our experience to develop tailored solutions for your needs.

Budgeting and cash flow forecasting are foundational to our fractional CFO services, plus our bookkeepers and accountants will record and analyze financial data to help keep your spending and fundraising in line with your budget all year long. Best of all, our services are affordable and cater to nonprofits of all sizes and missions!

Well-developed budgets help your nonprofit be financially transparent with its team, board, supporters, and community at large. This accountability—which is at the heart of all nonprofit accounting activities—is essential for instilling trust in all of these individuals and being able to fund your mission for years to come.

For more information on nonprofit financial management, check out these resources:

Nonprofit Accounting: An Overview & How to Get Started. Explore more essential documents, best practices, and principles to build your foundational knowledge of nonprofit accounting.
What Is a Fractional CFO for Nonprofits? The Ultimate Guide. Dive deeper into the role of the person who will lead your nonprofit’s budgeting processes and learn why outsourcing the CFO position is a good option for many organizations.
Free Nonprofit Assessments by Jitasa. Test your knowledge of nonprofit finance and systematically consider your organization’s overall health to inform your budgeting approach.

Develop, analyze and apply your organization’s budgets with expert help from the nonprofit financial professionals at Jitasa.

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The Do’s and Don’ts of Managing Donor-Restricted Funds

2025-12-11T12:00:00Z

For nonprofit leaders, receiving a large donation is a moment of celebration. But when that donation comes with strings attached, it marks the beginning of a critical fiduciary responsibility.

Restricted funds are contributions that must be used for a specific purpose, timeframe, or program as defined by the donor. They’re a powerful way for donors to direct their impact. But for associations and nonprofits, they can quickly become one of the most challenging areas of financial compliance.

Handled well, restricted funds build donor trust and strengthen the long-term financial sustainability of a nonprofit. Handled poorly, they can lead to negative audit findings, reputational damage, loss of donor confidence, and even legal trouble.

In this guide, we’ll break down some essential do’s and don’ts of responsible donor-restricted-fund management so your organization can maintain compliance and honor donor intent.

DO: Define, Document, and Standardize Everything

The very first step in managing donor-restricted funds is drafting a gift agreement documenting the donor’s intent in writing. This documentation should include information about:

Whether the gift is temporarily or permanently restricted: While leftover temporarily restricted funds may be released after a certain timeframe or after a certain purpose is fulfilled, permanently restricted funds (often taking the form of endowments) go toward an ongoing initiative, and your nonprofit cannot spend them directly. Instead, these are typically invested so that the principal funds are maintained and only the interest is used for a particular program or project.
The specific purpose or program the funds must support: For example, you may note whether a donor-restricted gift will be used for a building campaign, a scholarship fund, or a specific community outreach project.
Any timing requirements, reporting expectations, or measurable outcomes: Donor-restricted funds may include specific conditions related to when funds can be spent, how progress must be documented, or what outcomes must be achieved before restrictions are released. If these conditions aren’t properly tracked or documented, nonprofits risk misusing restricted funds, creating audit findings, or violating donor intent.

In contrast to donor-restricted gifts, restricted grants typically come with documentation and terms established by the grantor. Organizations then submit a proposal outlining the intended use of funds, and the resulting grant agreement ultimately defines the restrictions, reporting requirements, and conditions tied to the award.

Along with this restriction documentation, your nonprofit should have clear internal policies that outline who is authorized to accept restricted gifts, how restricted funds must be recorded and stored, what documentation must be collected, and how and when restrictions can be released once conditions are met. Standardization prevents confusion later and creates a defensible audit trail.

DO: Implement Meticulous, System-Based Tracking

Your accounting system must be able to track restricted funds separately from your operating dollars. This doesn’t always require opening a separate bank account, but your chart of accounts must clearly distinguish:

Restricted vs. unrestricted revenue
Expenses charged to specific restricted funds
Remaining balances at any given time

Your charity donation processing system should also be equipped to flag and correctly code restricted gifts the moment they come in. This ensures funds are entered correctly from day one, which is far easier than untangling commingled funds months later. You can also organize restricted funds in projects or using classes in your accounting system so you can easily generate reports based on the specific grant or donation that is restricted.

DO: Communicate Proactively to Build Trust

Proper fund management is a powerful tool for stewardship. You should provide regular, transparent reports to donors who give restricted funds. These reports should:

Show exactly how the money was spent
Demonstrate progress toward the intended purpose
Reference the original gift agreement or donor intent
Include outcomes, impact metrics, or stories
Any additional metrics outlined in the gift agreement

This transparency builds immense trust, demonstrates your financial competence, and makes future fundraising that much easier.

DON’T: Commingle Funds or Spend Before Conditions Are Met

Treating restricted funds as a flexible cash reserve is the cardinal sin of nonprofit financial management. If you use money designated for a capital project to cover this month’s payroll (even with the intent to "pay it back") or spending grant money before the required milestones are achieved, you can violate both donor intent and financial compliance standards, including specific accounting standards (ASC 958) and, in many states, the Uniform Prudent Management of Institutional Funds Act (UPMIFA).

Commingling, "borrowing," or premature spending can result in:

Misrepresentation of your true financial position.
Severe liability for your board members.
Regulatory scrutiny and serious audit findings.
Irreparable damage to donor trust.

Your organization must have strong internal controls to ensure restricted funds are never used for unrelated purposes or accessed before terms are fully satisfied. Crowded suggests using a unified banking platform to automate these controls. These tools allow you to:

Segregate funds: Use subaccounts to keep restricted and unrestricted funds visually and operationally separate.
Control spending: Set up restrictions so funds can only be spent on approved categories or with specific merchants.
Monitor compliance: Track transactions in real time to ensure spending aligns strictly with grant requirements.

By partnering with Jitasa, your accountant can also keep an eye on any restricted funds and provide reports to your nonprofit staff members as often as you need them. They’ll manage the funds on behalf of your team to ensure they’re used properly.

DON’T: Rely on Manual Spreadsheets or Outdated Tools

If you’re tracking your nonprofit’s finances in a spreadsheet, you’re exposing your organization to unnecessary risk, especially when it comes to restricted funds. Common issues include:

Formula errors
Version control problems
Copy-paste mistakes
Incomplete records
Difficulty reconciling across chapters or programs

This risk is magnified for multi-chapter organizations or nonprofits with several different locations. Tracking funds across different locations and volunteer leaders becomes nearly impossible with manual methods. Modern accounting and banking platforms are designed to automate this tracking, reducing risk and saving administrative time.

Final Thoughts

Managing donor-restricted funds is one of the core competencies of a healthy, trustworthy nonprofit. By implementing standardized policies, partnering with a trusted accounting firm, maintaining meticulous records, and communicating transparently, you honor the partnership you have with your donors. This diligence protects your organization from risk and, most importantly, channels your supporters' passion into real, measurable impact for your mission.

GivingTuesday Best Practices to Align Fundraising & Finances

2025-10-16T12:00:00Z

GivingTuesday is a peak fundraising day for charitable organizations around the world. As a nonprofit professional, you’ve likely worked on campaigns for this global giving day. If so, you know that a successful GivingTuesday depends on a solid strategy beforehand and careful analysis afterward—not only when it comes to fundraising and donor engagement, but also for managing your finances effectively before, during, and after the campaign.

In this guide, you’ll learn all you need to know about making the most of GivingTuesday for your nonprofit, including:

GivingTuesday is just one of many activities at your nonprofit where fundraising and financial management efforts need to align for maximum results, but it’s a great place to start because of how important this day is for nonprofits. Let’s get started!

Partner with the experts at Jitasa to develop a financially sound GivingTuesday strategy.

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GivingTuesday: Frequently Asked Questions

Before we dive into actionable strategies for GivingTuesday, let’s learn a bit more about the origins of this celebration of generosity.

What is GivingTuesday?

GivingTuesday is a global generosity movement in which hundreds of millions of people contribute time, money, and other resources to organizations and causes that matter to them. While some people start their own community movements on this day, many individuals and businesses prefer to support established nonprofits that run special campaigns for it.

Since its creation in 2012, GivingTuesday has been celebrated on the Tuesday after the Thanksgiving holiday in the United States, so it either happens during the last week of November or the first week of December. This makes it a great way to kick off your organization’s critical year-end giving season!

Why is GivingTuesday important for nonprofits?

If your nonprofit hasn’t previously launched a GivingTuesday campaign, the data speaks for itself on why now is the perfect time to start! Check out these statistics from GivingTuesday 2024 (the most recent results available at the time of this article’s publication):

GivingTuesday donations in the U.S. alone totaled $3.6 billion (a 16% increase over 2023).
36.1 million U.S. adults participated in GivingTuesday in some way (donating, volunteering, spreading awareness of causes, etc.).
GivingTuesday fundraising efforts in the U.S. have generated a total of $18.5 billion since 2012.
105 countries host official GivingTuesday movements.

Plus, since GivingTuesday kicks off the year-end fundraising season, it’s worth noting that approximately 30% of annual nonprofit giving occurs in December. A good GivingTuesday performance can set you up for a strong year-end campaign as well!

What resources are available to help my nonprofit plan for GivingTuesday?

Your organization has a lot of tools at its disposal to streamline the planning process and help you achieve your GivingTuesday goals! A few of these include:

Official GivingTuesday resources: The GivingTuesday team has written various articles about how to run a successful campaign and provides downloadable graphics you can use in your promotional materials.
Third-party educational content: Many organizations that serve nonprofits and philanthropy professionals have also published blog posts and downloadable resources that you may find useful to guide your process.
Fundraising software: GivingTuesday has several official nonprofit software partners. Even if the platforms your organization uses aren’t on that list, a solid tech stack will make your fundraising much more efficient.
External professionals: Depending on your nonprofit’s needs, you might partner with fundraising consultants, freelance designers, or outsourced financial management firms (like Jitasa!) to provide expert advice and additional hands for your campaign.

Arguably the most important resource you have available to you, though, is your team! GivingTuesday is an all-hands-on-deck effort, so everyone needs to be on the same page about your objectives and their responsibilities from start to finish.

Use our comprehensive checklist to stay on track with GivingTuesday preparation.

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GivingTuesday Best Practices: Before Your Campaign

Now that you understand the importance and impact of GivingTuesday, it’s time to dive into how exactly you should go about launching your nonprofit’s campaign. The planning process will likely be the most involved aspect of GivingTuesday, so let’s start there.

Keep in Mind: The earlier you can start planning for GivingTuesday, the better! Many organizations begin preparing in September, but some start as early as June or July. The best timeline for your nonprofit will depend on staff bandwidth and past experience with GivingTuesday campaigns—the more you participate, the easier it gets!

Set Clear Goals

Every successful fundraiser (and financial plan, for that matter) starts with clear objectives. Your GivingTuesday goals might center around:

Raising a certain amount of money
Spreading awareness about your mission
Attracting new supporters to your organization
Retaining existing donors year-over-year

Once you generally know what you want to accomplish, make your goals more practical using the SMART method, meaning that they’re:

Specific
Measurable
Attainable
Relevant
Time-bound

For example, you might set a goal to “raise $20,000 to support our ongoing community programs by the end of the day on GivingTuesday.” This goal is specific about what you want to accomplish, includes a metric and a deadline, and is relevant to your organization’s work.

To determine if your goal is attainable, review data from your previous GivingTuesday campaigns and assess your nonprofit’s current performance and capacity. If your nonprofit raised $18,000 last GivingTuesday and is generally in a better position this year, a $20,000 fundraising goal will push your team but likely won’t be out of reach.

After setting your goals, determine the specific strategies you’ll use to achieve them. For example, you might break your revenue goal down based on how much you plan to raise from different funding sources (more on this later!). Then, make sure your ideas align with your organization’s operating budget so you can stay on track financially throughout the campaign, and create a separate budget just for GivingTuesday if it’s helpful to you.

Develop a Marketing Plan

Among your nonprofit’s fundraising campaigns, GivingTuesday promotion is especially important because thousands of organizations fundraise on the same day. This means your nonprofit needs to stand out from the crowd to convince donors to support you over their other possible options.

As you create your GivingTuesday marketing plan, make sure to:

Incorporate multiple marketing methods. The more channels you use, the more touchpoints you’ll create for supporters to hear about and contribute to your campaign. While you’ll likely prioritize digital marketing channels like website content, email, text messaging, online ads, and social media, print communications such as flyers and direct mail are still helpful for reaching certain audiences and supplementing online materials.
Segment your supporters. Consider which supporter groups are most likely to prefer each communication channel, and tailor your messaging to that audience so that it resonates with them. For example, you might target direct mail appeals at older, wealthy donors, social media posts at younger volunteers, and digital ads at individuals interacting with your nonprofit for the first time.
Consistently brand your communications. Include your nonprofit’s logo, colors, and fonts in all of your marketing materials to instill trust in your audience and make your promotions look more professional. Additionally, using the GivingTuesday heart logo and #GivingTuesday in your content will tie the campaign together and increase its visibility.

Marketing is one of the biggest upfront expenses for any fundraising campaign, so you’ll need to balance creating lots of high-quality content with your budget. Fortunately, there are plenty of free marketing tools you can use to reduce your spending, and your nonprofit’s corporate partners may also be willing to go in on co-marketing opportunities for GivingTuesday to help you save money.

Invest in the Right Software

Along with marketing, software may be another upfront investment for your GivingTuesday campaign, depending on how your organization’s existing tech stack looks. Make sure you have the following solutions in your toolkit early on:

A robust constituent relationship management (CRM) system to track supporters’ donations, volunteer hours, event attendance, responses to marketing materials, and other participation in your campaign.
An online form builder so you can create and share mobile-optimized digital registration forms and a GivingTuesday-specific donation page.
A payment processor that accepts various payment methods—credit cards, ACH bank transfers, and mobile payments—while keeping donors’ information secure.
Tools to manage various campaign elements, such as peer-to-peer fundraising solutions, crowdfunding platforms, corporate giving databases, or mobile bidding software for auctions.
Accounting software to record and categorize all of the funding you bring in on GivingTuesday.

To that last point, if your nonprofit wants to upgrade its accounting tools before GivingTuesday, reaching out to an accountant is your best bet. If you partner with Jitasa, we’ll help you choose the right system and subscription plan for your organization’s needs. We’ll also configure it for nonprofit use, since the best accounting solutions on the market—QuickBooks Online, Sage Intacct, and Intuit Enterprise Suite—are designed for businesses and will need extra customization to work for your organization.

GivingTuesday Best Practices: During Your Campaign

The number one best practice for your GivingTuesday campaign itself is to diversify your revenue streams. By generating revenue in multiple ways, you’ll be more likely to reach your goals because you’ll engage more supporters with different giving preferences and have a stronger safety net in case one source falls short of expectations.

To help with your budgeting and recordkeeping, we’ve organized our favorite ways to bring in funds on GivingTuesday according to the five major categories of nonprofit revenue. Let’s look at each one in more detail.

Keep in Mind: Many nonprofit supporters also like to give back in non-monetary ways on GivingTuesday, so make sure to offer some volunteer opportunities and encourage supporters to spread awareness about your cause in addition to donating.

Individual Donations

As is probably the case year-round, individual donations will almost definitely make up the majority of your GivingTuesday revenue. Some ways you can collect individual donations during this particular campaign include:

Launching crowdfunding campaigns to raise money for specific organizational needs.
Creating a special text-to-give keyword to encourage mobile donations.
Mailing fundraising letters to previous donors, ensuring they’ll arrive at least a week in advance so supporters can contribute online or postmark their gifts by GivingTuesday.
Running a peer-to-peer fundraiser so loyal supporters can collect contributions from their family and friends on your behalf.
Hosting an event like a gala, auction, walkathon, or benefit concert (your choice will depend on your available budget and target audience).
Holding an in-kind donation drive to gather supplies for your nonprofit or its beneficiaries going into the new year.

Some of these fundraising methods have unique accounting considerations attached to them. For example, records of in-kind donations should show a net zero gain in cash, and you’ll need to split event revenue based on whether donors received something in return for their contribution (like admission to the event or an auction item) or not. Ask your accountant if you have any questions, and ensure you’re ready to properly record all types of individual donations before GivingTuesday.

Corporate Philanthropy

Many businesses of all sizes are just as eager to participate in GivingTuesday as individuals because they get to give back to their communities while boosting their reputations as socially responsible companies. Consider adding these corporate philanthropy revenue opportunities to your strategy:

Matching gifts—some companies may offer special match rates for GivingTuesday (for example, they might match employees’ donations at a 2:1 ratio when they usually match 1:1), so ask around and encourage all eligible donors to submit match requests.
Volunteer grants, which turn your campaign volunteers’ time into money.
Sponsorships, where a business contributes money, goods like auction items, or services like catering to offset your campaign’s upfront costs.
Internal employee giving campaigns—both financial and in-kind—that benefit your nonprofit.

Especially for sponsorships and internal fundraisers, work out the terms of your partnership with each company in advance so you know how you’ll both benefit from working together. For example, a business may get a mention on social media and in your event program in exchange for donating an auction prize. Noting this reciprocation is also important for accounting because, like with event revenue, you’ll need to record transactions where corporate supporters directly received something in return separately from ones where they didn’t.

Earned Income

A straightforward way to generate earned income on GivingTuesday is to design and sell branded merchandise. Include the official GivingTuesday logo alongside your nonprofit’s on these products, and release them in advance so supporters can spread the word about your campaign as they wear or use their new clothing, drinkware, and other items in public.

If your nonprofit charges fees for services, you could offer a GivingTuesday special on those services to encourage more supporters to use them and secure earned income that way. For instance, an animal shelter could reduce adoption fees to help send more pets to their forever homes. Or, the organization could host a one-day clinic where pet owners can bring their dogs and cats for vaccines, microchipping, and basic grooming services like nail trims.

Investments

Since investments generally focus on long-term revenue generation, they likely won’t be a priority for GivingTuesday fundraising. However, you might use GivingTuesday as a reminder to check on your investments before the end of the year. You could also consider setting aside some of the revenue you bring in from other sources to invest for the future.

Grants

Most government and foundation grants also take a long time to secure and spend, so they won’t be a major part of your GivingTuesday fundraising strategy either. There are two unique types of grants you can leverage for this campaign, though:

Challenge grants: These donations are contingent upon your organization reaching a specific fundraising target. For example, a challenge grant donor might pledge to donate $2,000 after your nonprofit raises $4,000 in individual online donations on GivingTuesday or match your crowdfunding campaign total once it reaches its goal. Challenge grants often come from foundations, businesses, or individual major donors.
Marketing grants: Applying for these grants before GivingTuesday can help you offset some upfront marketing expenses. For example, the Google Ad Grant gives eligible nonprofits $10,000 per month in search advertising credits, which you can use to drive more traffic to your website before and on GivingTuesday.

Additionally, because most traditional grants are restricted to certain projects and programs, remember not to use that funding for any upfront GivingTuesday costs. Instead, start by covering as much as you can with corporate sponsorships and marketing grants since those are campaign-specific, then use unrestricted funding to pay for the rest.

GivingTuesday Best Practices: After Your Campaign

When GivingTuesday ends, your work won’t quite be finished. You’ll still have several internal and external follow-up tasks to take care of, all of which use your campaign data in different ways.

Keep in Mind: Ensure you have systems in place to collect data on your GivingTuesday campaign before you launch it. Integrate your CRM with your fundraising and accounting tools to allow information to transfer automatically between platforms, saving your team time and reducing the risk of errors that often come with manual entry.

Evaluate Your Fundraising Success

After your campaign, review your collected data and compare your results with the goals you set at the beginning of the planning process. Determine whether you met, exceeded, or fell short of your objectives, and try to identify why you got those results.

These insights will inform several internal functions at your organization, particularly planning future GivingTuesdays. By understanding how you did in the past, you can set more realistic goals and push your team to fundraise more efficiently and effectively over time. Additionally, when you’re finalizing your budget, you’ll have a better idea of the actual revenue numbers you’ll have to work with going into the new year.

Demonstrate Your Campaign’s Impact

Your GivingTuesday data also has important external functions, one of which is to ensure supporters know that they played an integral role in your campaign’s success. Share information on participation rates, fundraising totals, and plans for the money you raised in your nonprofit’s:

Thank-you notes. While including campaign-wide data in all of your notes is helpful, you should also tailor these messages to each supporter’s unique involvement in your GivingTuesday campaign. For instance, auction participants will probably want to know about that event’s fundraising and attendance totals.
Annual report. In the financial section of your report, highlight how much of your revenue came from GivingTuesday using charts and graphs. You might also include pictures showcasing your community’s collective efforts and testimonials from staff members or volunteers about how the campaign made a difference for your mission.
Marketing materials for upcoming GivingTuesdays. If you share how much you’ve raised during this campaign in the past, supporters will be more motivated to help you exceed those numbers in the future.

Highlighting the impact of key fundraising efforts like GivingTuesday proves your organization's credibility by demonstrating effective campaign management and mission-aligned use of contributions. This builds supporters’ confidence and encourages them to stay involved with your nonprofit long-term.

Report GivingTuesday-Related Finances

Supporters aren’t the only external audience who want to see your nonprofit’s GivingTuesday data. You also need to report the financial information you collect to comply with legal requirements for exempt organizations and cross-industry accounting standards like the Generally Accepted Accounting Principles (GAAP). In particular, you need to include GivingTuesday information—both revenue generated and upfront expenses—in your annual financial statements.

Record the funds you raise on GivingTuesday under:

Revenue on your statement of activities.
Assets on your statement of financial position.
Cash inflows from operating activities on your statement of cash flows.

Record your campaign’s upfront expenses under:

Expenses on your statement of activities.
Cash outflows from operating activities on your statement of cash flows.
Fundraising costs on your statement of functional expenses.

Each of these statements summarizes your nonprofit’s financial data in a different way to help you analyze and apply it. Consider attaching them as appendices to your annual report in case some readers want to dig deeper into your financial activities.

Your financial statements will also play an essential role in your next independent audit and help you file your organization’s annual tax return. If you have any questions, consult a nonprofit accountant.

An effective GivingTuesday campaign requires managing many moving parts—fundraising, supporter engagement, and financial considerations. Use the tips above to get started, and don’t hesitate to reach out to external professionals (like Jitasa for any financial needs!) to answer any questions or help you in any way you need to make your efforts successful.

For more information on nonprofit financial management, check out these resources:

Nonprofit Revenue Recognition: What It Is & Why It Matters. Explore the unique factors that impact how your organization recognizes different aspects of its GivingTuesday revenue in its accounting system.
Nonprofit Financial Statements: 4 Essential Reports to Know. Dive deeper into the primary reports your nonprofit will use to share its GivingTuesday financial information for compliance and transparency purposes.
Nonprofit Bookkeeper vs. Accountant: What’s the Difference? Learn what distinguishes these two important financial roles and how both professionals can help you navigate the monetary side of GivingTuesday.

Simplify every aspect of GivingTuesday finances, from planning to reporting, by working with Jitasa.

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While your team focuses on inspiring donors for GivingTuesday, let our nonprofit experts ensure the financial side of your campaign runs flawlessly.

Complete guide + tips for nonprofit risk management.

2025-10-12T12:00:00Z

When everything is going well at your nonprofit, thinking about potential risks and how to navigate them may seem unnecessary (and scary). However, when those risky situations occur— whether they’re linked to external economic and social turbulence or internal errors—you’ll be much better prepared to handle them if you’ve created a risk management plan during the good times.

In this guide, we’ll cover everything you need to know to get started with nonprofit risk management, including:

Risk management impacts every aspect of your nonprofit’s work, from service delivery to donor engagement to financial activities, and it will only become more important as the sector continues to evolve. Let’s dive in!

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Nonprofit Risk Management: Frequently Asked Questions

To help you find your footing with this complex process, we’ll begin by answering some common questions about risk management in a nonprofit context.

What is nonprofit risk management?

The term “risk” refers to the probability that something bad (damage, injury, liability, loss, etc.) might occur due to internal or external circumstances. Therefore, nonprofit risk management is the process of identifying, evaluating, mitigating, and preventing negative situations that could impact your nonprofit.

At times, your organization may choose to venture into uncertain territory and potentially even take risks to build the capacity necessary for growth. In addition to protecting your nonprofit against purely negative situations you didn’t enter into willingly, risk management will also help you keep elective risks in check so they don’t cause harm or hinder your expansion plans.

What risks do nonprofits most commonly face?

Your nonprofit’s risks will likely be slightly different than the risks for-profit businesses have to navigate, and they may also vary based on organization size, vertical, and other related factors. However, some risks that crop up often (meaning your nonprofit definitely needs to be prepared to manage them!) include:

Cybersecurity violations. Poor data management and misguided online practices can lead to data breaches that expose sensitive information about your organization or its supporters, such as credit card details, bank account numbers, or home addresses. Depending on what data gets leaked, breaches can break donors’ trust in your nonprofit or leave your information vulnerable to other negative incidents.
Fraud. There are many types of fraud, which can occur intentionally or unintentionally (e.g., accidentally writing a check for the wrong amount). However, one nonprofit-specific type is fraud by impersonation, which occurs when a scammer uses your organization’s publicly available employer identification number (EIN) and branding materials to set up a fake donation page and “fundraise” as if they were your nonprofit while keeping the money for themselves.
Theft. If your nonprofit’s internal systems are faulty or lower-level employees and volunteers get access to resources they shouldn’t, someone close to your organization could steal its money or technology. Nonprofits tend to be composed of good, trusting individuals, which can make them especially vulnerable to theft.
Noncompliance. Nonprofits like yours are subject to certain regulations that businesses aren’t. These requirements ensure your organization can remain tax-exempt, solicit donations, and generally make a positive impact. If you don’t follow these rules (e.g., failing to file tax returns on time, not keeping up with state charitable solicitation registrations, or directly endorsing political candidates instead of sticking to issue-based advocacy), you risk losing your nonprofit's 501(c)(3) status and damaging its reputation.

Knowing what problems you might encounter is half the battle in solving them. Use these categories as a starting point, and reach out to an external professional if you need help identifying and managing other types of issues or just want an unbiased perspective on your risks.

Why is risk management important for nonprofits?

Effectively managing your nonprofit’s risks can lead to various benefits, including:

Safeguarding mission-critical activities, since you’ll be better equipped to continue delivering services despite difficult circumstances.
Ensuring compliance with legal requirements and other regulations for nonprofits.
Supporting strategic decision-making by giving leaders a more complete picture of a situation’s possible outcomes.
Promoting financial health and stability through an increased emphasis on accountability, which is at the heart of strong nonprofit accounting practices.
Building trust with donors and stakeholders, if you communicate transparently about how you’re navigating setbacks or preventing losses.
Protecting your nonprofit’s reputation so it doesn’t end up in the news for a negative reason.

You’ll maximize these benefits if your risk management strategy is proactive rather than reactive. Considering what could go wrong during relatively tranquil periods and embedding measures to prevent problems where possible will save your organization time, money, and stress in the long run.

Proactively prevent supporter-related risks with our Donor Privacy Policy Template.

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What makes a good nonprofit risk management strategy?

In addition to taking a proactive approach, your risk management plan should also be comprehensive and tailored to your nonprofit’s needs. Here are a few elements every strategy should include:

Clearly defined risks: Explain what the risk is, whether it’s internal or external, how much you can control it, and if it’s inherent to your operations or residual from addressing another issue.
Categorization and prioritization: Group similar risks and rank them based on likelihood and impact (more on this later!) to make it easier to determine which situations you most need to address and how to do so.
Preventive measures paired with contingency plans: While preventing risks by adjusting internal operations is extremely useful, it isn’t always possible, so you should also outline the steps for resolving problems once they’ve occurred.
An emphasis on open communication: Ensuring regular oversight and information sharing between staff, stakeholders, and other parties helps protect against bias and make workflows more efficient.

Of course, these are just a few examples of what you may include in your risk management plan. Your nonprofit’s finalized strategy should align with your mission, operations, and the specific issues your organization is likely to face.

Who is involved in nonprofit risk management?

Risk management should be a team effort, involving input from your:

Board, which will oversee your risk management plan’s development and implementation.
Leadership team, who will create the plan and take or delegate the measures that apply to their areas of responsibility.
Other staff members, who will provide strategy input as applicable and ensure they follow your established best practices in their day-to-day work.
Financial professionals, who will touch many areas of risk management planning, prevention, and mitigation because many risks eventually come back to funding.

Many organizations create a risk management committee that includes individuals from several of these groups to focus their efforts, and some large nonprofits even hire a full-time risk manager. Taking one of these approaches doesn’t make it any less important for everyone at your organization to be aware of potential risks and how to manage them, though.

How to Conduct a Nonprofit Risk Assessment

Conducting a risk assessment is the preliminary step to developing a risk management plan. There are several ways you can go about doing this, including:

Evaluating your nonprofit internally: A basic self-evaluation allows your team to review your organization piece by piece and continually ask, “What risks are associated with this aspect of our operations?” Then, you can take appropriate action based on your findings.
Using a checklist: There are also risk assessment checklists available online, through auditing firms, and in books that your nonprofit can follow to evaluate different types of risks more systematically.
Recruiting a third party: Professional help can be useful if you’re struggling to create your own risk assessment or want an unbiased, expert perspective on your organization’s situation. If your nonprofit has undergone an independent financial audit in the past, you may start by reaching out to your auditor, since they might also offer risk assessments or know of another firm that could conduct one for you.

No matter which route you go, make sure your assessment not only identifies and defines potential risks, but also prioritizes them based on how likely they are to occur and how severe the consequences would be if they were left unchecked. That way, you can determine the order in which you need to address risks in your plan, which will probably be as follows:

Likely situations with major consequences
Likely situations with minor consequences
Unlikely situations with major consequences
Unlikely situations with minor consequences

For example, let’s say your nonprofit already employs some data security precautions like database encryption and two-factor authentication, but your team would like to further strengthen its cybersecurity. Additionally, you’ve been finding it challenging to file your Form 990 on time the past few years.

Although both of these challenges could have serious consequences—breaking key stakeholders’ trust and losing your 501(c)(3) status, respectively—tax noncompliance would be a bigger risk than cybersecurity violations since it’s more likely to occur in your organization’s current position, so you should address the tax issue first and then work on data protection.

Tips for Effective Nonprofit Risk Management

At this point, you’re finally ready to create your nonprofit’s risk management plan! Here are a few tips for making it useful and driving better results:

Create individual mitigation strategies for each identified risk. As you go down your list of risks, brainstorm a specific way to address each one. Returning to our previous examples, if tax noncompliance is your highest priority risk, you might apply for a Form 990 extension or research outsourced accountants who could do your taxes for you. For your lower-priority cybersecurity risk, you may just quickly check if there are any precautions you haven’t taken (e.g., updating a system or changing user permissions).
Delegate management duties. Put different people in charge of your top five or so risks to spread out management responsibilities across your organization. When people feel they have ownership over something, they’re more likely to give it their all. Plus, delegation ensures no one is overloaded with risk-related duties.
Establish ongoing oversight. Whether it’s your board, a separate committee, or a full-time risk manager, someone should ensure risk review becomes an integral part of your operations and check in regularly with task leaders and your legal team to see how things are going. This oversight also makes it easier to launch crisis responses since you’ll already have leaders chosen, which improves efficiency and prevents panic.
Review policies and procedures. Policies and procedures are a great starting point for preventive risk management. Ensure you have strong financial policies in place for gift acceptance, conflicts of interest, expense reimbursement, and staff compensation, as well as guidelines for other key aspects of operations like technology usage and volunteer management. Publish all policies and procedures in shared handbooks or instructional documents for team members’ easy reference.
Implement internal controls. Internal controls are smaller guidelines that work alongside your overarching policies and procedures, but they’re specifically designed to prevent risks.
One internal control many organizations use is requiring two team members to sign off on payments over a certain amount. This procedure helps catch financial fraud early (whether intentional or unintentional) and ensures a single individual can’t be held liable if the payment amount is still incorrect after it’s reviewed.
Consider overall comfort level with risk. Some challenging situations are inevitable when running a nonprofit, and some risks are worth their rewards. Determining how comfortable your organization is with risk can help you make many important decisions, from how to invest your reserve funds to how to balance the trade-off between cost and comprehensiveness in insurance policies.
Diversify your team. Risky situations often arise when people are too busy to check in with each other, so make sure your organization is adequately staffed. Ensure each person has their own area of expertise, but also that teams collaborate to increase visibility. For example, your finance team might consist of a bookkeeper, accountant, and CFO who all have their areas of expertise (recordkeeping, analysis, and strategy, respectively) but work together on key activities like budgeting and audit preparation.

To that last point, if your nonprofit needs access to specific expertise to ensure adequate staffing but doesn’t have the need or budget for a new full-time staff member in that role, outsourcing is a great option. And if you’re looking to outsource any financial services, you’ve come to the right place!

Our experienced team at Jitasa works exclusively with nonprofits, so we understand the unique risks your organization may face and will work with you to prevent and mitigate the most critical ones to your specific operations as we help you manage your resources effectively. Whether you need bookkeeping, accounting, fractional CFO, or nonprofit controller services, we’ve got you covered—at an affordable rate for organizations of all sizes and missions.

Nonprofit risk management is an ongoing process that requires time and oversight every year. While it may seem tedious, having an effective risk management strategy in place will ultimately save your organization time and money in both the short and long term. Use the strategies above to get started, and don’t hesitate to reach out for expert assistance (especially on the financial side of things, since our team at Jitasa is happy to help!) whenever you may need it.

For more information on managing nonprofit risks and finances, check out these resources:

Restricted Funds: Everything Your Nonprofit Needs to Know. Discover an important area of nonprofit accounting where risks frequently arise: navigating donor-imposed designations on contributions.
12+ Top Nonprofit Accounting Firms & How to Choose One. Explore our top recommendations for outsourced partners to come alongside your nonprofit in its financial and risk management journey.
Free Nonprofit Assessments by Jitasa. Lay the foundation for risk management by evaluating your organization’s overall health, and test your knowledge of nonprofit accounting and its relationship to navigating risk.

Partner with Jitasa to diversify your team and prevent risks through expert financial management.

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Year-End Giving: How to Create a Financially Sound Strategy

2025-10-10T12:00:00Z

It’s no secret that the end of the year is a busy time for nonprofits like yours. Giving tends to spike during this season, so your fundraising and development teams need to plan effective campaigns and engage your supporters one final time this year. At the same time, your leaders and finance team have to close the books on the fiscal year, create and analyze reports, and make sure financial plans are ready to go for the new year.

While you might treat fundraising and financial management as separate tasks, they need to work together for the best possible results. In this guide, we’ll explore how to take a balanced approach to your nonprofit’s year-end giving season by covering the following topics:

By aligning your fundraising and financial strategies at year-end, you’ll set your nonprofit up for lasting success into the new year and beyond. Let’s dive in!

Simplify year-end financial management by partnering with the experts at Jitasa.

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What is year-end giving?

Year-end giving encompasses all donations made to your nonprofit in the last few weeks or months of the calendar year. Many organizations use GivingTuesday to mark the start of this season, although a few say it begins on December 1 for consistency and alignment with their operating budgets.

Either way, planning for this season should start several months in advance—minimally in October, although depending on your team’s bandwidth and the scale of your efforts, you could begin as early as July. No matter when you start, make sure to organize a cohesive year-end giving campaign. While many donations will likely come in in December just because of societal trends, a solid strategy will help you maximize this critical fundraising period for your mission.

Why is year-end fundraising important for nonprofits?

Donors are particularly motivated to contribute to the nonprofits and causes that matter to them at the end of the year for two main reasons: the holiday season brings a spirit of generosity with it that makes them want to give back to their communities, and they have the opportunity to claim one last tax benefit before they file for that year.

Regardless of which reason is more inspirational for your particular supporters, there is no doubt that year-end giving is critical for the entire nonprofit sector, especially when you look at the data:

30% of annual charitable giving occurs in December.
10% of nonprofit donation revenue comes in during the last three days of the year.
38% of all online donations happen in November and December.
97% of donors cite their gift’s impact as a major reason for contributing at the end of the year, although 56% indicate that tax deduction is still a significant motivator.

External factors naturally affect these statistics—for example, the exact distribution of online gifts made in November vs. December depends on when GivingTuesday occurs, and more donations tend to come in on December 31 if it falls on a weekday rather than a weekend. However, it’s clear that focusing on year-end giving provides much-needed revenue to close out the year well and build a foundation for sustaining your programs and operations in the new year.

An Overview of Year-End Financial Management

With a few exceptions, most nonprofits’ fiscal year follows the calendar year. So, while your team is managing its year-end fundraising, you’ll also need to wrap up your financial activities for this year and prepare for next year.

Year-end financial management involves completing a variety of tasks, some related to data management and some to documentation. Here are a few of the most critical activities you should add to your to-do list:

Record all remaining transactions so you have complete data on the revenue your nonprofit brought in and the expenses it incurred during the year.
Review all collected financial information from the year to ensure you’re practicing good data hygiene and to reduce the risk of creating inaccurate reports.
Perform a final bank reconciliation to confirm that your internal records match the transaction information your bank has on file.
Manage outstanding financial obligations by paying any unpaid bills or invoices you can and reviewing your accounts receivable and payable.
Check on your nonprofit’s assets and investments, noting any categorization errors or other management issues you need to address.
Compile annual financial statements, including your nonprofit’s statements of activities, financial position, cash flows, and functional expenses, to summarize data in actionable ways.
Create the financial section of your annual report, which should cover the year’s spending and fundraising highlights and direct readers to your attached financial statements if they want to learn more.
Finalize next year’s operating budget and submit it to your organization’s board for approval.
Plan for tax season so your nonprofit can meet its Form 990 filing deadline—May 15 for organizations that follow the calendar fiscal year.
Order W-2s and 1099s for each of your employees and contractors (respectively) to ensure you can issue them by their January 31 due date.

Just as your year-end giving campaign requires fundraising, development, marketing, and other departments to work together for success, year-end financial management is also a team effort. While your CFO, bookkeeper, and accountant will do most of the heavy lifting, other leaders and board members should also be involved to ensure everything gets done efficiently and to the benefit of your entire organization.

Stay on top of your nonprofit's year-end accounting processes with our comprehensive checklist.

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Tips for Coordinating Year-End Giving & Financial Management

Now that you understand the importance of year-end giving and fiscal year wrap-up tasks for nonprofits, let’s look at some actions you can take to conduct your final fundraising push of the year in a financially responsible way.

Set Clear Year-End Fundraising Goals

For any initiative your nonprofit launches, clear goals are essential to keep your team’s efforts on the right track. While your main objective for your year-end giving campaign will likely concern the amount of revenue you hope to raise, you might also set goals that relate to engaging supporters and spreading awareness about your mission. No matter what you decide you want to achieve, make sure your goals align with your in-progress operating budget for next year, as well as your ongoing or upcoming strategic plan.

Once you have a general idea of what you want to accomplish, make your year-end giving goals actionable using the SMART method, meaning they should be:

Specific about what success looks like.
Measurable—i.e., indicating a specific number or percentage you want to hit.
Attainable based on past year-end fundraising data and your nonprofit’s current capacity.
Relevant to your mission and upcoming initiatives.
Time-bound with a clear start and end date.

Keeping these parameters in mind, an example of a SMART year-end giving goal might be “to raise $50,000 ($3,000 more than we did during our last year-end campaign as we’re in a better financial position now) to sustain our ongoing community programs between GivingTuesday and the end of the day on December 31.”

Offer Multiple Ways to Contribute

Especially if donors make their biggest (or only!) charitable contribution of the year in December, they’ll be more likely to choose your organization if you let them give how they want to. Plus, diversifying your year-end fundraising strategy makes you more likely to reach your goal by providing backup revenue streams you can rely on in case unexpected shortfalls or expenses arise.

Let’s look at some of the best options for year-end giving based on the five major categories of nonprofit revenue.

Individual Donations

Individual donations will likely make up the bulk of your organization’s year-end contributions. Allow donors to choose from a variety of donation methods, such as:

Responding to a direct mail solicitation by sending a check in a prepaid return envelope or by scanning a QR code to your online donation page.
Texting a special year-end keyword to your nonprofit’s text-to-give number.
Donating to a crowdfunding campaign or similar social media fundraiser.
Campaigning for a peer-to-peer fundraiser or giving through a friend’s fundraising page.
Contributing physical goods to an in-kind donation drive.
Attending a fundraising event, possibly with a holiday theme to capture the spirit of the season.
Joining your recurring giving program so their contributions can continue into the new year.

Corporate Philanthropy

Donors’ employers may also be eager to support the causes their staff members care about at year-end. Research the companies your supporters work for to see if they offer any of these programs:

Matching gifts to double their employees’ monetary gifts without asking them to give more out of pocket.
Volunteer grants to turn the time volunteers contribute to your mission into money.
Sponsorships to offset the upfront costs of fundraising events.
Other workplace giving initiatives like team fundraising challenges or payroll deductions.

Earned Income

If your nonprofit has a membership program, December is a great time to promote it so you can secure renewals and encourage new first-time signups going into the new year. Some other ways your organization can legally generate its own income at the end of the year include:

Selling branded merchandise like clothing, drinkware, and magnets.
Launching product fundraisers, especially those featuring holiday-related items like wrapping paper and cookie dough.
Leveraging supporters’ holiday shopping through gift card fundraisers or rounding-up programs at popular retailers.
Running promotions on fees for mission-related services—for instance, an animal shelter might discount pet adoption costs in December, or a museum could rent out its event spaces at a reduced rate to other nonprofits for their year-end galas and auctions.

Investments & Grants

Since these revenue streams have a long-term focus, they likely won’t play a major role in your year-end fundraising efforts. However, you should take some time to ensure everything is in order for next year by:

Reviewing your existing investments to see if you want to make any adjustments to your portfolio.
Creating a calendar that shows when you’ll apply for new grants and complete essential grant management steps for existing ones.
Using marketing grants to offset some costs of promoting year-end giving opportunities.

Focus on Donor Retention

As of the end of 2024, the average year-over-year donor retention rate across the nonprofit sector was 42.9%. So, if 100 donors contributed to your organization last year, 43 of them would give again this year—if you were lucky.

The end of the year is a critical time for donor retention for a few reasons:

Cost effectiveness. On average, nonprofits spend $1.50 per dollar raised to acquire a new donor, but just $0.20 per dollar raised to retain an existing one. Retaining donors allows you to reduce upfront costs for your year-end giving campaigns and put more of your hard-earned resources toward your mission.
Annual giving habits. While some supporters stay involved with your nonprofit between their year-end donations (whether through monetary donations or other types of support like volunteering or event attendance), you’ll hear from other donors just once a year—in December. So, it’s essential to remind them about their year-end gift to re-engage them and maintain that relationship.
Reliable support. By retaining year-end donors, you’ll build a stable support base for your organization that will carry you into the next year and beyond. This is especially true if you can get supporters to sign up for your monthly giving program or membership program.

Although your nonprofit will likely want to acquire some new donors during its year-end campaign to fuel growth, you should prioritize retention to manage your resources effectively. If you haven’t reached the 42.9% year-over-year benchmark yet, work toward that goal first and improve from there.

Communicate Year-End Giving Impact

Given that the overwhelming majority of donors give at year-end to make a difference for a cause that matters to them, communicating impact is essential for retention and acquisition. Your marketing, fundraising, and appreciation materials should all emphasize the key role year-end donors play in helping your nonprofit further its mission.

Consider communicating impact to donors through:

Images. Use charts, tables, and graphs to make complex concepts easier to understand and show progress. Photos of your beneficiaries receiving services or your volunteers hard at work also put a face to your mission and allow supporters to visualize what their gifts are doing in the community. (Just remember to obtain consent before publicly sharing anyone’s pictures or names!)
Storytelling. Real-life impact stories help donors connect emotionally with the work their gifts have accomplished. Make sure to tell your nonprofit’s stories as they actually happened and include relevant firsthand perspectives from staff members, supporters, and beneficiaries to build trust with your audience.
Data. Statistics make your organization’s impact more concrete, and they ground images and stories in reality—as long as you’re transparent with supporters no matter the results. If you achieved your goals, genuinely thank them and follow through on your promises for how you’ll use their resources to further your mission. If not, explain why you think the shortfall happened, explain your plans to improve your results, and encourage supporters to help you accomplish more in the future.

Year-end financial reporting is another critical element of communicating impact. Although you have to comply with specific requirements and your audience includes government agencies and other stakeholders, you’re still demonstrating your organization’s commitment to using its resources wisely to fulfill its mission. Plus, some year-end campaign donors may look at your most recent annual report’s financial charts and graphs—if not your financial statements and past Form 990s—to decide if they want to contribute.

Leverage Outsourced Services

To effectively manage all of your nonprofit’s year-end activities, you may need some additional help beyond your existing team’s bandwidth. However, you might not have enough work for another staff member to take on year-round. Plus, hiring and onboarding are expensive and time-consuming.

Fortunately, you have the option to outsource some end-of-year tasks to external professionals instead of hiring new employees. For example, you might work with:

Fundraising consultants to assist with campaign strategy and strategic planning.
Marketing and design professionals to update your website and create other promotional materials for year-end giving.
Information technology experts to set up and maintain various types of software, from your donor database to event planning tools.
Financial management firms to work through all necessary fiscal year-end tasks accurately and strategically.

If you’re looking for any type of outsourced nonprofit financial services (bookkeeping, accounting, fractional CFO, or part-time controller), look no further than Jitasa! We provide affordable, tailored services for a flat monthly rate, so you can partner with us through the year-end busy season or all year round. Plus, we only work with nonprofits, so our experienced team understands your organization’s unique needs and will collaborate with you to ensure effective financial management and alignment with your fundraising efforts.

Year-end fundraising and financial management can feel overwhelming for any nonprofit. But by developing an integrated strategy, you’ll set your organization up to achieve its goals in both. Use the tips above to get started, and don’t hesitate to reach out to experts with any questions or issues—including our team at Jitasa for financial activities!

For more information on year-end financial management, check out these resources:

Nonprofit Revenue Recognition: What It Is & Why It Matters. Discover best practices for recording and categorizing the revenue you bring in during year-end fundraising.
GivingTuesday Best Practices to Align Fundraising & Finances. Dive deeper into how to create a financially savvy strategy for the day that kicks off the year-end giving season.
12+ Top Nonprofit Accounting Firms & How to Choose One. Explore our top picks for accounting firms to help you work through your nonprofit’s year-end financial to-do list.

Let Jitasa’s expert accountants handle year-end financial management so you can focus on your nonprofit’s fundraising success

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Form 1099 for Nonprofits: Why and How to Issue One

2025-09-30T15:00:00Z

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Many nonprofits have two different types of professionals working for them: employees and contractors. Employees are on your organization’s recurring payroll and have well-defined, consistent roles, while contractors provide specialized services on an as-needed basis. This role distinction not only impacts how work gets done at your nonprofit, but it also makes a big difference during tax season.

At the end of every year, you’ll provide each of your nonprofit’s employees with a W-2 to help them file their taxes. However, if you’ve hired independent contractors, you may need to issue them a 1099 instead.

In this guide, you’ll learn everything you need to know about 1099s for nonprofits, including:

While leveraging accounting services (like those provided by Jitasa!) saves your team time and helps ensure your organization’s forms are filled out correctly, it’s still important for you as a nonprofit professional to know what these forms are and how they’re used. Let’s dive in!

Form 1099 for Nonprofits: Frequently Asked Questions

To enrich your understanding of these essential tax documents, let’s start by answering some common questions about 1099s in a nonprofit context.

What is Form 1099?

IRS Form 1099 is a federal tax form used to prepare and file income information that’s separate from wages, salaries, or tips. Nonprofits like yours need to issue this form to independent contractors and vendors who complete work for your organization and file a copy with the IRS.

There are two types of 1099s you should be aware of: Form 1099-NEC (Nonemployee Compensation) and Form 1099-MISC (Miscellaneous Information), which are both shown below. Your organization will typically use Form 1099-NEC when working with independent contractors or freelancers and Form 1099-MISC with other types of vendors. However, these forms are easily confused, so it’s best to ask an accountant if you’re unsure about which one you need to complete.

What does “contracting” mean in a nonprofit context?

Nonprofit contracting refers to partnering with an external professional who can complete projects that require specialized skills outside your existing employees’ bandwidth. For instance, you might contract a web developer to redesign and relaunch your nonprofit’s website or a construction company to renovate your facility.

Of course, hiring is essential if you want to grow your organization, but you should be strategic about when and why you hire new staff members. Recruiting, onboarding, keeping up with compensation, and retaining larger pools of employees can quickly become expensive. So, it’s best to only bring on new full-time team members when you know you have sufficient room in your budget and a large enough long-term workload for them. In the meantime, you can save money by contracting out any short-term responsibilities you need help with.

After partnering with a contractor, securely store all of the information regarding the work they did for your organization and your payments to them, as well as the W-9 they completed for you at the beginning of your relationship (more on this later!). This data will be useful if and when you need to issue 1099s.

Can my nonprofit receive a 1099 from an external party?

The short answer is yes. The long answer is that income reported on a 1099 may or may not be taxable, but the IRS needs to know about it either way.

Like any other organization, your nonprofit can act as a contractor. For example, if a new nonprofit in a similar vertical to yours is getting started, the founder might contract your organization to consult on the launch process. Or, if your facility has a space that works particularly well for hosting events, other organizations might rent it out and create contracts with you for that purpose.

If your nonprofit’s contract work meets the conditions for issuing a 1099 (more on these later, too!), the contracting organization or individual will need to provide you with one, and you’ll need to send it to the IRS along with your annual tax return. Whether it’s taxable or exempt will depend on if the IRS considers it Unrelated Business Income (UBI) or just another part of furthering your organization’s mission.

What is the nonprofit 1099 filing deadline?

The deadline for payers to complete all of their 1099s for the previous calendar year is January 31. This is because each contractor will need their 1099 to file their taxes, so the forms have to be ready well before any other individual or organizational tax deadlines.

When you purchase 1099s for your nonprofit, you’ll also find a copy of IRS Form 1096 and related instructions in the pack. This form essentially summarizes all of the 1099s your organization issues, and you’ll need to fill it out and file it with the IRS by January 31.

If your organization fails to complete its 1099s by the January 31 deadline, you can face IRS penalties that apply to each late or missing form. Here is a breakdown of the current late fees:

$60 penalty for filing up to 30 days late
$130 penalty for filing more than 30 days late and before August 1
$330 penalty for filing a 1099 on or after August 1
$660 penalty for intentional failure to file

These fees can really add up depending on how many 1099s you have to file, so make sure to complete them correctly and on time!

Dive deeper into 1099s for nonprofits in our FREE online course!

Conditions for Issuing Nonprofit 1099s

Now that you understand the basics of 1099s, the one question that may still be on your mind is when to complete one of these forms. Generally speaking, you’ll need to issue Form 1099 when the following four conditions are met:

The payment recipient is not your nonprofit’s employee.
The payment recipient is an individual, partnership, vendor, or estate.
The payment was made for services to your organization.
Total payments during one calendar year amount to at least $600.

For example, let’s say you contracted a freelance graphic designer to create marketing materials for your nonprofit’s GivingTuesday campaign. They worked for your organization from August to November of this past year, and you paid them $5,000 over that time frame. In this case, you would definitely need to file a 1099. They’re an individual who isn’t your employee, and they provided a service to your nonprofit that you paid more than $600 for in one calendar year.

Besides understanding when you should issue a 1099, it’s just as important to know when it isn’t required. Here is a non-exhaustive list of payments for which your nonprofit doesn’t need to complete Form 1099-NEC or 1099-MISC:

Most payments to corporations (although there are always exceptions)
Payments for merchandise, computers, storage, and similar items
Wages paid to employees (report on Form W-2)
Disbursements of scholarships and fellowship grants (report on Form W-2)
Military differential wage payments made to employees while they are on active duty in the Armed Forces or other uniformed services (report on Form W-2)
Business travel allowances paid to employees (report on Form W-2)
Payments that fall under your expense reimbursement policy
Cost of current life insurance protection (report on Form W-2 or Form 1099-R)
Payments to tax-exempt trusts (IRAs, HSAs, Archer MSAs, and Coverdell ESAs), federal and state governments (including the governments of the District of Columbia and of U.S. possessions), or a foreign government

Form 1099 may seem a bit confusing at first glance, but if you follow the guidelines above, it should be easy to determine when to complete that form. (And, of course, you can always reach out for professional advice if needed!)

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How to Fill out a Nonprofit 1099

To issue 1099s properly, your nonprofit needs to accurately track all payments to contractors in your bookkeeping system. However, your organization won’t have all of the necessary information without the contractor’s input via Form W-9.

Using W-9s to Complete 1099s

IRS Form W-9 is a simple form that contracted workers fill out to provide your nonprofit with the necessary information to issue them a 1099. It also allows the IRS to match each Form 1099 your organization files to the right contractor’s tax returns. A W-9 is only one page long and typically looks like this:

On a contractor’s W-9, you can find the following information that you need for their 1099:

Business and/or individual’s name and address
Contractor’s tax status
Social Security Number (for sole proprietorships and individuals) or Tax ID Number (for applicable business entities)

We recommend asking contracted workers to fill out their W-9 at the beginning of your working relationship with them to save your organization time and energy come tax season. Keep W-9s on file as long as your relationship with a contractor is active and for at least four years after filing their last 1099.

Other Information Required on a 1099

Once you’ve pulled the details you need from Form W-9, find the following information in your nonprofit’s records to finish filling out Form 1099:

The category of the payments made to the contractor
Federal and state tax withholding information
The total non-employee (or miscellaneous) compensation the contractor received

While Form 1099 is fairly short, it’s important to get the details right. On top of late filing fees, there are also penalties for errors or omissions. Before getting started, take a moment to confirm that you have all of the information you need and fill in any gaps you may find.

By becoming familiar with what Form 1099 entails and why to issue one, you’ll be better equipped to maintain compliance when it comes to your organization’s contracted workers, and you might just find filing these forms a bit less taxing. However, it always helps to have experts on your side—like Jitasa’s experienced nonprofit accounting team!

For more information on filing your nonprofit’s tax forms, check out these resources:

Form W-9 for Nonprofits: What It Is + How to Fill It Out. Dive deeper into the requirements and best practices for requesting taxpayer information from contracted workers using Form W-9.
Nonprofit Form 990 Filing: FAQ Guide + How to Get Started. Discover everything you need to know about filing your nonprofit’s most important annual tax form—IRS Form 990.
12+ Top Nonprofit Accounting Firms & How to Choose One. Explore the benefits of working with an outsourced nonprofit accountant during tax season and beyond, as well as our top recommendations.

Jitasa accountants prepare 20,000+ 1099s for nonprofits every year—and we're ready to help with your organization's, too!

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Grant Management: How to Secure & Track Nonprofit Funding

2025-09-23T16:00:00Z

Grants are a critical revenue source for many nonprofits. Whether it comes from foundations, corporations, or government agencies, grant funding can make a significant difference in your organization’s ability to launch new initiatives and complete projects. That is, as long as you can secure the right grants by standing out in a competitive funding landscape!

When you apply for a grant, your job is to convince the grantmaker that of the many organizations applying for funding, your nonprofit is the most deserving—which is where effective grant management comes in. In this guide, you’ll learn everything you need to know about grant management, including:

Grant management may seem complex at first, but by being strategic in your process and seeking outside assistance as needed, you can make grants a seamless part of your nonprofit’s funding model. Let’s dive in!

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Grant Management: Frequently Asked Questions

If your nonprofit is like most that are getting started with grant management, you probably have a lot of questions going into the process. Let’s clear up some confusion by answering a few common questions here.

What is grant management?

Grant management is the process of securing, tracking, and reporting grant funding awarded to a nonprofit. The goal of management is to ensure your organization uses its grant funds effectively and in accordance with the grantmaker’s requirements for providing them.

Grantmakers (or “funders,” as they’re sometimes called) see awarding grant funding as an investment in a nonprofit whose mission and planned initiatives align with their values and vision. This is why it’s critical not only to pursue the right grant opportunities, but to demonstrate to funders through proper management that they made a wise investment by choosing your organization as a recipient.

Who is responsible for grant management at nonprofits?

Grant management is a team effort, requiring input from multiple departments and leaders at your nonprofit. Small organizations pursuing their first grants often handle the entire process in-house and divide up duties among whichever staff members have the bandwidth to take them on.

As your nonprofit grows and pursues more grants, you’ll likely want to assign certain responsibilities to specific team members (e.g., you might have program leaders seek out grants that align with their initiatives and bring them to leadership for approval). You also may bring on a grant writer to draft proposals and a grant manager to take point on post-award tasks, first in an outsourced or freelance capacity and then as an in-house hire if you have enough work for them.

Some nonprofit financial advisors and fractional CFOs (including our team at Jitasa!) will also manage grants along with the other financial services they provide. In any case, your organization’s financial professionals should be involved in grant management to oversee recordkeeping and align grant opportunities with your other revenue-generating and spending activities.

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How is grant management different for grantmakers vs. grantees?

The term “grant management” doesn’t just refer to activities undertaken by grant recipients. Funders also use it to describe their process of:

Developing and promoting grant opportunities
Tracking and reviewing proposal submissions
Recording fund disbursements
Compiling post-award reports from grantees

It’s important to understand this distinction primarily because platforms described as “grant management software” can be designed either for grantees or grantors. If your nonprofit invests in one of these platforms, make sure it’s made for the former rather than the latter so you can access the features you need.

Benefits & Challenges of Nonprofit Grant Management

Although grant management can become complicated, especially if your nonprofit is trying to manage multiple grants at the same time, it’s also extremely advantageous for your mission when done properly. Here is a quick breakdown of the main benefits and challenges associated with grant management.

Benefits

If you manage your nonprofit’s grants well, you can experience:

Increased impact. This benefit comes not only from ensuring you get to keep the grant funding awarded to you, but also from allocating that funding effectively as you push initiatives forward.
Innovation opportunities. Well-managed grant funding can provide additional flexibility in your project and program budgets that allows you to experiment with new approaches to problem-solving as you deliver services.
Stronger external relationships. By regularly communicating with funders and accurately reporting your grant progress, you can build trust that can lead to additional funding from those grantmakers down the line.
A reputation boost. Having complete records of how you used your grant funding can help establish your organization as one that fulfills its mission and reliably follows through on its commitments, which can catch the attention of other funders.

Challenges

The most common roadblocks to effective grant management include:

Compliance complications. Some grantmakers have stringent requirements for how grant recipients should use and report awarded funding, which your organization has to put a lot of time and effort into navigating.
Inconsistent reporting demands. If your nonprofit is managing multiple grants at once, each funder will likely ask you to report your progress differently in terms of both content and format.
Resource constraints. One grant usually won’t cover the full cost of an initiative, meaning you’ll need to secure several grants and/or allocate revenue from other sources toward that program or project as well—all of which you have to budget and report.
Uncertainty. Because grants are competitive, you might do all of the work to apply for one and prepare for post-award management only to lose out to another organization (which is why it’s advisable to have backup options for each initiative you want to pay for with grant funding).

The biggest issue with grant management that you should be aware of is that falling short in any area runs the risk of financial penalties, funds being withheld, or even legal consequences, depending on the grantmaker’s agreement. Before you apply for a grant, make sure it’s a good fit for your needs and that your nonprofit is equipped to record and report on it correctly if you win it.

The Grant Management Cycle for Nonprofits

Grant management is an end-to-end process that begins even before you secure funding. Let’s dive deeper into the individual stages of the nonprofit grant management cycle.

1. Identify Grant Opportunities

Most funders designate their grants for specific purposes, meaning the best grant opportunities to pursue are the ones that align with your mission and upcoming initiatives. Take some time to define your nonprofit’s goals and funding needs before you start looking for grants that match those criteria.

Fortunately, there are plenty of resources available to help you find the right grant opportunities for your organization, including:

Online grant research tools, such as Candid’s Foundation Directory or GrantStation.
Localized search engine queries, which are helpful for identifying grants provided by community foundations and city or county governments.
Board members, who may have community connections they can leverage to introduce your organization to potential funders.
Grants consultants, who can provide an experienced, third-party perspective on your grantseeking process if you have the resources to hire one.

Your nonprofit’s accountant can also be a good external resource for evaluating grants and determining whether you’re in a good financial position to secure them. Although not every opportunity will be right for your organization right now, reaching out early can create a connection that you can leverage in the future when your goals or situation have changed.

2. Apply for Grants

Once you’ve narrowed down your options, you’re ready to apply for the grant opportunities you want to pursue. The goal of grant proposal writing is to make it easy for grantmakers to see why your nonprofit is the most deserving of their funding out of the entire pool of applicants.

Here are a few tips for writing standout grant proposals:

Build relationships. Take time to get to know the funder, whether through an introduction from a board member or donor, a one-on-one meeting, or an invitation to one of your nonprofit’s events. Then, use what you’ve learned about their priorities and what they look for in a grant recipient to inform your proposal.
Tell your nonprofit’s story. Include detailed information about your mission, past achievements, and plans to make an even greater impact in the near future. To make your proposal more persuasive, back your claims up with a combination of quantitative and qualitative data. For example, you might share statistics showing increased participation in a program over time alongside a testimonial describing how that program improved a specific community member’s life.
Be specific. Describe the exact initiative you need funding for and how you plan to use the grant to push that initiative forward within a certain timeframe. Many funders ask for a sample budget to make your plans more concrete—if they do, double-check your calculations and include information about the other revenue you’ll use to supplement the grant if you secure it.
Ask for feedback. After you’ve drafted a grant proposal, ask several people at your nonprofit to review it and offer suggestions for improvement. Try to find someone outside your organization to provide feedback as well for a more objective perspective.

Before you submit your application, make sure you’ve followed all funder guidelines to the letter and that you’re sending it off before the deadline. Most grantmakers won’t accept late submissions, and deviations from the requirements or other glaring mistakes can land your proposal in the rejection pile before the funder even digs into it.

3. Track Your Grant’s Progress

So, you’ve crafted a well-written proposal and sent it off on time, and your application convinced the grantmaker that they should give the funding to your nonprofit. Congratulations!

However, your work isn’t finished when you receive your award letter. Accurately tracking grant progress shows funders that your organization is fiscally responsible and takes the grant management process seriously.

Use the budget you submitted along with your grant proposal as a spending guide (or create one now in the unlikely event you weren’t required to do so before this point in the process). From there, you can set up a documentation system using spreadsheets if it’s your first time managing a grant. However, if you’re planning to track multiple grants in the near future, you’ll likely need to invest in grant management software or use the grant management capabilities built into your accounting system.

In this documentation system, keep track of the date, amount, and purpose of every grant funding expenditure, as well as the other revenue you spend on the program or project the grant is being used for. Additionally, note how the initiative itself is going in case you need to report those details to the funder.

4. Record Grant Funding

Along with tracking grant progress for the funder’s benefit, you also need to accurately record grant funds for internal accounting purposes. There are specific revenue recognition guidelines that you should follow based on which of the following types of grants you receive:

Unconditional grants are just what they sound like: funds provided up front with no strings attached. You should record them as soon as you’re notified that you’ve won the grant, even if the funding takes slightly longer to arrive. For instance, if you receive the award letter for an unconditional grant in February but don’t get the direct deposit from the grantmaker until March, you should record the grant in February.
Grants with contingencies require your organization to fulfill certain funder-imposed conditions, and the money comes in installments as you show that you’ve met those requirements. For example, a grantmaker might agree to continue supporting a program as long as it meets a certain enrollment threshold. Record the first installment of one of these grants when you receive the award letter and each of the subsequent installments as the funding comes.
Reimbursable grants are paid out only after your nonprofit has spent the money for an initiative up front. In these situations, you’ll track expenses as you incur them so your accounting system is accurate and so you can give an itemized list of costs to the funder. Then, you’ll record the grant funding when you receive the reimbursement for that expenditure list.

When you apply for a grant, take note of the type so you’ll know exactly when to record the funding if you win it. If any difficulties arise, ask your accountant or bookkeeper.

5. Report Back to the Grantmaker

Finally, you’ll submit all of your required documentation to the grantmaker to show that you’ve upheld the grant’s conditions or are eligible to be reimbursed. Even for unconditional grants, it can be beneficial to update the grantmaker on your progress to prove your nonprofit’s trustworthiness and open the door to potentially securing additional funding from them in the future.

Especially for grants with contingencies, you’ll likely have to report your progress multiple times. Mark every reporting deadline on your calendar, and plan ahead to make sure you can compile the necessary data, catch and fix any mistakes, and format it according to the funder’s requirements well in advance of those dates.

After your nonprofit goes through the grant management process once, it’s time to go back to the beginning of the cycle and start looking for more grant opportunities! As your organization grows, you’ll likely have several grants at different stages of the process at any given time. But by that point, you’ll have formed connections that you can leverage to secure more funding, know the basics of writing a strong proposal, and already have tracking and recording systems in place to make reporting easier.

The grant management process may seem overwhelming, especially if you’re just getting started. However, when you put in the necessary research and effort, you’ll find the whole process much more manageable and rewarding. Plus, you can always turn to grant consultants or financial management firms (like Jitasa!) for help along the way.

For more information on grants and related topics, check out these resources:

Nonprofit Financial Management: Overview + Best Practices. Discover how grant funding fits into the bigger picture of nonprofit finance and how to handle all of your organization’s money properly.
Restricted Funds: Everything Your Nonprofit Needs to Know. Learn how to navigate donor- and funder-imposed designations on nonprofit contributions, including many grants!
What Is a Nonprofit Audit? Ultimate Guide + Checklist. Explore a process that some grantmakers may require your organization to undergo to demonstrate financial responsibility—independent auditing.

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Donor Analytics: What They Are & How to Apply Them

2025-09-16T12:00:00Z

Your nonprofit collects a lot of data on its supporters. Every time someone makes a gift, fills out a form, or interacts with your communications, new data is created—not to mention all of the general information in your database on donors’ backgrounds and preferences. That data holds untapped potential to influence engagement, strategic planning, and financial management until you interpret and apply it through the process of analytics.

In this guide, you’ll learn all you need to know about donor analytics, including:

Let’s get started by defining what donor analytics is and why it matters for your organization.

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What is donor analytics?

Donor analytics is the process of collecting, organizing, analyzing, and applying data on your nonprofit’s supporters. Its goal is to gather actionable insights from your stored data so you can make more informed decisions about any area of your organization’s work that directly (e.g., fundraising) or indirectly (e.g., long-term goal-setting) involves its donors.

Donor analytics and donor data aren’t synonymous—donor data is the information that feeds donor analytics, while “analytics” either refers to the process of drawing conclusions from data or the conclusions themselves. Donor analytics also falls under the larger umbrella of nonprofit analytics, which also covers conclusions drawn from fundraising, marketing, program, operational, and financial data.

Benefits of Donor Analytics for Nonprofits

Analyzing and applying donor data offers many advantages to your nonprofit, including:

Stronger supporter relationships, which lead to increased engagement and retention.
Smarter fundraising strategies that align with donors’ preferences and bring in more revenue.
Improved financial planning via more efficient resource allocation, cash flow tracking, and budgeting.
Increased transparency and accountability when you can show that your strategies are evidence-based.

These are just a few of the many benefits your organization can experience based on your exact approach to donor analytics. Plus, positive results in general hinge on analyzing the right data, applying it effectively, and taking necessary precautions to maintain donors’ trust throughout the process.

Use our Donor Privacy Policy Template to promote ethical, secure management of supporter data.

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Types of Nonprofit Donor Analytics & Their Applications

Now that you know the what and why of donor analytics, let’s dive into the how—the categories of donor data you should analyze and the conclusions you can pull from each one to improve your nonprofit’s operations across various areas.

Demographic Analytics

When your nonprofit is trying to acquire new supporters, it’s helpful to understand the demographics of your current supporter base. You’ll typically have an easier time reaching individuals who share similar qualities with existing donors than someone entirely different. So, targeting your outreach using demographic analytics can help lower acquisition costs and improve your return on investment (ROI).

Demographic analytics are generally based on the following donor data points:

Age
Gender
Location
Marital status
Family status
Education
Employment
Wealth

In addition to streamlining acquisition, understanding demographic analytics helps you engage existing supporters more effectively. For instance, employment data can tell you which of your supporters are eligible for workplace giving programs like matching gifts or volunteer grants that let them increase their support without contributing more out of pocket. Or, location information may help you decide whether an in-person or virtual fundraising event would attract more participants.

Be careful not to let preconceived notions or stereotypes about certain groups affect demographic analytics, especially concerning data points like age and gender. Instead, compare your interpretations of internal information t

Psychographic Analytics

Demographics only tell part of the story about your donors’ backgrounds, preferences, and opportunities. Psychological factors, also known as psychographics, supplement your knowledge of who your supporters are by telling you why they do what they do inside and outside your nonprofit.

In psychographic analytics, you should review data points like:

Interests
Values
Hobbies
Lifestyles
Opinions
Pain points
Communication preferences
Motivations for supporting your mission

When segmenting supporters (i.e., grouping them based on shared characteristics), consider psychographics alongside demographics to further target your engagement strategies. For example, universities often base donor segments on giving motivations related to relationships to the institution (alumni, parents, faculty, etc.). Segmenting by interests also works well in some cases—for instance, an animal shelter could group supporters based on whether they prefer dogs or cats and send each segment different messages about sponsoring those pets.

Psychographic analytics can even help you reach critical supporters on an individual basis. Let’s say your nonprofit tends to invite all of its major donors to its annual gala, but one longtime donor has always turned down the invitation because they “just don’t like fancy dinners.” When you review your data on that donor, you remember that they enjoy running and live a very active lifestyle. So, you decide to start sending them personalized invitations to your 5K fundraisers instead, which proves more effective for keeping them engaged between larger donations.

Giving Analytics

Understanding donor analytics related to giving patterns allows your nonprofit to gain insight into your supporters’ donation habits. If demographics and psychographics tell you the who and why of your donor base, giving analytics start to get into the what and how of their involvement with your organization.

Some essential giving data to track per supporter for analytics purposes include:

Average donation amount
Frequency of giving
Recency of giving (i.e., when their last donation occurred)
Preferred contribution channel (your website, social media, mailed-in checks, etc.)
Lifetime value

On an individual-donor level, giving analytics can help you develop more successful donation requests. Let’s say your nonprofit has just launched a monthly giving program, and you’re conducting targeted outreach to attract your first members. You identify a donor who has given $200 to each of your last three year-end fundraising campaigns, and you ask them to join your program at $20 per month. They’d likely respond well to that request since it’s just $40 more per year than they’ve donated previously, plus they can give more conveniently as a monthly donor.

Giving analytics can also inform your nonprofit’s revenue management when considered holistically. You’ll understand fundraising data patterns and fluctuations more comprehensively, so you can adjust your plans and budget accordingly to continue funding your work. For example, you might organize a summer fundraising event to combat the dip in donations that often occurs at that time of year or add to your reserve funds leading up to elections if you notice that key supporters prioritize political giving over charitable donations at those times.

Engagement Analytics

Monetary donations aren’t the only valuable way supporters can contribute to your nonprofit. Collecting and analyzing data on other forms of involvement allows you to draw more comprehensive conclusions about your organization’s effectiveness in engaging its donors.

For this category of donor analytics, you might track:

Interactions with communication materials (visiting your website, reading emails and texts, liking and sharing social media posts, etc.)
Event attendance
Volunteer time
Advocacy campaign participation
In-kind donations of goods, services, and non-cash assets like stocks or real estate

Analyzing non-donation involvement can help you proactively prevent donors from lapsing. For instance, in a 2024 survey of nonprofit supporters, donating items came out on top in respondents’ ranking of the most impactful ways of supporting nonprofits. So, if donors are struggling to understand their donations’ impact, you might promote in-kind giving to help them see the results of their efforts more clearly.

In-kind donations, volunteering, and advocacy are also great ways for supporters who are facing financial setbacks that temporarily make monetary giving difficult to stay involved with your organization. By keeping these donors engaged in free or low-cost activities, you’ll have an easier time retaining their support once they’re in a position to give again.

When supporters are engaged in more than one way with your nonprofit, they’re not only more likely to stay involved long-term, but they also provide value beyond their monetary donations. Engagement analytics show what they like and dislike about the various ways they can engage with your mission, so you can capitalize on what’s working well and improve or scrap initiatives that aren’t as well received.

Predictive Analytics

While there is no way to say for certain how your supporters will interact with your organization in the future, you can save essential information in your donor database that can help you get a general idea of potential involvement with your cause. These predictive analytics are based on a combination of internal and external data, and you’ll usually gather the latter through prospect research as you’re looking for new major donors.

To leverage predictive analytics, look for two major types of data:

Wealth data, which shows how much donors could potentially give to your nonprofit and includes information about stock holdings, real estate, political giving, and other income- and asset-related details.
Philanthropic data, which indicates whether a prospective donor would want to make a large contribution to your particular mission. Consider giving and engagement history with your organization and with other similar nonprofits in this category, as well as relevant psychographic information (interests, values, motivations, etc.).

As artificial intelligence (AI) has penetrated the nonprofit sector, predictive analytics has become an area of interest for leveraging AI-powered tools, although its potential is mostly untapped since only about 13% of nonprofits use AI for this purpose as of 2025. Whether you invest in a separate AI solution or just use the reporting tools in your donor and prospect research databases for predictive analytics, always keep data privacy and ethics at the forefront.

Donor Analytics Best Practices

Once you’ve decided what types of data to focus on and how you want to apply them, follow these best practices to make the most of your analytics approach:

Create individual supporter profiles in your donor database or constituent relationship management (CRM) system so you have a centralized location to store their data.
Leverage software integrations to allow data to transfer seamlessly between your CRM, fundraising, prospect research, marketing, and accounting solutions.
Practice good data hygiene by regularly auditing your database, removing inaccurate or duplicated information, and developing data entry standards.
Be transparent with supporters about how you’re using their information and keeping it safe, and allow them to opt out of data collection if they’d like.
Adjust your approach over time and as your nonprofit’s goals change, so you’re always analyzing the data that’s most helpful to you in the present moment.
Work with external professionals who can provide an objective perspective on your donor analytics and apply them in specific ways that align with their areas of expertise.

If you’re looking for help applying donor analytics to financial management, look no further than Jitasa! Our experienced team works exclusively with nonprofits, so we understand how important supporter data insights are to your organization’s financial planning, recordkeeping, and reporting. In particular, our fractional CFO and controller services are designed around strategic decision-making and involve applying donor analytics to strengthen every aspect of your nonprofit’s financial situation.

Whether you want to attract new supporters to your cause or make your fundraising efforts more efficient, donor analytics is essential to achieving your nonprofit’s goals. Use the tips and guidance above to get started, and don’t hesitate to reach out to experts for additional support in specific areas of application (like Jitasa for financial management!).

For more information on the intersection of donor data and finance, check out these resources:

Nonprofit Financial Statements: 4 Essential Reports to Know. Explore a few key sources of financial analytics that you can use alongside donor analytics to make informed decisions.
GivingTuesday Best Practices to Align Fundraising & Finances. Learn how to create a data-driven, financially savvy strategy for one of the biggest nonprofit fundraising days of the year.
Restricted Funds: Everything Your Nonprofit Needs to Know. Discover the ins and outs of donor-imposed designations on gifts, which affect how you spend funding as well as your understanding of your supporters.

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Statement of Functional Expenses: Ultimate Guide + Template

2025-09-09T12:00:00Z

The core of nonprofit accounting is accountability. As you record and report financial activities, your goal should be to show supporters and stakeholders that you’re reinvesting all of the funds you receive into your organization to further its mission.

Financial statements (i.e., recurring reports that summarize your nonprofit’s financial data) are essential to this accountability-centered accounting approach. One statement that particularly focuses on transparent spending of supporter contributions is the statement of functional expenses. In this guide, you’ll learn all you need to know about this report, including:

Let’s get started with an overview of the statement of functional expenses and how it fits into your nonprofit’s financial reporting processes.

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What is a statement of functional expenses?

A statement of functional expenses is a table- or matrix-style report that categorizes nonprofit costs based on the purpose the money was used to accomplish. The table’s rows list various expenses as they’re recorded in your organization’s accounting system—based on the nature of payments made—and the columns organize costs according to their function in your mission-driven work (more on this distinction later!).

Here is an example of what a statement of functional expenses might look like:

Other Nonprofit Financial Statements

The statement of functional expenses is one of four financial statements that all nonprofits should compile annually. The other three reports are the:

Statement of activities, which categorizes your nonprofit’s revenue, expenses, and net assets to provide an overview of your annual transactions.
Statement of financial position, which provides a snapshot of your nonprofit’s financial health by breaking down your assets, liabilities, and net assets.
Statement of cash flows, which shows how money moves in and out of your organization through operating, investing, and financing activities.

While each of the above reports has a direct for-profit parallel—income statements, balance sheets, and cash flow statements, respectively—the statement of functional expenses is unique to nonprofits because it specifically focuses on how your finances further your mission.

Categories of Functional Expenses for Nonprofits

At this point, you might be thinking, “If my nonprofit already records spending based on the nature of payments made, why do we need to reorganize our expenses according to their end goal?” Generally speaking, functional expense categorization adds a layer of transparency that natural expense categories alone don’t provide, which helps maintain compliance and build trust with supporters.

With that in mind, let’s look at each of the three categories of functional expenses in more detail.

Program expenses are directly related to your organization’s cause-driven efforts, so they vary widely from organization to organization. For example, an animal shelter would likely include spending on veterinary care supplies and pet food under its program expenses, while a nonprofit focused on children’s literacy might report purchases of books and other supplies for their student reading groups as program costs.
Administrative expenses (sometimes called “management and general” costs) are necessary to operate your nonprofit day to day. These may include rent or mortgage payments, utility bills, insurance, office equipment purchases, and staff compensation, among other expenses.
Fundraising expenses are the upfront costs associated with your nonprofit’s revenue-generating initiatives. Fundraising software subscriptions, event planning, marketing, and fundraising consulting fees are common costs that fall into this category.

You may also have heard the term “overhead expenses” in discussions of nonprofit finance, which refers to the administrative and fundraising categories of functional expenses combined. In the past, the general rule was that at least 65% of every nonprofit’s expenditures should be program-related and no more than 35% could go toward overhead. However, it’s now understood that every organization’s program-overhead spending breakdown will look different.

If your nonprofit is just getting started, you might have more overhead expenses as you secure a facility, launch and promote initial services, and acquire your first donors. Once your organization is better established, use the 65/35 “rule” as a general guideline to put as much revenue toward your programs as you reasonably can. If you determine that you need to cut costs, don’t take funding away from programming unless it’s absolutely necessary. Instead, start by finding small ways to reduce overhead, such as:

Evaluating your software to ensure you’re getting the best value for your money out of every platform you use and adjusting subscriptions as needed.
Requesting in-kind donations to cover event planning needs (e.g., auction items or catering services) so you don’t have to pay for those items out of pocket.
Installing smart thermostats and low-flow bathroom fixtures at your facility to lower utility bills over time.

Overhead isn’t inherently bad—in fact, administrative and fundraising expenditures are integral to your nonprofit’s sustainability—but it also shouldn’t eclipse your mission-related work. After all, your programs are why most donors and funders support your organization in the first place!

Purpose of the Statement of Functional Expenses

Every nonprofit financial statement has three basic purposes:

Compliance: Helping your organization meet external reporting requirements, whether they’re government-imposed or related to the Generally Accepted Accounting Principles (GAAP).
Transparency: Providing donors, funders, board members, and the community at large with deeper insights into your nonprofit’s financial situation.
Decision-making: Formatting financial data so it’s easier for your internal team to understand and act on.

The statement of functional expenses fulfills each of these purposes by being useful for:

Tax filing. If your nonprofit is large enough to have to file the full Form 990, you’ll fill out a statement of functional expenses as part of your filing. Form 990-EZ (for midsize organizations), Form 990-PF (for private foundations), and some state tax forms include abbreviated expense reporting sections, and your internal functional expense report is a good reference for completing these documents.
Annual reporting. Some of your nonprofit’s supporters likely want a detailed breakdown of your spending each year, while others are satisfied with a basic chart or graph in the financial section of your annual report. Refer to your statement of functional expenses to create that graph within the report, then attach the full statement as an appendix for donors who are interested in learning more.
Budgeting. By comparing your organization’s actual expenses with your predictions in last year’s annual operating budget, you can make more accurate projections when allocating expenses for the coming year.

Compile your statement of functional expenses as soon as you close your books for the fiscal year. That way, it’ll be ready to go for your Form 990 and annual report in the first few months of the new year. You’ll probably need to work on your operating budget before this occurs, so you can use a combination of year-to-date expense information, cash flow forecasting, and any previous years’ functional expense reports you still have on hand to make data-driven cost projections.

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Nonprofit Statement of Functional Expenses Template

Every organization’s statement of functional expenses will look slightly different depending on what expenses you incur and how you allocate resources. However, the functional expense categories of program, administrative, and fundraising costs are consistent for all nonprofits.

Here is a basic template to help you start creating your nonprofit’s statement of functional expenses (making sure to modify it for your needs):

While this DIY approach can work if your organization’s finances are relatively simple, the best way to ensure your statement of functional expenses meets nonprofit reporting requirements and accurately represents your spending is to partner with expert financial professionals like our team at Jitasa. Our accountants work exclusively with nonprofits, so when you partner with us, we’ll use our experience to compile comprehensive reports and recommend ways to improve your financial practices based on our analysis of them!

Although your nonprofit’s statement of functional expenses is essential for compliance, analyzing it and applying the insights you glean to your expense allocation and budgeting procedures can provide even more value for your organization. Use the tips in this guide to get started, and don’t hesitate to reach out for professional assistance whenever you need it.

For more information on nonprofit financial reporting, check out these resources:

Nonprofit Chart of Accounts: How to Get Started + Example. Explore the main resources your nonprofit’s statement of functional expenses should be based on: your chart of accounts.
Nonprofit Form 990 Filing: FAQ Guide + How to Get Started. Dive deeper into the process of filing your nonprofit’s annual tax return, including how it also promotes accountability and transparency.
Nonprofit Financial Management: Overview + Best Practices. Discover how functional expense reports and other financial statements fit into the bigger picture of nonprofit financial management.

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How to Set up QuickBooks for Nonprofits: The Complete Guide

2025-09-01T15:00:00Z

As your nonprofit expands and evolves, its financial situation will naturally become more complex. While you likely started out managing your organization’s finances in a spreadsheet, you’ll eventually outgrow this method (if you haven’t already) and need to invest in specialized software to keep your accounting practices on track.

One of the best-known accounting solutions your organization could invest in is QuickBooks Online. In this guide, we’ll explain everything you need to know to configure and use this powerful, trusted platform, including:

Both for-profit and nonprofit organizations use QuickBooks, albeit in different ways, which is why proper configuration matters for your organization to make the most of the platform. Let’s get started!

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QuickBooks Online for Nonprofits: Frequently Asked Questions

Due to the sheer volume of accounting platforms available to your nonprofit, keeping track of the basics of each solution can quickly become overwhelming. To clear up some of the confusion, let’s begin by answering a few common questions about QuickBooks Online.

What Is QuickBooks Online?

QuickBooks Online is an accounting solution developed by Intuit for organizations in all verticals, including nonprofits. Its main distinguishing characteristic is that it’s cloud-based, meaning your team can access the platform anywhere they have internet connectivity. This functionality makes it easy for remote team members and outsourced financial professionals to collaborate in a secure environment.

Is QuickBooks Online Specifically a Nonprofit Accounting Platform?

No—QuickBooks was originally designed for business use. However, there are many ways to adapt the platform for nonprofit accounting. Because your organization can’t turn a profit by definition, its goal in using QuickBooks differs from that of a business—to ensure accountability in financial management rather than to track profitability. So, QuickBooks has customizable settings that align with the fund accounting system your nonprofit should use to achieve this goal.

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Is QuickBooks Free for Nonprofits?

No—the platform is subscription-based for all organizations. However, free trials are available, as well as nonprofit discounts you can obtain by purchasing your subscription through TechSoup. While you’ll need to budget more carefully for long-term use of QuickBooks than for some other solutions, remember that free isn’t always better in terms of functionality and scalability.

What If QuickBooks Online Can’t Fully Support My Organization’s Accounting Needs?

QuickBooks Online is relatively scalable, so you can upgrade your plan if you need more features to manage all of your nonprofit’s financial activities. However, if your organization is very large and still needs more functionality, Intuit Enterprise Suite (IES) may be a better option. Because the same company makes both IES and QuickBooks Online, your data will transfer automatically if you switch from the latter to the former, so it’s a relatively easy transition.

How to Set up QuickBooks for Nonprofits in 5 Simple Steps

Now that you understand the basics of QuickBooks and why custom configuration is necessary for your nonprofit, let’s walk through the setup process.

1. Choose a QuickBooks Online Plan

Most nonprofits that use QuickBooks Online are either on the Plus or Advanced subscription plan. Let’s look at a few of the key differences between these plans.

QuickBooks Online Plus

As of 2025, a QuickBooks Online Plus subscription purchased from Intuit costs $57.50/month for the first three months and increases to $115/month after that. With this plan, your organization will get access to all of the platform’s core nonprofit accounting features for up to five internal users, such as:

Automated recordkeeping for various transactions
Revenue and expense categorization
Budget, donation, and grant tracking
Custom report generation

QuickBooks Online Advanced

The QuickBooks Online Advanced plan costs $137.50/month for the first three months and then increases to $275/month (again, as of 2025 and if you purchase directly from Intuit). In addition to providing access for up to 25 users, some of the extra features that an Advanced subscription offers include:

Batch invoices and cost reports
Automated revenue recognition
Auto-tracking for fixed assets
Expanded data restoration and sync capabilities

If your nonprofit is investing in accounting software for the first time, the Plus plan will likely meet your needs. However, if your organization has a more complex financial situation that could benefit from additional user permissions and more extensive functionality, it’s worth it to upgrade to the Advanced plan.

2. Modify Account Settings for Your Nonprofit

Once you’ve chosen your QuickBooks Online plan and answered the initial setup prompts, you’ll be taken to the main dashboard to start configuration in earnest. Click the gear icon in the top right corner to modify your account settings, beginning with your nonprofit’s:

Name and logo
Fiscal year start date
Accounting method (cash or accrual)
User permissions
Company type/tax form

The most important setting to double-check is the company type, which should naturally be “Nonprofit Organization.” This selection ensures QuickBooks will configure your accounting system to align with the information on IRS Form 990 so you can file your tax return accurately.

3. Configure Data Storage & Integrations

Next, you’ll need to take a few actions to ensure data security and streamlined workflows in QuickBooks. In particular, you should check that your information automatically backs up to the QuickBooks Online cloud so it’s always accessible and up-to-date, and sync your nonprofit’s bank accounts with QuickBooks for easy reconciliation.

Setting up integrations is also essential at this stage. Your team can save time and reduce the risk of errors that accompany manual data entry if your accounting software can “talk” directly to your nonprofit’s CRM, online donation processor, event management tools, payroll system, and other solutions in your tech stack.

Additionally, spend some time familiarizing yourself with the platform to understand where all of the major documents and types of data are stored. That way, it’ll be easier to find specific information later.

4. Customize the Interface

As previously mentioned, QuickBooks was originally developed for businesses rather than nonprofits. So, there are a few settings you should change to adapt the platform to your financial management model, such as:

Form styles. QuickBooks’ default sales receipts are very business-oriented, but your nonprofit can customize the templates to turn them into branded donation acknowledgments with just a few clicks!
Financial statement terminology. In QuickBooks, the statement of activities is called the Profit and Loss by Class Report, but you can easily change the name to avoid confusion.
Classes. If you enable classes in QuickBooks' nonprofit interface, the platform will organize your expense records by function (program, administrative, or fundraising) and categorize your revenue data by source.

You’ll also need to manually create two extra classes for permanently and temporarily restricted funds, since QuickBooks doesn’t track them directly.

5. Set up Your Chart of Accounts

Your nonprofit’s chart of accounts serves as a directory of all of the financial information you store in QuickBooks Online. QuickBooks has its own numbering system for charts of accounts that is also fairly business-oriented rather than nonprofit-specific. For clarity and consistency, we recommend also customizing this resource to align with the numbers on the Unified Chart of Accounts:

Assets (what your nonprofit owns): account numbers beginning with 1000
Liabilities (what your nonprofit owes): account numbers beginning with 2000
Net assets (what your nonprofit is worth): account numbers beginning with 3000
Revenue (what your nonprofit earns): account numbers beginning with 4000-6000
Expenses (what your nonprofit spends): account numbers beginning with 7000-9000

When you assign these numbers to each of your nonprofit’s financial designations, you’ll end up with a chart of accounts that looks something like this:

How to Use QuickBooks at Your Nonprofit

Once you set up your chart of accounts, you’re ready to start using QuickBooks Online! Here are a few ways your nonprofit can leverage this solution in its bookkeeping and accounting practices:

Recording transactions. Whenever your nonprofit spends or brings in money, your bookkeeper will ensure the information is recorded in QuickBooks. While they may still need to do some manual data entry, QuickBooks’ integrations and automation can streamline this process and allow them to focus on more complex bookkeeping tasks like allocating expenses and running payroll.
Tracking restricted funds. Although you need to set up this tracking manually, the QuickBooks platform can organize your revenue into unrestricted, temporarily restricted, and permanently restricted categories. This makes it much easier to honor donors’ restrictions on their contributions and spend the right money on the right projects.
Comparing budgeted vs. actual numbers. If you create your nonprofit’s annual operating budget in QuickBooks, you can easily refer back to it to ensure you’re on track with spending and fundraising and make adjustments as needed throughout the year.
Managing grants. QuickBooks also allows you to upload grant budgets and create invoices specifically for recording grant funding so you can lay the groundwork for effective grant management and reporting.
Creating financial statements. Along with the aforementioned statement of activities, your nonprofit can pull its annual balance sheet, functional expense report, and monthly cash flow statements directly from QuickBooks to promote external transparency and allow for better internal decision-making.
Filing tax forms. In addition to your Form 990, QuickBooks is also helpful for doing your due diligence as an employer each year by filling out individual W-2s and 1099s for each of your nonprofit’s employees and contractors, respectively.

Although QuickBooks Online simplifies all of these processes, it’s still most effective to navigate them with expert help from nonprofit financial professionals, like the team at Jitasa. QuickBooks setup comes standard with our bookkeeping and accounting services, and our experienced accountants are prepared to answer any questions you may have and help you make the most of the platform based on your organization’s unique needs.

QuickBooks Online is a robust accounting solution that, when leveraged effectively, can provide a variety of benefits to your nonprofit. Follow the steps above to get started, and don’t hesitate to reach out to nonprofit financial professionals (like the team at Jitasa) if you have any questions or want to learn more about maximizing your nonprofit’s use of QuickBooks.

For more information on integrating QuickBooks into your nonprofit’s accounting practices, check out these resources:

Nonprofit Form 990 Filing: FAQ Guide + How to Get Started. Learn the basics of filing your nonprofit’s annual tax returns, which all of your other activities in QuickBooks should support.
Understanding and Applying GAAP for Nonprofits: FAQ Guide. Discover what the Generally Accepted Accounting Principles (GAAP) are, why they matter, and how using accounting software can help your organization comply with them.
Nonprofit Bookkeeper vs. Accountant: What’s the Difference? Explore the differences between the roles of a nonprofit bookkeeper and accountant, the two professionals who will probably work in your organization’s QuickBooks account the most.

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Best Practices for Smart Fundraising Event Budgeting

2025-08-21T12:00:00Z

Nonprofit fundraising events are unique beasts. They’re not just about providing a great experience (though that is important)---they’re about raising meaningful funds, strengthening donor relationships, and engaging your supporters and community.

Unlike general nonprofit budgeting, event budgeting demands a more focused, strategic approach that accounts for both revenue generation and impact measurement. Done right, it drives mission-critical revenue and deepens your relationship with supporters and donors. Done poorly, it can eat into your bottom line and leave you wondering where things went off track.

That’s why smart fundraising event budgeting is so important. Having a clear, realistic budget ensures your event generates both financial returns and relationship-building ROI. It also gives your nonprofit a better understanding of where funds are going, which event revenue streams are most effective, and how to improve year over year. Whether you’re holding a gala, auction, charity golf tournament, or other fundraiser, applying these best practices in your budgeting processes can help your nonprofit reach its goals.

1. Define Event Goals & Build Your Budget Foundation

Before you crunch a single number, start with your goals. Are you hosting the event to raise a specific amount of money? Acquire new donors? Steward key supporters? Raise awareness about your mission? Having clear event goals helps shape your budget and benchmarks for success.

Let’s use a charity golf tournament as an example. A strong budgeting foundation should include:

A realistic net revenue goal. For instance, if your revenue goal is $50,000 and you project $20,000 in expenses, then you’ll need to bring in $70,000 to hit that mark.
Cost per dollar raised (CPDR). This key performance indicator (KPI) measures the efficiency of your fundraising efforts. For example, a CPDR of $.30 means you spend 30 cents for every dollar raised. In the above example, spending $20,000 to net $70,000 means your CPDR is $.29.
Breakeven analysis. Know your minimum revenue target to cover all costs so you have a baseline if revenue falls short.
Alignment with your annual operating budget. Make sure your event budget fits well within your nonprofit’s broader operating budget and is not a standalone item.
Clear benchmarks. Incorporate benchmarks such as team registrations, sponsorship targets, and average donation size.
Cost classification:
- Fixed costs. These include hard costs like the golf course rental, greens fees, cart rental, hole-in-one insurance, and signage.
- Variable costs. These costs are more flexible, depending on your tournament goals, and include food and beverage, swag bags, pin prizes, and on-course game prizes.
- Contingency funds. It’s a good idea to allocate 5-10% for surprise costs or budget overages.

2. Maximize Revenue With Strategic Fundraising Streams

Your event budget shouldn’t focus solely on controlling costs. It should also include avenues to boost revenue that deliver a strong ROI. Thoughtful planning around revenue streams can increase your event’s net return and reduce your CPDR.

Let’s say you’re hosting a charity golf tournament. You might consider these key revenue strategies:

In-kind contributions. Don’t overlook non-cash gifts! These might include donated food and beverages, player gifts, auction items, raffle prizes, or services like printing or marketing.
Sponsorships. Secure multi-tier sponsorships with attractive, tailored benefits, such as strategic logo placement, speaking opportunities, event signage, or branded giveaways.
Revenue enhancers. Fun add-ons like on-course games, raffle drawings, auctions, or on-course games can significantly boost revenue. High-end offerings, like VIP ticket upgrades and early access packages, add value and fundraising revenue.
Peer-to-peer fundraising. Let your supporters raise money for you. Peer-to-peer campaigns tap into broader networks and can grow your donor base beyond the event itself.
Mobile giving and matching gifts. Offer mobile-friendly donation tools for real-time, tournament-day giving. Double the Donation recommends encouraging supporters to explore any corporate giving programs with their employers to double their contributions.

3. Use a Simple Budgeting Template

To keep your event on track and on target, you need an easy-to-use budgeting template for nonprofit accounting purposes. You don’t necessarily need to use software (though platforms like QuickBooks or other budgeting software can be helpful); Excel or Google Sheets can work well for nonprofit teams with more basic needs. If your organization has a larger budget, an accountant or outsourced financial expert can help with planning and ensuring accuracy.

Your budget template should track:

Estimated vs. actual expenses
Committed (pending) vs. paid expenses
Forecasted vs. actual revenue
Payment due dates
Vendor quotes

You’ll likely share files with your team, but take some precautions to prevent errors. For instance, keep the formatting clean and consistent. Also, your file should be shareable among your team, but make sure you lock columns or version-control it to prevent accidental edits or confusion among team members.

4. Monitor Budget Performance & Evaluate Impact

Your budgeting work doesn’t stop once event planning ends. A common nonprofit mistake is treating an event budget as a static document. However, real impact comes from tracking and adjusting as you go.

Here are some tips to actively track spending and stay on top of performance:

Assign a finance lead. This person should ideally be someone with finance or project management experience who can oversee budget tracking and flag issues early.
Have regular budget check-ins. Review spending and revenue line by line during committee or planning meetings to help you catch overruns or shortfalls as early as possible.
Use dashboards or real-time spreadsheets. These resources help everyone involved see where things stand in real time rather than static documents that quickly become outdated.

After the event concludes:

Compare actual vs. projected revenue. Compare actual with projected revenue and expenses to determine ROI on various revenue streams.
Collect stakeholder feedback. Gather important data from attendees, sponsors, and volunteers. Develop an event report that packages the feedback with a financial summary to inform decisions for next year’s event planning.

Next Steps for Smarter Fundraising Event Budgeting

Smart budgeting does take time upfront, but it pays dividends in clarity, efficiency, and ultimately, dollars raised. Here’s what to do next when you start planning your nonprofit’s next fundraising event:

Start budgeting early. Use last year’s numbers or comparable events as a baseline.
Track every expense and revenue stream. Record everything in real time to avoid errors or last-minute surprises.
Set realistic revenue goals. Factor in sponsorships, registrations, donations, and revenue enhancers.
Conduct a post-event budget review. Compare projected vs. actuals, document lessons learned, and use this information to inform your next event.

These smart budgeting best practices will help your nonprofit make the most of every fundraising event, maximizing revenue and mission impact.

5 Nonprofit Revenue Diversification Tips to Amplify Funding

2025-08-20T12:00:00Z

Your nonprofit organization is primarily committed to furthering its mission, but financial management activities are essential to achieving that. One way to ensure your finances are secure and reliable is by generating revenue from multiple sources. This boosts your profits and can help your organization recover more quickly if one source falls through.

Diversifying your nonprofit’s income sources can mitigate financial risk, drive long-term success, and help you provide uninterrupted service no matter the influence of external factors on one source of funding. In this guide, we’ll explore why revenue diversification is so important, the top revenue streams to consider, and how to get started.

Why diversify revenue streams?

The problem with limited revenue streams

A lack of diversity in your nonprofit’s income places you at a higher risk for financial hardship. If something happens to your sole source of money, what will you do to make up for that loss?

For example, say funding from a grant makes up 80% of your revenue for your primary community program. If the grantmaking institution suddenly loses its own funding or decides to redirect the grant you rely on, your organization is left scrambling to find other resources, or else you might have to pause that program.

The benefits of nonprofit revenue diversification

When your funding comes from many places, one source can slow down or end with little disruption to your operations. You may need to replace it, but you will have funding available to cover operations in the meantime.

Diversified revenue streams can also benefit your nonprofit by:

Mitigating financial risk. A diverse funding model shields your nonprofit from unexpected losses that could significantly impact your ability to deliver the services your community counts on.
Enhancing organizational flexibility. Relying on a single revenue source, such as a large grant or a gift from a major donor, can limit how your organization uses funding. Multiple sources give you the freedom to pursue innovative projects without needing to constantly appease one funder.
Helping in times of economic downturn. In the midst of national tragedies or recessions, individual donations may decline as people lower their spending. Having other streams of revenue, like sponsorships, grants, or earned income, can provide a funding safety net.
Strengthening brand awareness. When your nonprofit can navigate financial challenges and is clearly engaged with multiple funding channels, you’ll be seen as prudent and credible. You’ll secure more support from various sources when people interact with your organization in different ways (e.g., they may not be inclined to donate but are excited about attending one of your events).

Revenue diversification ultimately drives resilience and long-term financial sustainability for your nonprofit. You’ll have the freedom and flexibility to expand your services or implement new initiatives that you know will benefit your beneficiaries most.

5 types of nonprofit revenue

When it comes to raising money to support their work, nonprofits aren’t limited to charitable donations from their supporters. Here are five common nonprofit revenue sources you can pursue to diversify your income:

1. Grant funding

Many organizations receive a large portion of their revenue from grant funding. Grants are a form of financial assistance from grantmaking institutions like foundations, which see the funding they provide as an investment in a nonprofit whose work aligns with their values.

The size, scope, and application process vary across grants. For example, application processes range from a single form to lengthy documentation of your impact. Most proposals require good storytelling, competent writing, and a compelling description of your organizational characteristics and why they match what the funder is looking for.

Most grants come with requirements for how recipients may spend the money and reporting requirements. Some grantmakers provide all the funding up front, while others pay out grants in installments as long as your nonprofit continues to meet certain conditions (e.g., enrollment threshold for programs), so make sure you know which type you’re applying for.

2. Fundraising and charitable contributions

These contributions include both monetary gifts and in-kind donations of goods and services.

You can bring in individual donations through fundraising events, donor drives, recurring giving programs, capital campaigns, and many other initiatives. Fundraising looks different for each nonprofit and can vary from year to year as organizational needs change.

3. Earned income

Nonprofits can sell products and services to raise funding to support their missions, and have great success! Examples of this range from nonprofit hospitals that fund their activities by charging for medical care to the annual Girl Scout cookie fundraiser. Other nonprofits might charge a fee for membership or sell merchandise to earn income.

There are tax implications to consider with these activities. Unrelated business income (UBI) is income generated by the regular or ongoing sale of products and services that are not substantially related to your organization’s mission. These activities are subject to unrelated business income taxes (UBIT), and your organization will need to file a separate tax form in addition to its annual return.

However, there are certain scenarios in which this income would remain tax-exempt, including:

The products or services directly promote and educate the customer about the organization’s mission.
- Example: T-shirts or other apparel featuring the nonprofit’s logo and an educational tagline about the cause.
The items being sold result from exempt activities.
- Example: IRS Publication 598 highlights an example in which a nonprofit maintains an experimental dairy herd for scientific purposes and then sells the milk and cream produced during normal operational procedures.
The sale is part of a short-term fundraising initiative.
- Example: Girl Scout cookies are only sold for a few weeks at a time.
The products or services result from volunteer labor.
- Example: A nonprofit establishes a thrift store to boost revenue. The store is run entirely by volunteers and sells donated items.
The items or services provided enhance convenience for staff, supporters, or members.
- Example: A museum has an in-house restaurant, allowing visitors and staff to eat while attending the exhibits.

Keep in mind that this is a simplified version of complicated tax regulations. Before launching a product fundraiser or filing your taxes, be sure to consult with a nonprofit accountant.

4. Corporate philanthropy

Many corporations engage in corporate philanthropy by implementing corporate social responsibility (CSR) initiatives at their business. These programs provide a framework for promoting social good in their communities and supporting the causes their employees care about.

Here are a few common CSR programs that can be an important source of revenue for your nonprofit:

Matching gifts When an employee donates to an eligible nonprofit, they can submit a match request to their employer. The company will then match the employee's donation to the cause, essentially doubling the employee’s contribution.
Corporate grants: These grants are a form of financial support offered to nonprofits by for-profit businesses. Typically, there is an application process similar to foundation grants.
Volunteer grants: This type of corporate grant is typically awarded to organizations where employees regularly volunteer. Every company has its own guidelines for awarding grant funding, but usually, employees must volunteer a certain number of hours before receiving funding based on the number of hours volunteered.

Some nonprofits also form long-term corporate partnerships with businesses. Not only does this expand their network and supporter base, but it also allows them to take on larger projects by sharing resources and expertise with another organization (e.g., a co-branded cause marketing campaign).

5. Government funding

Many nonprofits receive government funding, usually in the form of a grant. Historically, government-issued grants make up a large amount of available grant funding, although cuts to federal funding sources in 2025 significantly impacted nonprofits that relied on those income sources, impacting their staffing, program delivery, and overall sustainability.

These recent events underscore the need to diversify your nonprofit’s revenue sources, even when it comes to grant funding. If you can, seek out grants from private foundations or corporations to avoid leaning too much on just one source.

Renewable vs. nonrenewable funding

While all funding is appreciated, not all funding is created equal. Some funding happens just once, while other sources are offered many times. Having a mix of renewable and nonrenewable funding is ideal.

Examples of renewable funding

Renewable funding is often the result of annual fund contributions and is usually not restricted. Renewable income can also come from monthly giving programs, multi-year grants, or endowment funds.

Examples of nonrenewable funding

Nonrenewable funding is more unpredictable as it varies year to year. For example, if you sell t-shirts for a one-time event, you can’t count on having this income the following year. In fact, most fundraising efforts are considered nonrenewable.

While both types of funding should be planned for and accounted for in your nonprofit’s budget, renewable funding offers more stability.

5 strategies to diversify nonprofit revenue streams

Knowing what types of funding exist is only half the battle. Being able to actually diversify your income is the next step you’ll have to take. Here are a few tips for getting started:

1. Expand your donor base

This may sound straightforward, but one of the best things you can do is look for new donors to grow your overall donor base and stabilize your organization’s financial standing. A few ways to do this include:

Boosting your presence on social media and other digital platforms.
Holding peer-to-peer fundraising campaigns that help you reach current donors’ personal networks.
Investing in email and content marketing (or even trying out influencer marketing).
Optimizing your website to make it more visible and findable via search engines.
Forming partnerships with peer organizations or corporations to reach their communities and networks.

Additionally, make sure you can tap into audiences who will want to support your work for a long time. Engaging potential donors who are likely to donate many times over many years offers a better return on investment (ROI) than engaging those who only donate once. Decide who your audience is, how you might reach them, and what you’ll need to do to build a lasting relationship with them.

2. Form corporate partnerships

Form alliances with businesses in your community without the expectation of financial support. Focus on cultivating relationships with people who know people to strategically expand your network. These relationships can provide many benefits for your nonprofit, including additional revenue.

When reaching out to businesses about forming partnerships, remember to present the reasons these partnerships would be beneficial to them. For example, if you want a business to sponsor your charity 5K, explain that you plan to promote their company by adding their name and logo to the event t-shirt, marketing materials, and venue signage. Additionally, share statistics about the size of your audience and how donors’ interests may overlap with the business’s offerings.

3. Focus on Grants

There are so many grants available, and you’re likely only applying to a small percentage of them. Because the application process can be so time-consuming, it can be advantageous to hire an experienced grant writer. These professionals are experts at writing compelling grant proposals, but they can also help you research grants and develop a grant strategy. A nonprofit accountant may also assist with grant management, helping you use funds effectively and meet the funder’s requirements.

4. Sell Products or Services

No matter your niche, there is probably a product or service you can offer that promotes and educates donors about your mission. Branded merchandise and tutoring services are great (and relatively easy) examples of ways you might make some money and diversify your income.

However, you need an organized way to present and sell the products, and an online store can do just that. With an online store, your organization can:

Clearly list and describe all of the products or services you offer.
Customize the store with your organization’s branding and mission statement, providing seamless, trustworthy shopping experiences.
Smoothly and securely accept various payment methods.
Adjust pricing as needed to maximize profits in relation to sales quantities.
Collect and export the contact information of supporters who purchase products.

Ideally, you should look for a platform that allows you to set up your store for free, offers nonprofit-friendly fees on sales, and manages order fulfillment and shipping for you. Additionally, tools designed for fundraising will allow you to collect additional donations from your generous supporters.

5. Steward Your Support System

Always remember to practice gratitude. Show your appreciation for donors with:

Prompt, personalized thank-you messages.
Donor appreciation events.
Free branded merchandise as a thank-you for their ongoing support.

When you build intentional relationships with the individuals and businesses giving you money, they’ll be more inclined to give or tell their friends about your cause. Approach things from an authentic place and find ways to recognize the people who support your organization.

One or two income streams are great, but ten are even better. In a perfect world, you’ll have income from monthly giving, grants, fundraising events, major gifts, and sponsorships—all at the same time. Plan for as many sources of funding as you can responsibly manage, and increase your goals over time to set your nonprofit up for years of continued success.

Nonprofit Form 990 Filing: FAQ Guide + How to Get Started

2025-08-01T15:00:00Z

If your nonprofit has a valid 501(c)(3) status, it’s exempt from paying federal income tax, as well as most state taxes. However, this doesn’t mean your organization can completely write off tax season! To maintain your status, nonprofits like yours still have to file an annual tax return via IRS Form 990.

Rather than determining how much your nonprofit owes in taxes, Form 990 demonstrates that you’re handling funds properly and have sound financial management practices in place, meaning your organization is still worthy of its exempt status. In this guide, we’ll explain everything you need to know about Form 990 filing by covering the following topics:

Filing your Form 990 is the culmination of your annual financial activities and data collection, which should all point your nonprofit toward long-term sustainability and increased impact. Let’s get started!

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Nonprofit Form 990: Frequently Asked Questions

At first glance, filing Form 990 might seem like a confusing, taxing process. So, let’s walk through the answers to some of the most common questions about this document.

What Is Form 990?

Form 990 is the tax return document that exempt organizations complete each year and file with the IRS. The government uses this form to ensure all registered nonprofits are legitimate and financially honest, which tells them whether each organization deserves to maintain its tax-exempt status.

Although the IRS updates Form 990 from year to year, yours will probably look something like this example:

Does My Nonprofit Also File State Tax Returns?

It depends on what state your organization operates in. Each state government has slightly different requirements for remaining tax-exempt. You’ll likely have to do some combination of the following:

File a separate state-specific income tax return, such as Form 199 in California or Form CHAR500 in New York.
Send your state government a copy of your Form 990.
Complete other forms that aren’t strictly tax returns but are still required for compliance, such as annual reports, property or sales tax exemption applications, or charitable solicitation registration renewals.

There are plenty of resources available online to help you stay up to date on your state’s filing requirements. Just make sure that if your organization operates in multiple states, you understand how to maintain compliance in all of them.

What Organizations File Form 990?

Although Form 990 is designed exclusively for exempt organizations, not every exempt organization has to file Form 990. Organizations that are required to file it include:

Traditional nonprofits
Private healthcare organizations and systems
Independent educational institutions
Tax-exempt associations
Public and private foundations

Exempt organizations that do not have to file Form 990 include:

Houses of worship (churches, synagogues, temples, mosques, etc.) and their integrated auxiliaries (e.g., church-affiliated schools or religious conventions)
Governments and government-run organizations (e.g., public schools and universities or municipal hospitals)
Political organizations (they have a separate federal return, Form 8872)

If you’re unsure whether your organization needs to complete Form 990, the answer is probably yes, but you can double-check with a nonprofit financial professional just to be safe.

Which Version of Form 990 Should I File?

There are four versions of Form 990, and which one your organization files depends on your annual gross receipts and total assets. Generally speaking, the larger your nonprofit is, the longer your Form 990 needs to be so you have space to report all of your financial activities.

Here is a quick breakdown of the four Form 990 versions and the criteria for filing each one:

Form 990-N (e-postcard): Your nonprofit can file this form if your gross receipts total less than $50,000. Form 990-N is an eight-question online form that asks for your organization’s legal name and address, employer identification number (EIN), tax year, website URL, principal officer’s name and address, and confirmation of gross receipts under $50,000.
Form 990-EZ: Your organization can file this form if your gross receipts are less than $200,000 and your total assets equal less than $500,000. Form 990-EZ is a condensed version of the full Form 990 and is about four pages long when printed.
Full Form 990: Your nonprofit has to file this 12-page, comprehensive tax return if your gross receipts total $200,000 or more, or if your total assets equal $500,000 or more. Make sure to use your total assets in this calculation, not your net assets, as your total assets will almost always be a larger number.
Form 990-PF: All private foundations need to complete this 13-page form, regardless of their total assets or gross receipts. Foundations tend to be more financially complex than other nonprofits, so the IRS requests additional, consistent information on private assets, trustees, officers, grants awarded, and other activities to ensure your organization is allocating funds properly.

Your nonprofit can save time and resources by ensuring that you’re filing the right size form (and again, checking with an accountant if you need help figuring that out!).

When Is the Form 990 Filing Deadline?

Your nonprofit’s Form 990 is due on the 15th day of the fifth month after the end of its fiscal year. If your organization’s fiscal year follows the calendar year (as most nonprofits’ do), your Form 990 deadline is May 15. If your nonprofit has a different fiscal year, you’ll need to adjust accordingly—for instance, organizations that use a July-to-June fiscal calendar (which is common among educational institutions because it roughly aligns with the school year) have to submit their Form 990s by November 15.

Additionally, your nonprofit can apply for an official extension of your Form 990 deadline as needed using IRS Form 8868. As long as your request is approved, your due date can be pushed back by up to six months.

What Happens If I File My Form 990 Late?

In the situation that you don’t submit your Form 990 by the deadline, apply and get approval for an extension, or provide reasonable cause for filing late as defined by the IRS, your nonprofit will be subject to financial penalties as follows:

If your gross receipts are less than $1,208,500 for the tax year, the penalty is $20 per day that the return is late. The maximum possible fee is either $12,000 or 5% of your organization’s gross receipts, whichever is less.
If your gross receipts are greater than $1,208,500 for the tax year, the penalty is $120 per day that the return is late, with a maximum fee of $60,000.

If your nonprofit fails to file Form 990 for three years in a row, your nonprofit’s 501(c)(3) status will be revoked. In this case, you’ll need to file Form 1023 again and pay additional fees to re-register your organization as tax-exempt. Long story short, make sure to file your Form 990 on time!

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What Do I Do About My Form 990 While My Nonprofit Conducts an Independent Audit?

If your nonprofit is planning to undergo an independent financial audit, we recommend doing so before filing your Form 990 and applying for an extension as needed. That way, you can update your return with relevant details from your audit report and changes you’ve made to your financial management practices based on those results before submitting it. Plus, you won’t have to navigate two time-consuming financial processes at the same time!

Preparing for an audit will also prompt your organization to take some preliminary steps that will help you get ready to file your Form 990, such as compiling financial statements and cleaning up your accounting records. Make sure all of your audit resources are easily accessible so you can reference them again as your tax return deadline approaches.

Note: An independent financial audit is different from an audit conducted by the IRS, which is less common for nonprofits than for individuals and for-profit organizations. However, an IRS audit can be triggered if you don’t file your Form 990 for one year or reviewers discover a discrepancy in it.

Who Has Access to My Nonprofit’s Form 990?

All Form 990s are required to be publicly available for at least three years after filing, meaning anyone can find the information on your forms once the IRS publishes them. Be careful not to include sensitive information in your returns—for example, Social Security numbers are strongly discouraged due to concerns around (and past incidents of) identity theft.

Nonprofit research companies like Guidestar use Form 990s to provide donors with additional information about organizations they’re interested in supporting. Your nonprofit can choose to register with Guidestar to make this information more accessible and boost transparency. Additionally, you can publish your Form 990 on your organization’s website and include data from it in your annual report so it’s even easier for interested donors to find.

Why Form 990 Filing Is Important

Your Form 990 is arguably the most critical financial report you compile each year. There are many reasons to take this process seriously and treat it with care, including that:

It allows you to maintain your nonprofit’s status. As discussed previously, filing a Form 990 each year is essential for keeping your nonprofit’s 501(c)(3) status. Plus, avoiding the penalties for failing to file is good for your organization’s financial health.
It holds your organization accountable. Filing taxes each year is a good opportunity to regularly review your organization’s financial information and identify strengths and areas for improvement.
It promotes financial transparency. Because Form 990s are public records, donors, funders, and community members can gain valuable insight into your nonprofit’s finances when they look up your past tax forms. This can instill confidence that boosts supporter acquisition and retention.
It proves your nonprofit’s integrity. Carefully preparing your Form 990 not only shows that your organization is acting honestly (and unfortunately, there are often news stories circulating that show this isn’t always the case) but also can be helpful in identifying and mitigating financial risks.

Beyond just ensuring compliance, accurately filing your nonprofit tax returns is essential for effective financial planning and maximizing these benefits!

How to File Your Nonprofit’s Form 990

There are two main ways you can go about completing your Form 990: filing on your own or working with an accountant. Filing on your own is possible, but if your leaders don’t have a background in accounting, it can be challenging to keep up with changes in the tax system and resolve issues that may come up during the process. If you choose this method, you should also note that all nonprofit tax returns have to be filed electronically.

The best way to make sure your Form 990 is completed correctly and on time is to bring on an accountant who has experience working with nonprofits. Since hiring a new full-time staff member can be expensive and time-consuming, many organizations instead choose to outsource their tax preparation and other accounting needs to nonprofit-specific firms whose services align with their goals and budgets.

We may be a little biased, but we recommend Jitasa as the best nonprofit accounting firm to file your organization’s Form 990. Our experts have completed tax returns for nonprofits of all sizes and missions, meaning they have experience with many different financial situations and can meet your organization’s unique needs—all at an affordable flat rate! Plus, you can partner with Jitasa just for tax filings, or you can work with us year-round to cover all of your accounting, bookkeeping, operational, and advisory needs.

Jitasa accountants have completed 5,000+ federal and state nonprofit tax filings—and we're ready to help with yours, too!

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Form 990 filing is an unavoidable but fulfilling part of running a financially responsible nonprofit. Learning about your Form 990 is the first step in ensuring a successful tax season. The next step is completing the form, which is much easier when you partner with a nonprofit accounting firm like Jitasa!

For more information on nonprofit tax filings, check out these resources:

Form 1099 for Nonprofits: How and Why to Issue One. Discover another important tax form, Form 1099, which your nonprofit will need to issue to any independent contractors you work with.
In-Kind Donations: The Ultimate Guide + How to Get Started. Dive deeper into one of the most challenging types of contributions to report on your Form 990 (but also one of the most beneficial for your mission!): in-kind donations..
12+ Top Nonprofit Accounting Firms & How to Choose One. Explore our recommendations for outsourced nonprofit accounting services to help you file your annual tax returns.

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Nonprofit Bookkeeper vs. Accountant: What’s the Difference?

2025-06-17T15:01:15Z

When your nonprofit was just starting out, your executive director likely handled most of your organization’s financial tasks. This means they were essentially a bookkeeper and accountant on top of all of their other duties. However, as your organization grew and more complex situations arose, having a separate bookkeeper and accountant became essential to ensure thorough and accurate financial management.

Bookkeepers and accountants work closely together, making it easy to confuse these two roles and their responsibilities. In this guide, we’ll clear up the confusion by covering the following topics:

Regardless of whether your bookkeeper and accountant are in-house staff members or outsourced professionals, you should know the difference between the two before you start recruiting. Let’s dive in with an overview of the different financial positions your nonprofit needs to fulfill and who you should task with each one.

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Nonprofit Financial Roles: an Overview

Although this guide will primarily focus on bookkeepers and accountants, there are four financial positions that your nonprofit must fill. Each of these professionals has different responsibilities, so to help differentiate them, we’ll assign a unique keyword you can associate with their work.

Here is a quick breakdown of these nonprofit financial roles:

Your nonprofit treasurer is the main financial expert on your board of directors, and the keyword to associate with their work is oversight. Their duties include approving your organization’s financial policies and planning documents, developing risk management strategies, and presenting recurring reports to the rest of the board.
Your chief financial officer (CFO) is either a full-time member of your nonprofit’s leadership team or an external professional hired on a fractional basis to work closely with your leaders. They’re responsible for tasks like forecasting cash flows and managing grants. The keyword to associate with this role is strategy.
Your nonprofit bookkeeper takes care of your organization’s day-to-day financial needs like tracking transactions, writing checks, and processing payroll. Their keyword is recordkeeping.
Your nonprofit accountant is responsible for financial analysis at your organization. They take the information your bookkeeper records and draw actionable insights from it to improve your financial management practices. They also report your financial data in a variety of ways (more on this later!).

Although these professionals have distinct duties, they also collaborate often. For example, your CFO will typically take the lead on creating your organization’s annual operating budget because they’re in charge of strategic financial planning. However, to create this budget, they’ll rely on data recorded by your bookkeeper and analyzed by your accountant to predict the coming year’s revenue and expenses. Then, your treasurer has to sign off on the budget before it goes into effect.

Comparing the Nonprofit Bookkeeper vs. Accountant

Bookkeepers and accountants are both professionals below the executive level who collaborate closely, so their duties can be challenging to differentiate. We’ll break down their responsibilities to help you understand the difference between the two positions.

Nonprofit Bookkeeper

Bookkeepers don’t typically need any specialized education or certifications to do their jobs well, although they may find it helpful to have some basic training on how to use your accounting software. However, nonprofit finances operate differently from those of for-profit organizations. Therefore, to serve your nonprofit effectively, your bookkeeper should have enough baseline financial knowledge to track multiple revenue streams and funding restrictions.

Your bookkeeper’s main duties include:

Entering basic data. Bookkeepers record all of your organization's key expenditures, income, and other financial data in an organized manner within your accounting software.
Writing checks. For example, a bookkeeper will pay rent, utilities, vendor fees, and other basic expenses, either digitally or using traditional paper checks.
Making deposits. Bookkeepers handle general bank transactions and record the basic information associated with them.
Processing payroll. There is some overlap between nonprofit bookkeeping and human resources when it comes to payroll, but most small to mid-sized organizations assign this responsibility to their bookkeeper.
Allocating costs. Although your accountant and CFO will handle most of your nonprofit’s expense allocation strategy, your bookkeeper needs to understand the general categories of functional expenses (program, administrative, and fundraising) to ensure that allocation goes smoothly in practice.

In general, a nonprofit bookkeeper is responsible for keeping records up-to-date and organized whenever funds change hands or new financial data is created. Bookkeeping, in essence, lays the foundation for the accounting processes that follow.

Nonprofit Accountant

Unlike bookkeepers, accountants are required to have at least a bachelor’s degree in accounting or a related field, and many also pursue more advanced degrees. They also need to pass a series of specialized exams to be considered a certified public accountant (CPA). This is because the analytical duties associated with accounting are much more complicated and require a deeper understanding of various financial topics than a bookkeeper’s.

At nonprofits like yours, accountants are typically responsible for:

Reviewing all of your organization’s accounts. Accountants make sure everything in your nonprofit’s accounts looks correct in order to fully understand your financial situation and resolve any discrepancies that may arise.
Balancing and reconciling transactions. In double-entry nonprofit accounting systems, bookkeepers typically record one side of a transaction at a time. Then, your accountant ensures the debit and credit values for various transactions are balanced and matches them to the information on your organization’s bank statements.
Compiling financial statements. Nonprofits compile a standard set of financial reports each year, including the statements of activities, financial position, cash flows, and functional expenses. Your accountant will create and analyze each of these reports to draw conclusions about your organization’s financial health.
Preparing for audits. If your nonprofit undergoes an independent financial audit for any reason, your accountant will help you choose the right auditor, compile all of the necessary documentation, and clean up your accounting system so it’s ready to go.
Filing tax forms. Although your nonprofit is tax-exempt, you still need to file a federal tax return each year via IRS Form 990, as well as individual W-2s and 1099s for your organization’s employees and contractors, respectively. Your accountant ensures all of these forms are filled out correctly and submitted on time.
Analyzing operating budgets. As mentioned above, your accountant analyzes the financial data that goes into your nonprofit’s annual operating budget and reviews the budget before it’s finalized.
Maintaining compliance. To maintain transparent accounting practices, both for-profit and nonprofit organizations are expected to follow the Generally Accepted Accounting Principles (GAAP). Nonprofits are also subject to unique government regulations due to their tax-exempt status. As your accountant analyzes your nonprofit’s finances, they will ensure your organization follows all of these standards.

Essentially, accountants look at the data recorded by bookkeepers, analyze it, and develop recommendations to improve your organization’s financial management practices. This is why your nonprofit needs both a bookkeeper and an accountant. Accountants have the expertise to evaluate your finances that bookkeepers may not, while bookkeepers take financial data collection and tracking off your accountant’s plate so they can focus on higher-level tasks.

Learn more about your accountant’s responsibilities in our Beginner’s Guide to Nonprofit Accounting.

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Other Nonprofit Financial Roles

We briefly touched on two other financial management roles at your nonprofit: your treasurer and your CFO. Let’s take a closer look at each of these positions and how their responsibilities differ from those of your bookkeeper and accountant.

Treasurer

While your bookkeeper records your data and your accountant analyzes that information, your treasurer is responsible for overseeing financial activities and communicating pertinent information to your board. Though your treasurer is a member of your board, they often act as an intermediary between your board and staff, providing financial details to both groups.

Typically, a treasurer’s responsibilities include:

Strategic planning. Your board is responsible for paving your nonprofit’s future direction, and the treasurer’s role is to provide financial guidance to ensure the goals in your nonprofit’s strategic plan align with your organization’s budget.
Budgeting. Your bookkeeper, accountant, and treasurer will all play a role in setting your annual budget. However, budgets typically require board approval, and your treasurer should be able to answer fellow board members’ questions in detail so they can make an informed decision about signing off.
Financial policy development. Treasurers’ main responsibility is oversight, and as such, they help create policies to guide your organization’s financial practices. For instance, they often set guidelines for gift acceptance, expense reimbursement, and compensation.
Reporting. While your accountant analyzes your data to create reports, treasurers create their own separate monthly or annual reports to help other board members understand organizational cash balances, revenue, and expenses. These resorts are also used in conversations with prospective major donors to explain your nonprofit’s financial need.
Audit preparation. Alongside your accountant, your treasurer will also play a role in assessing potential auditors and compiling necessary documents.
Risk management. Nonprofit boards are generally responsible for managing risks and creating contingency plans. As such, your treasurer is tasked with identifying and resolving issues related to fraud, theft, and noncompliance.

Your treasurer needs two sets of skills to do their job well: financial knowledge and communication abilities. These skills allow them to present financial information to your board, answer questions, and provide guidance for financial planning.

CFO

Your nonprofit’s CFO is essentially the leader of your organization’s financial operations. They are responsible for crafting and overseeing your overall financial strategy. This means their work often intersects with your accountant and treasurer’s, taking on tasks related to financial planning and budgeting.

While large organizations often have a permanent CFO, small nonprofits often work with external agencies to hire fractional CFOs. Though CFOs are important, small organizations often have fewer responsibilities for their CFO, so fractional CFOs can provide affordable access to expertise on a part-time basis.

When hiring a fractional CFO, look for a firm that specializes in nonprofit finance, like Jitasa. Our team has years of experience working with a wide range of nonprofits, and we can bring those insights to help your nonprofit build strategic financial plans, create strong internal processes, and analyze your data to find key opportunities.

Hiring Nonprofit Bookkeepers and Accountants

How you recruit a bookkeeper and accountant depends on your nonprofit’s financial needs and hiring budget. Let’s look at the different options for working with these professionals and the steps for hiring them in more detail.

Types of Nonprofit Bookkeeping and Accounting Services

There are three main ways your nonprofit could work with a bookkeeper and accountant, each with its own advantages and disadvantages. You might also use one method to hire your bookkeeper and a different one to hire your accountant.

Here is an overview of the three types of nonprofit bookkeeping and accounting services:

Hiring in-house. Large nonprofits with complicated bookkeeping and accounting needs often hire full-time professionals who can focus exclusively on their needs. In-house bookkeepers and accountants tend to be highly motivated and turn around projects quickly. However, hiring and onboarding new staff members is expensive. Additionally, if they make any mistakes in your financial reporting, your nonprofit will be held liable.
In-kind donations. Small organizations that are just getting started with financial management may recruit a volunteer to do their bookkeeping and ask local accountants to contribute their services pro bono. This option is completely free and helps new nonprofits establish professional relationships. However, unpaid bookkeepers and accountants may have limited motivation and can choose to end their relationship with your organization at any time.
Outsourcing to an accounting firm. Outsourcing balances long-term access to bookkeeping and accounting expertise with cost effectiveness. It still provides consistent professional relationships, and the firm you hire is liable for any mistakes, motivating them to produce high-quality work. The only drawback is that turnaround may take longer because firms often have many clients, although effective communication can help with this.

No matter which option your organization chooses, ensure your bookkeeper and accountant have experience working with nonprofit finances. Nonprofit bookkeeping and accounting are different from for-profit financial management in both purpose (ensuring transparency vs. maximizing profits) and practice. Your financial professionals need to understand these key differences to produce useful deliverables for your organization.

How to Hire a Bookkeeper or Accountant

Once you’ve chosen your hiring method(s) for your nonprofit bookkeeper and accountant, follow these steps:

Finalize your goals. Determine the top two or three responsibilities you need each of your financial professionals to fulfill so you can hire someone who is willing and able to complete those tasks.
Conduct online research. Look up nonprofit bookkeepers and accountants in your area, see what services they provide, and read reviews from past clients. Also, consider contacting other nonprofits in your network to see if they have recommendations.
Reach out to your top candidates. Narrow down your list based on your research, then arrange a meeting with each of your top picks to discuss your goals and determine whether they would be a good fit for your organization.
Make your final decision. Keep your budget in mind as you assess your top candidates, and establish a contract with your chosen partner before you start working together.

If you’re looking for an outsourced partner in nonprofit bookkeeping and accounting, Jitasa offers affordable, tailored services for both! Our team works exclusively with nonprofits and brings their years of experience to the table to fulfill your organization’s needs and achieve your financial goals.

Both a bookkeeper and an accountant are essential for your nonprofit to manage its finances. With a thorough understanding of each role, you can find the right fit when hiring, soliciting in-kind donations, or outsourcing your bookkeeping and accounting services.

For more information on nonprofit bookkeeping and accounting, check out these resources:

What Is Fund Accounting? A Guide to Basics & Best Practices Learn more about fund accounting—the unique system nonprofits use to track their finances—to get a better idea of the expertise you’re looking for in a nonprofit bookkeeper and accountant.
Nonprofit Chart of Accounts: How to Get Started + Example. Discover a key organizational resource that both your nonprofit bookkeeper and accountant will leverage in their work: the chart of accounts.
Bookkeeping and Accounting Services Exclusively for Nonprofits. Explore Jitasa’s outsourced nonprofit bookkeeping and accounting services in more detail to see if they would be a good fit for your organization.

See how Jitasa’s affordable, tailored bookkeeping and accounting services can work for your nonprofit.

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Restricted Funds: Everything Your Nonprofit Needs to Know

2025-06-16T12:00:00Z

In a 2024 Give.org survey of nonprofit supporters, 67% of respondents said they think it’s essential to trust an organization before contributing to it. However, only 22% of respondents to the same survey highly trust nonprofits. From these numbers, it’s easy to see that there is a need for nonprofits like yours to build trust with donors, and effective financial management is a major aspect of this process.

One of the most challenging but important areas of nonprofit finance for increasing donor trust is properly handling restricted funds. In this guide, we’ll cover the basics of nonprofit funding restrictions, including:

By honoring supporters’ and funders’ restrictions on their gifts, you can demonstrate that you’re committed to fulfilling your promises and furthering your mission, making donors feel more confident in your nonprofit—and therefore more likely to give.

Properly manage restricted funds with expert help from Jitasa’s accounting team.

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Restricted Funds: Frequently Asked Questions

Since restricted funds can be confusing, especially if you haven’t handled this type of funding before, let’s begin by answering a few common questions about them.

What are restricted funds?

Restricted funds are nonprofit contributions that are earmarked for a specific purpose by the contributor. When making a gift, donors and funders have the legal right to choose designations for the funding they contribute to your nonprofit and require that their gifts be used only for their chosen initiative.

On the flip side of restricted funds are unrestricted funds, which are contributions with no designations attached. Your organization can decide what its greatest need is for those funds and allocate them as you see fit.

Why are restricted funds important?

Restricted funds are significant for both your nonprofit and its donors. (Not to mention the government—the IRS expects to see accurate reporting and proper usage of restricted funds on your annual tax return, which demonstrates that your organization prioritizes accountability in all aspects of its financial operations.)

For your nonprofit, restricted funds matter because most of your largest contributions likely come with designations. It’s estimated that 80% of individual donation revenue comes from the top 20% of nonprofit donors. Plus, other significant revenue sources like grants and fiscal sponsorships are vital to your organization’s success, and these contributions are frequently restricted as well.

Most large-dollar donors and funders want to understand exactly where their money is going before giving it away. So, for stakeholders, restricted funds give them control over how their contributions will further your mission. They’ll often put their gifts toward areas of your work they’re passionate about. For example, if a major donor to your environmental nonprofit highly values education and has served on their local school board, they might designate their gift for your initiative to teach K-12 students about recycling.

What risks are associated with funding restrictions?

Your nonprofit’s key stakeholders tend to take restricted funds very seriously, so you should, too. The reason restricted funds are so challenging is because there are several major risks associated with managing them incorrectly, including:

Legal noncompliance. If the IRS discovers that your nonprofit hasn’t honored funding restrictions, you may face fines or even lose your tax-exempt status. Donors and funders who impose restrictions on contributions also reserve the right to sue your organization for misallocation of funds.
Reputation damage. Improperly allocating restricted funds doesn’t just damage your nonprofit’s relationship with that one supporter—it can also make the rest of your community see your organization as untrustworthy.
Inaccurate assessment of financial health. Failing to account for funding restrictions may give you the impression that you have more cash on hand to cover your nonprofit’s costs (especially overhead expenses, as very few donors designate gifts for these) than you actually do, skewing your budget and revenue goals.
Strategic misalignment. Most restrictions are established during conversations between potential donors and staff members at your organization, or else are set forth by funders of grants your nonprofit chooses to apply for. If you don’t select grant opportunities carefully or allow donors to designate gifts in ways that don’t align with your nonprofit’s strategic plan, these funds will start to hinder your goals rather than help them.

While these risks are real and can be detrimental to your nonprofit, it is possible to manage and mitigate them. Ensure everyone at your organization is well educated about funding restrictions and is committed to pushing your current priorities forward through solid financial management so they can seek out and handle restricted contributions properly.

Dive deeper into restricted funds with our free course!

Types of Nonprofit Funding Restrictions

Not all funding your nonprofit receives will be restricted in the same ways. Here is a breakdown of the three major categories of nonprofit funds (sometimes also referred to as categories of nonprofit net assets) according to how your organization should track them in a fund accounting system.

Unrestricted Funds

As mentioned previously, unrestricted funds have no designations, so you can put them toward any expenses listed in your nonprofit’s budget, including:

Administrative costs like staff compensation, utility bills, rent or mortgage payments on your facility, insurance, office equipment purchases, and any other costs necessary to operate your organization day-to-day.
Fundraising costs such as event planning, marketing, merchandise creation, consulting fees, software subscriptions, and other upfront spending on revenue-generating campaigns. Fundraising and administrative costs together make up your nonprofit’s overhead.
Program costs that aren’t fully funded by restricted contributions. For example, if you need $50,000 to launch a new program and you have a $25,000 grant and a $20,000 major gift designated for that program, you can use unrestricted funding to cover the remaining $5,000.

Many types of nonprofit contributions are typically unrestricted, including:

Most small to mid-sized individual donations
Some types of corporate giving, like matching gifts and volunteer grants
Most investment returns, such as interest earned via brokerage accounts
Exchange transactions, which are contributions made with the expectation that the donor will receive something in return, like a piece of merchandise or admission to an event

Only donor-imposed funding designations are legally binding and therefore considered restrictions. However, if you launch a fundraiser and tell donors that all of the revenue from that campaign or event will go toward a specific initiative, it’s in your best interest to follow through on your promise to build trust with those supporters.

Permanently Restricted Funds

Permanently restricted funds typically take the form of endowments. Your nonprofit isn’t allowed to spend these funds directly. Instead, you’ll put them in an investment account and use the interest they generate to fund an ongoing, donor-designated initiative.

Endowment funds are most common among universities and cultural organizations, which use them to support scholarships, research, and other long-term funding needs. However, any nonprofit can start an endowment account and solicit contributions for it to future-proof high-priority areas of their mission.

Temporarily Restricted Funds

Temporarily restricted funds are typically bound by a time limit or a specific purpose. If that time expires or the purpose is fulfilled and there is still money available, you may be able to release the leftover funds from restriction, depending on your agreement with the donor or funder. Some contributors may want the extra money back or have another project in mind to designate it for, but donation agreements where surplus funding becomes unrestricted revenue after the initial conditions are met tend to be the most beneficial for your organization.

The most common types of temporarily restricted funds include:

Major and planned gifts from individual donors
Grants provided by government agencies and foundations
Corporate sponsorships—the one commonly restricted type of exchange transaction (since companies enter into sponsorship agreements with the expectation of receiving free publicity in return for financial support) and the type of restricted funding most often linked to overhead costs (because sponsorship funding is often designated for events)

To see how temporary restrictions work in practice, let’s say your nonprofit launches a capital campaign to renovate your facility, and a major donor contributes $50,000 to the project. The renovations are completed under budget, so you only end up using $48,000 of this donor’s gift. With the donor’s permission, you can release the remaining $2,000 from restriction and allocate it to other areas of your budget, such as hosting your first event at the upgraded facility or paying its future utility bills there.

Temporarily Restricted Funds vs. Deferred Revenue

Temporarily restricted funds are sometimes confused with deferred revenue. Although both terms describe revenue your organization isn’t allowed to freely spend upon receiving it, they’re accounted for separately.

Deferred revenue refers to funding your organization has received but isn’t yet allowed to recognize as income in your accounting system. This occurs when the agreement between your nonprofit and the donor is conditional upon your organization providing goods or services to the donor. Until you deliver what you’ve promised, deferred revenue is considered a liability in your records and reports.

By contrast, the donor’s conditions for temporarily restricted funds are related to how you’ll use the funding. You can record the contribution as income as soon as you receive it, and you’ll treat it as an asset from the beginning.

For example, let’s say a science museum offers week-long summer day camps for elementary-age kids. To make planning easier for staff and families, signups open in February each year. Although parents pay the participation fee at the time of registration, the organization can’t recognize those fees as revenue until they provide the parents the promised service of a week of camp for their children. Therefore, these advance registration fees are considered deferred revenue.

How to Manage Restricted Funds

Now that you understand the basics of restricted funds, here are a few additional tips for managing them effectively at your nonprofit:

Configure your software for fund accounting. While there are accounting platforms built specifically for nonprofits, three of the most popular solutions—QuickBooks Online, Intuit Enterprise Suite, and Sage Intacct—are designed primarily for business accounting. However, all of these platforms can be customized for nonprofit use, so familiarize yourself with their settings and implement separate tracking for various types of restricted funds when you set up your software.
Separate out restricted funds on financial statements. Your statements of activities and financial position both track your nonprofit’s net assets. Separating your net assets with and without donor restrictions in these reports will help you analyze your financial data and fill out your tax returns more accurately. Plus, it’s common to attach your financial statements to your annual report so interested stakeholders can dig deeper into your finances, including restricted funds.
Budget restricted revenue first. When you create your annual operating budget, start by noting what restricted revenue you’ve received and allocating it toward the initiatives it’s designated for. This way, you’ll know how much unrestricted funding you need to fill in the gaps and avoid misappropriating funds.
Conduct regular financial audits. An independent financial audit provides an external, objective perspective on your nonprofit’s finances so you can improve your management practices. Your auditor will point out if there are any issues with your existing procedures around restricted funds and help you identify opportunities to more effectively align them with your strategic plan.

The best way to ensure you’re handling restricted funds properly and making the most of them is to work with a nonprofit accountant, like our team at Jitasa. With our years of experience working exclusively with organizations like yours, we’ve seen nearly any situation you could think of related to funding restrictions, and we can use this expertise to create tailored solutions for your nonprofit. No matter your organization’s size, vertical, or funding mix, we’re here to help.

Restricted funds may seem challenging to handle at first, and it’s critical to keep track of them for compliance purposes. With a strong understanding of basics and best practices on your side (along with an experienced accountant!), you’ll be well on your way to honoring your promises to donors, grantmakers, and sponsors and establishing a reputation as a trustworthy nonprofit.

For more information on funding restrictions and their impact on nonprofit accounting, check out these resources:

Nonprofit Revenue Recognition: What It Is & Why It Matters. Dive deeper into key terms and concepts associated with revenue recognition, including restricted net assets, deferred revenue, exchange transactions, and more.
Grant Management: How to Secure and Track Nonprofit Funding. Learn more about every stage of managing a common type of restricted revenue—grants—from application to reporting.
12+ Top Nonprofit Accounting Firms & How to Choose One. Explore the best options for an outsourced nonprofit accountant to help you navigate restricted fund tracking, budgeting, accounting system setup, and other essential tasks.

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Fueling the Flames: DignityMoves + Jitasa in Film

2025-05-19T16:00:00Z

At Jitasa, we believe that nonprofit organizations change the world—and that behind every mission-driven nonprofit is a network of support helping them succeed. That belief is brought to life in a new film produced for Jitasa by BBC StoryWorks Commercial Productions and presented by B Lab Global as part of the Common Good series.

This film tells the powerful story of DignityMoves, a nonprofit dedicated to ending unsheltered homelessness by creating interim supportive housing communities throughout California. Their approach is innovative, compassionate, and rooted in the fundamental belief that everyone deserves dignity and stability.

Watch the Film

Produced for Jitasa by BBC StoryWorks Commercial Productions
Presented by B Lab Global

The Power of Staying Focused

In the film, the DignityMoves team shares how quickly their organization grew from the get-go. Needing much of their time to manage this growth, their team wanted to make sure financial systems didn’t fall to the wayside. That’s where Jitasa steps in. Our team provides expert nonprofit bookkeeping and accounting services behind the scenes, ensuring that financial compliance, reporting, and day-to-day operations run smoothly.

This back-end support allows organizations like DignityMoves to do what they do best: focus entirely on their mission, knowing their finances are in reliable hands.

Purpose Meets Process

DignityMoves addresses one of the most urgent social challenges in our country with dignity, efficiency, and heart. We’re honored to support their work—not just as accountants, but as purpose-driven partners who share in the impact of every life they help uplift.

The film captures that partnership in motion: from the construction of valued housing to a pancake breakfast shared between residents, the DignityMoves team, and one of the amazing Jitawesomes that works on their account.

As a certified B Corp, Jitasa is proud to be part of a global community of businesses using their work as a force for good. Supporting nonprofits like DignityMoves is not just what we do—it’s who we are.

Experience Positive Change

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Convincing Your Nonprofit Board to Outsource Accounting.

2025-04-28T12:00:00Z

Convincing Your Nonprofit Board to Outsource Accounting

So, you’ve decided to outsource your nonprofit’s accounting—great choice! Outsourcing offers numerous benefits, including improved financial organization, cost savings, and more time for your team to focus on the mission.

Now, the final step is getting your board on board. The key is to present a clear, thoughtful case that shows how you reached your decision. We recommend highlighting the administrative burden of managing accounting in-house, explaining how outsourcing alleviates that burden, and compiling a concise report to share with your board members.

Review the Administrative Burden of Accounting

If you’re looking for an accounting solution, chances are you’re already facing some form of administrative burden with your current approach. Be sure to consider both the challenges you’re experiencing now and those that may not be immediately obvious.

For example, if your staff requires a lot of time on reconciliations because they lack accounting expertise, your financial reports may also be less accurate. Include these concerns in your report to the board and, wherever possible, back them up with data.

Try to pull concrete data that can be used to quantify the burden accounting has for your organization. For example, ask yourself questions like:

Who is currently handling your accounting tasks? How many staff hours are being used?
If you have an in-house accountant, what is the cost of their salary and benefits? Are you satisfied with the quality of their work?
Does your current accounting resource have experience and skills required to work within the nuanced world of nonprofit accounting? Are they experts in commonly used nonprofit accounting technology?
Have financial missteps resulted in missed grant opportunities, delayed donor reporting, or other funding setbacks? Can you estimate the value of those missed opportunities?

Quantifying the cost of your current accounting process will demonstrate the potential value of outsourcing. This data-driven approach can be especially helpful when addressing concerns from board members who may be resistant to change.

If you don’t have this data on hand, ask your team to track relevant metrics. For example, they could log the time spent on accounting tasks each month or review recently missed funding opportunities to estimate the impact.

Once you’ve outlined the problem, you’re ready to show how outsourcing your accounting can relieve that burden and improve efficiency.

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Highlight How Outsourcing Relieves the Burden

Getting your finances in order can resolve a wide range of challenges for nonprofits—including many of the concerns outlined in the previous section.

Once you’ve identified your organization’s current accounting pain points, take time to evaluate how outsourcing could solve them. Don’t hesitate to reach out to the accounting firm you're considering to ask how they’ve addressed similar challenges for other clients.

For example, Jitasa offers:

Dedicated support at no extra cost: Our clients are supported by a full team of accountants, always available to answer questions. Thanks to our fixed-fee structure, you’re never charged extra for the time spent seeking advice or clarification.
More value, lower cost: Hiring an in-house accountant can be costly—and you're relying on the expertise of just one person. At Jitasa, you gain access to an entire team of nonprofit accounting experts for less than the cost of a single employee.
Nonprofit expertise: We work exclusively with nonprofits, so grant management, funder reporting, and board-ready financials are second nature to our team.
Proven results: We’ve helped thousands of nonprofits streamline their accounting. In fact, many of our clients have unlocked new funding opportunities simply because their books are finally in order. Our success stories speak for themselves.

You’ll also want to mention to your board how you came to the conclusion of outsourcing rather than other options. Many newer organizations find that relying on volunteers or in-kind donors to provide accounting services is the best way to get up and running. However, they quickly surpass the stage where this is a viable option, meaning the two most logical choices are:

Hiring an in-house accountant – often expensive and better suited for the largest organizations.
Outsourcing to a specialized provider – the most cost-effective and scalable solution for the majority of nonprofit organizations.

Outsourcing strikes the right balance—bringing professional support, affordability, and nonprofit-specific knowledge that grows with you.

Put Together a Business Case and Schedule a Meeting

Once you’ve gathered information about your current administrative burden, how outsourcing solves those concerns, and why outsourcing is the best option, the next step is to organize it into a clear business case to present to your board. The more complete your presentation, the easier it will be for them to make an informed decision—so don’t forget to include a recommendation for a specific provider.

Naturally, we hope you’ll choose Jitasa as your outsourced accounting partner. But what’s most important is being able to confidently explain why your chosen provider is the right f it for your organization. Your board will want to see that you’ve done your due diligence.

In your report, be sure to include:

A list of the providers you considered and your criteria for selecting them.
A summary of your evaluation process and why you believe the recommended provider best meets your organization’s needs.
A breakdown of the proposed services and fee structure.

Provide printed copies for board members to take home, in case they’d like additional time to review the information before voting. Once you've presented your case, formally ask the board to hold a vote on moving forward.

Wrapping Up

Convincing your board to embrace change can feel daunting—especially when it comes to something as important as your organization’s finances. But when you present the full picture—the opportunities outsourcing offers, along with the supporting facts and figures—it becomes a much easier case to make.

Stay open to the questions and perspectives your board members bring to the table. With thoughtful discussion and thorough preparation, we’re confident your team will arrive at the right decision.

We’re confident that decision will lead you to Jitasa, so we’ll say it now: Welcome to the Jitasa family!

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What Is a Nonprofit Audit? Ultimate Guide + Checklist

2025-03-05T16:00:00Z

If your nonprofit has valid 501(c)(3) status, it’s exempt from federal income tax, as well as many state taxes. So, you might be wondering, “If my organization is tax-exempt, does that also mean it’s exempt from financial audits?”

The short answer is no—but this isn’t a reason to panic! Nonprofit audits are usually conducted by independent auditors whose goal is to provide an objective perspective on your nonprofit’s financial management practices and help you improve as needed.

In this guide, you’ll learn all you need to know about nonprofit financial audits, including:

By exploring these basics and best practices, you’ll see that nonprofit audits aren’t something to fear, but instead a useful tool for improving your organization’s financial health. Let’s dive in!

Get support at every stage of the nonprofit audit process by partnering with Jitasa.

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Nonprofit Audits: Frequently Asked Questions

There are many misconceptions about audits, and the process can be challenging to understand at first. To clear up this confusion, let’s begin by answering some common questions about nonprofit audits.

What is a nonprofit audit?

A nonprofit audit is a comprehensive review of an organization’s records, reports, transactions, policies, and procedures. When a nonprofit audit is conducted by an independent auditor, its goal is to assess the organization’s overall health and ensure compliance with federal, state, and general financial regulations.

Are there different types of nonprofit audits?

Yes! While the term “audit” is mostly used in a financial sense, there are several different types of audits your nonprofit could conduct. Here is an overview of the most common audit categories:

Independent financial audit. This type of nonprofit audit occurs when a third-party auditor or auditing firm examines your organization’s financial statements, transactions, accounting practices, and internal controls. Then, the auditor creates a report that provides an objective, comprehensive perspective on your organization’s financial health and compliance.
IRS financial audit. Although the IRS doesn’t audit exempt organizations often, that doesn’t mean a federal audit or compliance check is out of the question for your nonprofit. In most cases, the IRS will select nonprofits for review if they don’t file required forms or a reporting discrepancy is discovered, which is why it’s critical to complete your organization’s annual tax return and employer tax forms carefully and on time.
Internal financial audit. Your nonprofit’s management team conducts these audits. Although the results can’t be completely objective, they allow your organization to take a step back from everyday tasks and consider opportunities for large-scale improvement in your financial strategy.
Compliance audit. Compliance audits assess adherence to federal, state, and local government regulations, as well as your organization’s bylaws and other policies. Reviewing financial management activities is usually part of the audit, but the process isn't as focused on health and stability as a typical independent financial audit. They also involve auditing other areas of compliance at your nonprofit, such as charitable solicitation practices and data security.
Operational audit. This type of audit assesses your nonprofit’s internal systems, productivity, staffing, and management practices to determine strengths and areas for improvement. They can be holistic or specific to one area of your organization’s operations, such as technology or human resources.

For the purposes of this article, we’ll primarily focus on independent financial audits—just don’t be surprised if your nonprofit undergoes one of the other types at some point.

Does my nonprofit need to conduct a financial audit?

It depends. There are four main situations in which your nonprofit may be required to undergo an independent financial audit for compliance purposes, which are as follows:

Audits are written into your organization’s bylaws. Upon establishing your nonprofit, the founders may have specified a need to conduct recurring audits to promote financial security and transparency.
Your nonprofit receives more than $750,000 in federal funding per year. This includes federal funding passed through the state in which your organization operates.
State laws require your organization to conduct an audit. Most states stipulate that if your nonprofit’s total annual funding exceeds a certain threshold (often $500,000), you have to conduct an independent audit.
A grant application asks for an audit report. Before they invest in your organization, most grantmakers want to see financial proof that you’ll manage the grant well. Some funders will accept copies of past tax returns or financial statements, but others will specifically request an independent audit report.

If any of these requirements apply to your nonprofit, that doesn’t necessarily mean you’ll need to conduct an independent audit every year going forward. For example, some nonprofit bylaws require annual audits, but others state that they should occur every two, four, or five years. Or, if your organization doesn’t plan to apply for any grants that request audit reports this year, even though you did so in the past, you may be able to skip this year.

However, even if your nonprofit isn’t required to undergo an audit, it can still be worthwhile to conduct one to get a better understanding of your organization’s financial situation.

How can independent audits benefit my nonprofit?

Maintaining compliance isn’t the only reason to conduct an independent financial audit, which is why your nonprofit might consider undergoing an optional one. Some other key benefits include:

Regular accountability. If you conduct recurring audits every year or every few years, your nonprofit will be held accountable to the same high financial reporting and compliance standards. Even as your organization changes and expands, you can be confident that your finances are always secure and properly allocated.
Clear opportunities for improvement. Audits can help your organization identify places where you could adjust your policies and procedures, leading to more efficient processes and sound management. Plus, establishing a review schedule will help protect your nonprofit from common risks like fraud and theft.
Increased transparency. You may decide to communicate that your nonprofit conducted an audit and the recommended improvements you’re implementing to your supporters. This way, they’ll know that you take financial management seriously and trust that you’ll use their contributions as promised to further your mission.
Potential reputation boost. There are a number of charity watchdogs that provide information about charities to potential donors, and they may rank your organization higher if you’ve conducted an audit. This also promotes transparency with supporters who do their research before contributing.

Although you’ll need to put in effort to prepare beforehand and apply the auditor’s recommendations afterward, the benefits of financial auditing typically outweigh these costs.

How long does the nonprofit audit process take?

If your nonprofit is required to submit your audit results to a government agency or grantmaker, you should, of course, complete the audit well in advance of the deadline. If your audit is optional, you can simply consider when your team will have adequate time to prepare for it and implement the recommendations.

To help you plan more effectively, here is an estimated timeline of the independent financial audit process:

Select an auditor: 4-12 weeks
Prepare for your audit: 2-4 weeks
Auditor conducts the audit: 2-4 weeks
Implement recommendations from the audit report: No specified time limit—but the sooner, the better!

Regardless of your nonprofit’s reporting deadline (or lack thereof), we recommend completing your financial audit before completing your annual tax return so you can include the changes you’ve made as a result of the audit in it.

Your organization’s Form 990 filing deadline is the 15th day of the fifth month after your fiscal year ends (May 15 if your fiscal year follows the calendar year like most nonprofits). If you won’t have enough time to complete your audit, start incorporating the recommendations, and fill out the form by the deadline, you can file for an extension of up to six months via IRS Form 8868.

Steps to Choose a Nonprofit Auditor

In many cases, the most time-consuming part of the audit process is choosing an auditor. Your audit report will be most helpful to your nonprofit if you select an auditing firm with a strong track record that aligns with your needs and budget.

To find the right auditor for your organization, follow these steps:

Begin your research online. A simple Google search is often the best place to start—just make sure your search terms include the word “nonprofit” (e.g., “best nonprofit auditing firms” or “nonprofit auditor near me”) to narrow down the list to firms that specialize in the sector. Browse each candidate’s website, note their fee structure and estimated audit timeline, and read reviews from past clients.
Ask for recommendations. Reach out to other nonprofits in your network to see if they’ve conducted independent audits and, if so, what they thought of their auditors. Your organization’s accountant can also provide recommendations based on their knowledge of the nonprofit finance space, although they typically won’t conduct your audit themselves to avoid a conflict of interest.
Issue a request for proposals (RFP). Once you’ve narrowed down your list of potential auditors, an RFP allows you to compare your top candidates side by side. In addition to confirming the fees and timeline, ask for a detailed statement of the work the auditor will provide and several references.
Make your final decision. After reviewing the proposals you receive and checking each auditing firm’s references, you’re ready to approach your top choice and hammer out the final details of your contract for working together.

Once you’ve selected an auditor, they should provide information about preparing for the audit. This will usually come in the form of a Provided by Client (PBC) list, which ensures you give them access to all of the documentation they’ll need to effectively assess your nonprofit’s finances.

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Nonprofit Audit Preparation Checklist

Naturally, the first step in preparing for your nonprofit audit is compiling all of the items on your auditor’s PBC list. These often include your organization’s:

Bank statements
Investment statements
Unpaid invoices
Details of grants received
Information on major and planned gifts
Payroll and staff compensation details
Board member names and meeting minutes
Recent tax documents (Form 990s, W-2s, 1099s, etc.)
Fiscal policies and procedures handbook

There are also some other steps you should take to prepare for your audit, which we’ve compiled into a handy checklist for reference:

Reconcile all bank accounts to see whether your statements match your internal financial records and your account balances are accurate.
Identify and address uncleared transactions to determine why they occurred and how they’ve affected your organization’s cash balance.
Review your nonprofit’s vendors and remove any inactive ones from your list.
Check for unpaid membership dues if your nonprofit has a membership program.
Deposit any undeposited funds to maximize cash availability.
Look for coding errors such as duplicate, missing, or incorrect data to keep your financial records clean.
Check your capitalization to ensure your nonprofit’s assets are properly categorized.
Review your accounts receivable and payable to confirm your outstanding cash obligations and resolve any discrepancies.

If your auditor requests access to your accounting system, make sure to grant them the correct level of user permissions (often view- or read-only) before the audit. Also, add all of the documents they’ll need to a centralized digital folder you can share with them.

After Your Audit

Once the auditor completes their work, they’ll compile their findings into a report and present it to your nonprofit. The first thing to know about this report is that if it isn’t clean, that is totally fine! What really matters isn’t how many recommendations the auditor made—it’s how promptly and thoroughly you act on them.

Shortly after receiving the report, schedule a leadership team meeting to review it in detail and create an action plan that addresses everything the auditor identified across all relevant areas of your organization. Some of these actions may be simple improvements that add up to make a significant difference in your operations, while others may be more complex changes that will take time and effort to implement.

Either way, if you need help with this or any stage of the audit process, don’t hesitate to reach out to financial professionals like the experts at Jitasa. Our years of experience working exclusively with nonprofits like yours will help you approach audits with confidence and make the most of them.

Dedicated audit preparation comes with our standard bookkeeping and accounting services for mid-sized to large nonprofits and is available as an add-on for small organizations. Plus, we can suggest potential auditors and work with you to develop and implement your post-audit action plan, customizing our approach based on your unique needs and goals.

An independent financial audit is, at its core, a learning opportunity. No matter why you’re conducting your audit or what the results look like, remember that your auditor has your organization’s best interests in mind, and they’ll give you a blueprint for how your nonprofit can improve its financial management processes for the future.

For more information on nonprofit audits and their applications, check out these resources:

Nonprofit Accounting: An Overview & How to Get Started. Explore the principles and best practices of nonprofit accounting to help you understand what your auditor is looking for.
Understanding and Applying GAAP for Nonprofits: FAQ Guide. Besides checking compliance with legal requirements, your auditor will also ensure your nonprofit’s financial practices align with the Generally Accepted Accounting Principles (GAAP). Learn more in our guide.
Nonprofit Form 990 Filing: FAQ Guide + How to Get Started. Dive deeper into another essential tool for financial compliance and a key document for the auditing process: IRS Form 990.

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Nonprofit Accounting: An Overview & How to Get Started

2025-02-12T16:00:00Z

If you’re like most nonprofit professionals, the reason you chose to work in this sector was to further a good cause, not to crunch numbers and worry about compliance. However, effective financial management is critical for your nonprofit to make a difference in its community. After all, you need to bring in and properly allocate funding just to keep your organization’s lights on, let alone launch mission-critical programs and projects.

Whether you’re brand-new to the world of nonprofit accounting or want to brush up on the basics, you’ve come to the right place! In this guide, you’ll learn all you need to know to get started with this critical aspect of managing your organization, including:

Let’s get started by ensuring we’re on the same page about what nonprofit accounting is and how it’s different from business accounting.

Access affordable, scalable, expert nonprofit accounting services by partnering with Jitasa.

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What Is Nonprofit Accounting?

Nonprofit accounting is the unique process that charitable organizations use to plan, record, and report their finances. The core of nonprofit accounting is accountability, meaning your goal in your accounting practices should be ensuring honesty and transparency with your donors, other stakeholders, and the government.

While for-profit organizations use their accounting practices to help them turn a profit and pay dividends to their investors, nonprofits aren’t allowed to do this by definition. Instead, your organization has to reinvest all of its funding into its mission and operations, and proper accounting will help you make sure you always do this, even as your nonprofit grows and changes over time.

Accounting in the Nonprofit Financial Management Landscape

While the terms “accounting” and “financial management” are sometimes used interchangeably, accounting actually falls under the larger umbrella of financial management. Accounting is also often confused with another element of financial management, bookkeeping. To clear up this confusion, let’s break down some of the differences:

Bookkeeping covers your nonprofit’s day-to-day financial needs, mostly concerning recordkeeping. Your organization’s bookkeeper should be responsible for tasks like basic data entry, writing checks, making bank deposits, managing invoices, and processing payroll. While bookkeepers need some on-the-job training to perform well in their roles, they aren’t required to have any specialized education or certifications.
Accounting involves a wide variety of more complex financial tasks related to analysis and reporting. Accountants will come in behind your bookkeeper to review transactions, perform bank reconciliations, and compile essential financial documents to help your nonprofit make informed decisions. Accountants need at least a bachelor’s degree in accounting or a related field and a CPA certification to do their jobs well.

Effective nonprofit financial management also involves duties related to strategy and oversight. These areas are typically covered by your organization’s chief financial officer (CFO) and treasurer, respectively. Having at least four people working on your nonprofit’s finances allows them to delegate responsibilities and check each other’s work, reducing the risk of human error and creating a more efficient system.

Key Nonprofit Accounting Documents

Since reporting is critical for ensuring accountability, let’s dive into the practical aspects of nonprofit accounting by reviewing the most important documents your accountant will create.

Chart of Accounts

Your nonprofit’s chart of accounts (COA) is essentially a directory of its finances and the backbone of all accounting procedures at your organization. It organizes all of your financial accounts and ledgers into a table-style list for easy reference.

Most nonprofits divide their COA into five categories:

Assets: Everything your organization owns, such as cash, property, and accounts receivable.
Liabilities: Everything your organization owes, such as debt, deferred revenue, and accounts payable.
Net Assets: What your nonprofit is worth, calculated by subtracting your total liabilities from your total assets.
Revenue: All of the funding your organization receives from individual donors, corporate partners, grantmakers, and other funders.
Expenses: All of the funding your organization spends on its mission-related activities, administrative needs, and the upfront costs of fundraising campaigns.

These categories are based on the Unified Chart of Accounts (UCOA), a standardized COA model that aligns with nonprofit reporting requirements. However, most small to mid-sized organizations find the UCOA too detailed and prefer to use other online templates that they can customize to only include the accounts they need.

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Financial Statements

Financial statements are among the most critical reports your nonprofit’s accountant will compile every year. Each of these documents organizes and summarizes your accounting data in a different way to help you glean unique, actionable insights into your organization’s financial situation.

The four core nonprofit financial statements are as follows:

Statement of activities: The nonprofit parallel to the for-profit income statement, this report breaks down your revenue, expenses, and change in net assets over the past year to inform the budgeting process for the coming year.
Statement of financial position: Also known as a balance sheet, this statement lists your nonprofit’s assets, liabilities, and net assets to provide a snapshot of its financial health and potential for growth.
Statement of cash flows: This report shows how cash moves in and out of your organization through operating, investing, and financing activities. It’s usually pulled monthly as well as annually to help your nonprofit keep its spending and fundraising on track with its goals.
Statement of functional expenses: The one financial statement unique to nonprofits, this report organizes your expenditures into the categories of program, administrative, and fundraising costs so you can see how your spending furthers your mission.

Many nonprofits attach their financial statements as appendices to their annual reports so supporters who want to learn more about their financial situations can easily dig deeper. These statements are also essential for correctly completing your organization’s annual tax returns.

Tax Forms

When your nonprofit was first incorporated, its founders filed Form 1023 with the IRS to secure 501(c)(3) status, meaning your organization would be exempt from federal income tax. However, just because your nonprofit has this status doesn’t mean you can completely write off tax season! There are several tax forms you still need to file each year, including:

IRS Form 990. This is the federal return for exempt organizations, which you’ll need to file by the 15th day of the fifth month after your fiscal year ends (May 15 if your fiscal year follows the calendar year). Depending on your nonprofit’s size and designation, you may need to complete Form 990-N (small organizations), Form 990-EZ (mid-sized nonprofits), the full Form 990 (large organizations), or Form 990-PF (private foundations of all sizes), so check with your accountant to ensure you file the correct form.
State-specific tax returns. Some states have additional annual filing requirements for nonprofits to remain exempt from state and local taxes. For example, organizations registered in New York are required to file Form CHAR500, and California nonprofits have to complete Form 199. However, other states (such as Connecticut and Georgia) will accept copies of nonprofits’ Form 990s for this purpose.
Employer tax forms. Because your nonprofit is an employer, you’re also obligated to help your staff members file their annual tax returns. Issue Form W-2 to each individual employee on your nonprofit’s payroll and Form 1099 to any contractors you work with no later than January 31 each year.

There are penalties for filing each of these forms late, and failing to file them for several consecutive years risks your organization’s exempt status. Work with your accountant to plan ahead and ensure you can complete all of them accurately and on time.

Budgets

In essence, a budget is a financial planning document used to predict expenses and allocate revenue for your nonprofit. Your organization may create budgets for various reasons, such as:

Laying out all of your expenditures and fundraising activities for the fiscal year (operating budget)
Monitoring your expenses incurred and revenue raised for a large-scale, multi-year project (capital budget)
Detailing the costs of launching a new program and how you’ll cover them (program budget)
Monitoring your upfront spending on planning and promoting a fundraising event (event budget)
Showing a grantmaker how you’d use their funding if they awarded it to you (grant proposal budget)

Since budgeting is a strategic activity, your CFO will usually take the lead on creating budgets. However, your accountant will typically review all budgets to ensure they’re feasible based on your organization’s current financial situation and relevant to your goals.

Additional Nonprofit Accounting Best Practices

In addition to knowing how your nonprofit’s financial data is recorded and reported, you should also be familiar with how to use that information to make decisions. Let’s walk through a few accounting best practices that nonprofit professionals should implement.

Categorize Revenue by Source

You’ve probably heard that you shouldn’t put all of your eggs in one basket when it comes to nonprofit revenue generation. While revenue diversification mostly falls under the financial strategy umbrella, it also touches the analysis and reporting aspects of accounting.

Here is a breakdown of the five major nonprofit revenue categories and some sources that fall under each one:

Individual donations: Small, mid-sized, and major monetary gifts; event revenue; in-kind donations of goods or services
Corporate philanthropy: Sponsorships, matching gifts, volunteer grants, internal employee fundraising campaigns
Earned income: Membership dues, merchandise sales, fees for services provided
Investments: Endowments, mutual funds, stocks, bonds, cryptocurrency
Grants: Federal and state government grants; private, public, and family foundation grants

Organize your nonprofit’s revenue according to these categories in your financial records, reports, and budgets. This way, all of your data will be consistent, and it’ll be easier to review your funding model and make adjustments to increase your organization’s financial stability.

Correctly Understand Overhead Expenses

The term “overhead” has historically had a negative connotation in the nonprofit sector, since spending funding on overhead was seen as taking that funding away from mission-critical work. However, overhead isn’t something to be afraid of—in fact, some overhead spending is necessary and good for your organization to operate.

Overhead simply refers to the combination of your nonprofit’s administrative and fundraising costs from your statement of functional expenses, so it covers everything from employee compensation and utility bills to marketing and fundraising software fees. While these expenses are important to your cause, they contrast with program costs, which are directly related to the initiatives that further your organization’s mission.

In the past, the general rule was that nonprofits should put at least 65% of their funding toward program expenses and spend no more than 35% on overhead. However, it’s now commonly accepted that the exact breakdown will look different for every organization.

Treat the 65/35 “rule” more like a guideline to direct as much of your nonprofit’s funding toward its programs as is reasonably possible. If you have to cut costs at your organization, see if you can reduce overhead spending before taking any funding away from your programs.

Honor Funding Restrictions

When donors make large contributions to your nonprofit, they often want some control over how you use that funding to further your mission. So, they may place restrictions on their gift, or designate it for a specific initiative.

To make sure your organization spends contributions as they’re intended, separate the following categories of funds in your accounting system:

Unrestricted funds have no limitations on their use, so you can use them to cover any of your organization’s expenses—whether they’re program-related or overhead costs. Most small to mid-sized individual donations, corporate contributions, and earned income fall into this category.
Permanently restricted funds usually take the form of endowments, which your nonprofit can’t spend directly. Instead, you’ll invest these contributions and use the interest they generate to fund a donor-designated program or initiative.
Temporarily restricted funds include most major and planned gifts, grants, and sponsorships (the one restricted type of corporate contribution). These gifts are designated for specific purposes, but once the project is finished or a certain time period elapses, any leftover funding is released from restrictions.

By accounting for restricted funds correctly, your nonprofit can stay accountable to and keep its promises to stakeholders, making them more likely to support you long-term.

Use Dedicated Accounting Software

To effectively track all of your nonprofit’s revenue streams, expenses, and restricted funds, you’ll need the right tools. While many organizations start out managing their finances in a spreadsheet, a specialized accounting platform will become necessary as your nonprofit grows.

One of the most commonly used dedicated accounting solutions for nonprofits is the Intuit QuickBooks suite. Luckily, the Jitasa team members are QuickBooks experts and have helped many organizations configure this platform to meet nonprofit needs rather than business needs as it was originally designed.

We find that small to mid-sized nonprofits benefit most from investing in the Plus or Advanced plans of QuickBooks Online. The Plus plan includes all of the essential accounting features your organization needs in a cloud-based platform and provides access for up to five users. However, if you want to add more users to your account or leverage more complex tools like batch invoices and fixed asset auto-tracking, it’s worth upgrading to the Advanced plan.

For large nonprofits, the Intuit Enterprise Suite solution provides additional project management and multi-entity reporting features that are particularly useful for tracking finances across locations.

Working With a Nonprofit Accountant

As mentioned previously, the best way to ensure your nonprofit’s finances are tracked and reported properly is to work with an accountant. Especially if they have experience in the nonprofit sector (which you should look for during recruitment!), they’ll have a deeper understanding of compliance requirements, problem-solving approaches, and other best practices to level up your organization’s financial management.

There are three ways your nonprofit can gain access to an accountant:

Hiring for an in-house position. This option works well for large nonprofits with many accounting needs that would benefit from a dedicated professional’s expertise. However, recruiting, onboarding, and compensating a new employee can be time-consuming and expensive.
Receiving an in-kind donation of accounting services. Brand-new organizations may choose this option to get their financial management practices off the ground at no cost. But when you don’t compensate a professional for their services, they often lose motivation over time and prioritize paid projects, so this option isn’t sustainable.
Outsourcing to a nonprofit accounting firm. Outsourcing provides access to the consistent expertise of a full-time accountant at a fraction of the cost of hiring—it’s a win-win! Plus, these services are usually scalable, so they work for nonprofits of various sizes over long periods of time.

We may be biased, but we recommend that your organization outsource its accounting services to a nonprofit-specific firm like Jitasa. Our expert accounting team has worked with nonprofits of various sizes and missions for more than 15 years, and we use our experience to create tailored solutions for every organization. We also offer bookkeeping services and fractional CFO guidance through the Jitasa Strategic Advisory Team (J-SAT) to develop a well-rounded financial management system for your organization.

By understanding the basics of nonprofit accounting, your team will be better equipped to fund its mission and make strategic decisions about your organization’s future. Use the tips above to get started, and don’t hesitate to contact an accountant (like our team at Jitasa!) with any questions or to take your systems to the next level.

For more information about nonprofit accounting, check out these resources:

Understanding and Applying GAAP for Nonprofits: FAQ Guide. Discover the standardized guidelines that inform all aspects of for-profit and nonprofit accounting.
Church Accounting: Ultimate Guide + Best Practices to Know. Church accounting is very similar to general nonprofit accounting, but there are a few key differences—learn more in this guide.
What Is a Nonprofit Audit? Ultimate Guide + Checklist. Explore a critical accounting-adjacent (and often misunderstood) process—the independent financial audit.

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12+ Top Nonprofit Accounting Firms & How to Choose One

2025-02-11T12:00:00Z

Nonprofit accounting is a unique beast. Due to your organization’s tax-exempt status, it’s subject to many financial rules and regulations that for-profit businesses aren’t. Plus, rather than trying to turn a profit, the goal of nonprofit accounting is to allocate your resources in the best possible way to further your mission.

To ensure your organization manages its finances properly, it’s important to work with financial professionals who have experience in the nonprofit sector, since they’ll understand the uniqueness of your situation more deeply. While many larger nonprofits hire an accountant in-house, small to mid-sized organizations often find that outsourcing to a nonprofit accounting firm is better suited to their needs and budget.

In this guide, we’ll discuss why and how to outsource your nonprofit’s accounting services before diving into our picks for the top nonprofit accounting firms:

Jitasa: Best Overall Nonprofit Accounting Firm
File 990	Growthforce	EBS Chartered Accountants	NFP Partners
Paro Accountants	Kiwi Partners	CBIZ	Numbers 4 Nonprofits
All In One Accounting	Lescault & Walderman Accounting	ROSE Financial Solutions	Quattro

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Why outsource your nonprofit’s accounting services?

When it comes to working with an accountant, your nonprofit generally has three options:

Hiring in-house: This is a good choice for large nonprofits with numerous financial needs that require a dedicated staff member to manage, but it’s time-consuming and expensive.
Receiving an in-kind donation of accounting services: This route is beneficial for small, brand-new nonprofits to get professional help at no cost, although it isn’t sustainable long-term.
Outsourcing: This is the option we generally recommend, as it provides organizations of various sizes with access to consistent accounting expertise for a significantly lower cost than hiring—it’s a win-win!

Besides the reduced cost, outsourcing allows your nonprofit to get input on its financial situation from a whole team of accountants with different perspectives. Plus, most firms work with a wide variety of nonprofits, so if your organization has an accounting problem, they’ve probably seen something similar before and can use their experience to help you solve it.

What should you look for in a nonprofit accounting firm?

Once you’ve decided to outsource your nonprofit’s accounting needs, the next hurdle is to find the firm that’s the best fit for your organization. Here are some qualities you should consider during your search:

A nonprofit-specific focus to ensure you get the experience and expertise discussed above.
The ability to meet your organization’s goals, whether you want help preparing for an audit, managing grants, or simply filing your annual tax returns.
Other types of financial services, such as bookkeeping and strategic advising, so you can go to them for both large-scale and everyday concerns.
Alignment with your organization’s budget to ensure you make the most of your resources with this investment.

Additionally, your nonprofit’s leaders and board members need to be able to collaborate effectively with your outsourced accounting team, since communication will be essential for a successful partnership. After narrowing down your list by researching online, reading reviews, and asking for recommendations, meet with your top candidates to assess the fit between your organizations before you make your final decision.

Learn more about what accountants do in our Nonprofit Accounting 101 Course.

Top Nonprofit Accounting Firms to Consider

Now that we’ve laid the foundation for how to choose a nonprofit accounting firm, let’s dive into our favorite outsourced accounting firms and services.

Jitasa: Best Overall Nonprofit Accounting Firm

We may be a little biased, but our top choice for outsourced nonprofit accounting is Jitasa. Our experienced team works exclusively with nonprofits, so we have experience navigating your organization’s needs and will provide personalized services designed to improve your efficiency and effectiveness.

When you partner with Jitasa, you’ll receive:

A fully staffed accounting and bookkeeping team so you can get service whenever you need it, led by a dedicated associate who understands your situation inside and out.
Access to expertise—not only from our accountants and bookkeepers, but also through the Jitasa Strategic Advisory Team (J-SAT), which provides add-on fractional CFO services.
Enhanced internal controls, since your organization’s financial security is our team’s top priority.
Software setup and data migration to to common accounting systems such as QuickBooks Online, giving you the tools you need to work with us on effective recordkeeping and reporting.

Our team will help you with everything from day-to-day data entry and allocation to year-end tax filings and financial statement creation. “Jitasa” means the spirit of serving others, which is what drives our team to help nonprofits make meaningful differences in their communities through effective financial management.

Access affordable, scalable, expert nonprofit accounting services by partnering with Jitasa.

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File 990

For small nonprofits that are just looking for help filling out Form 990-EZ or 990-N, File 990 is an effective solution. While this isn't a full accounting firm, it’ll help you take care of this one key need and maintain your 501(c)(3) status for another year.

File 990 boils down the complex parts of these tax documents into simple questions for your team to answer. Then, the software auto-completes the form and allows you to e-file your organization’s annual tax return right then and there.

GrowthForce

GrowthForce offers bookkeeping, accounting, and financial advisory services for both businesses and nonprofits. Every GrowthForce client is assigned a three-person team to manage its unique accounting situation.

Similar to Jitasa, GrowthForce will also get your organization started with QuickBooks and develop workflows to make the most of this solution. Because they offer extensive solutions (accompanied by a custom price tag), this accounting firm is an excellent choice for larger nonprofits.

EBS Chartered Accountants

EBS Chartered Accountants also provides outsourced accounting services for both nonprofits and small businesses. Their services extend far beyond accounting and bookkeeping, though—they also offer audit assurance services, organizational setup services, and web development.

EBS’ a la carte services are a good investment for rapidly growing or larger organizations, but their extensive options can quickly become overwhelming or unnecessary for smaller to mid-sized organizations, so keep that in mind as you assess your nonprofit’s financial needs.

NFP Partners

If your nonprofit’s main accounting goals are related to its financial technology, NFP Partners might be the right firm for you! They’ll help you implement a new accounting solution and manage that software over time.

In addition to NFP Partners’ software and outsourced accounting services, they also offer private cloud hosting, which is particularly useful for clients who are outgrowing their current solutions and want secure data and document storage.

Paro Accountants

Paro Accountants, which is part of the Paro AI technology company, primarily targets businesses. However, the firm also serves nonprofits, and the team has more than 15 years of experience in accounting, financial reporting, taxes, and related needs in the sector.

Rather than offering set packages or quotes, this firm allows clients to contract freelance financial experts. This provides additional flexibility for covering needs that may vary over time, from controller oversight to bookkeeping cleanup.

Kiwi Partners

Kiwi Partners offers outsourced nonprofit accounting in addition to services like consulting and human resources. Their team serves organizations of all sizes, helping with bookkeeping tasks, budget productions, and financial reporting on an as-needed basis.

Kiwi Partners is a great option if your nonprofit is looking for temporary accounting support. For example, a large organization may turn to their services when transitioning to an in-house accounting expert or if they need additional services to supplement their existing accounting department. However, this firm’s goal is to create processes and let your team take over from there, not to work with your nonprofit long-term.

CBIZ

CBIZ specializes in ensuring financial security for nonprofit and for-profit organizations. Their team helps nonprofits conduct financial audits for compliance purposes or simply to check that their procedures and systems are in good working order.

In addition to audits, CBIZ offers Systems and Organization Control (SOC) report services. SOC reporting allows your organization to understand and implement necessary security protocols for safe financial and data management.

Numbers 4 Nonprofits

Numbers 4 Nonprofits, as the name implies, is fully dedicated to nonprofit accounting. This firm’s financial services include annual budgeting, cash flow projections, audit preparation, cash management, and asset protection.

Numbers 4 Nonprofits’ team works at a high level to help clients prepare for the future as well as with the day-to-day operations of financial management. They aim to understand each organization’s unique needs through an onboarding survey and human-centered communication throughout their partnership.

All In One Accounting

All In One Accounting works primarily with nonprofits and entrepreneurs. The firm provides outsourced accounting, fractional CFO services, tax filing, audit preparation, and recruiting support for mission-driven organizations.

All in One Accounting’s approach is technology-driven, so the team ensures proper data management and security at every step of the way. They’ve also developed their own financial health assessment (known as the Clarity Score) to give your organization an idea of what kind of help it might need.

Lescault & Walderman

Lescault & Walderman's approach to accounting centers on financial automation. This firm provides end-to-end support for businesses and nonprofits, using technology to help their clients save time on accounting processes.

In addition to systematizing bookkeeping, budgeting, and reporting, the Lescault & Walderman team will assist their nonprofit clients with all stages of grant management and help them make the most of events from a financial perspective.

ROSE Financial Solutions

ROSE Financial Solutions brands itself as a “Finance as a Service (FaaS) provider” for nonprofits and technology-focused companies. In addition to setting your organization up with QuickBooks or Sage Intacct, this firm also provides its own solution, Easby, for more advanced financial reporting and task management.

ROSE also provides outsourced accounting, tax filing, compliance, and fractional CFO services to its nonprofit clients. In the firm’s words, their scalable offerings allow clients to “Achieve More with Financial Confidence™.”

Quattro

Nonprofit accounting and human resources needs often go hand-in-hand. Quattro takes this into account, offering outsourced accounting for nonprofits and small businesses alongside HR assistance for a well-rounded view of your organization’s finances.

Quattro’s services include managing accounts payable and receivable, reconciling accounts, reporting finances, and providing input for data-driven decisions. Plus, they’ll help ensure HR compliance, oversee employee onboarding, and perform other essential personnel functions.

Keep in mind that the right choice of a nonprofit accounting firm depends on your organization’s unique needs. Assess your situation, goals, and budget before you start looking for partners to help you effectively fund your mission. But if you want a firm with affordable, expert services that cater to nonprofits of various sizes and verticals, look no further than Jitasa!

For more information about nonprofit accounting, check out these resources:

Nonprofit Bookkeeper vs. Accountant: What’s the Difference? Dive deeper into the differences between these two essential financial roles and discover why your nonprofit needs both.
Understanding and Applying GAAP for Nonprofits: FAQ Guide. Learn about a key set of guidelines your outsourced accountant will help your organization follow: the Generally Accepted Accounting Principles.
Nonprofit Bookkeeping and Accounting Services by Jitasa. Explore all of the offerings and benefits you can expect when you partner with Jitasa’s expert financial management team.

See how Jitasa’s affordable, tailored bookkeeping and accounting services can work for your nonprofit.

Request a Quote

Nonprofit Finances in Annual Reports: What You Should Know

2025-01-08T16:00:00Z

As a nonprofit professional, it’s easy to get caught up in the nitty-gritty of developing programming, managing donor relationships, and mobilizing your volunteer base. While it’s important to pay attention to the finer details of your day-to-day activities, you should also zoom out and take the time to evaluate your organization as a whole.

Your annual report presents a chance for your team to reflect on the work you’ve done, the milestones you’ve reached, and the goals you’ve accomplished over the past year. Additionally, this document allows you to address any challenges you’ve encountered and how your organization will overcome them.

One of the most important components of an annual report is financial information. In this guide, we’ll explore why it’s important to incorporate financial data into your annual report, which financial components to include, and how to display this information effectively.

Why Is It Important to Include Financial Information in Your Annual Report?

Some nonprofits may be hesitant to list financial information in a report that showcases the year's successes, concerned that donors or funders may not agree with how they’ve allocated funds or nervous about exposing their financial struggles.

However, it’s important to include pertinent financial data in your annual report to:

Build stakeholder trust. Studies show that 67% of donors want to know all the details about how nonprofits use their funds. Sharing financial information in your annual report demonstrates your commitment to financial transparency and accountability with stakeholders. This transparency builds trust with donors, sponsors, funders, grantmakers, and other stakeholders by revealing responsible resource allocation.
Demonstrate financial health. Showing your organization is financially stable and sustainable encourages stakeholders to continue contributing to your nonprofit. Additionally, some grantmakers may require you to submit an annual report when you apply for funding so they can assess your organization’s financial health.
Maintain compliance. Some state governments require nonprofits to submit their annual reports to maintain their incorporation, tax-exempt status, and/or charitable solicitation registration in the state, and they’ll expect to see financial information that confirms organizations are using funds to support their missions. Check your state’s requirements to remain compliant.
Illustrate impact. When you attach financial metrics to your impact statements, you can draw the connection between your financial resources and your effect on the community. Understanding the concrete impact of their contributions will push donors to give again in the future.
Celebrate accomplishments. Whether you had a record-breaking peer-to-peer fundraising campaign, scored a new long-term partnership with a local business, or exceeded your fundraising goals, your annual report allows you to celebrate your financial successes and what they’ve allowed you to accomplish for your mission.

Including financial data in your annual report makes this document more comprehensive and transparent, allowing stakeholders to get a full picture of your nonprofit’s year and excite them about what’s to come.

Key Financial Elements to Include in Your Annual Report

You may be wondering what financial information you should actually include in your annual report. While you want to be transparent, you also don’t want to overwhelm stakeholders with excessive financial data. We recommend incorporating the following elements into your annual report:

Financial overview. Start with a brief overview of this year’s finances, including any major accomplishments and challenges. Give stakeholders an idea of how your fiscal year went by listing your total income, expenses, and net assets at the beginning and end of the year.
Revenue breakdown. Next, illustrate where your nonprofit’s revenue came from this year. List sources like individual contributions, grants, sponsorships, fundraising event revenue, program fees, and investment income.
Expense allocation. Let stakeholders know which areas their funds support by detailing your expenses. You’ll sort them into three main categories: program, administrative, and fundraising expenses. Together, administrative and fundraising expenses make up your nonprofit's overhead costs.
Financial statements. Attach your nonprofit financial statements to give interested readers a more in-depth look at your organization’s financial health. These statements include your statement of financial position, statement of activities, statement of cash flows, and statement of functional expenses.
Audit information. If you had an external party audit your nonprofit's finances this year, include this information to demonstrate accountability. You may note any significant findings and how you’ve incorporated the auditor’s recommendations into your financial practices.

In addition to this financial data, add a section acknowledging major donors and sponsors for their significant contributions to your organization. Obtain their permission before featuring their names or other identifying information in your report; otherwise, list them as anonymous contributors.

How to Present Financial Data Effectively

Anyone should be able to open your annual report and easily understand the financial information you’re portraying—regardless of their level of financial knowledge or expertise. Make your financial data accessible and effective with the following tips:

Create charts and graphs. Data visualizations make it easier to interpret financial information and identify trends. For example, you could use pie charts to demonstrate your revenue breakdown and expense allocation so readers can quickly understand the percentage of funds that come from or go toward each area.
Use simple language. Avoid any jargon that some audience members may not be familiar with, or define more technical terms to ensure everyone is on the same page. For instance, you may explain that assets are resources your organization owns and liabilities are debts your nonprofit owes.
Highlight key metrics. Summarize your finances with key metrics and ensure they’re prominent on the page. Bloomerang’s nonprofit strategic planning guide recommends tracking metrics like cost per dollar raised, average gift size, donor retention rate, new donor acquisition rate, monthly giving program participation, and fundraising strategy return on investment (ROI).

You may also contextualize this data by pairing it with impact stories. For instance, when discussing individual donations, you may explain how the funds raised allowed your disaster relief organization to help families like the Smiths, who lost their home in a recent forest fire.

By adding financial information to your annual report, you’ll demonstrate financial transparency, give richer context to your nonprofit’s impact, and allow your staff and stakeholders to celebrate this year’s successes. If you need any assistance with compiling or analyzing this financial data, reach out to a nonprofit accounting firm for help.

Bench Alternatives: Migrating Your Nonprofit to a New System

2025-01-01T16:00:00Z

The accounting software company, Bench, shocked their thousands of customers by abruptly shutting down in the last days of December. Soon after, they were quickly acquired by the HR Tech company, Employer.com.

While Bench initially stated that customers would need to find a new bookkeeper in the first several months of the new year, Employer.com swooped in and stated that customers can continue with business as usual, even keeping the same bookkeeper as they previously used with Bench.

With the confusion and stress brought about by this whole ordeal, Bench customers have a decision to make. Some might decide to stay with Bench and trust Employer.com to continue business as usual. However, many frustrated organizations might be concerned about all of the changes and decide to change systems.

If that’s you, there are other options available to help your organization feel comfortable and confident that your bookkeeping and accounting needs are in good hands, especially if you’re a nonprofit. We’re here to walk you through the next steps and some of our favorite Bench alternatives to help get your research started.

Before we dive in, let’s talk next steps if your organization was using Bench to manage your finances.

Next Steps for Bench Users

Between the holidays, the start of a new year, and the upcoming tax season, you may feel like you’re scrambling already. And thinking about new bookkeeping and accounting options doesn’t make things easier. First step: take a deep breath! The process of finding a Bench replacement doesn’t need to feel overwhelming.

There are several important steps you should take to prepare to migrate systems. These steps include: downloading your data, creating a plan for tax season, and evaluating new systems.

Download/Migrate Your Data

The first and most important step to take is to download your financial data from your Bench portal. While the acquisition means you no longer need to worry about losing that data completely, it’s still always smart to have it on hand. This will serve as a backup in case there are any challenges during the migration process

Create a Tax Plan

If your organization wants to change systems before submitting your 2024 taxes, you’ll want to make sure you have a plan in place to make sure you’re able to submit taxes in time and accurately. Some steps you might consider include:

Find someone to issue 1099s and W2s. These are due at the end of January, so you’ll need to ensure they’re completed as soon as possible. Whether you stay with Bench to complete these, complete them in house, or hire someone else to complete them, make sure you have a plan to complete them.
Consider filing for a tax extension. For nonprofits, we often recommend filing a Form 8868 to extend the 990 deadline for six months past the initial deadline. This allows for more time to conduct an audit, to ensure reports are accurate, and to correctly file returns. Write down all deadlines in a calendar (including extended deadlines) to be sure you meet them in time.

Evaluate New Systems

The next step your organization will need to take is evaluating new systems. Consider what services were available through Bench that you enjoyed and would like to have with another provider. Then, you’ll want to consider some specific steps to be sure you migrate to a system that will work for your organization.

The last thing you want is to switch to a system that isn’t right for your organization, forcing you to migrate again in a few months. Instead of panic-purchasing a new financial system, take a little time to really consider which one will provide the features you need. The following steps will help:

Evaluation: List out the key features that Bench provided your organization and what was especially important or useful. Also, consider their limitations. What features did you wish you had access to?
Determination: After you’ve listed out key features, organize them into those features that would be “essential” and those that are “nice-to-have.” This will help you ensure your most pressing needs are met when you consider new systems.
Research: Conduct some research to evaluate which systems are out there. Check out their features and compare those features to your list of “essentials.” This will help you make a short list of systems that will meet your organization’s specific needs.
Review: Schedule calls and meetings to review the Bench alternatives on your short list. Be sure to use the “essentials,” “nice-to-haves,” and past pain points to develop a list of questions prior to these calls. Take notes during the meetings of key points and answers to those questions. This will help you make your final decision.
Consider: Consider your budget. You may have a specific budget set aside for bookkeeping and accounting systems in 2025. Talk to your leadership team to determine the ideal budget size and any available wiggle room for this new system. Note that some organizations will also migrate or implement you into your new system for free! For example, Jitasa migrates nonprofits’ data to QuickBooks Online for free when they sign up for bookkeeping services.
Choose: Pick the system that best meets your needs, satisfying both the features you need and any budgetary constraints.

Note: When you’re evaluating your Bench replacement, make sure you consider both your current and future needs. If you have a season of growth in your near future, you might consider upgrading to a more robust system than your current needs dictate.

Let’s jump into some Bench alternatives that you might consider to manage your finances.

Jitasa: Best Bench Alternative for Nonprofits

Here at Jitasa, we provide outsourced bookkeeping and accounting services specifically for nonprofit organizations. If your nonprofit previously outsourced your bookkeeping to Bench, Jitasa will be your best replacement option. We offer:

Access to QuickBooks: We include a subscription to QuickBooks as a part of our services. This means we will help you get up and running with a new system immediately.
Fully-staffed accounting team: Our global team means your organization will have access to a team member around the clock. Our team-based model also means you have several experts available to answer any of your questions.
Access to expertise: Jitasa exclusively works with nonprofit organizations. If your nonprofit has a question or concern about bookkeeping or accounting for your system, we’ve probably seen it before! With years of experience in the sector, we have seen just about everything and are happy to answer questions.
Enhanced internal controls: Safety is and should be a top concern for your organization. We segregate duties, provide control activities, and ensure proper security procedures and policies are in place to establish continuous reliability and security for your financial data.

How is Jitasa Different?

The biggest difference between Jitasa and other outsourced bookkeeping and accounting providers (in addition to our unwavering commitment to excellence) is the fact that we exclusively serve nonprofits.

Nonprofit accounting is unique and requires a team with unique skills to serve these amazing organizations. Whether your organization is local, national, or a chapter to a larger organization, we can help! One of our values is to “serve all,” so we’ll help any nonprofit of any size and any purpose in the United States.

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Other Bench Alternatives

Before picking the first option you come across, make sure you evaluate all the options available to your organization. This will help you make sure you find the right solution to meet your particular needs. We’ve included a few of our favorite software solutions for consideration below:

QuickBooks Online

QuickBooks Online provides bookkeeping and accounting tools that are helpful not only for our Jitasa team, but also for small businesses. As many small to mid-sized businesses are among those Bench customers now looking for new solutions, you might consider migrating your needs to QuickBooks.

QuickBooks Online offers features such as:

Cloud-based accessibility
Expense tracking and management
Invoicing and payment processing
Standard and custom reporting and analytics

As a big name in the accounting world, QuickBooks Online also has many integrations with other solutions, creating seamless workflows.

IES: Intuit Enterprise Suite

If your organization has outgrown QuickBooks Online, you might be more interested in Intuit’s new solution, Intuit Enterprise Suite (IES). This system provides more robust features than those in QuickBooks Online, essentially becoming the older brother between these systems.

IES offers the features available in QuickBooks Online, adding on more robust tools such as:

Industry-specific customizations, notably for construction companies
Role-based access permissions
More extensive projects capabilities
Multi-entity business accounting and management

While smaller organizations will likely benefit greatly from QuickBooks Online, slightly larger ones or those with more complex needs may gravitate toward IES instead.

Sage Intacct

Sage Intacct offers software for both nonprofits and businesses alike. They tend to have slightly more robust features available than those available with QuickBooks Online, making them more competitive with IES.

This cloud-based solution offers advanced accounting features, automation, and customizable tools to improve financial efficiency and accuracy. Some of the available features include:

Multi-entity and multi-currency support
Standard and custom reporting and dashboards
Compliance and audit support
Payroll and HR management

Sage Intacct is particularly popular in industries like nonprofits, healthcare, and professional services due to its focus on multi-entity management and robust reporting capabilities.

Local Bookkeepers and Accountants

Another Bench alternative you might consider is a local bookkeeper or accountant. Be sure to compare their offerings with those on your list of essential needs. You might also consider asking them questions about:

The size of their typical client
The industries they’ve worked with
Referrals and references from other organizations

This will help you understand better whether your organization fits in with their experience and expertise.

In-House Bookkeepers and Accountants

Generally, organizations decide to outsource their bookkeeping and accounting because hiring someone in-house is an expensive option. And that remains true! Consider your organization’s size, budget, and plans for growth before determining whether hiring someone in-house will be the best route for your organization.

Wrapping Up

Switching bookkeeping and accounting solutions can be overwhelming and concerning. But with the right plan and some proper research, you shouldn’t worry! Simply take some important steps and conduct your research thoroughly. As you look for a Bench replacement, consider your needs and how each solution you evaluate can account for those needs. Good luck!

The Essential Church Bookkeeping Guide: How to Get Started.

2024-12-18T16:00:00Z

Church leaders generally strive to build thriving churches that bring congregants together to worship and minister effectively to the community. But growing a healthy church also involves growing a financially stable church. After all, you need well-managed finances simply to keep your church’s lights on, not to mention fueling all of the initiatives that further your mission!

To fully understand your church’s financial situation and manage its resources properly, it’s critical to develop solid bookkeeping processes. In this guide, you’ll learn all you need to know to get started with church bookkeeping, including:

Let’s begin by aligning on what church bookkeeping is and who is responsible for it.

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What is Church Bookkeeping?

Church bookkeeping is the systematic process of organizing and tracking a church’s finances. It involves keeping records of your church’s revenue, expenses, transactions, assets, liabilities, and other essential financial information that informs its operations.

Most churches with robust bookkeeping systems entrust these duties to a designated professional. Once you hire a bookkeeper, they’ll manage a variety of everyday financial responsibilities, including:

Entering basic financial data into your church’s accounting system.
Writing checks for everyday payments like vendor fees and utility bills (and getting leadership approval for larger checks as needed).
Making bank deposits of physical cash and checks, and/or overseeing electronic deposits.
Managing invoices from consultants and contractors.
Processing payroll for your church’s staff (although this task could also fall to a human resources professional, depending on your church’s management structure).
Allocating costs on a day-to-day basis according to your church’s budget.

While your church’s bookkeeping needs may vary depending on its unique situation, these responsibilities should form the basis of your bookkeeper’s job description.

The Difference Between Church Bookkeeping & Accounting

To create a top-notch financial management system for your church, you need an accountant on your team as well as a bookkeeper. However, bookkeeping and accounting are frequently confused—here is how to distinguish between these functions:

As mentioned previously, bookkeeping covers churches’ everyday financial needs and focuses on recordkeeping. Bookkeepers aren’t required to obtain specific degrees or certifications to perform their roles—they just need some general financial knowledge and on-the-job training to work effectively.
Nearly all accounting jobs, on the other hand, require a CPA certification and at least a bachelor’s degree in accounting or a related field. This is because accountants perform more complex tasks related to financial analysis and reporting, such as:
- Reconciling various types of transactions
- Reviewing budgets
- Preparing for audits
- Compiling financial statements

Bookkeeping and accounting are related in that bookkeeping lays the foundation for the accounting processes that follow. Your church’s bookkeeper and accountant will likely work closely together to ensure accuracy in your records and reports.

Benefits of Church Bookkeeping

If your church prioritizes effective bookkeeping, you can experience several key benefits, including being able to:

Ensure regulatory compliance. Although most churches don’t have to file Form 990 each year, they still need to comply with other IRS rules to maintain their tax-exempt status. Plus, all organizations (for-profit and nonprofit) are expected to follow the Generally Accepted Accounting Principles (GAAP) to standardize their financial practices. Thorough recordkeeping helps your church stay aligned with both sets of regulations.
Reduce operational risks. In addition to non-compliance, there are other real financial risks that could derail your church’s operations, like fraud and theft. Properly managing financial information allows you to identify these risks early and take action to prevent them from causing significant problems.
Make data-driven decisions. Effective bookkeeping doesn’t just lower the chances of negative consequences for your church—it also boosts positive outcomes. Clear financial records can inform many decision-making processes at your church, from showing you what types of fundraisers are most profitable to determining if you’re financially ready to complete a major project.
Increase transparency. As Ministry Brands’ 2024 State of Church Giving Report explains, financial transparency factors into congregants’ decisions to give to churches—in fact, more than half of churches that increased their giving totals in 2023 cited it as a contributing factor. But to fully experience the benefits of transparency (increased giving and stronger congregant relationships), you need accurate financial data to share!

Bookkeeping doesn’t just lay the foundation for accounting—it’s also the basis of strategic planning, fundraising, communications, and many other vital activities at your church. Make sure your whole team is on the same page about the importance of bookkeeping, and keep the lines of communication open between your financial professionals and your other employees so everyone can understand your church’s financial situation as it applies to their work.

Pro Tips for Effective Church Bookkeeping

Now that you know what church bookkeeping entails and why it’s important, let’s walk through some additional tips to set your organization up for success.

Recognize Revenue Properly

Revenue recognition refers to the procedures your church uses to record the funds it brings in correctly. Different types of revenue should be recognized at different times and organized into different categories in your records according to GAAP and other Financial Accounting Standards Board (FASB) regulations, so your bookkeeper should be familiar with those guidelines.

Here are a few key terms you should know to frame your church’s revenue recognition processes:

Contribution transactions occur when your church receives funding without directly giving the contributor anything in return. Most individual donations (regardless of size or giving method) and grants are considered contribution transactions. Record this revenue as soon as you know the full amount you’ll receive, even if the funding takes more time to arrive or comes in installments.
Exchange transactions happen with the expectation that a supporter will receive something in return from your church. This category includes revenue from activities like merchandise sales, fundraising events, or ministry-related fees (e.g., costs for church members to attend retreats or participate in mission trips). Record exchange transactions when the contributor receives what they were promised.
Restricted funds should have their own section in your bookkeeping system, although you’ll follow the same transaction-specific procedures for when to record them. These funds (usually major gifts or grants) have contributor-imposed designations attached to them, so your church has to put them toward certain initiatives. Recording restricted funding separately makes it more likely that your church will fulfill its obligations rather than accidentally spending this money on costs it wasn’t intended to cover.

Revenue recognition also affects financial reporting because, as a general rule, your church’s records and reports should line up. Set up your system properly to make things easier for both your bookkeeper and your accountant.

Keep Records of Non-Cash Contributions

Today’s donors appreciate flexibility in giving methods, and accepting in-kind donations is a great way for your church to provide this. In-kind donations also allow your church to secure useful goods (like used books for your lending library or snacks for your children’s ministry) and services (such as web development or legal counsel) at no cost, so you can reallocate the funds you would’ve spent on them to other areas of your budget.

Besides goods and services, other forms of non-cash giving are becoming increasingly popular for churches, such as gifts of stock, real estate, and cryptocurrency. Your bookkeeper should create separate categories in your records for all of these contribution types to track them accurately.

To track traditional in-kind donations, figure out the gift’s fair market value (FMV), which is the price you would’ve paid for the good or service on the open market. Then, record the FMV as a debit and credit to reflect that these gifts result in a net zero gain in cash for your organization. For other non-cash contributions, record their value when you receive them and when you sell them (if applicable). Your bookkeeper should be familiar with all of these processes, but your accountant can come in behind them to review and balance transactions as needed.

Categorize Expenses Consistently

Your church’s financial records and reports should also align when it comes to tracking expenses. There are two main ways your bookkeeper can categorize cost data:

Natural expense categorization organizes costs based on the type of payment made. If your church uses this method, your categories might include items like staff compensation, facilities, and outreach, among others.
Functional expense categorization sorts costs according to how they further your church’s mission. The primary categories here are program expenses (directly mission-related), administrative expenses (necessary for operations), and fundraising expenses (upfront costs of generating revenue).

Many nonprofits use functional expense categorization to align with the requirements of Form 990, so if your church is required to file that tax form, you should use the corresponding method. If your church is exempt from Form 990 like most, you can choose either method, as long as your records, operating budgets, and financial statements all categorize expenses the same way.

Invest in Dedicated Software

When your church first started tracking its finances, you probably used a spreadsheet to keep data organized. While spreadsheets work in the short term, it’s best to switch to a specialized accounting platform when you can. Accounting software makes it easier to record various types of transactions, monitor your church’s financial obligations, create and store reports, and facilitate various other bookkeeping and accounting activities.

While there are a number of good church accounting platforms available, one of the most commonly used is Intuit’s suite of products. If you choose to go this route, your church can choose from a few different solutions and plans depending on your needs:

QuickBooks Online Plus: Provides small to mid-sized churches with core bookkeeping and accounting features in a cloud-based platform.
QuickBooks Online Advanced: Similar to the Plus plan, but includes several more specialized features and access for additional users.
Intuit Enterprise Suite (IES): More robust financial management tools and analysis capabilities that large churches can benefit from.

While QuickBooks Online and IES aren’t designed specifically for churches or nonprofits, it’s possible customize a lot of factors during the setup process—from expense categories to chart of accounts designations—to meet your church’s needs for the long haul. No matter what software you choose for your church, make sure you find an accounting firm that supports it and can help with the set-up and maintenance process. For example, Jitasa supports the most common accounting solutions on the market for churches and nonprofits.

Track your church’s finances with our customizable Church Chart of Accounts Template.

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Designate a Church Bookkeeper

As mentioned previously, the most important thing your church can do to set itself up for bookkeeping success is to have a dedicated bookkeeper on its team. There are three ways your church can fulfill this need, each of which has advantages and drawbacks:

Hiring in-house. Bringing on a new employee can be a good option for large churches with many bookkeeping needs. However, recruiting, onboarding, and compensating an in-house bookkeeper is expensive, so you have to evaluate whether these costs are worth it for your church.
Asking a volunteer or in-kind donor. This option works well for smaller or newer churches since it’s free. It isn’t particularly sustainable, though, since volunteer bookkeepers often lose motivation over time and eventually start prioritizing paid work over helping your church.
Leveraging outsourced bookkeeping services. Outsourcing allows your church to work with expert bookkeepers at a fraction of the cost of hiring in-house. These professionals are typically highly motivated and dedicated to your church, and their experience helping other organizations informs their approach. The only drawback here is that turnaround times can be longer because outsourced bookkeepers typically have multiple clients, but you can work around this through proactive communication.

If you choose the last option, we (of course!) recommend considering Jitasa, the largest provider of outsourced church bookkeeping and accounting services in the United States. We’ve partnered with more than 100 churches of all sizes and denominations, so if your church has a financial need, we’ve probably seen something similar before and can help you manage it. Plus, we work exclusively with tax-exempt organizations, so we know the ins and outs of bookkeeping for churches and will maintain compliance every step of the way.

Effective church bookkeeping involves managing many moving parts, but with the right strategy and tools on your side, you’ll set your church up for enhanced decision-making, transparency, and financial compliance. Use the tips above to get started, and don’t hesitate to reach out for expert help whenever you need it.

For more information on church finance, check out these resources:

Church Accounting: Ultimate Guide + Best Practices to Know. Dive deeper into the other side of church financial management—accounting—to get a clearer picture of how it works together with bookkeeping.
How to Set up QuickBooks for Nonprofits: The Complete Guide. Learn how to configure and leverage QuickBooks Online to serve your church’s needs effectively.
Bookkeeping & Accounting Services for Churches | Jitasa Group. Explore Jitasa’s affordable, scalable bookkeeping and accounting services, tailor-made for churches like yours.

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The Role of a Nonprofit Controller: Complete FAQ Guide

2024-12-05T16:00:00Z

Effective nonprofit financial management requires your team to navigate many moving parts. From goal-setting and budgeting to data analysis and reporting, organizations of all sizes often need additional help completing these tasks in the best possible way to support their missions and ensure compliance.

A nonprofit controller is one individual who can fulfill this responsibility. In this guide, we’ll answer some of the most frequently asked questions about the role of a nonprofit controller, including:

Let’s begin by defining the term “nonprofit controller” as it relates to other financial roles you might be familiar with.

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What is a nonprofit controller?

A nonprofit controller is an experienced professional who manages key financial functions for a tax-exempt organization. Their duties typically span all stages of nonprofit financial activities, from planning and day-to-day operations to analysis and reporting.

The controller position essentially combines the duties of two other nonprofit financial roles: accountant and chief financial officer (CFO). Here is a quick overview of how these positions compare:

Accountants are responsible for financial analysis and reporting tasks. At nonprofits, these can range from bank reconciliations to tax filing to audit preparation.
CFOs take the lead on strategy—i.e., the planning and operational side of nonprofit finance. They manage budgets, grants, cash flow, and goal-setting, among other tasks.
Controllers typically spend some of their time doing accounting and the rest working on financial strategy. At mid-sized to large organizations, they often lead a finance team so they can delegate responsibilities as needed and effectively handle all of the tasks that land on their plate.

Controllers are distinct from bookkeepers, who manage recordkeeping and other everyday financial tasks, and treasurers, who provide financial oversight as board members. Your nonprofit should minimally have a treasurer, bookkeeper, and controller (or accountant and CFO) working on its finances to cover all of your bases and ensure proper governance.

Why should nonprofits hire a controller?

Besides rounding out your financial management structure, adding a controller to your nonprofit’s team has several unique advantages, including:

Strategic decision-making. A good controller will use their nonprofit finance experience and intimate knowledge of your organization’s situation to set goals and create action plans to help you reach them.
Internal and external accountability. As your controller manages your nonprofit’s finances, they’ll keep your team on track with duties and deadlines while also creating reports for external stakeholders.
Improved compliance. Your controller should be familiar with legal requirements for nonprofits and industry standards like the Generally Accepted Accounting Principles (GAAP), so they can align your systems with these regulations.

Additionally, hiring a nonprofit controller rather than an accountant and CFO provides the benefit of only having to recruit, train, and compensate one employee. This is especially convenient when your organization is just getting started with financial management, since you can save time and money upfront and hire more team members later if needed.

What are a nonprofit controller’s key responsibilities?

Your controller's exact duties will depend on your nonprofit’s needs and existing management structure. To help you start thinking about what you might have this professional do for your organization, let’s walk through six common responsibilities of nonprofit controllers.

Budgeting

Creating your nonprofit’s annual operating budget is a team effort, requiring input from all departments across your organization and your board. However, your nonprofit controller will take the lead on this essential financial planning process to ensure your budget includes:

Defined activities related to generating revenue from a variety of sources and allocating that funding appropriately between program and overhead costs.
Specific time periods, including peak fundraising times and when you plan to make significant investments or expenditures.
Realistic and measurable metrics for each revenue-generating activity, total spending, and annual savings.

Your controller will also help create other types of nonprofit budgets, like for capital campaigns, specific programs, fundraising events, or grant proposals. While other staff members (e.g., your development director, program lead, event planner, or grants consultant) might take point on these budgets because they’re more familiar with those areas of your operations, your controller can still provide useful input based on their financial background

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Financial Policy Development

Fiscal policies govern your team’s day-to-day use of funds, so they’re foundational for effective financial management. Your nonprofit controller will assess your current procedures and make recommendations to improve them.

In particular, if you don’t have solid policies covering the following four areas, your controller will help you create or strengthen them:

Gift acceptance: Covers the types of donations (both monetary and in-kind) your organization can and can’t accept and the conditions for accepting them.
Conflict of interest: Details what to do in situations where leaders’ or board members’ outside interests could affect their decision-making for your nonprofit.
Expense reimbursement: Explains when and how staff members and volunteers can be reimbursed when they spend their own money on behalf of your mission.
Staff compensation: Outlines the procedure for setting and adjusting employees’ salaries and benefits.

Your controller may recommend additional policies and procedures as needed to make your nonprofit run more efficiently and manage risks effectively.

Audit Preparation

Some nonprofits are required to conduct independent financial audits for compliance, while others choose to do so for a deeper understanding of their financial situations. Whatever your organization’s reason for undergoing an audit, your controller will play a major role in your team’s preparations by helping to:

Select an auditor whose model aligns with your nonprofit’s needs and budget.
Compile the financial documents on the auditor’s Provided By Client (PBC) list.
Review your accounting information to resolve any errors or discrepancies in advance.

After your audit, your controller will also review the auditor’s recommendations and take the lead on implementing them across your organization.

Financial Reporting

Financial reporting is essential for accountability at your nonprofit—to your internal team, the government, and your supporters. There are a few different types of reports your controller will compile, such as the four core nonprofit financial statements, which organize and summarize fiscal data in different ways so you can glean actionable insights. These include the:

Statement of activities. As the nonprofit parallel to the for-profit income statement, this report breaks down your organization’s revenue, expenses, and change in net assets over a given year to provide a reference for future budgets.
Statement of financial position. Also known as a balance sheet, this statement shows an annual snapshot of your nonprofit’s financial health and growth potential by reporting your assets, liabilities, and net assets.
Statement of cash flows. This report explains how cash moves in and out of your organization through operating, investing, and financing activities. It’s usually pulled monthly to help keep your spending and fundraising on track with your current budget.
Statement of functional expenses. The one financial statement that’s unique to nonprofits divides your nonprofit’s expenditures into program, administrative, and fundraising categories so you know how your expenses further your mission.

These statements help your controller file your nonprofit’s tax returns via IRS Form 990 and create the financial section of your annual report to give supporters an overview of key data from the year.

Staff Management

As mentioned previously, large nonprofits often put their controller in charge of a finance team to ensure adequate bandwidth to take care of their many financial needs. In these situations, the controller usually focuses on higher-level strategy and management and assigns more manual tasks to other team members. For example, when preparing for an audit, the controller might delegate data review and document retrieval, then make themselves available to answer questions as needed and check that everything is in order at the end.

Even if they aren’t in charge of a team right away, your controller should have strong management and leadership skills. They’ll advise the rest of your staff on financial topics and procedures as is applicable to their roles, plus they’ll be prepared to lead if your organization needs to create a larger team in the future.

Strategic Planning

Expanding your nonprofit requires a strong financial foundation. Your nonprofit controller should be involved in this decision-making process, since they can provide insight on:

Whether your nonprofit is financially prepared for growth
How you can get ready if you aren’t yet
Where your organization’s resources should go in order to expand sustainably

They should also have input in creating your nonprofit’s strategic plan to ensure the financial goals in it are realistic, actionable, and relevant to your mission.

How do you hire a nonprofit controller?

If your nonprofit is ready to hire a controller, the responsibilities above should give you an idea of some of the qualities to look for in this professional. The most important skills and qualifications to consider include:

A background in finance and experience in the nonprofit sector
Familiarity with your nonprofit’s accounting system and other essential tools
Leadership and team management abilities
Strong organization, planning, and time management

These factors will help you finalize your goals for the position and write the job description. From there, follow these steps to hire a nonprofit controller:

Start your search online. Once you’ve posted your job description on your organization’s website, expand its reach by sharing it on professional networking sites like Indeed and LinkedIn. If time permits, browse those sites for strong candidates and reach out to them directly with information about the role.
Ask for recommendations. Reach out to other nonprofits in your network to see if they’ve worked with a nonprofit controller before, what they thought of them, and if their current controller might know someone who would be interested in working with you. Your treasurer or bookkeeper may also have useful connections in the field.
Interview your top candidates. Vet resumes and schedule interviews as you start receiving applications. Tailor your interview questions to the role—ask them about their experience and how they’d deal with different situations related to nonprofit finance. Also, introduce them to team members they’ll work closely with to ensure a good fit.
Make your final decision. All you have to do from here is officially offer them the job and finalize position details, and then you’ll be ready to onboard your new nonprofit controller!

While this traditional hiring process can be effective for larger nonprofits that need a full-time controller, small to midsize organizations may not have the resources to go through it—or enough work to warrant bringing on a new team member. In this case, we recommend modifying your process and outsourcing the controller role to a nonprofit financial management firm like Jitasa.

Jitasa’s affordable, scalable bookkeeping and accounting services cover the core duties of a nonprofit controller, from audit prep to reporting to financial advising from the Jitasa Strategic Advisory Team (J-SAT). If you’re looking for additional financial planning and strategic management, J-SAT offers more in-depth fractional CFO services you can leverage. Plus, Jitasa works exclusively with tax-exempt organizations, so our team understands your unique needs and will develop tailored solutions to help you accomplish your financial goals.

Create a more accurate, compliant, and efficient financial ecosystem by partnering with Jitasa.

Explore Our Nonprofit Controller Services

A nonprofit controller is a key addition to your organization’s team. Their expertise in financial strategy, analysis, and reporting will help your nonprofit continuously improve its management practices and work toward sustainable growth. Keep in mind that you don’t necessarily have to go through a full hiring process for this role, as outsourced services (like those we provide at Jitasa) can give your organization everything it needs at a fraction of the cost.

For more information on nonprofit financial professionals, check out these resources:

Nonprofit Bookkeeper vs. Accountant: What’s the Difference? Dive deeper into the roles of two frequently confused nonprofit financial roles—bookkeepers and accountants.
Outsourced Accounting for Nonprofits: Top 10+ Firms. Explore our recommendations for outsourced accounting and controller services to align with your nonprofit’s needs.
Free Organizational Health Assessment by Jitasa. Review your nonprofit’s current management practices and identify areas where your controller could help you improve.

Discover how Jitasa’s affordable, scalable nonprofit controller services can work for your organization.

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Nonprofit Revenue Recognition: What It Is & Why It Matters

2024-10-14T12:00:00Z

To increase your nonprofit’s financial stability, you need to bring in funding from various sources, such as individual donations, corporate contributions, and grants. However, the more revenue streams your organization has, the more complicated it becomes to record and report your funding.

This is why proper revenue recognition is critical for your nonprofit. When you manage your funding consistently, you can ensure compliance with legal requirements and streamline your processes for better results.

In this guide, you’ll learn all you need to know about nonprofit revenue recognition, including:

Let’s get started by breaking down what exactly nonprofit revenue recognition is.

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What is Nonprofit Revenue Recognition?

Nonprofit revenue recognition refers to the procedures charitable organizations use to record and report the funding they receive. It’s essential for financial transparency, accountability, and effective resource management.

Revenue recognition applies to both internal recordkeeping and external income reporting on your nonprofit’s financial statements, annual tax return, and other key accounting documents, since your reports should line up with your records.

Why is Nonprofit Revenue Recognition Important?

Correctly recognizing your organization’s revenue ensures that you comply with various regulations on nonprofit finances. Some of these include:

Financial Accounting Standards Board (FASB) rules. The FASB is the private-entity governing body of accounting for for-profit and nonprofit organizations in the U.S. Their Accounting Standards Codification (ASC) 606 outlines how all organizations that enter into financial contracts should report their revenue.
Generally Accepted Accounting Principles (GAAP). These agreed-upon accounting standards promote accountability in financial management through standardized practices—such as how to recognize revenue.
IRS tax reporting requirements. When your nonprofit files its annual tax return via Form 990, the way you’ve recognized revenue throughout the year will affect how you complete your report—which needs to be as accurate as possible to avoid raising red flags about your organization.

Additionally, developing a system for revenue recognition streamlines financial management. Your internal records and chart of accounts will be more organized, and it’ll be easier to be transparent about your nonprofit’s financial situation with stakeholders when you know how your revenue was recognized.

Revenue Recognition Key Terms

When you’re getting started with nonprofit revenue recognition, it’s often helpful to frame the process around its key terms. While you may have some familiarity with these concepts from requesting and processing donations for your organization, we’ll review the nonprofit accounting terminology and discuss the applications of each in more detail.

Contribution Transactions

Any time money moves in or out of your organization in such a way that it changes hands from one party to another, it’s known as a transaction. Contribution transactions occur when your nonprofit obtains funds without the contributing individual or organization directly receiving anything in return.

Examples of contribution transactions include:

Most individual monetary contributions (small, mid-level, major, and planned).
Some types of corporate giving, such as matching gifts, volunteer grants, and internal employee fundraising campaigns.
Most in-kind donations of goods, services, and non-cash assets like stocks or real estate.
Government and foundation grants.

In most cases, your nonprofit should recognize contribution transactions as soon as you know the full amount you’ll receive, even if the funding comes in installments or doesn’t arrive right away. For example, let’s say a company confirms they’ll match an employee’s donation in August, but they wait until September to write your organization one check for all matching gifts requested during the third quarter. You’d still recognize the revenue in August when it was pledged.

Exchange Transactions

In contrast to contribution transactions, exchange transactions occur when your nonprofit provides something in return for the funding it receives. While you should show appreciation for every contribution, the difference with exchange transactions is that the funder gives with the expectation of a specific type of reciprocity.

Here are some common types of exchange transactions in a nonprofit context:

Corporate sponsorships, since businesses are typically promised opportunities for publicity in return for supporting an initiative.
Membership dues, which are key revenue streams for associations and cultural organizations like museums.
Branded merchandise sales, product fundraisers, and other purchase-centric revenue-generating activities.
Crowdfunding and peer-to-peer campaigns where supporters can receive incentives or “perks” for donating at certain levels.
Sales of event tickets and auction items.
Fees for services provided—for example, if an animal shelter offered a vaccine clinic for adopted pets, each paid-for vaccine would be an exchange transaction.

Your organization should recognize revenue from exchange transactions when the contributor has received what they were promised. For instance, if you were to sell t-shirts branded to your nonprofit online, you would record the revenue from each purchase when the shirt is shipped to the supporter who ordered it.

Deferred Revenue

Deferred revenue is funding that your organization has received but isn’t yet allowed to recognize as income (and therefore can’t spend yet). This usually happens with exchange transactions where the supporter pre-pays for a good or service that will be delivered at a later date.

Let’s say you work for a nonprofit art museum that offers various paid workshops for community members. You have a four-week landscape painting workshop on the calendar for October, but you open registrations in August to facilitate logistical arrangements for your team. Although participants pay the registration fee when they sign up, your organization can’t recognize that revenue until you provide the service you promised in return—the workshop. Therefore, the registration fees are considered deferred revenue until the workshop is finished.

Restricted Funds

Deferred revenue is sometimes confused with restricted funding, since both terms refer to revenue your nonprofit isn’t currently allowed to freely spend. However, restricted funds usually come in via contribution transactions rather than exchange transactions, and the restrictions are donor- or funder-imposed regarding how your nonprofit uses the revenue.

There are three categories of restrictions that may apply to your nonprofit’s contributions:

Unrestricted funds have no requirements attached to their use, so your organization can put them toward any area of its budget. Most small-to-mid-sized revenue transactions—both contribution and exchange—fall into this category.
Permanently restricted funds usually take the form of endowments, a specific type of contribution transaction. Your nonprofit doesn’t spend these gifts directly but instead invests them and then uses the interest they generate to fund donor-designated programs or projects.
Temporarily restricted funds are designated for a specific project or time frame. Once the project is finished or the time expires, any leftover funding is released from restriction. For example, if a major donor contributes $50,000 to a building project and you only end up needing $48,000 of it, the remaining $2,000 becomes unrestricted funding when the project is finished. This category includes most major and planned gifts, grants, and sponsorships (the one commonly restricted exchange transaction).

While you should follow the same transaction-specific procedures for recognizing restricted and unrestricted revenue, make sure to include a separate section in your records for restricted funds to ensure your organization uses them as they’re designated.

Conditional Revenue

Conditional revenue refers to situations in which the contributor will only provide funding if specific conditions are met, either internally or externally. In these cases, you’ll recognize the revenue when the conditions come to fruition.

Bequests are a common form of nonprofit revenue that is often dependent on an external condition—the donor’s passing. Therefore, your organization wouldn’t record these until the donor has passed away and their estate has been valued so you know how much you’ll receive. By contrast, some grants are dependent on your nonprofit internally fulfilling conditions related to the initiative being funded (more on this later).

Common Revenue Recognition Pain Points (& Their Solutions!)

Nonprofit revenue recognition can be complicated and takes time to learn. Let’s dive into a few of the most common pain points nonprofits encounter with revenue recognition and discuss how to work through them.

Grant Revenue Recognition

Grants can be tricky to navigate since different funders have varied requirements for every part of the process, from application to reporting. There are also different procedures for recognizing grant revenue depending on the type of grant a funder offers:

Unconditional grants are usually provided all at once with no strings attached, so you’ll record them as you would most contribution transactions—as soon as you receive the award letter, even if the funding takes additional time to arrive.
Conditional grants are paid out in installments as your organization meets funder-imposed conditions (for example, they may only agree to fund a community program as long as it has a certain number of participants). Record the first installment of a conditional grant when you receive the award letter and subsequent installments as you receive the funding.
Reimbursable grants require your nonprofit to spend the money for an initiative up front and keep an itemized list of your expenses so the funder can reimburse you for them. Record these grants when you receive the funding since you likely won’t know the exact grant amount until the funder reviews your expense list and makes the payment.

As soon as you identify a grant opportunity for your organization, note its type so you’re prepared to recognize the revenue properly if you win it.

Accounting Methods

Your nonprofit’s revenue recognition structure depends on which accounting method you use: cash or accrual basis. Here is a quick overview of these systems:

Cash accounting systems recognize revenue when it’s paid and expenses when they’re paid in order to track the flow of cash in and out of your organization.
Accrual accounting systems recognize revenue when it’s pledged and expenses when they’re incurred to reflect your nonprofit’s financial commitments.

The accrual accounting method is your best bet for effectively managing every aspect of revenue recognition. Although it’s more complicated than cash accounting and requires your nonprofit to invest in specialized accounting software rather than simply using a spreadsheet to track transactions, it’s worth making the switch to ensure compliance.

Standardization of Revenue Recognition

While your nonprofit will likely have a few financially savvy individuals who primarily deal with your revenue recognition system—such as your bookkeeper, accountant, or chief financial officer—they all need to be on the same page about your processes. Plus, anyone else who needs to utilize your organization’s financial data for various tasks (like strategic planning or fundraising goal-setting) should be aware of how revenue recognition works in case questions arise.

This is where a revenue (or income) recognition policy comes in. In it, make sure to outline:

The types of revenue covered by the policy.
How each of these types of revenue is classified (i.e., contribution vs. exchange transaction).
When and how each classification of revenue should be recorded.
How conditions and restrictions affect revenue recognition.
Comprehensive revenue reporting procedures.
Internal controls and other oversight measures to ensure the policy is followed.
The schedule for reviewing and updating the policy over time.

Once you’ve developed a revenue recognition policy, add it to your nonprofit’s financial policy handbook to ensure everyone at your organization can reference it as needed.

Use our customizable template to create your nonprofit’s income recognition policy.

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The revenue recognition tips above should provide a solid starting point for your nonprofit. However, the best way to overcome the challenges associated with it is to work with a nonprofit accountant (like the experts at Jitasa!) who can use their years of experience and financial expertise to tailor their accounting approach to your organization’s unique needs. Your accountant will also be well versed in compliance to ensure your organization can continue to grow and thrive as it brings in even more revenue for its mission.

For more information on recording and reporting nonprofit revenue, check out these resources:

Grant Management: How to Secure and Track Nonprofit Funding. Dive deeper into every aspect of the grant management cycle, from grantseeking to proposal-writing to reporting.
Getting Started With Nonprofit Bookkeeping: A Complete Guide. Proper revenue recognition is essential for effective bookkeeping—discover why and how in this guide.
How to Set up QuickBooks for Nonprofits: The Complete Guide. Explore the best accounting software on the market, QuickBooks Online, and learn how to configure it for your nonprofit’s needs.

Work with Jitasa’s expert accountants to develop your nonprofit’s revenue recognition system.

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What is IES (Intuit Enterprise Suite) for Nonprofits?

2024-09-25T16:00:00Z

If you tried QuickBooks Online years ago, you might have the impression that your organization is too complex to use the system. The outdated reputation of the software is that it can be used only for small organizations. But the Intuit team is turning this reputation around by introducing new products like Intuit Enterprise Suite (IES).

IES is a new tool for mid-market organizations, offering more advanced features that can be used for larger organizations. You might be wondering how this impacts your nonprofit. And that’s what we’re here to answer! We’ll walk through some of the new features offered through IES, explain how you might use those features for your nonprofit, and discuss which nonprofit organizations may benefit from this accounting system.

What is Intuit Enterprise Suite (IES)?

IES is a new product released by Intuit for larger organizations, with new features that solve for more complex situations than their other products. While IES is not specifically designed for nonprofit organizations (newsflash, neither was QuickBooks Online!), nonprofits can still use it to handle some of their more complex accounting needs.

Many organizations deal with complicated accounting issues like tracking multiple grants, endowments, and other revenue restrictions unique to the nonprofit world. This means that accounting software needs specific features to handle these types of issues (and it never hurts to have an accountant who specializes in nonprofit accounting). IES includes features designed to help organizations handle these types of complexities.

Download the IES Buyer’s Checklist now to compare top platforms and learn more about how IES stacks up.

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How does IES compare to Other Accounting Software for Nonprofits

IES vs. QuickBooks Online

QuickBooks Online (QBO) is a standard accounting system designed with small businesses in mind. It should be noted that there is a QuickBooks for Nonprofits product. But there are very few notable differences between that product and QBO. The basic functionality is the same but they do use some more nonprofit-centric terminology such as “donors” rather than “customers” and “pledges rather than “invoices.”

QBO and IES both offer a core number of accounting features including:

Income and expenses tracking
Cash flow tracking
Reporting for financial statements such as your
- Statement of financial position (balance sheet)
- Statement of functional expenses
- Statement of cash flows
- Statement of activities (income statement)
A general ledger
Journal entries
Bank reconciliations
Bill management
Project features

QBO (or QuickBooks for Nonprofits) has accounting functionality appropriate for many organizations, especially those that don’t have as many grants and other restricted funds that need to be considered.

The general ledger, revenue and expense tracking, and automations can be used for basic financial tracking. However, QBO tends to have a less built-out projects feature, which is best used to track grants and other restricted funds.

Donors or grantors may choose to restrict funds so that those funds are used for a specific purpose and for that purpose alone. Nonprofits must consider this unique aspect of nonprofit accounting when they encounter these restrictions and especially when they encounter several of them. If you have many restrictions, you’ll need software that can track them in order to remain compliant with grant requirements and accountable to donors.

IES offers more comprehensive projects features, which can help with grant and restricted fund management, providing new functionality such as:

A new project manager role
Project-specific reporting
Project monitoring

All of these features can be used to better understand restricted funding, helping organizations better understand their spending and how much funding is left as a part of each restricted fund.

In addition to grants, larger organizations with several chapters or subsidiaries may find that the multi-entity component of IES software can manage. For organizations with multiple entities, you no longer need to organize your reports separately. With Intuit Enterprise Suite, you can pull reports and analyze financial information for each entity separately or as a whole organization.

This multi-entity feature will offer options to analyze:

Consolidated financial statements
Inter-organizational journal entries
Inter-organizational transaction eliminations

Plus, all transactions and reports for multi-entity organizations can be handled from a single login. You won’t be required to obtain multiple licenses in these situations with IES. You can simply use a drop-down menu to view information about the parent organization and any subsidiaries from a singular dashboard.

IES also offers additional reporting options that help you further break down data, which we’ll discuss in more detail in the next section.

IES vs. Sage Intacct

Another feature that is less robust in QBO that has historically lead many organizations to solutions like Sage Intacct is comprehensive reporting. While solutions like Sage Intacct provide robust reporting tools such as P&L per project, QBO has historically lacked features for these more complex insights.

Intuit Enterprise Suite is designed to close this gap and create a solution that is more competitive with these comprehensive features available in Sage Intacct. Because Sage Intacct is specifically designed with nonprofits in mind, it offers several reporting features that make it easier to comply with grant requirements. For example, Sage Intacct offers:

Budget vs. actual reports per grant
Reporting and filtering by grant details
Grant classifications in transaction reporting
The ability to tie time sheet entries to specific grants
Task and grant tracking dashboard
Marking transactions as reimbursable during the transaction reporting process to account for reimbursable grants.

Some of these features are possible in QuickBooks Online, but they’re not as robust. For example, you can track time sheet entries to grants through the Time Activity tab of the projects tool in QBO. And you can see the specific transactions per grant in the Project Transactions tab.

Project reports available through QBO Projects are limited to:

Project Profitability
Time cost by employee/vendor
Unbilled time and expenses

As you can see, these QBO features are not nearly as robust as the Sage Intacct ones, but IES is working to solve that.

IES will offer more reporting options by project, including:

Project status
Project cost by vendor or project
Project cost details
Time by employee and project
P&L by project

As IES is not designed specifically for nonprofits, their reporting terminology uses the word “project” more than “grant,” but, in effect, these are synonymous for nonprofits using the software.

IES also offers deeper insights into reporting that goes past projects and grants. Their multi-dimensional reporting options allow organizations another level deeper into reports, providing a level deeper than the standard organizational profit and loss statement.

With multi-dimensional reports, your organization will be able to understand profit and loss information by various attributes, including:

Location
Fund Restrictions
Fund Balances
Grants
Department
Donor Type
Business Unit
Revenue Type

With this configurable solution, your organization can create up to 20 custom dimensions with five levels of hierarchy. You can also get a granular view of this data by tagging line items, accounts payable and accounts receivable transactions with your custom dimensions.

IES also carries over the user-friendliness of QuickBooks, a long-admired feature of the QuickBooks system. Some consider this system easier to learn than Sage Intacct, although the setup for IES will require more time and energy than that for QuickBooks.

Other Features Available Through IES

Unlike Sage Intacct, IES is not designed specifically for nonprofit organizations. However, the features we’ve discussed already are very useful for nonprofits of a certain size. The software does offer a number of other features that some nonprofits may find useful but are not as applicable to the general nonprofit industry. These features include:

Multi-entity management
20+ dimensions with multi-dimensional reporting
AI-generated P&L projections and budgets
Budget collaboration through task assignments

While these features are not necessary for the nonprofit industry as a whole, some organizations may find that they’re useful.

Common Nonprofit Questions About IES

Your nonprofit may have some questions about this software past simply what it offers, pertaining specifically to how it’s used for nonprofits like yours. These are some of the common questions we’ve heard from other nonprofit organizations like yours:

Why move from QBO to IES?

If your nonprofit manages lots of grants (over 5) and find that the QBO offerings don’t offer features to help you manage all of that funding, IES could be the solution to help you manage it. If you operate using fund accounting and have lots of restricted assets, this could also help you manage those funds and maintain compliance with GAAP accounting standards.

What organizations will benefit most from IES?

Organizations that will find IES the most beneficial will be mid-sized to large nonprofit organizations with multiple restricted revenue sources. Generally, those organizations with greater than $3 million in annual gross revenue may find this product most useful to organize their finances.

How much will this product cost?

The price of IES has not yet been released at the time of this article's publication. However, it’s safe to assume it will be more expensive than a standard QuickBooks Online subscription. How it compares in cost to Sage Intacct is currently unknown.

Final Thoughts

Intuit Enterprise Suite is still a brand-new product with many more details to come. Please check back often as we’ll continue updating this article as we learn more about the software.

IES combines the user-friendly interface of QuickBooks Online with the complexities of Sage Intacct. It’s a great option for nonprofits that need to manage many grants or have a level of complexity that cannot be solved in QBO alone.

If you have further questions about this software or want to know if it could be the right solution for your organization, feel free to reach out to Jitasa’s accounting team. As we work with nonprofits of any size and with a multitude of accounting complexities, our knowledgeable staff can point you in the right direction for this accounting system. Request a quote today!

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The Power of Data in Nonprofit Decision-Making: A Guide

2024-09-23T00:00:00Z

From balancing your budget to managing sensitive client information, data plays a key role in almost every part of your nonprofit’s operations. With a strong data collection, management, and assessment policy, your nonprofit can make data-driven decisions that drive the best outcomes for clients and program participants.

To help your nonprofit understand the power of nonprofit data, this guide will explore two key types of nonprofit data before walking through how to measure data maturity.

Types of nonprofit data

Fundraising

Most nonprofits will gather fundraising-related data through their fundraising and donor management software. For example, a few relevant data points to track include:

Total annual fundraising
Average donation size
Number of donors
Donor retention rate
Donor lapse rate
Average major donation size
Marketing metrics, such as email open rate, website traffic, bounce rate, engagement rate, and conversion rate

This information can help you make key decisions about what fundraisers to host, how much to ask for in your fundraising appeals, and what fundraising strategies are likely to succeed.

Be sure to also track fundraising revenue outside of individual donations. For instance, if your nonprofit receives grant funding, you will likely need to follow several requirements for using that funding. Most grants are restricted funds that can only be spent on select projects, and many grantmakers require nonprofits to provide follow-up reports that document how the grant was spent.

Program management

Managing your fundraising and financial data ensures your nonprofit can stay afloat and fulfill your mission, but it’s equally important to ensure your programs are putting your funds to good use by tracking data related to your programs and initiatives.

While most nonprofits generally focus on similar fundraising data points, program data depends heavily on your nonprofit’s mission. While the specifics can vary wildly, your organization should collect data relevant to your programs, such as the number of beneficiaries helped and whether said beneficiaries are people, animals, environments, or anything else. Of course, some nonprofits also lack beneficiaries in the traditional sense.

For example, an animal shelter might measure the number of animals they intake every year and what percent are placed in permanent homes. In contrast, a nonprofit that advocates for accessibility accommodations may have rough estimates of the number of people impacted in their community but primarily measure results based on the number and quality of accommodations implemented.

Though metrics vary from nonprofit to nonprofit, all organizations should collect data related to their programs. This information allows your organization to make data-driven decisions, identify initiatives that are successful and ones that need improvement, and present your data to funders to make a case for support.

Additionally, nonprofits in the healthcare or human services sectors may be required to provide program data in order to maintain federal reporting compliance. Case management software can help these organizations run their programs and file these reports.

How to measure data maturity

Fundraising and program management data are essential to making both everyday and major decisions at your nonprofit. However, whether your nonprofit’s data is currently in a place where it can help you make decisions depends on its maturity level.

Data maturity measures how robust, sophisticated, and effective an organization’s data management and analysis practices are. In a traditional data maturity model, there are four levels of data maturity:

1. Committed

Nonprofits at the lowest level of data maturity appreciate the idea of sophisticated data management and analysis but currently lack the processes or tools needed to improve.

For example, this might include nonprofits that use paper forms and file cabinets rather than data management software. While these systems keep the nonprofit afloat, they make data analysis difficult, and it’s easy to lose important reports and forms.

These organizations collect data but lack the capacity to make strong use of it, leading to an inability to present their impact to stakeholders, track budgets accurately, or make evidence-based decisions.

If your nonprofit is at this stage, begin having serious conversations with leadership about implementing structured processes for collecting and managing data so you can move on to the next stage of data maturity.

2. Counting outputs

Outputs are the quantifiable services your nonprofit delivers. For example, a nonprofit dedicated to environmental restoration might count the number of trees planted or pieces of trash picked up.

Nonprofits at this stage usually have some data collection tools implemented, such as:

Surveys and questionnaires. If gathering qualitative feedback from clients or program participants is relevant to your nonprofit, be sure to invest in survey software. For example, a youth readiness program might ask participants to fill out a questionnaire before entering and after leaving the program to assess the skills they’ve gained.
Marketing platforms. Most marketing tools have analysis features that help nonprofits gauge the success of their outreach efforts. For example, an email messaging platform might provide reports on what percentage of people opened your emails and how many clicked on links within them.
Financial management systems. Basic bookkeeping tools can help you keep track of how much revenue your nonprofit takes in and how much you spend.

At this stage, nonprofits understand their impact somewhat but still lack the data needed to assess long-term outcomes, understand cause and effects, and make meaningful decisions about the direction of their organization.

3. Measuring outcomes

To understand this stage, we first need to discuss the difference between outputs and outcomes. Outputs are individual data points related to your nonprofit’s programs, whereas outcomes are an analysis of the short- and long-term results of that data.

For example, let’s go back to the nonprofit that focuses on ecosystem restoration by planting trees and picking up trash. Each tree planted and piece of trash picked up is an output. A 10% decrease in pollutants in a river is an outcome.

Nonprofits that progress to measuring outcomes can finally put their data to use in making strategic decisions. These organizations have the proper data collection protocols and tools in place to understand how each of their programs performs and what impact those programs have.

On the financial side, this is the stage where nonprofits can perform fundraising assessments. Fundraising assessments are audits of your nonprofit’s fundraising practices to identify strengths and weaknesses in your approach. Organizations that measure outcomes have the ability to analyze their fundraising metrics and dig deeper into the why behind their results, laying the groundwork for assessing their outreach and marketing practices.

4. Managing outcomes

In the final stage, your nonprofit collects and manages data optimally, allowing you to not only track outcomes but also make strategic decisions quickly and confidently about how to improve them.

To maintain your data at this level, be sure to:

Keep your data clean. Practice regular data hygiene to ensure your data stays organized, accurate, and usable. Perform routine maintenance by scanning your database for duplicate, incomplete, and unnecessary data.
Assess your technology routinely. While changing your software too frequently can cause confusion and consistency issues, be aware of developments in nonprofit software and assess whether your current tools still meet your needs. This will help you determine when it is time for an upgrade and make the data migration process as smooth as possible.
Hire external services. To maintain a professional level of quality for certain types of data management, consider working with professionals. For example, you might hire an external bookkeeping and accounting firm to manage your finances.

At this level, your nonprofit will have a strong command of your data, allowing you to identify trends and make decisions in real time to react to challenges and opportunities alike.

Nearly every part of your nonprofit generates data, and how you manage that data impacts your ability to make strategic decisions. Stay on top of your data by implementing the practices, investing in the software, and hiring the experts you need to not just collect individual data points but manage your nonprofit’s impact.

5 Practical Budgeting Tips for Women’s Church Groups

2024-09-05T00:00:00Z

Like any other organization, church ministries need the right resources to fulfill their missions. Your resources—including tangible items, team time, and funding—serve various purposes to fuel your work.

As the leader of a women’s church group, you need to use your ministry’s resources wisely to sustain your work over time. However, when your main focus is your ministry, financial management tasks like accounting and budgeting can easily fall by the wayside.

Fortunately, there are practical budgeting tips you can follow to handle your ministry’s books like a pro. Let’s explore a few of these tips and how they can impact your women’s church group.

1. Set Clear Financial Goals

Your budget is unique to your women’s church group, as it depends on the resources available to your ministry and the way you use them. This means your group’s financial goals, or objectives that guide how your ministry will manage its resources to achieve financial success, should be the driving force behind your budget.

These objectives can be short-term or long-term, and you’ll likely have numerous goals depending on your group’s priorities. For example, you might raise funds to renovate the building your group meets in, which could take a year or more. By contrast, your goal to supply reading materials for the group would be a short-term objective.

To set meaningful goals, NXUnite by Nexus Marketing recommends using the SMART framework, which means setting specific, measurable, achievable, relevant, and time-bound (SMART) goals. Let’s walk through the SMART framework using the example of purchasing reading materials:

Specific: First, clearly define what you want to achieve. You’ve found the best Christian book for women and plan to raise funds to purchase 50 copies for all of the women in your church group.
Measurable: Next, ensure the goal is quantifiable. The book you’ve chosen to purchase costs $10 per copy including sales tax, meaning you’ll need to raise $500 to buy enough copies for the women in your group.
Achievable: Measure your expectations for achieving your target. You can evaluate past fundraising efforts to determine whether you’ve been able to raise similar amounts for previous campaigns.
Relevant: Buying this book will make it easier for women in your group to gain access to a book that empowers their spiritual growth, meaning it aligns with your group’s mission and values.
Time-bound: Set a deadline for achieving your goal. After three months of fundraising activities, one of the group’s leaders will order the books and announce their availability once they’ve been delivered.

Once you’ve defined your various financial goals, prioritize them based on the group’s mission and needs. For example, purchasing Bible study materials for an upcoming class is likely a pressing need, while non-essential renovation projects can be deprioritized.

2. Create a Detailed Budget

Use your financial goals to outline a comprehensive budget. Your planned budget defines the parameters for saving and spending to help you achieve the goals you’ve laid out.

Your budget will include two main categories:

Revenue: List all of your group’s sources of income, such as donations, fundraising events, and membership dues. Remember to include any non-cash assets your group receives, as well, such as in-kind donations of books or Bibles.
Expenses: Create categories for all of the costs your group incurs. For example, a category for event expenses could include the cost of conference tickets, hotel rooms, and food for a group trip to a Christian conference out of town.

While your budget should be as detailed as possible, be prepared to adapt. Unexpected expenses and new sources of income can shift resource allocation as your group executes its plans.

3. Track All Financial Activities

Your budget becomes a practical tool once your women’s group starts raising and spending funds. Regularly monitoring your financial transactions is crucial to ensure your group makes informed decisions based on accurate data.

Keep a record of all income and expenditures as these transactions take place. To simplify the process, consider setting up accounting software that tracks financial activity and generates reports.

As time passes, conduct regular reviews in which you compare your budget to your actual tracked data. If you notice significant variances, adjust your budget as needed and evaluate what changes you could make in your fundraising or spending activities.

4. Implement Cost-Saving Strategies

Let’s say your group notices many differences between its planned budget and actual financial activity. Your expenses consistently exceed what you had planned in your budget, and you need to rein in the group’s spending.

By implementing cost-saving strategies, you can ensure your group spends less than it brings in—a key aspect of effective financial management. Here are a few strategies you can implement:

Organize fundraisers: Fundraising ideas ranging from donation letters to bake sales to crowdfunding campaigns can help your ministry generate income to cover its expenses.
Utilize volunteer services: Recruit volunteers to help with various tasks for your group, such as marketing outreach or fundraising event management. This can help your ministry save on professional services you would’ve otherwise paid for.
Bulk purchase supplies: As Esther Press explains, Bible studies can encompass books, workbooks, videos, and other resources that help women deepen their understanding of the Bible. Purchasing necessary materials in bulk can allow you to take advantage of discounts from providers.

These strategies not only help your women’s church group stick to its predetermined budget but also maximize its resources. This allows you to achieve—or even exceed—your goals!

5. Educate and Engage Group Members

No matter the structure of your ministry’s leadership, it’s important that everyone is on the same page about your group’s budget. This fosters a sense of collective responsibility for the group’s finances and allows for more effective financial management.

Provide regular financial updates to keep group members in the loop regarding the group’s financial status. This may involve discussing your highest budgetary priorities and most pressing financial needs, as well as sharing key data points and creating infographics to make the numbers more digestible.

Such transparency not only builds trust among group members but can also equip them to contribute their financial knowledge to other areas of their church. For example, women who volunteer for their church’s children’s ministry can help develop a budget for that program.

Your women’s church group makes a significant impact on the lives of the women in its ministry. However, that impact is made possible by effective resource management. Your budget is the key to making the most of your resources and supporting members’ spiritual walks. By implementing the right strategies, your group can take an effective approach to financial management.

What Is a Fractional CFO for Nonprofits? The Ultimate Guide

2024-09-04T00:00:00Z

If you work in the nonprofit sector, you know how important strategic leadership is to your organization’s ability to further its mission. A key aspect of this strategy is effectively managing your nonprofit’s financial resources, and the leader responsible for this task at most organizations is the chief financial officer (CFO).

However, small to mid-sized nonprofits may not have the budget to hire a full-time CFO, and an external professional working on a part-time basis could easily fulfill their needs. Fortunately, there are financial experts who provide these types of services—they’re known as fractional CFOs.

In this guide, you’ll learn all you need to know about fractional CFOs for nonprofits, including:

Let’s begin by defining the role of a fractional CFO in the context of your nonprofit’s larger financial management structure.

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What is a Fractional CFO for Nonprofits?

A fractional CFO for nonprofits is an outsourced financial executive who provides strategic management services and fiscal expertise to charitable and tax-exempt organizations. Although a fractional CFO will work on a part-time or as-needed basis for each individual organization, they typically have an extensive background in nonprofit finance and often assist multiple clients at any given time.

As would be the case if your nonprofit had a full-time CFO, a fractional CFO’s primary focus area is financial strategy—i.e., high-level responsibilities related to your nonprofit’s overarching goals and long-term success. To allow your CFO to concentrate on strategic tasks, your organization should have at least three other individuals on its financial team, each with their own focus:

Treasurer: Responsible for fiscal oversight, including various approval and governance tasks, as the financial expert on your board of directors.
Bookkeeper: Handles recordkeeping and other day-to-day financial tasks like writing checks and managing invoices at your nonprofit.
Accountant: Manages financial data analysis and reporting tasks for your organization, such as reconciling bank accounts and filing tax forms.

Your organization’s fractional CFO will collaborate frequently with these three professionals, as well as your executive team, to ensure alignment across all aspects of your nonprofit’s financial and leadership activities.

Responsibilities of a Fractional Nonprofit CFO

Now that you have a general understanding of the role of a fractional CFO for nonprofits, let’s dive deeper into the key tasks they can complete for your organization. Of course, every nonprofit has different needs and preferences, so make sure you and your CFO are aligned on the exact services you need them to provide for your organization.

Budget Creation

Arguably the largest financial planning task your nonprofit undertakes each year is creating an annual operating budget. While budgeting is likely a team effort involving your organization’s entire leadership team, board, and accountant, your fractional CFO will take the lead on this aspect of your financial strategy.

As they develop your nonprofit’s operating budget with input from the rest of your team, your CFO will:

Consider your organization’s priorities for the year and set specific, measurable financial goals related to them.
Assess your nonprofit’s projected expenditures and organize them according to the functional expense categories of program, administrative, and fundraising costs.
Review all of your organization’s funding sources (such as individual donations, corporate philanthropy, investments, and grants) and predict how much you can realistically expect to earn from each of them.
Outline all of your revenue and expenses in one document, including detailed notes about what revenue your nonprofit will use to cover various expenses and when you expect to receive different types of funding or incur certain costs.
Make strategic recommendations about how your organization could boost its revenue generation potential or cut unnecessary expenses so you bring in more than you spend throughout the year.

Once your fractional CFO finalizes your nonprofit’s budget and gets it approved by the board, they’ll also play a key role in recurring budget reviews throughout the year, helping to keep your spending and fundraising in line with your organization’s strategy.

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Cash Flow Forecasting

Cash flow forecasting is the process of predicting how cash will move in and out of your organization in the near future. While it's an essential aspect of the budgeting process, your fractional CFO will also forecast month-to-month cash flows to help your nonprofit adjust its strategy proactively in case of unexpected expenses or revenue shortfalls.

Fractional CFOs often use specialized software to predict cash flows and visualize the possible outcomes of financial scenarios using graphs and dashboards. They also rely on the statements of cash flows your accountant creates each month to evaluate how your cash inflows and outflows from operating, investing, and financing activities have changed and consider how these data points will continue to shift over the next few months or years.

Grant Management

While grants provide critical funding for your nonprofit’s most important projects and programs, they can be challenging to secure and track. Your fractional CFO will work with your team on all aspects of the grant management process, including:

Identifying grant opportunities that align with your organization’s mission, current strategic plan, and upcoming high-priority initiatives.
Applying for grants—although it’s often helpful to work with a dedicated grants consultant on proposal writing, your fractional CFO can assist with creating grant proposal budgets and a schedule to help you get your applications in on time.
Tracking your grant’s progress once you’ve secured one, which involves recording the amount and purpose of all grant funding expenditures and efficiently allocating other revenue toward the target initiative.
Recording grant funding in your accounting system—your bookkeeper will likely perform the actual data entry, but your CFO will ensure the funding is recorded correctly according to the type of grant you’ve received (unconditional, contingent, or reimbursable).
Reporting back to the grantmaker, ensuring each report aligns with their content and format requirements and is completed by the set deadline.

As your nonprofit grows, you might have multiple grants at different stages of the management process at any given time. Your fractional CFO can help you develop a tailored system of scheduling and delegating tasks that allows your organization to secure and track various grant funds effectively.

Financial Policy Development

Financial policies are foundational to effective management since they provide day-to-day, organization-wide guidelines for how to handle your nonprofit’s funding. When you partner with a fractional CFO, they’ll work with you to develop new financial policies or revamp your organization’s existing fiscal policy handbook to ensure it follows industry best practices. In particular, they’ll focus on solidifying the following policies:

Gift acceptance policy: Details the types of gifts (both monetary and in-kind) that your nonprofit can and can’t accept, as well as the conditions under which you’ll accept each kind of contribution.
Conflict of interest policy: Defines the types of situations that constitute a conflict of interest at your organization, the procedure for disclosing conflicts, and the steps to take if a conflict is disclosed or discovered.
Expense reimbursement policy: Outlines when and how staff members and volunteers should receive reimbursements for personal money they spend on behalf of your mission.
Staff compensation policy: Provides guidelines for setting, reviewing, and changing your employees’ compensation—both direct compensation like salaries and indirect compensation like paid time off and healthcare benefits.

In addition to these core policies, your fractional CFO will also establish or assess your nonprofit’s internal controls, which are smaller procedures designed to prevent financial risks like fraud and theft. For example, many nonprofits require two signatures on checks written for large amounts of money. By having multiple people involved in that process, it’s easier to catch and fix errors before payments are processed, and it ensures no one person is held liable in case of accidental fraud.

Strategic Management and Leadership

This category encompasses a variety of tasks that your fractional nonprofit CFO will take part in while working closely with your organization’s leadership team. For example, they may:

Create or evaluate the financial goals in your nonprofit’s long-term strategic plan.
Conduct industry research to choose fiscal key performance indicators (KPIs) and set benchmarks.
Visualize financial data through charts, graphs, and dashboards to make it easier to understand and apply to your strategy.
Attend occasional board meetings to provide training and answer questions.
Suggest improvements to your overall management system that will help your nonprofit mitigate risks and achieve financial sustainability.

Although the nature and extent of these strategic management responsibilities will depend on your organization’s unique financial situation, your fractional CFO should be equipped to handle many tasks in this vein that would benefit your nonprofit.

Benefits of Hiring a Fractional Nonprofit CFO

The main benefit your nonprofit will experience by leveraging fractional CFO services is gaining access to all of the expertise of a full-time chief financial officer on a part-time basis. This can save your organization a lot of time and money—recruiting, onboarding, and compensating a new executive-level employee takes significant effort and can be expensive.

Fractional CFOs for nonprofits can also provide your organization with several operational advantages, including:

Improved financial planning through expert-developed strategies, goals, and budgets.
Streamlined management processes that boost productivity and mission effectiveness across your organization.
Training and development to help your staff and board members better understand your nonprofit’s finances as they apply to their roles.
An objective perspective on your organization’s financial situation that can help you view your procedures and collected data in a new light.

Plus, fractional CFO services are typically scalable, so you can give these professionals an expanded or adjusted role as your nonprofit grows and your needs change over time.

What to Look for in a Fractional CFO for Nonprofits

If you think partnering with a fractional CFO may be right for your nonprofit, you might be wondering how to find the right professional to work with. Like with most significant decisions your organization makes, you should first finalize your budget for hiring a fractional CFO and your goals for the partnership to guide the process.

Then, conduct online research on fractional nonprofit CFO services, and reach out to other nonprofits in your network that have partnered with fractional CFOs. As you consult these resources, look for fractional CFOs who have:

Extensive experience working with nonprofits and a strong understanding of the unique complexities of nonprofit finance.
Skilled command of essential technology like accounting platforms, cash flow dashboards, grant management software, and your nonprofit’s central database.
Compatibility with your leadership team and other financial professionals, since they will all need to communicate effectively to make the partnership productive.
Positive reviews from current and past clients, especially nonprofits of a comparable size and with similar missions to your organization.
A straightforward pricing structure that aligns with your budget, doesn’t contain hidden fees, and can be adjusted as necessary to scale services.

At Jitasa, we offer a full slate of fractional nonprofit CFO services through our Jitasa Strategic Advisory Team (J-SAT). Composed of dedicated individuals with prior experience as full-time nonprofit CFOs, our team leverages industry-leading technology to help organizations like yours work through financial challenges and achieve goals. While J-SAT works exclusively with nonprofits, we’ll partner with organizations of all sizes and missions to provide affordable solutions tailored to your needs.

If your organization is looking to improve its financial planning, management processes, and effectiveness in funding its mission-driven activities, working with a fractional CFO for nonprofits can provide all of these benefits and more. Consider which responsibilities of a fractional CFO are your organization’s biggest priorities before you start your search, and make sure to partner with experienced professionals who understand nonprofit finance inside and out (like the team at Jitasa!)

For more information on nonprofit financial management, check out these resources:

Nonprofit Risk Management: Complete Guide + Tips for Success. Much of your fractional CFO’s work will help your nonprofit manage risks more effectively—learn more strategies for risk management in this guide.
Nonprofit Bookkeeper vs. Accountant: What’s the Difference? Dive deeper into two of the other key nonprofit financial roles—bookkeeper and accountant—and discover why their duties are frequently confused.
Fractional Nonprofit CFO Services | Jitasa Group. Explore the various fractional CFO services your organization can take advantage of by working with J-SAT.

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27 Questions to Ask an Outsourcing Agency

2024-09-03T00:00:00Z

Outsourcing can be a cost-effective way for you to manage a function of your organization in which you might lack expertise or prefer to rely on an expert for. It can also free up a chunk of your time that you can then refocus toward your mission.

However, outsourcing some of your organization’s functions to another business requires a strong relationship with effective communication and preparation. Taking the time to interview an outsourcing agency before you sign a contract will ensure that you’re making the best choice for your organization.

When you decide it’s time to outsource, compile a list of potential agencies that you’d be comfortable working with. Check service options, reviews, and price points to narrow down your options to a short list. Then, you’ll be ready to ask a number of questions to make your final decision about which outsourcing agency will be best for your organization.

In that spirit, here is a list of 27 outsourcing questions to help you interview a potential candidate.

What to ask about the company:

1. What makes your company different from other outsourcing options?

When you ask this question, you’ll have already down some research into other agencies. Take careful notes so that you understand the major differentiators between the agencies in your short-list.

For example, at Jitasa, what sets us apart is that we work exclusively with nonprofit organizations. While this is a helpful differentiator for nonprofits that need bookkeeping and accounting services, if a for-profit company came knocking, they’ll realize that our services are not as relevant for them.

2. How long have you been providing your services?

Asking how long services have been provided can give insight into the amount of experience the outsourcing company has. This is another great comparison point for different agencies. While it’s not foolproof, the longer someone has been in the space, the more experience they should theoretically have.

However, be sure to use this metric alongside other information such as the number of clients the company has, their retention rate, referrals, and reviews.

3. Do you have client testimonials?

Client testimonials are a great way to see not only what other organizations have said about the company, but also what other organizations that company has worked with. If you know of the organizations and especially if they’re similar to your organization, it’s a great sign that the company could be a viable option for you.

4. What percentage of clients would refer you?

This outsourcing company question forces some self-evaluation. Companies that claim 100% of their clients would refer them are likely not being honest with you or themselves. Every company knows that they are not the best fit for everyone and should own up to that. The answer to this question combined with references, testimonials, and your gut feeling should help you determine the satisfaction of the company’s client base.

5. What makes your services worth the investment?

Of course, you’ll be looking to determine this for yourself through questions about their services and price. But what better way to get an inkling towards the answer than asking the question right out? Every company you speak to will believe their services are worth the investment. Asking why can give you valuable insight into their values.

For example, Jitasa offers many services a la carte, meaning clients will only pay for those services that they need. This keeps costs low for organizations that are still getting set up, but provides growth opportunities for the future. It also means organizations don’t pay for more than they need.

6. What security measures do you have in place to protect your clients?

Security is, and should be, a top priority for your organization. Your information is sensitive and any outsourced company you work with should have policies in place to mitigate risks. Look for policies, certifications, and other reassurances that show the company will take your security seriously.

7. How will you meet the needs of my organization?

To answer this question for the outsourcing company, your organization will need to have clearly established and explained your needs. Pay attention to be sure they provide an answer that satisfies every need you have from an outsourcing agency.

Tip: When you take notes, leave an entire column available to write down the “bells and whistles.” These are the shiny features that they offer that don’t exactly meet your needs but could be nice to have. By organizing your notes this way, you won’t get distracted by the bells and whistles and make sure that having your needs met will remain your number one priority.

8. How often would I receive communication from you if I were a client?

As we mentioned, communication is a key factor in the business relationship between your organization and the outsourced company you choose to work with. Open and frequent communication should be ongoing from the time you finish onboarding to any termination of a contract. Hear their answers, then set expectations for how frequently you would like to hear from them.

9. How many individuals will work on my account?

This outsourcing question helps you gain some insight into the agency’s operations and how they’ll serve your needs. For example, will you have a single contact person to chat with? Will they be in a similar time zone to you?

Jitasa, for instance, offers around-the-clock service to clients through a global team. So, no matter what time it is, someone will be available to answer your finance questions.

10. What type of oversight will my account have?

Proper oversight helps the agency understand your account’s performance, ensures security measures, and helps catch any mistakes as soon as possible. Ask both about oversight policies and norms at the organization along with the communication of their findings to ensure you’re kept in the loop.

11. How long would it take your company to become familiar with my account? To completely take over my function?

This question for outsourcing companies gives some insight into the onboarding process. If you have a certain deadline to get your account up and running, it can help you determine if you’ll meet that deadline. For example, if tax season is approaching and taxes are one function you want the organization to take over, you should make sure they’ll have enough time to become familiar with your organization, prepare your taxes, and submit them. You’ll also gain an understanding of how long outsourced tasks will remain on your plate.

12. How often do your employees receive training?

Some outsourced professions require regular recertification or training to best understand changing demands in the industry. For instance, lawyers are required to recertify on a regular basis to maintain their credentials. Asking about training will help you determine if their staff members are up to date with changing standards in their respective industry.

13. How can I be sure you are up to date on nonprofit regulations and requirements?

Nonprofits like yours require specialized attention. Regulations, requirements, and even expectations are different than those from for-profit companies. Your best bet is to look for companies that work primarily (or exclusively) with nonprofit organizations. This ensures their team is motivated to stay updated with the latest nonprofit regulations and requirements.

14. How will problems with my account be addressed?

This question for outsourcing agencies should help you better understand the communication standards with the company. If they run into a problem, you should know how they’ll reach you and in what timeframe. Or, if you run into a question, you should best understand how to best reach their team. You should gain some idea as to the amount of urgency their team will dedicate to any issues on your account.

15. If your company makes a mistake, how will that be dealt with? Will I be notified immediately?

You deserve transparency from your outsourcing agency and their response to this question should leave you feeling reassured that this transparency is top-of-mind for their team as well. No matter what the outsourcing agency is, if they run into a mistake, you should be notified immediately, and they should provide clear next steps as to how they’ll rectify that mistake.

16. What if my needs change?

Changing needs are more frequent in some industries than others and depend on your organization’s plans. For example, organizations in a major growth period might want to expand their outsourced marketing services over time, ensuring they keep up with the nonprofit’s growing audience. Or you may find unexpected growth opportunity when you’ve outsourced financial needs because you’re able to dedicate time back to your mission. This may lead to additional services you want covered by the outsourced agency.

Make sure you understand the conditions under which you can expand or reduce your contracted services with an agency before signing a contract.

17. Will I be reimbursed if you are responsible for an error?

Depending on the agency and the error, this reimbursement may take different forms. Organizations that bill based on time may offer to fix the error without charging for the time spent remedying it. Meanwhile others with a flat fee may offer some reimbursement for the service provided if an error occurred on their account.

18. Who can I contact to provide feedback on my experiences?

Hopefully, by conducting a thorough vetting process to pick an outsourced agency, you’ll find the one that’s perfect for your needs and you’ll want to provide only positive feedback. However, there’s always a chance the outsourced agency could use some constructive feedback regarding how to better meet your needs.

Either way, you should know how to communicate with the company how they’re meeting your needs or about how they could better serve your organization.

What to ask about YOUR role:

19. What would my obligations as your client be?

Gain an understanding of what will be expected of you in your relationship with this new outsourcing company. Will their services truly save you time? Ask about both the onboarding process and the ongoing tasks you’ll take on throughout the duration of the relationship. Then, consider the time commitment for each of these. Onboarding will be a temporary time commitment, but you should know about how long that process will take before the agency will be able to operate mostly independently.

20. How much time would I need to devote to working with your employees?

This outsourcing question goes hand-in-hand with the previous one. Ask the question, then consider both their answers and your own thoughts. You’ll know better than the agency does how long it takes to accomplish certain tasks.

For example, if you’re a photographer and well-versed in photoshop, it’ll be no problem sending photos to your outsourced marketing team. However, it could take a photography novice a little more time and effort to do so. And if the outsourced agency doesn’t know about your photography prowess, they may estimate more time will be dedicated to the activity than actually required.

21. Would I have deadlines to meet?

Write these deadlines down up front so that you know what’s expected of you throughout the relationship. Your job will be easing the tasks of the outsourced agency. After all, when their job is easy so is yours, so it’s a win-win!

Tip: After the onboarding process, set up calendar reminders for deadlines on recurring tasks. This will help ensure they don’t fall to the wayside by mistake.

22. Will I still have access to my records?

There are very few industries you can outsource to where records aren’t important. Ask ahead of time to ensure you’ll have access to all records and that you know where to find them when you need them.

What to ask about contract obligations:

23. Will I be required to sign a contract?

Have you heard the joke after someone signs a contract saying they’ve just “signed their life away?” It’s not true. Contracts are important and can be used to your advantage. They can help secure the pricing you’re looking for and define exactly how you can operate within a business relationship, providing security for your organization along with the agency.

The important thing is to carefully read the contract, ensuring it includes everything you need. Consult a lawyer, suggest revisions, and make sure the contract is something you’re on board with before signing.

24. What is the minimum duration of the contract?

If you’re working with a new outsourcing agency, you might consider a shorter contract to ensure that you’re happy working with them before entering into a longer agreement. Jitasa doesn’t provide legal advice, so always consult a lawyer before making decisions regarding contracts.

25. Will I be charged for canceling early? At the end of my contract?

We hope that every organization will work with the perfect agency that meets their every need on the first go-round. Sometimes, though, that’s not the case. To protect yourself, you should make sure you understand the requirements and necessary steps to take to terminate the contract if necessary.

26. What services are not covered under my contract?

Companies generally understand that they can’t provide everything your organization needs. In fact, if they tried, they’d probably spread themselves too thin and be unable to provide quality service. That’s why outsourcing agencies stick to specific services in which they specialize.

Asking what services aren’t covered by the contract can help show you what services will remain on your plate or those that you might consider outsourcing to another agency.

27. Will I be made aware if a service I desire comes at an extra fee?

This is an important way to make sure your organization’s wallet stays in check! Let’s just say you’re outsourcing your social media marketing, and you want to do a one-off blog article for your website. You should understand whether a blog article is included in your contracted services or whether your monthly fee will be higher than usual due to the one-off activity.

Asking about fees may be uncomfortable for some, but it’s a key aspect of budgeting for your organization. Be sure you’ll be notified if anything changes in regard to your organization’s payment.

Wrapping Up

Investing in an outsourcing agency is a big deal. You’re putting valuable organizational tasks and information into the hands of someone else. Therefore, you should conduct thorough research before signing any contracts or taking on an agency. Ask questions, take notes, and be sure whatever organization you choose will fully live up to your expectations. After all, your nonprofit provides the best service, so you deserve the best service from your vendors.

If you’re interested in outsourcing your bookkeeping and accounting needs, please don’t hesitate to contact us at Jitasa. We’re here to provide you with top-quality service that meets your financial needs and frees up your time for what matters most: your mission.

Nonprofit Financial Management: Overview + Best Practices

2024-08-06T12:00:00Z

As a nonprofit professional, your primary focus is on fulfilling your organization’s mission, meaning most of your activities likely revolve around running community programs and fundraising. Among all of the critical initiatives in these areas, financial management tasks sometimes take a backseat.

However, effective financial management is essential to provide your staff with the resources necessary to pursue your mission. To help you get started, this guide will cover the basics of nonprofit financial management, including:

Before we dive into actionable strategies for nonprofit financial management, let’s make sure we’re all on the same page about what this term means and why it matters for your organization.

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Nonprofit Financial Management FAQs

If your organization is just getting started with financial management, you likely have a lot of questions. So, here are the answers to some of the most common ones.

What is nonprofit financial management?

Nonprofit financial management is the strategic planning and monitoring of a nonprofit organization’s financial resources. Its overarching goal is to achieve sustainable financial health for the organization while maintaining accountability. Activities like bookkeeping, accounting, and financial planning fall under the umbrella of financial management.

Why is nonprofit financial management important?

While for-profit organizations manage their finances in order to maximize profits, nonprofits focus on using their resources to maximize their community impact. Here are just a few of the ways financial management can benefit your organization:

Effective stewardship of the monetary and in-kind contributions you bring in through fundraising.
Increased transparency with supporters, which builds trust.
Improved risk management abilities through proactive prevention and mitigation.
Compliance with various regulations, from IRS legal guidelines for tax-exempt organizations to the Generally Accepted Accounting Principles (GAAP).
Data-driven decision-making, especially in regards to planning for growth.

Think of financial management as the bridge between fundraising and service delivery. To make a difference in the community, your nonprofit not only needs to bring in sufficient funds but also properly allocate that revenue toward your programs. Then, the impact you make through service delivery combined with transparency about your financial management practices will lead more supporters to contribute to your fundraising efforts.

Who is responsible for effective nonprofit financial management?

The short answer is everyone at your organization! Proper financial management requires a commitment from all of your leaders, staff, and board members to use your nonprofit’s resources wisely as they go about their individual responsibilities.

However, there are four individuals your nonprofit should have on its team whose core duties revolve around financial management. They include your:

Treasurer. As a member of the board of directors, the treasurer provides financial oversight for your nonprofit. Besides approving key documents like your operating budget and annual tax return (more on these later!), the treasurer reports your organization’s financial situation to the rest of the board on a recurring basis.
Chief Financial Officer (CFO). Your CFO is responsible for financial strategy activities like budget creation and cash flow forecasting. They work closely with your leadership team and can either be a full-time member of that team or hired on a part-time (fractional) basis.
Bookkeeper. This team member (or volunteer for very small organizations) takes care of your nonprofit’s daily financial needs, such as inputting transaction data, writing checks, and managing invoices. The keyword to associate with this position is recordkeeping.
Accountant. This professional is responsible for financial analysis and reporting tasks like reconciling bank records, creating financial statements, and filing tax forms. Depending on your organization’s needs and budget, you could hire an accountant in-house or leverage outsourced accounting services (more on this later, too!).

Although each of these individuals has their own focus area with respect to financial management, they frequently collaborate to ensure accuracy and accountability in their work. They also develop goals, strategies, and procedures that apply across your entire organization.

Financial Policies: The Foundation of Effective Management

To lay the groundwork for effective financial management, your nonprofit needs to develop a set of fiscal policies and procedures that govern your team’s day-to-day use of funds. Compile all of the policies you develop into a handbook, and share this resource with your staff and board members so they can reference it whenever necessary.

While there are a plethora of policies and procedures your nonprofit could enact, we’ll cover a few of the most important in the following sections.

Gift Acceptance Policy

Imagine your nonprofit is planning its annual silent auction fundraiser. To keep the event’s upfront costs as low as possible, you solicit in-kind donations of auction prizes from individual donors and local businesses, and you receive many useful items through this channel.

Then one day, a supporter brings in an assortment of scented lotions, facial masks, and other at-home spa supplies. You think this will make a great gift basket—until you realize that several items are missing their safety seals. These contributions could be dangerous to sell to an auction participant, but the donor obviously meant well. How should you respond in this situation?

Gift acceptance policies help prevent these issues from occurring in the first place and provide guidance for dealing with them when they do. These guidelines should include:

The types of gifts (both in-kind and monetary) your organization can and can’t accept
The circumstances or conditions under which you’ll accept various donations
The procedures for recording different kinds of gifts

By showing the misguided supporter in our example the official policy that states that donations of personal care items need to be unopened, your team can politely decline the gift without seeming ungrateful. Additionally, if you explain the policy in your supporter communications, you can encourage even more eligible contributions of various types—money, physical goods, pro bono services, and immaterial assets like real estate and stock donations.

Use our customizable template to create your nonprofit’s gift acceptance policy.

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Conflict of Interest Policy

Conflicts of interest occur when nonprofit leaders, board members, or other key players have professional or personal interests that may oppose their duty to act in your organization’s best interest. For example, if a board member owns a software company and your nonprofit is considering purchasing that type of software, that would likely be considered a conflict of interest.

To effectively navigate these situations, include the following in your organization’s conflict of interest policy:

Your nonprofit’s definition of a conflict of interest
The proper timeline and method for disclosing conflicts
The next steps to take after a conflict of interest is disclosed or discovered

In the example situation, your organization’s conflict of interest policy may require that the board choose a different solution or that the company owner abstain from voting. Besides removing bias from financial decision-making, this policy can protect your nonprofit’s reputation by ensuring conflicts are managed proactively.

Expense Reimbursement Policy

Your nonprofit should have a bank account with funding set aside for each of your expenses. However, there may still be times when your staff members or volunteers spend their personal money on behalf of your cause, whether they’re buying supplies for an event or paying the registration fee for an industry conference. When this occurs, they may be able to be reimbursed—if you have a policy that allows you to provide expense reimbursements!

In your expense reimbursement policy, include information about:

The types of expenses that can be reimbursed
The information that should be submitted in reimbursement requests (items purchased, cost, reason for purchase, etc.)
The staff member(s) responsible for providing the reimbursement
The procedure for recording reimbursements

Make sure to include deadlines in your policy, both for submitting reimbursement requests and for paying out reimbursed funds. Many organizations use a 30- or 60-day window for each of these deadlines.

Staff Compensation Policy

A common myth about the nonprofit sector is that employees don’t make living wages—and they shouldn’t so that the organization can put as much funding as possible toward its mission. While some nonprofit staff members are willing to take a pay cut to work for a cause that matters to them, they deserve to be compensated fairly for their efforts. Plus, by providing fair and competitive compensation, you can boost employee retention and actually save money in the long run!

To make this happen for your organization, create a staff compensation policy that outlines:

Your nonprofit’s compensation structure and elements
The procedure for approving compensation for new and existing roles
The timeline for reviewing and raising compensation rates

As you create this policy, make sure to consider all aspects of your employees’ compensation. This includes not only direct compensation like salaries and bonuses, but also indirect compensation like healthcare and retirement benefits, paid time off, and professional development opportunities.

Key Nonprofit Financial Documents

In addition to your financial policy handbook, there are several resources you’ll need to effectively plan and report your nonprofit’s finances. Let’s review three essential categories of nonprofit financial documents in more detail.

Budgets

The most important aspect of your nonprofit’s financial planning processes is budgeting, in which your team (typically led by your CFO) creates documents that outline your organization’s revenue and expenses for a specific time period and/or activity.

The most common type of nonprofit budget is an annual operating budget, which covers all of your organization’s financial activities for a given year. It usually breaks down your projected revenue by source and predicted expenses based on their role in fulfilling your nonprofit’s mission.

However, there are several other types of budgets your organization might create, including:

Capital budgets, which cover long-term, large-scale projects like capital campaigns
Program budgets, which help your organization plan specific community outreach initiatives or services
Grant proposal budgets, which you’ll submit along with grant applications to show grantmakers how you plan to use their funding if you secure it
Fundraising campaign budgets, which detail the expenses associated with events or other significant fundraisers and the revenue you’ll use to cover them

No matter what type of budget you need, make sure it includes well-defined goals and realistic metrics to effectively guide your nonprofit’s spending and revenue generation efforts.

Chart of Accounts

Your nonprofit’s chart of accounts (COA) serves as its financial directory. It’s a table-style list of all of your organization’s financial accounts and records, making it the backbone of all accounting procedures and a key reference for anyone needing to reference specific financial data.

Most nonprofits divide their COA into five categories and use the following numbering system for reference:

Assets (account numbers beginning with 1000): Everything your nonprofit owns, such as cash, property, and accounts receivable.
Liabilities (account numbers beginning with 2000): Everything your nonprofit owes, such as debt, deferred revenue, and accounts payable.
Net assets (account numbers beginning with 3000): The total amount your nonprofit is worth, calculated by subtracting your liabilities from your assets. Most organizations also separate unrestricted net assets from net assets with donor restrictions.
Revenue (account numbers beginning with 4000-6000): All of the income your nonprofit brings in, including both monetary and non-monetary funding sources.
Expenses (account numbers beginning with 7000-9000): All of the costs your nonprofit incurs, whether they’re related to your programs or operations.

This system of categorization is based on the Unified Chart of Accounts (UCOA), a standardized chart of accounts that aligns with nonprofit reporting requirements. However, many organizations find the complete UCOA too complicated for their needs, so consider it a starting point and customize your COA to include only the accounts your nonprofit regularly uses.

Financial Statements

One of the main purposes of your nonprofit’s chart of accounts is to inform its financial statements—essential reports that your organization should compile each year. Financial statements organize and summarize your nonprofit’s financial data so you can draw actionable conclusions from it.

The four core nonprofit financial statements include the:

Statement of activities. As the nonprofit parallel to the for-profit income statement, this report is integral to the budgeting process. It breaks down your organization’s revenue, expenses, and net assets so you can compare your actual numbers for the year to the projections in your last budget and make more accurate predictions for next year.
Statement of financial position. Also known as a balance sheet, this statement lays out your nonprofit’s assets, liabilities, and net assets. This provides a snapshot of your organization’s financial health and is helpful in planning for growth.
Statement of cash flows. This report shows how cash moves in and out of your organization through operating, investing, and financing activities. It’s usually pulled monthly rather than annually so that your team can use it to keep your spending and fundraising on track throughout the year.
Statement of functional expenses. The one financial statement unique to nonprofits, this report organizes your expenditures based on whether they’re used for programs, administrative activities, or fundraising so you can see how your spending furthers your mission.

In addition to using financial statements for internal decision-making, many nonprofits attach them as appendices to their annual reports to promote transparency with supporters and stakeholders who may want to learn more about the organization’s financial situation.

Tax Forms

The main purpose of your financial statements is to inform your nonprofit’s annual tax returns. When your organization was established, its founders filed Form 1023 with the IRS to obtain 501(c)(3) status, meaning your nonprofit is exempt from federal income tax. To prove that your organization still deserves this status, you have to file a tax return via Form 990 every year.

There are four versions of Form 990 that your organization could file based on its size and designation:

Form 990-N: Small nonprofits with less than $50,000 in annual gross receipts are eligible to file this eight-question digital form.
Form 990-EZ: If your organization’s annual gross receipts total less than $200,000 and your total assets are worth less than $500,000, you can complete this four-page form.
Form 990: Your nonprofit is required to file the full 12-page return if its annual gross receipts total $200,000 or more or your total assets are worth $500,000 or more.
Form 990-PF: All private foundations have to complete this 13-page form, regardless of gross receipts or total assets.

Unless your organization requests an official extension using Form 8868, the deadline for filing any type of Form 990 is the 15th day of the fifth month after your nonprofit’s fiscal year ends. If your organization’s fiscal year follows the calendar year, your Form 990 is due on May 15. Filing late can incur penalties, so plan ahead to complete your return on time.

Additionally, since your nonprofit is an employer, you’ll need to file tax forms for all of your employees to help them pay their income taxes. Complete a Form W-2 for each staff member on your organization’s payroll and a Form 1099 for any contractors you work with by January 31 of each year (regardless of when your nonprofit’s fiscal year ends).

Additional Financial Management Best Practices

Effective nonprofit financial management is more than just implementing the right policies and creating compliant reports. It also includes the decisions you make to put your organization on a path to sustainable growth. Here are five best practices to help you do just that!

1. Diversify Your Revenue Streams

You’ve likely heard that you shouldn’t put all of your eggs in one basket when it comes to nonprofit revenue generation, and many organizations have learned that lesson the hard way over the years. For instance, most in-person fundraising events had to be canceled or reworked in 2020 due to the COVID-19 pandemic, and the discontinuation of AmazonSmile in early 2023 left nonprofits that had relied heavily on the program scrambling to find replacement funding sources.

When revenue streams fall through like this, it’s easier to recover if your nonprofit has a diversified funding model. Here are the major categories of nonprofit revenue and a few types of funding that fall under each one:

Individual donations: Small, mid-level, and major gifts; event revenue; in-kind contributions
Corporate philanthropy: Sponsorships, matching gifts, volunteer grants
Earned income: Membership dues, merchandise sales, fees for services
Investments: Endowments, mutual funds, stocks, bonds, cryptocurrency
Grants: Federal and state government grants; public, private, and family foundation grants

Choose several sources from this list to incorporate into your strategy, considering your team’s capacity, your organization’s connections, and your supporters’ giving preferences. Then, ensure all of your revenue is reinvested into your nonprofit, whether through expenditures that support your mission and operations or additions to your organization’s reserve funds.

2. Maintain the Right Expense Ratio

In your nonprofit’s operating budget, statement of functional expenses, and Form 990, your expenses will be broken down into the following three categories based on how that spending furthers your mission:

Program costs: Expenses directly related to making a difference in the community, which vary widely by organization (for example, a nonprofit that provides free after-school tutoring would put the cost of students’ books and school supplies under its program expenses).
Administrative costs: Expenses that are necessary to operate your organization, such as staff compensation, utility bills, and office equipment purchases.
Fundraising costs: Expenses associated with launching fundraising campaigns, including event planning, marketing, and fundraising software fees.

You might also have heard the term “overhead expenses,” which refers to your nonprofit’s administrative and fundraising costs combined. Overhead isn’t inherently bad—some of these expenses are essential for your organization to thrive. However, your goal should be to put as much of your funding toward your mission as possible.

The widely accepted rule of the past was that nonprofits’ expenses should consist of 65% program costs and 35% overhead, but the exact breakdown will look different for every organization. Treat this “rule” as a guideline to find ways to reduce overhead costs within reason and allocate your resources wisely toward mission-related activities.

3. Focus on Donor Retention

As of 2023, the average year-over-year donor retention rate in the nonprofit sector was just under 35%. This means that if your organization received contributions from 100 individuals last year, only 35 of them would give again this year.

However, retaining donors is significantly more cost effective than acquiring new ones. On average, nonprofits spend $1.50 per dollar raised to acquire a new donor, but only $0.20 per dollar raised to retain an existing donor. Plus, donor retention allows you to build stronger relationships with your supporters, which often leads them to increase their contributions or engage with your nonprofit in other ways.

There will be times when your organization will need to put additional effort into donor acquisition, especially if you’re planning for growth. But on a daily basis, prioritizing retention will help you manage your nonprofit’s finances more effectively.

4. Leverage Accounting Software

Across all areas of your nonprofit’s operations, it’s important to maintain consistency in data entry and practice good data hygiene. However, proper management of information matters even more when it comes to your organization’s finances—not only do you need organized, accurate data to make informed decisions, but it’s also critical for compliance.

The best way to manage financial data is to invest in a dedicated accounting platform. Jitasa's team are experts in the most common accounting solutions for nonprofits. One that we've found works for many is QuickBooks Online since it’s cloud-based (allowing for seamless, secure collaboration) and relatively simple to customize to your organization’s needs.

QuickBooks Online has two plans available for nonprofits: Plus and Advanced. The primary differences between these plans are functionality and user permissions. If your organization is just starting out with accounting software, the Plus plan will likely meet your needs. However, if you need access for more than five users (the limit on the Plus plan) or more extensive features like batch invoices or dedicated employee expense records, it’s worth it to upgrade to the Advanced plan.

5. Outsource Your Financial Management Needs

Large nonprofits often hire a bookkeeper, accountant, and CFO in-house since their financial needs are complex enough that they need full-time professionals managing them. However, many small to mid-sized organizations don’t have the budget to fill all of these roles internally. Instead, outsourced financial management services provide access to all of the expertise these nonprofits need at a fraction of the cost.

At Jitasa, we offer a full slate of outsourced financial management services, including:

Bookkeeping and accounting services that are flat-rate, personalized, and scalable.
Tax services—we’ve completed more than 5,000 nonprofit tax filings to date!
Fractional CFO services through the Jitasa Strategic Advisory Team (J-SAT).

Plus, Jitasa works exclusively with nonprofits, so we understand your organization’s unique needs. If you have a financial situation that you don’t know how to navigate, chances are we’ve seen something similar before and can use our experience to help you solve problems and achieve your goals.

Effective nonprofit financial management allows your organization to achieve the health and sustainability necessary to pursue your mission and take on additional growth opportunities. Use the advice in this guide to get started, and don’t hesitate to reach out to nonprofit financial professionals (like our team at Jitasa) about any questions or needs that may arise.

For more information on nonprofit financial management, check out these resources:

What Is a Nonprofit Audit? Ultimate Guide + Checklist. Another action your nonprofit can take to more effectively manage its finances is to conduct independent audits—learn more about these processes in this guide.
Grant Management: How to Secure and Track Nonprofit Funding. Dive deeper into the process of identifying, applying for, and utilizing grants as it relates to your overall financial management strategy.
Church Accounting: Ultimate Guide + Best Practices to Know. Explore the ins and outs of church financial management, which is somewhat similar to other tax-exempt organizations but also includes some unique considerations.

Effectively manage your nonprofit’s finances with Jitasa’s affordable, scalable bookkeeping and accounting services.

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Getting Started With Nonprofit Bookkeeping: A Complete Guide

2024-07-08T12:00:00Z

As with most decision-making processes at your nonprofit, financial management is most effective when it’s data-driven. Keeping clear records of your organization’s finances allows you to develop analysis, planning, and reporting procedures that lead to greater efficiency and sustainability. This is accomplished through a process known as nonprofit bookkeeping.

If you aren’t sure where to start with nonprofit bookkeeping, you’ve come to the right place! In this guide, you’ll learn all you need to know about bookkeeping for nonprofits, including:

Not only is nonprofit bookkeeping different from its for-profit counterpart, but a bookkeeper is just one of the professionals you should have working on your organization’s finances. Let’s begin by clearing up these points of confusion and ensuring we’re all on the same page about what bookkeeping is.

Simplify your nonprofit’s bookkeeping by partnering with the experts at Jitasa.

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What is Nonprofit Bookkeeping?

Nonprofit bookkeeping is the process of systematically recording, organizing, and tracking a nonprofit’s financial activities. It allows your organization to monitor its spending, fundraising, assets, receivables, payables, and other transactions essential to its operations.

Naturally, the job of recording and managing financial data falls to your nonprofit bookkeeper. This position is one of the four key nonprofit financial roles—the other three are your:

Treasurer, who provides financial oversight for your organization
Chief financial officer (CFO), who takes the lead on strategy and goal-setting
Accountant, who is responsible for analyzing and reporting financial information

Since your treasurer is typically a member of the board of directors and your CFO works closely with the rest of your executive leadership team, their roles are fairly easy to distinguish. However, your bookkeeper and accountant are both professionals below the executive level who work with financial data in distinct ways. Because of this, bookkeeping and accounting are frequently confused—let’s dive deeper into the differences between them.

The Difference Between Nonprofit Bookkeeping and Accounting

Bookkeeping covers your nonprofit’s day-to-day financial needs, mostly concerning data entry and simple transactions (more on these duties to come!). Although bookkeepers need some on-the-job training and financial know-how to do their jobs well, they aren’t required to have specific degrees or certifications.

Accountants, on the other hand, need at least a bachelor’s degree in accounting or a related field and a CPA certification to do their jobs well. This is because accounting encompasses more complicated financial duties, such as:

Reviewing and reconciling various types of transactions
Compiling financial statements
Filing tax forms
Analyzing budgets
Preparing for audits

The relationship between bookkeeping and accounting is that bookkeeping lays the foundation for the accounting processes that follow it. Once your bookkeeper records financial data, your accountant will base their analytical work and reports on that information.

Learn more about your accountant’s responsibilities in our Beginner’s Guide to Nonprofit Accounting.

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Why is Nonprofit Bookkeeping Important?

Besides informing your accounting practices, your nonprofit can experience multiple benefits by prioritizing effective bookkeeping, including:

Compliance with legal and regulatory standards. Clean, organized financial data makes it much easier to meet the operational and reporting requirements that federal and state governments have set forth for nonprofits. Both for-profit and nonprofit organizations in the United States also have to follow the Generally Accepted Accounting Principles (GAAP) in their financial management, and bookkeeping especially helps with adherence to the principles of regularity and consistency.
Data-driven decision-making. As mentioned earlier, bookkeeping provides a resource for your whole team to use when solving problems that involve financial information, from developing overarching goals for your strategic plan to setting fundraising campaign targets to determining how to cut expenses when necessary.
Increased transparency. Having a centralized reference point for all of your financial data also promotes accountability internally and externally, which is the core purpose of all nonprofit financial management activities. If a staff member, board member, or donor ever has a question about how your organization manages its finances, your records will allow you to answer them accurately.

While small organizations can often manage their bookkeeping activities in a spreadsheet, mid-sized to larger nonprofits will likely need to switch to specialized accounting software to fully experience these advantages. Since these solutions often limit user permissions for security reasons, create open lines of communication between your financial professionals and the rest of your staff so everyone can receive the data they need quickly and easily.

Core Nonprofit Bookkeeping Duties

Generally speaking, your bookkeeper will step in to keep records whenever funds change hands or new financial data is created. To give you a better idea of how this works in practice, here is an overview of six of the main activities associated with bookkeeping for nonprofits:

Entering basic data. Whether your nonprofit uses spreadsheets or accounting software to track its transactions, your bookkeeper will record the revenue your organization brings in and the expenses it incurs within the system. In most cases, they’ll only handle single-entry data (debit or credit values, not both), and your accountant will come in after them to balance transactions that require a double-entry tracking format (such as in-kind donations, payables, and receivables).
Writing checks. For most day-to-day payments like rent, utility bills, and vendor payments, your bookkeeper will either be responsible for sending off the physical check or verifying that an automated bank transfer took place. Many nonprofits have internal controls that require payments over a certain amount to receive signed approval from leadership, which your bookkeeper will ask them for if necessary.
Making bank deposits. Overseeing the depositing of funds into your nonprofit’s bank accounts (whether they come in electronically or via a paper check) also falls under the bookkeeper’s domain. They’ll keep detailed records of these deposits, and your accountant will then serve as a second set of eyes to compare the internal data to your organization’s bank statements and ensure there are no discrepancies or errors.
Managing invoices. This bookkeeping duty can go two ways. If your nonprofit provides paid services—whether it’s a core aspect of your mission or a one-time instance like renting out your facility for another organization’s event—your bookkeeper will format and send out invoices to those who owe you money. Or, if your nonprofit receives invoices from contractors (such as fundraising consultants or freelance web designers), your bookkeeper will pay, file, and record them.
Processing payroll. Most large nonprofits have their human resources professionals handle payroll along with other employee-focused tasks like compensation-setting and recruitment. Since small to mid-sized organizations typically have less capacity in their HR department (if they have one at all), they often allow this responsibility to fall to their bookkeeper instead.
Allocating costs. At a big-picture level, expense allocation is mostly associated with budgeting, which your accountant and CFO will primarily handle. However, your bookkeeper needs to be trained in some basic allocation practices to ensure the right revenue is used for each expenditure, especially when it comes to managing restricted funds.

Every organization has different financial needs, so the exact activities that are considered “bookkeeping duties” will vary from nonprofit to nonprofit. Use the responsibilities listed above as a starting point when creating a role description for your bookkeeper, then consult with your team to add and remove tasks from the list so it’s customized to your organization.

How to Hire a Nonprofit Bookkeeper

If your nonprofit is just getting started with bookkeeping, you may not have the resources or level of need to bring on a new team member to fill that position. Small organizations can often keep effective records by incorporating bookkeeping duties into the role of the existing staff member with the most financial knowledge or asking a trusted volunteer to serve as the bookkeeper.

However, as your organization grows and its financial data becomes more complex, you’ll likely need to hire a bookkeeper—whether on a full-time, part-time, or outsourced basis. Once you’ve determined which of these routes you’ll take, follow these steps to find the right bookkeeper for your nonprofit:

Develop a clear role description. The responsibilities you’ve determined your bookkeeper needs to cover will form the basis of this description, although you should also include your nonprofit’s values to attract candidates who align with them. Consider your outsourcing budget or the new employee’s compensation plan at this stage as well. Post a formal job description online if you’re hiring in-house, or use these talking points to guide your initial communications with outsourced professionals.
Do your research. Expand your search for an in-house bookkeeper by sharing the job description on networking sites like Indeed or LinkedIn, where you can also reach out to individual candidates who may be a good fit for your organization based on their profiles. If you’re outsourcing, look up nonprofit bookkeeping firms in your area on Google, evaluate their services and pricing pages, and read reviews from their other clients.
Interview your top candidates. While interviews are usually associated with hiring, it’s also helpful to set up an in-person or phone conversation with someone at each of the outsourced bookkeeping firms you’re considering so you can get a sense of whether they would work well with your team. Make sure to ask about the depth of their knowledge and experience with nonprofits to confirm that they
Make your final decision. Assess everything you’ve learned through your research and interviews, then send an offer letter to your top candidate or establish a contract with your chosen firm.

If you outsource your bookkeeping needs, consider choosing a firm that also does accounting so you can have a wider range of financial needs met by one expert team for a single price. At Jitasa, our mission is to do just that—improve the efficiency and effectiveness of nonprofits through our affordable, tailored bookkeeping and accounting services. We’ve helped more than 1,500 organizations take their recordkeeping and analysis to the next level, and we’re prepared to work with your nonprofit no matter what financial challenges you might face!

As your nonprofit gets started with bookkeeping, remember that your goal in financial management should always be to further your mission. Use your past records to strategize ways to continuously improve your organization’s fundraising and service delivery. Additionally, consider outsourcing your bookkeeping needs to give your team more time to focus on making a difference in the community.

For more information on nonprofit bookkeeping and financial management, check out these resources:

How to Set up QuickBooks for Nonprofits: The Complete Guide. Discover how to get started with the most popular accounting software for nonprofits, QuickBooks Online, so your bookkeeper has everything they need to record your organization’s financial data.
Cash vs. Accrual Accounting for Nonprofits: The Basics. Which of the two primary accounting methods your nonprofit uses will determine the timing for entering financial information into your bookkeeping system—learn more in this guide.
Bookkeeping and Accounting Services Exclusively for Nonprofits. Explore Jitasa’s core bookkeeping and accounting offerings, which cater to nonprofits of all sizes and missions.

See how Jitasa’s affordable, tailored bookkeeping and accounting services can work for your nonprofit.

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Uniform Grants Guidance Overhaul: A Break-Down for Nonprofits

2024-06-25T12:00:00Z

This year, the OMB (Office of Management and Budget) is overhauling aspects of federal grant guidance. Don’t be nervous, though! This overhaul is designed to help nonprofits and other recipients of federal funding. The goal of the changes is to improve the performance of the program, de-complexify the process for grant-seekers, and mitigate the risk of misappropriation of federal funds.

The reform is important because about a third of nonprofit revenue comes from federal grants. And your nonprofit could benefit. The Uniform Grants Guidance final rule takes effect on October 1, 2024.

Let’s dive in to learn more about these changes.

What’s changing?

Details Regarding Indirect Cost Rates

Increase to the De Minimis Rate

The de minimis rate in the Uniform Grant Guidance is a simple way for nonprofits to charge indirect costs to federal grants. Originally, nonprofits without a negotiated indirect cost rate could use a flat rate of 10% of their modified total direct costs (MTDC).

The change being made is the increase of the de minimis rate from 10% to 15%.

This change benefits smaller organizations and those without negotiated indirect cost rates, making it easier for them to recover a portion of their indirect costs associated with grant activities. It also helps level the playing field for these smaller organizations who may not have the resources to develop and negotiate their own indirect cost rates.

No Bullying Nonprofits into Lower Indirect Cost Rates

The Uniform Grants Guidance changes introduce a crucial clarification that protects nonprofit organizations from being coerced into accepting lower indirect cost rates. Specifically, the guidance stipulates that government agencies cannot compel recipients and subrecipients to use an indirect cost rate lower than the established 15% de minimis rate unless a lower rate is explicitly mandated by statute.

Essentially, nonprofits cannot be bullied into accepting an indirect cost rate lower than 15%.

While organizations have the option to voluntarily forgo the 15% minimum rate, they cannot be forced to do so. This empowers nonprofits to make informed decisions about their funding and cost recovery strategies without undue pressure from grant-making entities. By safeguarding the 15% de minimis rate, the revised guidance promotes financial stability and fairness, allowing nonprofits to focus more on their missions and less on negotiating unfavorable terms.

Indirect Cost Dispute Notice

To further protect nonprofits, the revised Uniform Grant Guidance includes an update stating that recipients and subrecipients can notify the OMB if they encounter any disputes with a federal agency regarding the application or acceptance of federally negotiated indirect cost rates.

This provides a formal avenue for nonprofits to seek assistance and resolution from OMB if they believe federal agencies are not adhering to established regulations.

This added layer of oversight helps protect nonprofits from potential abuses or misunderstandings, ensuring that they can fully benefit from the funding and recover the necessary indirect costs to sustain their operations.

Negotiated Indirect Cost Rates Must be Adhered to

According to the new OMB guidance, if a nonprofit has a negotiated indirect cost rate with one federal agency, that rate must be honored by all other federal, state, and local government agencies involved in the funding process. This change ensures consistency and fairness, preventing different agencies from applying varying indirect cost rates to the same nonprofit.

Therefore, federally negotiated indirect cost rates (NICRAs) must be accepted and honored by pass-through entities.

Processes for Grant Seeking and Acceptance

Previous guidance for grant seekers made the process of applying for, accepting, and reporting on grants unnecessarily complicated. The OMB released changes that are designed to help those who most need federal funding assistance by simplifying these requirements.

Some of the changes that will help simplify this process are as follows:

It will no longer be mandatory to exclusively use the English language in grant notices, applications, and reporting.
Recipients of federal grant funding are urged to engage members of the community that will be impacted by the provided funding.
Revisions on the Notices of Funding Opportunities (NOFOs) are designed to include basic information at the top of the grant announcement. This way, organizations can more easily decide whether to apply. NOFOs will also include an executive summary in plain language to clearly communicate requirements.
Federal agencies are urged to take diversity into account when developing policies and procedures for merit review panels.
OMB encourages federal agencies to work in collaboration with impacted communities when designing programs.
OMB is changing the reporting requirements for program performance, only requiring reports that are necessary to effectively monitor the grant. Other unnecessary reports will not be required.

Fewer complexities help more organizations and individuals who truly need federal funding to have a fair chance of receiving it. It lowers the barrier of entry for these organizations to apply for, receive, and report on funding.

The Single Audit Threshold

The single audit threshold for federal grant funding is a financial threshold that determines when a non-federal entity is required to undergo a single audit. As of the latest regulations, any non-federal entity, such as a nonprofit organization, state, local government, or Indian tribe, that expends $750,000 or more in federal awards during a fiscal year must have a single audit conducted.

In accordance to the new Uniform Grants Guidance, this threshold will increase from $750,000 to $1,000,000.

A single audit is a comprehensive financial statement and federal awards audit. It aims to ensure that federal funds are managed properly and in compliance with federal requirements. This includes reviewing the entity's financial statements, internal controls, and compliance with laws and regulations related to the federal awards.

The single audit helps provide assurance to federal agencies that the funds are being used appropriately and that the entity is adhering to the terms and conditions of the grants.

Wrapping Up

Finally, the OMB reinforced the existing guidelines favoring up-front payments to organizations over reimbursable grant payments. Only when certain criteria are met should the recipient or subrecipient receive reimbursable grants.

Overall, these changes are designed to help nonprofits and other entities receiving federal funding. It should help organizations that are the most deserving receive the funding and lower administrative costs associated with grant funding.

If you’d like to read more on the subject, check out the National Council of Nonprofits’ analysis.

Navigating Risk Management: 4 Practical Insights to Consider

2024-06-13T12:00:00Z

Risk management is a fundamental practice that enhances operational efficiency. It’s essential for preventing and mitigating risks, such as running over your organization’s budget or violating legal regulations, so that you can focus on delivering promised services to your beneficiaries.

By proactively managing risks, you’ll ensure nothing gets in the way of driving your mission forward.

In this guide, we’ll explore four top tips to follow when managing risk for your organization. To visualize how you can navigate risk management, we’ll use a hypothetical healthcare organization, HealthyCare Clinic, as an example. With that in mind, let’s get started!

What Is Risk Management?

Risk management is the systematic process of assessing potential risks and formulating a plan to effectively mitigate them. These risks may relate to an organization’s financial activities, operations, or external factors.

For example, HealthyCare Clinic might identify the risk of budgetary oversight for patient outreach and develop a plan to allocate its resources more effectively. The clinic could also assess patient health risks to predict the cost of healthcare and ensure services are delivered equitably. Arcadia defines this process as risk adjustment analytics, which predicts a patient group’s likelihood of using healthcare services and the associated costs.

4 Tips to Navigate Risk Management

1. Create a Risk Management Strategy

Uncertainties are always present, no matter your unique operations or financial situation. The best approach to risk management is to be prepared with a comprehensive management strategy that outlines what steps you’ll take to prevent and address certain risks.

Your management plan should cover the following steps:

Identification: Review your organization’s collected data, such as financial statements or constituent information, to identify risks related to your operations. Specific occurrences, such as past incidents and organizational processes, can help determine what risks your organization faces.
Assessment: Evaluate the probability of a risk becoming a reality and its potential consequences to your organization.
Mitigation: List the actions you can take to prevent risks from occurring and create a response plan to enact in case they occur. Delegate the tasks of your plan to team members as they relate to each individual’s responsibilities.

Let’s say HealthyCare Clinic aims to ensure equitable healthcare delivery. To fulfill this mission, the clinic should analyze patient data to identify underserved groups or high-risk individuals who may lack the care they need in the future.

Then, HealthyCare Clinic can assess these risks to forecast future healthcare utilization and costs. This way, they can not only offer treatment plans to proactively address the disease but also help payers build health insurance plans based on a patient’s risk score.

2. Collect Thorough and Accurate Data

Your organization can’t identify risks without contextual information to help predict the likelihood of challenges arising. However, data must be accurate and comprehensive to provide reliable insights into an organization’s potential risks.

According to NPOInfo, organizations must practice good data hygiene, which involves verifying existing data and appending new data, to effectively utilize the information at their disposal. Detailed data allows for targeted risk identification and mitigation so you can accurately predict and address upcoming challenges.

For example, HealthyCare Clinic may use a modern healthcare data platform to organize electronic health records (EHRs), member data, claims data, and care coordination data. As a result, the clinic is equipped with a holistic view of patients’ health statuses to guide their risk assessments.

3. Use SWOT Analysis to Identify Potential Risks

Accurate and thorough data collection is only beneficial if you put it into action and obtain valuable insights from it. To guide your risk identification process and make the most of your data, use a SWOT analysis.

SWOT analysis is a method of evaluating the strengths, weaknesses, opportunities, and threats associated with an initiative. While this method is typically used to plan for specific projects, its components can also be used to identify potential risks in the following ways:

Strengths: Note any areas of over-reliance, whether that is a funding source or a tool in your technology stack. For example, HealthyCare Clinic may rely on a robust EHR system but lack the staff training to ensure new employees are familiar with the solution.
Weaknesses: Identify areas that could be improved, such as the need for better accounting practices or more streamlined solutions, for a direct impact on your operations. For example, if HealthyCare Clinic’s data platform is outdated or not interoperable, it may lead to decreased quality of care.
Opportunities: Look ahead to opportunities for risk avoidance. For example, identifying high-risk patients early enough enables HealthyCare Clinic to provide proactive treatment recommendations and educational materials to help patients self-manage if possible.
Threats: Spot the immediate risks that need to be monitored and managed. This could refer to a wide range of challenges, such as cybersecurity, fraud, or compliance risks.

When conducting a SWOT analysis, remember to consider both internal and external factors affecting your organization’s goals. Additionally, check for any interconnected risks, or challenges that can compound each other. A holistic approach to risk identification can ensure nothing slips through the cracks.

4. Prioritize Risks Based on Likelihood and Impact

Some risks are more likely to occur than others, and some have greater consequences than others. Your risk management plan will largely depend on your prioritization of the risks facing your organization.

After you’ve identified potential risks, rank them in order of importance using the following strategies:

Risk scoring: Assign a numerical value to each risk according to its likelihood of happening and its potential impacts. For example, HealthyCare Clinic might measure patient risk by equating each individual’s health status to a number, or risk score. A patient with a higher risk score may be more likely to contract a severe disease, whereas a lower risk score might indicate the patient is likely to remain healthy.
Risk matrices: Plot risks on a grid, with one axis representing the probability of the risk occurring and the other representing the severity of its impact. The graph will highlight the risks that are most likely to happen and would have the most severe consequences.
Scenario analysis: List potential risk scenarios and develop detailed narratives for each to examine their potential outcomes. This way, your organization can predict the likely outcomes of specific risks based on their unique circumstances and impact. Additionally, this can help you gauge how certain risks could evolve over time.

Continually monitor each risk’s significance to ensure your mitigation strategies are effective in reducing risk over time. Tracking key risk indicators and assessing your risk management plan through regular audits can give you the insight needed to adjust your plan over time. Additionally, as new risks crop up, your organization will have a standardized plan for identifying challenges and preventing them before they even occur.

As you cement your risk management plan, keep your team in the loop with regular training. Your approach should be consistent across teams and departments, so extra guidance in implementing the plan can help ensure everyone is on the same page. That way, no matter what challenges arise, your team will be equipped to handle them with confidence!

Nonprofit Statement of Cash Flows: Ultimate Guide + Example

2024-06-12T12:00:00Z

Do you know how much money you spent last month? What about your household’s net income? If you don’t, you aren’t alone—about 65% of Americans aren’t aware of their monthly spending amounts, and 84% of those who have a monthly budget report exceeding it.

While it’s important for individuals to understand their expenses and income for personal financial stability, it’s even more critical for nonprofits to know where their money is going and coming from. Effective financial management can make or break your ability to further your organization’s mission, and tracking cash flow is a foundational part of an effective management strategy.

Fortunately, there is an accounting tool designed to help your nonprofit with this process: the statement of cash flows. In this guide, we’ll cover everything you need to know about this report, including:

Let’s get started by defining what the nonprofit statement of cash flows is and how it fits into the bigger picture of financial reporting.

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What is the Nonprofit Statement of Cash Flows?

The nonprofit statement of cash flows is a financial report that shows how cash moves in and out of your organization. It breaks down all of your nonprofit’s transactions into the categories of operating, investing, and financing activities.

Similarly to other financial statements, it summarizes the data stored in your organization’s accounting system so it’s easier to interpret. Most nonprofits compile this report on a monthly basis, since it helps keep their spending and revenue generation aligned with their annual operating budgets.

Other Nonprofit Financial Statements

The statement of cash flows is one of the four core financial statements your organization is required to compile to maintain compliance with the Generally Accepted Accounting Principles (GAAP) and legal requirements for nonprofits. The other three statements are the:

Statement of activities. The nonprofit parallel to the for-profit income statement, this report outlines your organization’s revenue, expenses, and change in net assets to assist with the budgeting process.
Statement of financial position. Also known as a balance sheet, this statement breaks down your assets, liabilities, and net assets to provide a snapshot of your nonprofit’s financial health and help you plan for growth.
Statement of functional expenses. The only financial statement unique to nonprofits, this report categorizes your organization’s expenses into program, administrative, and fundraising costs so you can see how your spending is furthering your mission.

Most organizations compile the three reports above annually rather than monthly like the statement of cash flows. Additionally, the statement of cash flows is used by for-profit and nonprofit organizations alike, all of which refer to it using similar terminology (statement of cash flows, cash flow statement, or cash flow report).

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Types of Nonprofit Cash Flow

As mentioned previously, the nonprofit statement of cash flows is divided into three main sections: cash flows from operating, investing, and financing activities. Let’s look at each of these elements in more detail.

Cash Flows From Operating Activities

This section describes the cash your nonprofit brings in and spends on the majority of its day-to-day work. Cash outflows from operating activities include:

Most expenses related to your organization’s programs
The upfront costs of running fundraising campaigns and events
Variable administrative costs such as staff compensation and utility bills

On the flip side, cash inflows from operating activities include most of your nonprofit’s major revenue sources, such as:

Individual monetary donations of all sizes
Corporate philanthropy contributions like matching gifts and fiscal sponsorships
Earned income like merchandise sales and membership fees
Government and foundation grants

In-kind donations and sponsorships typically aren’t noted on the statement of cash flows. This is because gifts of goods, services, and immaterial assets result in a net zero gain in cash for your organization.

Cash Flows From Investing Activities

This category includes all cash movement related to your nonprofit’s long-term assets, such as property, equipment, and investments. Cash outflows from investing activities include:

Purchasing new property, equipment, or other fixed assets
Spending money on improvements to existing fixed assets (such as renovating or expanding a building)
Investing reserve funds in new vehicles like stocks, bonds, money market mutual funds, and cryptocurrency

Cash inflows from investing activities most often include:

Proceeds from sales of fixed assets
Interest or dividend payments earned on investments

Investments and their returns often create relatively small cash flows compared to your nonprofit’s other revenue streams, while changes in fixed assets are typically large but infrequent. However, it’s still important to track your organization’s cash flows from investing activities since they affect its long-term financial health and ability to grow.

Cash Flows From Financing Activities

This section describes cash movement related to your organization’s capital structure, most of which concerns debt. Examples of cash outflows from financing activities include credit card and loan payments, while cash inflows from financing activities might look like proceeds from loans made to other organizations and lines of credit.

Some contributions designated for growing your nonprofit’s capital may also fall under your cash inflows from financing activities, particularly endowment funds. However, endowments often bridge all three categories of cash flows. The returns they generate are considered cash inflows from investing activities. Distributions from them are categorized as cash outflows from investing activities or operating activities, depending on whether you spend them on assets or programs.

Applications of the Nonprofit Statement of Cash Flows

Your nonprofit’s statement of cash flows provides a close-up analysis of its spending and fundraising habits. However, this report also has other applications in the bigger picture of accounting. Here are a few of the most common applications:

Calculating cash flow metrics.Your accountant will likely use your statement of cash flows to determine your organization’s free cash flow (the level of financial flexibility you have to fund growth initiatives) and cash flow to debt (how much cash you have on hand to service any debt you may carry).
Developing future operating budgets. Understanding how money moves in and out of your organization month-to-month helps account for variability in revenue and expenses. For example, your cash flow reports might show that you bring in the most revenue from late November through the end of December due to your year-end giving campaigns, but you incur extra fundraising expenses in October and early November as you plan those initiatives. Then, you can note those differences in your budget.
Informing treasurer reports.When your nonprofit’s treasurer creates monthly financial reports for the board of directors, the main point they’re trying to make is how your organization’s cash balance changed from the beginning to the end of the past month. So, they’ll likely refer to that month’s cash flow statement as they develop their report.
Filing tax returns.In addition to your statement of activities, you can refer back to all of your statements of cash flows from a given year as you report your nonprofit’s revenue and expenses via IRS Form 990.
Creating annual reports. Most nonprofit annual reports include a financial summary, which you can again use your cash flow statements from the past year to inform. You might also compile all of them into a summary cash flow statement for the whole year and attach that as an appendix to your annual report in case some donors want to learn more about your financial situation.
Preparing for audits. If your nonprofit undergoes an independent financial audit, your auditor will likely ask you to pull several statements of cash flows so they can review and make recommendations based on them.

Pro tip: Working with a nonprofit accountant (like the experts at Jitasa) is the best way to ensure you’re understanding and leveraging your organization’s cash flow statement in the best possible ways for your unique situation.

Nonprofit Statement of Cash Flows Example

To help you visualize what your nonprofit’s statement of cash flows might look like, we’ve included a basic example here:

Since this report will look slightly different for every organization, reaching out to an accountant is also the best way to ensure your nonprofit has accurate, comprehensive cash flow statements to reference. Our team at Jitasa has worked with more than 1,500 nonprofits in all verticals across the United States, so we have the experience and knowledge to help your organization create, analyze, and apply its financial statements to achieve its goals.

The nonprofit statement of cash flows is an integral accounting report that your organization should take great care to compile and leverage in your day-to-day work. Use the guidelines and tips above as a starting point, and don’t hesitate to contact an accountant if you have questions or want to take your report creation and analysis to the next level.

For more information on nonprofit financial reporting, check out these resources:

Nonprofit Chart of Accounts: How to Get Started + Example. Your nonprofit’s chart of accounts is an essential resource that informs your cash flow statements. Explore its structure, purpose, and maintenance in this guide.
Nonprofit Financial Statements: 4 Essential Reports to Know. Dive deeper into everything the four core nonprofit financial statements entail and how they work together to inform your organization’s strategy.
Fractional Nonprofit CFO Services | Jitasa Group. Learn about the additional cash flow-related services we offer through the Jitasa Strategic Advisory Team (J-SAT), including forecasting, benchmarking, and data visualization.

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Can an LLC Be a Nonprofit? Exploring the Possibilities

2024-05-22T12:00:00Z

In the diverse landscape of business and charitable operations, the distinctions and connections between various organizational structures can often become blurred. One common question that arises is whether a Limited Liability Company (LLC) can also be recognized as a nonprofit organization. This question not only touches on legal and fiscal complexities but also challenges common perceptions about the nature and capabilities of these different forms of entities.

In this guide, we’ll explore the complexities of converting an LLC into a nonprofit organization, clarifying common misconceptions, and outlining the necessary legal and procedural steps. We’ll cover the following topics:

Understanding LLCs and Nonprofit Organizations

When discussing organizational structures in the U.S., Limited Liability Companies (LLCs) and nonprofit organizations represent two distinct entities designed with different objectives and operational frameworks. Understanding their unique characteristics and legal standings helps clarify potential intersections and transformations from one form to another.

Limited Liability Companies (LLCs) and Nonprofit Organizations differ fundamentally in purpose, ownership, financial management, and tax treatment. Here’s a concise breakdown of each:

Limited Liability Companies (LLCs):

Purpose: Designed to operate as commercial enterprises that can generate profit.
Ownership: Owned by one or more members who invest in the company.
Liability: Provides limited liability protection, shielding members’ personal assets from business debts and liabilities.
Taxation: Benefits from pass-through taxation, avoiding the double taxation typically associated with corporations.
Management Flexibility: Members may manage the business directly or appoint managers to handle business operations.

Nonprofit Organizations:

Purpose: Established to support a public or social cause without the intention of distributing profits.
Ownership: Do not have owners; instead, they are governed by a board of directors or trustees.
Revenue Reinvestment: All profits must be reinvested into the organization’s mission-related activities.
Tax Exemptions: Eligible for tax-exempt status under various IRS sections, most commonly 501(c)(3), which exempts them from federal income tax.
Regulatory Oversight: Subject to strict compliance with IRS regulations and required to maintain transparency in financial reporting to retain tax-exempt status.

By defining and understanding these fundamental differences and characteristics, it becomes clearer how each entity operates within its sphere and under what circumstances an LLC might consider transitioning into a nonprofit organization, if such a change aligns with a shift towards a mission-driven focus.

Can an LLC be a Nonprofit?

Legal Considerations

Exploring the possibility of an LLC being recognized as a nonprofit involves understanding the distinct legal frameworks that govern each type of entity. While LLCs are typically established as for-profit businesses, they can, under certain circumstances, be structured to operate for nonprofit purposes depending on a few factors:

State Regulations: Each state has specific statutes that govern the formation and operation of LLCs, including whether an LLC can qualify as a nonprofit. Some states explicitly allow LLCs to pursue nonprofit status if their operating agreement and articles of organization clearly state their nonprofit motives and comply with the same regulations that govern traditional nonprofit corporations.
Operational Requirements: For an LLC to be recognized as a nonprofit, its operational and organizational structure must align strictly with nonprofit guidelines. This includes adopting a mission that serves the public good and ensuring no profits are distributed to members or managers beyond reasonable compensation.
IRS Considerations: Recognition by the IRS as a 501(c)(3) tax-exempt entity is another crucial aspect. This federal recognition is separate from state-level nonprofit status and requires compliance with specific IRS rules concerning charitable purposes and operational conduct.

Tax Implications

Should an LLC successfully navigate the legal requirements to be considered a nonprofit, significant changes in tax treatment would follow. Understanding these implications is essential for managing the financial aspects of transitioning from a for-profit to a nonprofit model.

Federal Tax Exemption: Upon receiving 501(c)(3) status from the IRS, an LLC would be exempt from federal income tax. This exemption applies to any income generated from activities that are directly related to the organization's nonprofit purpose.
State and Local Taxes: Besides federal tax exemptions, nonprofit status can affect state and local taxes, including sales, property, and employment taxes. Specific benefits vary by jurisdiction but generally favor nonprofit operations to encourage their growth and sustainability.
Donor Contributions: One of the most significant tax-related benefits for nonprofits is the ability to receive tax-deductible charitable contributions. For LLCs transitioning to a nonprofit status, this opens new avenues for fundraising by appealing to donors who can claim deductions for their donations.

Transitioning an LLC to a nonprofit is a complex process that requires careful legal planning and understanding of both state and federal tax laws. It is advisable for LLCs considering this transformation to consult with legal and tax professionals to ensure compliance and to maximize the benefits of nonprofit status.

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Steps to Convert an LLC to a Nonprofit

Evaluate the Mission and Structure

The first step in transforming an LLC into a nonprofit organization involves a thorough evaluation of the company’s mission and organizational structure. This is critical because the IRS strictly requires that the mission of any entity applying for nonprofit status must be clearly charitable, educational, religious, or scientific, and benefit the public.

Aligning with Charitable Purposes: The LLC must reassess its business goals and activities to ensure they align with IRS-approved charitable purposes. This may involve redefining the company’s objectives and operational methods to focus on public rather than private interests.
Restructuring the Organization: It may be necessary to restructure the organization’s governance to fit a nonprofit model. This includes establishing a board of directors, setting up non-distribution clauses (ensuring that no profits go to private individuals), and implementing policies that ensure accountability and transparency.

Amend the Articles of Organization

Amending the Articles of Organization is an essential legal step in the process of converting from an LLC to a nonprofit entity. This formal document, initially filed with the state to establish the LLC, must be updated to reflect the new nonprofit mission and operational structure.

Drafting Amendments: The amendment to the Articles of Organization should include a clear statement of the new nonprofit purpose. It should also outline any changes in governance, like the adoption of a board of directors and provisions regarding the distribution of assets upon dissolution.
Legal Compliance: Each state has its own requirements for amending articles, typically involving filing with the state’s Secretary of State or similar agency. This process may require the LLC to provide a detailed explanation of why the changes are being made, along with a nominal filing fee.
Consultation with Legal Experts: Given the complexity of state and federal laws governing nonprofits, consulting with legal experts or attorneys who specialize in nonprofit law is highly advisable. They can provide guidance on the specific language and clauses that need to be included in the amendments to meet legal standards for nonprofit organizations.

Benefits and Challenges of LLCs as Nonprofits

Benefits

Transitioning an LLC to a nonprofit status comes with several potential benefits that can enhance the organization’s impact and sustainability:

Tax Exemptions: One of the most immediate benefits is eligibility for federal and state tax exemptions. Nonprofits can be exempt from corporate income taxes, which reduces overhead costs and allows more resources to be directed towards achieving the organization's mission.
Access to Grants and Donations: As a nonprofit, the organization gains the ability to receive public and private grants, as well as tax-deductible donations from individuals and corporations. This can significantly expand funding opportunities beyond what is typically available to LLCs.
Enhanced Credibility: Operating as a nonprofit can enhance the organization’s credibility and public image, making it more appealing to volunteers, benefactors, and the communities it serves. This perceived integrity can be crucial for community engagement and long-term partnerships.
Limited Liability Protection: Retaining the limited liability protection of the original LLC structure means that members are not personally liable for the organization’s debts or legal issues, which can provide peace of mind and attract qualified individuals to the organization.

Challenges

However, the transition from an LLC to a nonprofit also presents several challenges that require careful consideration:

Complex Legal and Tax Compliance: Achieving and maintaining nonprofit status requires navigating complex legal and tax compliance issues. This includes rigorous reporting requirements, compliance with specific operational restrictions, and adherence to standards of public disclosure and accountability.
Restrictions on Activities and Profit Distribution: Nonprofit organizations face strict restrictions on their activities, especially regarding how profits are used. Unlike LLCs, nonprofits must ensure that all profits are reinvested into the organization's mission, and personal profit-taking is prohibited.
Organizational and Cultural Shifts: Transitioning to a nonprofit model often requires significant changes in organizational culture and operations. This might involve restructuring the management team, redefining roles, and instilling a service-oriented mindset among staff and members, which can be disruptive and time-consuming.
Dependency on Funding: While access to donations and grants is a benefit, it also creates a dependency on fluctuating external funding sources, which can lead to financial instability if not managed carefully.

Understanding both the benefits and challenges of converting an LLC to a nonprofit is crucial for any organization considering this transition. It allows for a strategic approach to restructure and realign the organization’s objectives and operations to better serve its mission while ensuring compliance and sustainability in the long term.

Wrapping Up

Exploring whether an LLC can be a nonprofit reveals a transformative pathway for businesses to adopt a mission-driven approach. This transition offers significant benefits such as tax exemptions and access to grants, yet it requires meticulous planning and strict adherence to legal and nonprofit standards. For LLC owners considering this change, it's crucial to thoroughly evaluate their organization's mission and structure. Successfully converting an LLC to a nonprofit not only enhances the ability to serve the public good but also opens new avenues for funding and collaboration.

If transitioning your LLC to a nonprofit has sparked your interest in enhancing financial transparency and accountability, working with a nonprofit accountant can be invaluable. As you navigate this complex process, thorough research and expert advice are crucial. Below are some additional resources to help you gain deeper insights and guidance:

Working With a Nonprofit Accountant: What to Expect. Working with an accountant can help your organization develop an effective budget. Read more about what an accountant can do for you in this comprehensive article.
Outsourced Accounting for Nonprofits: Top Firms. Ready to start working with a nonprofit accounting firm to solidify your budget? Check out our favorite nonprofit accounting firms with experts who are more than happy to help.
Nonprofit Financial Ratios: Definitions & Calculators. In addition to your budget, you can leverage financial ratios to determine your organization’s financial health. Learn more about your organization’s financial standing by using Jitasa’s free ratio calculators.

Church Accounting: Ultimate Guide + Best Practices to Know

2024-05-03T12:00:00Z

As a church leader, your top priority is furthering your church’s mission and ministry. Everything you do in your role—from engaging the congregation to conducting community outreach—depends on your church having enough resources to fund these initiatives and managing its finances through effective accounting practices.

Accounting is important for any organization, but there are some special considerations for churches like yours because of their purpose and structure. That is where this guide comes in—we’ll cover the basics of church accounting, including:

Let’s get started with an overview of what church accounting is and what makes it unique.

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What is Church Accounting?

Church accounting refers to the organization, recording, and planning of a church’s finances. The process of church accounting is most similar to nonprofit accounting, since every church is also required to reinvest all of its funds into the organization and its mission. However, there are a few small differences between the two that we’ll cover in more detail later.

The primary difference between church accounting and for-profit accounting is its focus. In general, businesses use accounting to maximize their profits, while churches aren’t legally allowed to turn a profit.

Instead, the core of church accounting is accountability. Since your church relies on its congregation’s generosity to acquire the majority of its funding, your accounting practices should focus on demonstrating that you’re handling your supporters’ contributions responsibly and using your funding to make a difference.

Benefits of Church Accounting

When your church implements responsible accounting practices, you can experience several advantages, such as:

Better stewardship of resources. By properly tracking and allocating your church’s funding, you can make the most of your resources to serve your community.
Data-driven fiscal decision-making. If your church keeps detailed records of its finances year after year, you can reference this data to set realistic goals and timelines as you plan for future growth.
Proactive risk management. Effective accounting practices help protect against financial risks like fraud and theft, which could damage your church’s reputation.
Increased supporter trust. According to Ministry Brands’ State of Church Giving Report, 57% of the churches that saw increased congregational giving in 2023 achieved those results in part by being transparent about their spending. Financial transparency builds trust with supporters, which can make them more likely to give to your church.

Church accounting is also important for maintaining compliance with legal requirements for religious and nonprofit organizations, as well as the Generally Accepted Accounting Principles (GAAP), which standardize financial reporting and recordkeeping across all organization types.

Key Church Accounting Documents

To get started with church accounting, you’ll need to understand a few notable financial resources and reports. Here is a breakdown of four of the most important document types.

Chart of Accounts

Your church’s chart of accounts is essentially its financial directory. Since most churches receive funding from multiple sources and spend money in various ways, it’s important to keep records organized into categories, or “accounts.” The chart of accounts lists all of these categories in a table-style format, allowing you to easily find the correct records whenever you need to access them.

As with most nonprofit charts of accounts, it’s most effective to split your church’s chart of accounts into the following five categories:

Assets: Everything your church owns, such as cash, property, and accounts receivable.
Liabilities: Everything your church owes, including accounts payable, deferred revenue, and debt.
Net Assets: The total amount your church is worth, which is equal to your assets minus your liabilities.
Revenue: All of the funding your church brings in through its various income sources (more on this later!).
Expenses: All of the money your church spends on its ministries, administrative needs like facility upkeep and staff compensation, and revenue-generating initiatives.

These categories are based on the Unified Chart of Accounts (UCOA), a nonprofit-specific, standardized sample chart of accounts. However, many churches find the UCOA too detailed and are better off using other church-specific templates that they can customize to meet their needs.

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Operating Budget

Your church’s operating budget is its master financial plan for a given fiscal year. You’ve likely created a budget for your household before, in which you predicted your income for the year and allocated it to ensure you could cover all of your expenses. Church operating budgets work very similarly, except that they detail an entire organization’s predicted revenue and expenses.

To make your operating budget as helpful as possible, ensure it features the following characteristics:

Defined activities. Every aspect of your church budget should be associated with a specific initiative (for example, running your children’s ministry or launching a capital campaign). Record the total amount of predicted revenue and expenses for each initiative in your operating budget, then create separate program or project budgets to provide additional details.
Specific time frames. Although your operating budget covers one full year, you should also consider how much revenue you’ll bring in each month. Donating to churches and nonprofits alike peaks in December and tends to die down during the summer, so plan ahead to ensure you always have enough to cover necessary expenses. Additionally, if a project spans multiple years, break down your spending and fundraising on a year-by-year basis to align with your operating budget timeline.
Realistic and measurable goals. This is where past financial records are especially useful—use them to set spending and fundraising goals that will push your team but won’t be out of reach. For instance, if your church raised $10,000 during last year’s year-end giving campaign and $8,000 the year before, setting a goal to raise $12,000 during that campaign this year will likely be challenging but not impossible.

Although you’ll create an operating budget from scratch once a year, budgeting shouldn’t be a one-and-done event for your church. Check in with your budget on a monthly basis to help keep your church on track with its spending and revenue generation throughout the year.

Financial Statements

If your operating budget is your church’s master financial plan, financial statements are your church’s master fiscal reports. Each statement organizes and summarizes your church’s data in a different way to provide insights into its financial situation.

The four main financial statements used by churches and other nonprofits are the:

Statement of activities. The nonprofit parallel to the for-profit income statement, this document breaks down your church’s revenue, expenses, and net assets to inform future budgeting decisions.
Statement of financial position. Also known as a balance sheet, this statement provides a snapshot of your church’s financial health and its potential for growth by reporting its assets, liabilities, and net assets.
Statement of cash flows. This report shows how cash moves in and out of your church through operating, investing, and financing activities. While most organizations compile the other financial statements annually, it’s best to pull this one monthly to track your spending and revenue generation more closely throughout the year.
Statement of functional expenses. This report breaks down your church’s expenses into the categories of program, administrative, and fundraising costs to provide a more detailed view of how your spending supports your mission.

Financial statements also make excellent external resources. While most churches include a basic financial summary in their annual reports, it can be helpful to attach your financial statements as appendices so that potential supporters who want to learn more about your fiscal activities can do so easily.

Tax Forms

Although nearly all churches are tax-exempt organizations, that doesn’t mean your church can write off tax season! Unlike other nonprofits, most churches don’t have to file an annual tax return via IRS Form 990. However, there are exceptions to this rule, as well as special forms your church may have to complete depending on its income or the state it operates in. Stay up to date on the IRS’s guidelines for church financial reporting to ensure compliance each year.

Additionally, regardless of organization-wide annual filing requirements, your church needs to help its employees file their individual income taxes. Make sure to issue W-2s to each staff member on your church’s payroll and 1099s to any contractors you work with by January 31 of each year to fulfill your tax obligations as an employer.

Additional Accounting Best Practices for Churches

Besides compiling each of the above documents, there are a few other strategies your church should implement to effectively manage its finances. Let’s look at three of these best practices in more detail.

Diversify Your Revenue Streams

In the past, churches brought in the majority of their revenue through in-person donations, such as by passing around a collection plate during services or placing an offering box in the back of the sanctuary. While cash and check contributions are still important for many churches, they’re less significant than they used to be.

According to ChurchTrac’s 2024 church giving statistics, three in five church donors are willing to give via digital means, and just under half actually do. Adding an online donation page to your church’s website that accepts credit card payments, bank account transfers, and mobile payment services like Venmo and Apple Pay makes giving more convenient and accessible for congregants. In fact, Nonprofits Source reports that churches that allow supporters to give online have seen a 32% increase in overall contributions on average!

In addition to accepting digital donations, your church can branch out even more in its revenue generation efforts by taking advantage of opportunities such as:

Hosting fundraising events like walkathons, auctions, or family fun nights
Participating in passive fundraising programs like gift card sales or restaurant profit shares
Applying for grants that align with your church’s mission and needs
Directly collecting supplies for ministry programming or community outreach initiatives via in-kind donation drives
Accepting non-cash contributions like gifts of stock, donor-advised funds, and cryptocurrency donations

Having a variety of revenue streams makes your church more financially stable. If one source falls through or some of your expenses are higher than expected, it’s easier to recover when you don’t have all of your funding eggs in one basket. And, if everything goes to plan, you can use your additional revenue to create an emergency fund or save for long-term church growth.

Leverage Accounting Software

Many organizations start out tracking their transactions in a spreadsheet for simplicity. However, as your church grows and its financial situation becomes more complex, you’ll eventually need to switch to dedicated accounting software.

Make sure your accounting solution can handle the unique aspects of church accounting discussed above, such as categorizing multiple revenue streams and creating the financial statements used by nonprofits. If your church wants to pursue grant funding, look for a platform that includes grant management tools to make the process easier.

There are many accounting solutions available for your church to try, so weigh your options and choose the one that best aligns with your needs and budget. (We at Jitasa recommend QuickBooks Online, as it’s the most comprehensive, flexible, and well-known accounting solution that can be customized for churches!)

Work With a Dedicated Church Accountant

Church accounting involves a lot of moving parts, and working with an accountant can take the burden of financial management off your team and allow you to focus on your mission. You have three basic options for recruiting an accountant for your church, which are:

Hiring an accountant in-house. This option is best for large churches that have the resources available to hire a new full-time employee and enough accounting work to warrant it. It’s the most expensive option, but this professional will be completely dedicated to your church, so they’ll become very familiar with its needs and goals.
Requesting an in-kind donation of accounting services. For small churches that are just getting started with accounting, it often makes sense to ask a local accountant to contribute their expertise for free. While this is very cost-effective, it often isn’t sustainable. Although an accountant might be happy to donate their time to a good cause at first, they’ll eventually start to prioritize paid projects.
Outsourcing your church accounting needs. Outsourcing provides your church with consistent access to specialized accounting expertise at a much lower cost than hiring. Project turnaround might take slightly longer than it would with a full-time accountant, but you can overcome this challenge by communicating effectively with your outsourcing partner.

Especially if you choose to outsource your accounting needs, make sure your accountant has experience managing church or nonprofit finances so they’ll understand your unique financial situation. Our team at Jitasa works exclusively with nonprofits, including churches, so we’re equipped to do just that!

Church accounting allows your team to gain insider knowledge about your church’s financial health and position. That way, you can make plans within the scope of financial possibility at your organization while maintaining as high of an impact as possible. Use the tips above to get started, and don’t hesitate to reach out for professional help whenever you need it!

For more information about church accounting, check out these resources:

Fund Accounting 101: The Basics and Best Practices. Dive deeper into the unique system of financial recordkeeping and analysis that churches and other nonprofits leverage.
How to Set up QuickBooks for Nonprofits: The Complete Guide. Discover how your church can get started with the most popular accounting software on the market.
Bookkeeping & Accounting Services for Churches | Jitasa Group. Explore our outsourced financial management offerings designed specifically for churches like yours.

Learn how Jitasa’s team of experts can help you make the most of your church’s accounting practices.

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Building Corporate Relationships: 4 Steps For Nonprofits

2024-04-09T16:00:00Z

Do you believe your nonprofit lacks the resources needed to attract and manage corporate partnerships? It's a common misconception that only large organizations have what it takes to earn corporate partners. Rather, your mission's impact and story are invaluable assets that can attract corporate interest, regardless of your budget.

To boost your nonprofit’s revenue, we’re here to help you reach beyond the limitations of traditional fundraising methods and form meaningful relationships. Follow the easy steps we share to forge lasting partnerships, from identifying companies to tracking their ongoing support!

Step 1) Research Potential Corporate Partners

Building corporate relationships begins with identifying potential partners whose corporate social responsibility (CSR) goals align with your nonprofit's mission.

Start by understanding what your nonprofit brings to the table. What are your strengths, achievements, and unique selling points? How does your mission resonate with current societal needs or corporate philanthropy trends? By understanding your value proposition, you can more effectively locate companies that share your vision.

To pinpoint specific corporate giving opportunities, we recommend:

Looking for generous programs. A company’s existing CSR programs indicate what types of support you could earn through a partnership. Consider your nonprofit’s priorities. If you want to grow supporter engagement and secure more funding, look for matching gifts and volunteer grant opportunities. If you regularly host fundraising auctions, look for companies that offer in-kind gifts to donate auction items. If you need more hands-on support, look for employee volunteer programs.
Leveraging existing networks. Board members, volunteers, and donors often have corporate connections that could fit your organization. For example, try asking supporters where they work and if they can introduce you to the company’s leadership.
Analyzing CSR reports and commitments. Many companies that engage in CSR have a mission statement page on their website and publish annual CSR reports. Reviewing these resources provides a deeper understanding of a company's priorities.

In this step, your goal is to cast a wide but strategic net, focusing on companies that have the capacity to support your mission and share a genuine interest in your cause.

Step 2) Prioritize Partners That Offer Matching Gifts

Let’s dive deeper into the idea of prioritizing companies that offer generous programs, specifically those with matching gift programs. Matching gift programs double the impact of individual donors’ contributions, boosting your fundraising potential. These programs empower companies to align their charitable giving with their employees’ values, bringing a deeper meaning to your partnerships.

Not only are matching gifts great for these partnerships, but doubling contributions is great for donor engagement, too! According to Getting Attention’s donor engagement guide, 84% of donors are more likely to give if a match is offered, while 1 in 3 donors will actually donate a larger gift.

Information about individual matching gift programs can often be found on a company's CSR page or through a matching gift database. Pay attention to the specific requirements of each company’s program, such as:

Donation minimums and maximums
Match ratios, which are the rate at which a company will match employees’ gifts
Employee eligibility requirements
The types of nonprofits that are eligible
The process for submitting match requests

These details will help you assess the potential impact of a partnership with each company and prioritize those with the most favorable terms. Even if a company doesn’t offer matching donations, it may be willing to create a custom program to match employees’ donations to your nonprofit exclusively.

Best of all, while a matching gift program is a great indicator of a generous corporate partner, you don’t even have to form partnerships to leverage this type of corporate philanthropy.

Step 3) Develop Tailored Proposals

Crafting formal sponsorship proposals goes beyond asking for support. A well-crafted proposal lays the foundation for a lasting relationship. Here’s how you can create ones that align your nonprofit’s vision with each company’s values and goals:

Avoid one-size-fits-all proposals. Personalize your approach based on each corporate partner's specific interests and CSR objectives. Use your research from previous steps to highlight aspects of your nonprofit’s work that directly align with each company’s CSR initiatives.
Highlight how the company will benefit. While business owners may genuinely want to support good causes, corporate philanthropy offers other benefits to corporations, such as community exposure, higher employee engagement, and tax deductions. Double the Donation’s workplace giving guide indicates that 69% of employees are more loyal to companies that offer workplace giving, while 84% have more trust in businesses with charitable giving programs.
Tell your nonprofit’s story. Your proposal should vividly convey your mission, your work’s impact, and the lives that have been changed. Our grant management guide suggests combining emotional stories from beneficiaries with concrete data about your organization’s accomplishments to create a persuasive proposal.

During this step, remember your nonprofit’s unique value proposition from step one. By building a strong case for support, you can get the right corporate partners invested in your mission.

In each proposal, be clear about the type of support you’re seeking, whether that’s financial, in-kind donations, or volunteer time. Make your ask direct but flexible, showing that you’re open to different forms of support.

Step 4) Maintain Effective Records

Once you’ve successfully formed partnerships with some companies that you’re really excited about, you need to cultivate long-lasting relationships with them. A big part of inspiring corporate partners to stick around is maintaining effective records.

Proper record-keeping goes beyond organizational hygiene; it’s essential for tracking the impact of corporate giving, managing in-kind gifts, and ensuring compliance with legal obligations.

To effectively record the impact of your corporate partnerships, here’s what you can do:

Record all financial contributions, including cash donations and matching gifts, with detailed information about the donation date, amount, and the specific program or project supported. Accurately log these financial contributions in key financial documents and systems such as your statement of activities, general ledger, and donor records.
Establish a system to assess the fair market value of in-kind gifts. When recording these gifts, be sure to keep detailed records of what was received, when, and how it was used.
Develop a reporting schedule. Regular reports will help you stay on top of your record-keeping, build trust with corporate partners, and show them the tangible results of their support. Develop a schedule for internal and external reporting, including financial reports, impact assessments, and updates on how contributions are being used.

Maintaining effective records and communicating results to corporate partners can go a long way in fostering a foundation of trust that encourages ongoing support. You can even share results with future partners to showcase that you take corporate relationships seriously.

Wrapping Up

“Corporate philanthropy” isn’t just another buzzword in the nonprofit sector. It’s a way for companies to make a real difference for important causes like yours. Building ongoing relationships through partnerships allows you to transform corporate giving into a lasting revenue source for your cause. Follow these steps, and you’ll start identifying and connecting with more companies that are ready to make an impact.

Learn more about how nonprofits make and allocate money.

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Key Tax Considerations for Your Nonprofit’s Next Event

2024-03-25T12:00:00Z

Planning a fundraising event is an exciting undertaking for your nonprofit. You get to work closely with your team to bring your fundraising dreams to life, but there are many boxes you need to check off to make sure you’re on track—including reserving a venue, booking catering, and preparing your marketing materials.

However, an equally important part of planning for your event is ensuring you are compliant with the IRS and adhere to all necessary tax provisions. This way, you can keep your nonprofit in good standing and retain your 501(c)(3) status.

To ensure your organization hosts a financially responsible and compliant event, we’ll go over the key tax considerations to keep on your radar. While it’s recommended that you consult a legal or financial professional to navigate any tax implications associated with your event, this guide is a great starting point. Let’s begin!

Understanding the Basics of Special Events

Special events are synonymous with fundraising events and, according to the IRS, include examples like “dinners/dances, door-to-door sales of merchandise, concerts, carnivals, sports events, and auctions.” Essentially, special events are considered fundraisers that do not substantially further the organization’s exempt purpose other than by raising funds.

For example, let’s say your nonprofit hosts a walkathon fundraiser. Although you are raising money to support your mission, the walkathon itself is not directly related to your overall purpose and therefore will require additional tax considerations.

Gross income generated by special events must be reported annually on the IRS Form 990, which is how the IRS gathers data about tax-exempt organizations. In line 8a of Form 990, the IRS explains that fundraising events exclude:

Sales or gifts of goods or services of only nominal value
Raffles or lotteries in which prizes have only nominal value
Solicitation campaigns that generate only contributions

Keep in mind that events unrelated to your exempt purpose can, in certain circumstances, be considered taxable unrelated business income (UBI), which we will cover in a later section. However, your event may be exempt from UBI as long as it is hosted irregularly (such as once a year as opposed to every month), run by volunteers, and not hosted to make a profit.

Let’s take a closer look at how your nonprofit must file special events to remain in good standing with the IRS using Form 990.

Form 990 Special Event Considerations

If your nonprofit receives income from fundraising events during a given fiscal year, you’ll need to report it using Form 990. Your nonprofit will be required to submit the following details about your fundraising events:

Name of the event
Total revenue generated
Total fair market value (FMV) of noncash contributions

If your nonprofit reports receiving gross event revenue totaling more than $15,000, then you will be additionally required to fill out Form 990 Schedule G, Part II. This schedule is used to report on professional fundraising services and special events, like galas or auctions, in greater detail. For example, you’ll need to record costs incurred with your fundraising events such as:

Cash and noncash prizes
Food and beverages
Entertainment
Rent/facility costs
Other direct expenses

The IRS also requires that your nonprofit inform donors of tax deductibility for event tickets or purchases of $75 or more. Disclosing that you have complied with this rule is one of the questions on Form 990 and is essential to avoid unnecessary legal or financial penalties.

Between planning your fundraising events, leading donor stewardship activities, and everything in between, it’s easy to put filing Form 990 at the bottom of your priorities. However, correctly submitting your data by the filing deadline is critical to maintaining your nonprofit’s legal standing.

To ensure you have all the data you need to quickly and easily submit Form 990 by the deadline, OneCause, a leader in fundraising technology, recommends working with top fundraising software that integrates with your CRM. This will ensure that all incoming fundraising data from your events is automatically recorded and stored in your database for easy reporting.

Corporate Sponsorship and UBI Considerations

Corporate sponsorships can help your nonprofit in a variety of ways, from giving you access to more funding to host your event to in-kind donations like auction items. However, corporate sponsorships can fall under unrelated business income (UBI) in certain circumstances, meaning that this income would be taxable.

For example, a corporate sponsorship may be considered UBI if it crosses over into advertising. IRC Section 513(i) explains that a corporate sponsorship may be considered advertising if your nonprofit explicitly promotes the products or services of a person or company, including using “messages containing qualitative or comparative language, price information, or other indications of savings or value, an endorsement, or an inducement to purchase, sell, or use such products or services.”

For instance, let’s say your nonprofit is hosting an online fundraiser and partners with a company to match gifts during your campaign. To acknowledge their support and show appreciation, you share a social media post with their logo and write “Huge thank you to [Company Name] for matching gifts during this campaign!” This does not count as an advertisement and your nonprofit would not be taxed.

However, if you instead wrote something like “Thank you to [Company Name]! They are the leading provider in selling quality products, so purchase something from them today!”, you would likely be tax-liable.

Corporate sponsorships can also fall under UBI if any of the following situations apply:

The sponsor is deemed to be the exclusive provider
Your nonprofit provides privileges like facilities or services to the sponsor that are considered to be of substantial value
The sponsorship payment is connected to a qualified convention or trade show activity

Keep in mind that corporate sponsorships aren’t the only source of revenue that could fall under UBI. Another common funding source of revenue that may be considered taxable is gaming. If you’re planning to host an event that involves raffles, bingo, lotteries, or other games of chance, you’ll want to reference both IRS provisions and state and local law to ensure you’re legally adherent.

If your nonprofit earns $1,000 or more in UBI, you will be required to fill out IRS Form 990-T. This form is due at the same time as Form 990. For more information on unrelated business income, reference [IRS Publication 598: Tax on Unrelated Business Income for Exempt Organizations.

Wrapping Up

Fundraising events are a key part of fueling your nonprofit’s mission. As you engage in event planning, take into account these key tax considerations to ensure compliance and save your nonprofit from spending any extra unnecessary funds. You can always work with a top accounting firm that specializes in nonprofit financial management to simplify filing your taxes.

National Nonprofit Day: Celebrating Unsung Heroes

2024-03-21T12:00:00Z

In the heart of our communities, amidst the hustle and bustle of daily life, lie the unsung heroes who make the world a better place—one selfless act at a time. These are our nonprofit organizations, the bedrock of societal support, working tirelessly to mend the fabric of our community with threads of compassion, resilience, and altruism. National Nonprofit Day, observed every August 17th, is more than just a date on the calendar; it's a call to acknowledge, appreciate, and amplify the silent, yet profound, impact of these organizations.

A Salute to the Pillars of Our Community

Much like the guiding principle behind in-kind donations, National Nonprofit Day is rooted in the spirit of giving, highlighting the myriad ways these organizations enrich our lives. From providing essential services to advocating for societal change, nonprofits touch every facet of our society. They are the shelters for the homeless, the educators for the underserved, the protectors of our environment, and so much more. Today, we stand to honor their commitment as they continue to bridge gaps and build stronger, more resilient communities.

Empowering Change: How You Can Contribute

On National Nonprofit Day, and indeed, throughout the year, every individual holds the power to make a difference. Below are a few examples on how you can make help this great cause:

Engage Directly Through Volunteering: Volunteering is the heartbeat of nonprofit success. Whether it's by providing hands-on help at local events, offering administrative support, or bringing your professional skills to the table, your time is a priceless gift. Nonprofits thrive on the energy and dedication of volunteers, and there's always a need that matches your interests and abilities. From mentoring youth to building homes, every moment you dedicate contributes significantly to their mission.
Leverage Your Expertise: Sharing your professional skills can have a transformative impact on a nonprofit. If you have expertise in areas such as marketing, legal services, financial planning, or IT, consider offering your services pro bono. By doing so, you're not just volunteering time; you're enhancing a nonprofit's capabilities, enabling them to operate more efficiently and effectively. This could mean helping them to build a new website, offering legal advice, or assisting in creating a strategic plan.
Spread the Word: Raising awareness is a powerful form of support. Use your social media platforms, your community influence, or even word-of-mouth to talk about the causes you care about. Highlighting the work of a nonprofit can lead to new volunteers, increase donations, and build a stronger community around their mission. Sharing stories of how the organization has made a difference can inspire others to contribute or seek help.
Attend and Promote Nonprofit Events: Many nonprofits host events to fundraise, celebrate their successes, or raise awareness about their mission. By attending these events, you not only show your support but also have the opportunity to learn more about the organization and network with like-minded individuals. Furthermore, promoting these events within your circle can increase attendance, boost fundraising efforts, and amplify the nonprofit's message.
Consider Board Membership or Mentorship: If you have the time and are deeply committed, consider serving on a nonprofit's board of directors or becoming a mentor. These roles allow you to contribute to the strategic direction and governance of the organization, ensuring its growth and sustainability. Additionally, mentoring staff or volunteers can help build capacity and ensure the transfer of valuable skills and knowledge.
Encourage Corporate Sponsorships: If you're part of a business or organization, explore opportunities for corporate sponsorships or partnerships with nonprofits. These can provide essential resources and support for nonprofits, while also offering corporate partners positive exposure and the satisfaction of giving back to the community.

Remember, your contribution matters. Never underestimate the impact of your involvement. Whether it’s through time, resources, or spreading the word, your contribution plays a crucial part in empowering nonprofits to achieve their mission. By taking action in any of these areas, you become a vital partner in their efforts to create positive change in the world.

A Reflection of Our Collective Spirit

As we observe National Nonprofit Day, it's a time to ponder the core principles that connect us: empathy, generosity, and a sense of community. These aren't just abstract concepts but the very pillars that sustain the nonprofit world and its mission to enact real change. This special day acts as a beacon, highlighting our collective capacity for kindness and the shared human experiences that drive us to support each other. It's about honoring not just the organizations but also each person who extends their hand to help another. This communal spirit reflects our understanding and care for one another, standing as a testament to what we can achieve when we unite for a common cause.

Moreover, National Nonprofit Day should serve as a catalyst, transforming reflection into action. It's one thing to recognize and celebrate the values that underpin the nonprofit sector; it's another to live by them. This means taking concrete steps: volunteering your time, contributing resources, or simply spreading the word about a cause close to your heart. It's about turning empathy into assistance, generosity into action, and community into collaboration. By actively engaging in these endeavors, we not only support the vital work of nonprofits but also reinforce the bonds that tie us together, forging a stronger, more compassionate society.

Integrating Nonprofit Accounting into the Celebration of National Nonprofit Day

On National Nonprofit Day, as we honor the significant impacts made by nonprofit organizations, it's crucial to also acknowledge the fundamental role of nonprofit accounting in upholding these entities' transparency, integrity, and operational excellence. Integrating the principles of nonprofit accounting into the day's celebrations can elevate our understanding and appreciation of the financial backbone that supports these entities' missions. Here’s how you can help:

Educational Workshops and Seminars: Embrace National Nonprofit Day as an opportunity for learning and growth by hosting or attending workshops and seminars focused on nonprofit financial literacy. These educational sessions can cover a range of topics, from demystifying financial statements and understanding the balance sheet, income statement, and statement of cash flows, to navigating the complexities of audits. Workshops could also delve into effective budgeting techniques, ensuring all attendees grasp the importance of aligning an organization's financial plan with its strategic goals, and financial planning strategies that underscore the necessity of forecasting and adapting to the nonprofit's changing needs.
Transparency Drives: On National Nonprofit Day, encourage nonprofit organizations to initiate transparency drives. This could involve opening up about their financial successes and challenges over the past fiscal year. By transparently showing how funds have been allocated and detailing the tangible impacts generated through various projects, nonprofits can bolster donor confidence and public trust. Sharing stories behind the numbers on financial statements can humanize the data, making the financial aspects of nonprofit work more relatable and understandable to the general public and potential donors.
Appreciation for Financial Teams: The dedication and hard work of financial teams often go unnoticed in the nonprofit sector. Use National Nonprofit Day as an occasion to shine a spotlight on the accountants, financial managers, and bookkeepers behind the scenes. Celebrate their successes and acknowledge the crucial role they play in maintaining the organization's financial health and integrity. Highlighting these individuals’ contributions through social media shout-outs, awards, or special recognition events can boost morale and emphasize the value of their work.

The Journey Forward

In the spirit of continuous improvement and collective impact, let's use National Nonprofit Day as a stepping stone towards deeper engagement and support for the nonprofit sector. Let this day be a spark that ignites a year-round commitment to supporting the invaluable work of these organizations. After all, in a world brimming with challenges, the role of nonprofits has never been more critical.

As we move forward, let's carry the essence of National Nonprofit Day in our hearts and actions, fostering a culture of giving, understanding, and mutual support. Together, we can continue to build a world where every person can thrive, supported by the steadfast pillars of our nonprofit community.

Understanding and Applying GAAP for Nonprofits: FAQ Guide

2024-02-05T12:00:00Z

Nonprofit accounting is unique in both its purpose and execution. While for-profit organizations orient their accounting practices around the goal of turning a profit, nonprofits’ main goal in accounting is financial transparency with donors, stakeholders, and the government. This allows these organizations to remain tax-exempt and use their revenue to effectively further their missions.

However, there is a set of accounting standards that all organizations are expected to follow, known as the Generally Accepted Accounting Principles (GAAP). In this guide, you’ll learn everything you need to know about why these principles are important and how to apply them at your nonprofit. We’ll answer the following frequently asked questions about GAAP:

GAAP is a foundational accounting concept that all nonprofits should be familiar with. If you have any questions or need help implementing GAAP standards at your organization, make sure to work with an accountant who specializes in nonprofit work, as they’ll be best equipped to navigate the complexities of your organization’s accounting situation. For now, let’s get started by reviewing the principles that comprise GAAP.

Work with the team at Jitasa to apply GAAP at your nonprofit.

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What are the Generally Accepted Accounting Principles?

The Generally Accepted Accounting Principles—commonly known as GAAP—are a set of agreed-upon accounting standards that provide a framework for recording and reporting financial information. They ensure consistency and comparability in financial management among all organizations in the United States, both for-profit and nonprofit.

The 10 GAAP standards are as follows:

Principle of Regularity: GAAP-compliant accounts adhere to established rules and regulations.
Principle of Consistency: Financial reports are created according to consistent standards.
Principle of Sincerity: Accounting practices are conducted accurately and impartially.
Principle of Permanence of Methods: Financial reports are prepared using standardized procedures.
Principle of Non-Compensation: All aspects of an organization’s performance—both positive and negative—are reported with no prospect of debt compensation.
Principle of Prudence: Reported financial data is not influenced by speculation.
Principle of Continuity: Asset values are reported under the assumption that the organization’s operations will continue.
Principle of Periodicity: Financial reporting schedules are divided into standard accounting periods, such as fiscal years, quarters, and months.
Principle of Materiality: Financial reports fully disclose an organization’s financial situation.
Principle of Utmost Good Faith: Everyone involved in the accounting process is assumed to be acting honestly.

These principles apply to all types of organizations, but they’re especially useful for nonprofits because, like nonprofit accounting in general, one of their main purposes is to promote accountability.

Who developed GAAP?

Since GAAP first came about in the early 20th century, it has been a collaborative effort to create, update, and maintain. The primary organizations involved include:

American Institute of Certified Public Accountants (AICPA). This organization, which administers the CPA certification exam and establishes various accounting and auditing requirements, laid the foundation for GAAP.
Financial Accounting Standards Board (FASB). A private-sector organization created for the primary purpose of accounting standardization, FASB has been in charge of keeping GAAP up-to-date since the organization was founded in 1973.
Securities and Exchange Commission (SEC). This federal government agency regulates the market and protects investors, meaning it’s the most involved organization in maintaining GAAP on a national level.
State governments. Individual states also help uphold GAAP through the reporting regulations they set forth, although each government does this slightly differently. Check the IRS requirements for your state to stay up-to-date on this aspect of compliance.

Although the primary goal of GAAP—ensuring consistency, comparability, and transparency—has stayed the same over the 100-plus years of its existence, accounting practices have evolved as technology has become more prevalent. So, GAAP has also had to evolve, and multiple organizations in different niches of accounting continue to guide that process to ensure it’s holistic.

Why do nonprofits need to comply with GAAP standards?

While the main benefit nonprofits gain by following GAAP is focusing more deeply on the accountability aspect of accounting in light of donor and stakeholder concerns, that isn’t its only purpose. Here are some additional reasons why your organization should implement GAAP standards:

Complying with legal requirements. Although GAAP isn’t a legal regulation in and of itself, the principles inform many of the legal guidelines nonprofits have to follow. For instance, despite being tax-exempt, nonprofits still have to file an annual tax return (IRS Form 990) because of the Principles of Consistency and Periodicity.
Establishing credibility. Reporting your finances in good faith and according to standardized procedures helps external parties see your nonprofit as a professional, trustworthy organization. The accuracy and thoroughness of reports required by GAAP deepen that confidence.
Aligning with grantmaker and auditor expectations. If your organization applies for grants or undergoes financial audits, the grantmakers and auditors you work with will assume that you comply with GAAP and assess your nonprofit’s information accordingly. It’s much easier for them and for you when this is the case since you’ll have to include disclaimers on all of your grant or audit materials if not (which may negatively affect grantmakers’ opinions of your nonprofit).
Standardizing organizational financial management. GAAP also provides a good framework for allocating, recording, and overseeing your nonprofit’s finances to most effectively further your mission. That way, all of the internal and external financial professionals you work with—your CFO, your treasurer, your bookkeeper, and your accounting team—will be on the same page about these activities.

To begin implementing GAAP, sit down with the above financial professionals and anyone from your leadership and fundraising teams who can provide insight into your nonprofit’s everyday resource use so you can create a comprehensive financial action plan together. Once you’ve started following this plan, check in with your team regularly to identify what is going well and where there is room for improvement.

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How can I apply GAAP for nonprofits?

The action plan you develop may involve creating or updating a variety of financial policies, procedures, and documents for your nonprofit. However, there are five key ways you should make sure GAAP standards are being followed:

Use the Accrual Accounting Method

In an accrual accounting system, your nonprofit will record revenue when it’s pledged and expenses when they’re incurred. This is in contrast to a cash accounting system, which records revenue and expenses only after the money has changed hands.

Because accrual accounting includes both financial commitments and cash flows, it provides a more complete picture of your organization’s situation as required by GAAP. It also makes filing your Form 990 easier since you’d have to include a disclaimer and do additional calculations if you used the cash accounting method.

Properly Recognize Different Types of Revenue

Nonprofits make money from various sources, such as individual donations, grants, investments, and corporate contributions. Each of these types of revenue should be recorded separately in your accounting system to ensure consistency and materiality when it comes time to report your revenue.

Some contributions have additional requirements for how to recognize them in your accounting system for GAAP compliance. For instance, the monetary value of in-kind gifts is recorded as both a debit and a credit to note that you received it, but the amount of cash your organization has hasn't changed.

Honor Donor Restrictions on Funding

Some of the revenue your nonprofit receives will be restricted, or set aside for specific purposes by the contributor. This most often happens with major gifts and grant funding because donors and grantmakers want to ensure their significant contributions will be used to further aspects of your mission that align with their values.

To act sincerely and in good faith, your organization needs to honor your commitments to use those funds as the donor or grantmaker intended. Plus, these contributors have the right to sue your nonprofit for misuse of funds if you don’t respect their official wishes—another way GAAP and legal requirements for nonprofits align.

Allocate Expenses by Function

Generally speaking, there are two ways your organization can allocate expenses in its budget. The first method is based on the type of payment you’ll make to cover each intended cost, referred to as natural expense allocation. The second method, functional expense allocation, is based on how each expenditure impacts your mission.

The three categories of functional expenses are:

Program costs, which are directly related to the activities that further your mission.
Administrative costs, which are essential for your nonprofit to operate (such as paying utility bills and compensating your staff).
Fundraising costs, which are associated with running giving campaigns, planning events, and marketing your nonprofit.

While all three types of expenses are necessary to achieve your goals, your nonprofit should be spending much less on its administrative needs and fundraising than it does on its programs. Allocating your expenses based on these categories allows you to see exactly how much of your funding goes toward mission-related activities and how much is being used to run the organization, allowing for the full transparency that GAAP calls for.

Compile Financial Statements

Since many of the GAAP standards have to do with reporting, ensuring your nonprofit creates accurate financial statements each year is the most essential aspect of compliance. These statements organize and summarize data in consistent ways to provide different insights into your organization’s financial situation.

Under GAAP, both for-profit and nonprofit organizations are required to compile these three financial statements:

Income statement or statement of activities. These terms are interchangeable, although for-profit organizations prefer the former and nonprofits tend to use the latter. This report outlines your organization’s revenue, expenses, and net assets to provide actual numbers that you can compare to the predictions in your budget for a given fiscal year.
Balance sheet or statement of financial position. This statement is also compiled annually and referred to by two interchangeable names. It breaks down your assets, liabilities, and net assets to provide a snapshot of your organization’s financial health, which is especially useful if you’re planning for growth.
Statement of cash flows. Both for-profit and nonprofit organizations use the same term for this statement and typically compile it monthly. It shows how cash moves in and out of your organization through operating, investing, and financing activities to help you stay on track with your spending and fundraising.

There is also a fourth type of financial statement that is unique to nonprofits, known as the statement of functional expenses. This report divides your organization’s expenses into the functional expense categories we outlined previously to demonstrate how your funding is being used to further your mission.

GAAP is one of the most fundamental concepts for nonprofit accounting, so you need to know what it entails to manage your organization’s finances effectively. Use the information and application tips above to get started, and don’t hesitate to reach out to nonprofit accounting experts (like the team at Jitasa!) with any questions or concerns that come up along the way.

For more information about GAAP and its applications for nonprofits, check out these resources:

Fund Accounting 101: The Basics and Best Practices. Dive deeper into the unique accounting system nonprofits use to transparently track their funds and honor their donors’ wishes.
Nonprofit Chart of Accounts: How to Get Started + Example. Discover the ins and outs of the chart of accounts, a key nonprofit accounting resource for GAAP compliance.
How Do Nonprofits Make Money? Making Nonprofits Profitable. Explore the different revenue streams your nonprofit may have as part of its funding model and learn how to properly account for each one according to GAAP.

Apply GAAP standards at your nonprofit with the help of Jitasa’s experienced team.

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Maximizing Your Capital Campaign Communications Budget

2024-02-02T12:00:00Z

To get the most out of your capital campaign communications budget requires you to know what gives you the biggest “bang for the buck,” to use an old expression. And you may be surprised to learn that it’s not a fancy campaign brochure!

In fact, if you think that the heart of your campaign is an elegant, glossy, full-color brochure and a high production value video, that’d be a hard idea to swallow. Because both the brochure and the video are expensive.

But in reality, many capital campaigns are successful without a fancy brochure or high-end video.

It’s a myth that successful campaigns rely on high-end materials. The research shows that nonprofits with small budgets can meet their capital campaign fundraising goals, especially when they focus on building relationships with their top donors. And those folks don’t need fancy materials. In fact, many of them are pleased to be included in the planning phases of the project and the campaign and are happy to review drafts of your planning materials, like your case for support.

So, what do you need to spend communications money on?

7 Important Capital Campaign Elements to Focus Your Communications Budget On

Though the communications budget for your campaign will vary depending on the size and scope of your campaign, you will want to include line items for the following elements.

Strategy Development: If you don’t have a communications expert on your team, you will want to bring in an expert to help develop key messages and determine the best strategy for using various communications channels.
Graphic Design and Branding: Throughout your campaign, you will want high-quality design services to develop a consistent identity for your campaign that will be used in all of your campaign materials.
Collateral Materials: Even though you don’t have to invest heavily in brochures and videos, you will need some collateral material and it should be well designed.
Digital Presence: You will want to update your website during the campaign to include the campaign and you may need help with email marketing campaigns and social media campaigns.
Media Relations: You should develop a plan for press releases and media events.
Events: Your campaign will have both a kick-off event and a final celebration. You may wish to budget for professional assistance in planning and executing those events.
Advertising: During the public phase of your campaign, you may wish to use paid advertising to spread the word about your organization and your campaign more broadly.

Before you spend any money on communications, apply a financial management best practice and evaluate your available resources. Do any of your staff members have communications expertise? Is there someone on the staff who might take the lead in developing a communications plan? Do you have board members or other active volunteers with communications expertise?

That said, communications are an important aspect of a capital campaign, and you shouldn’t compromise on quality. If you plan well and use resources effectively, you should be able to get high-quality expertise without spending an inordinate amount.

Remember, while you will need a well-conceived communications plan, you won’t need a costly brochure or video!

How to Create a Budget for Your Children's Ministry

2024-01-15T12:00:00Z

As a church leader, your top priority is likely to impact the members of your congregation. For your children’s ministry, this means engaging kids as you teach them about God and His Word. However, the resources you use to do so require funding, and it’s your responsibility to budget wisely so that you can access these tools.

To do so, you’ll need to understand the basics of budgeting as it applies to your children’s ministry. That’s where this guide comes in—we’ll explore four steps to creating a budget for your ministry’s funding that will help you master financial management:

To truly make the most of your ministry’s budget, you’ll need an understanding of your current financial position, goals for the future, and a plan to bridge the gap between them. With that in mind, let’s take a closer look at how you can achieve this.

Analyze Your Expenses

Before you can determine how to allocate your funding, you first need to know the current state of your finances. How do you currently use your program’s financial resources? What does it take to keep your children’s ministry running?

This includes all expenses associated with your children’s ministry, which might be broken down into the following categories:

General fund: This includes most of your church’s expenses that allow it to continue operating. For example, your general fund might cover the cost of your children’s ministry curriculum or Sunday school supplies.
Missions or Community fund: Any philanthropic good your children’s ministry does is covered by your missions fund, such as youth mission trips or community service days. These initiatives can be especially important in impacting kids as they allow children to put their faith into action.
Special Programming fund: This might include special holiday plans, events you plan for your ministry, and anything in between!

This organization of expenses is often referred to as fund accounting. Fund accounting for churches helps ministries account for each expense, even as costs fluctuate over time. Include every expense in your analysis and categorize these costs appropriately to track each cost your ministry incurs.

Determine Expected Budget

Whether your children’s ministry hosts fundraising events, receives a budget each year from church leadership, or builds additional funds through the year from the church’s offerings, you likely already have an idea of where the funding you’ll use to cover your program’s expenses will come from.

Determine your expected annual “revenue” and categorize each source of income to balance your budget. This allows you to evaluate the affordability of your expenses and sets the expectation for your financial goals.

Even if your children’s ministry is given a set budget for the year, knowing this number is still important. The amount you have to work with allows you to plan for resources that can truly make an impact, such as Bible study books or other teaching materials.

Plus, evaluating your budget can help you manage restricted funds. According to Double the Donation’s guide to nonprofit accounting, this means that some church members may give with the stipulation that their money be used for a specific project. For example, a member of your congregation may donate and ask that their contribution be used to rebuild the children’s playground. Honoring that restriction allows your ministry to remain accountable to its donors, building trust with them.

Set Your Goals Within the Budget

Equipped with an overview of your ministry’s current finances, it’s time to get specific about how your funds should be allocated for effective financial management. For example, how much should you raise for your budget for the year, or is your budget fixed? How much do you plan to spend on children’s holiday parties?

To structure your financial goals, use the SMART framework:

Specific
Measurable
Achievable
Relevant
Time-bound

Instead of profitability, your ministry’s accounting goals will be to further your mission with the resources you have available. Keep your children’s ministry objectives in mind as you set financial goals and ask your senior leadership to do the same when thinking about your budget.

For example, you might want to focus your teaching more on pointing kids back to the Bible in the coming year. In this case, Wonder Ink’s guide to children’s curriculum recommends choosing a curriculum with core values rooted in biblical truth. Set a budgetary goal according to the price of such a curriculum so that your finances support your ministry’s mission.

Create a Plan

Using the information you gathered about your ministry’s finances and your specific goals, create a concrete and actionable plan for your ministry’s funding. This involves aligning your expenses with your fundraising, ensuring you allocate your funding in a way that achieves your budgetary goals.

For example, let’s say your children’s ministry is expanding to reach fifth graders when it previously only served kids in preschool through fourth grade. You might look for a children’s church curriculum for this new group that is age-appropriate, but your budget must support the expense of this new curriculum in order for your ministry to fulfill its goals.

Use the following tips to develop a financial plan for your budget:

Prioritize your expenses. Determine which expenses are necessary and what new expenses your program should incur to further its mission. Identify any areas where you can reduce costs without taking away from the value you provide to ministry participants.
Measure your income. Will your expected revenue for the year cover your expenses? If not, determine how you’ll raise more for your ministry. If you’re left with a surplus, create a plan for the leftover funding so that nothing is wasted.
Expect the unexpected. Throughout the year, your ministry will encounter unexpected costs. Leave room in your budget for the unexpected, such as broken or lost supplies.

Your budget should account for all of the funding that your ministry receives and uses in a given year. However, you should also plan ahead for your potential future revenue and expenses. If you want to grow your ministry, you’ll need to identify the expenses associated with expansion and determine how you’ll raise the funds to do so.

The budget for your children’s ministry will depend on your program’s unique needs and goals. To ensure you develop and follow an effective budget, consider asking your church’s finance manager for help as needed. Since the person in this role is familiar with your church’s budget, they’ll also be well-equipped to assist you in budgeting specifically for your ministry.

You can also outsource your ministry’s budgeting to a professional accountant. This allows you to leave the finances to accounting experts who have likely dealt with various types of budgets and financial situations. With their help, you can focus on what truly matters most: impacting the kids in your children’s program.

What Is a Nonprofit Treasurer Report? Overview + Example

2023-12-21T12:00:00Z

One of the primary purposes of your nonprofit’s board of directors is to provide oversight for your organization’s core activities. As the lead financial expert on the board, your nonprofit treasurer is in charge of overseeing how your organization manages its finances. This not only allows your organization to maintain compliance with government regulations for nonprofits but also helps you allocate funds more effectively to further your mission.

One of your treasurer’s main responsibilities is compiling and presenting regular reports on your nonprofit’s financial situation. In this guide, we’ll cover the essentials of a nonprofit treasurer report, including:

Let’s dive in with an overview of what this report is and when it is compiled.

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What Is A Nonprofit Treasurer Report?

A nonprofit treasurer report is a summary of an organization’s financial data compiled and presented by the financial leader on its board of directors. Its purpose is to update the board, organizational leaders, and outside stakeholders on the nonprofit’s financial situation over a given period of time.

Developing a regular schedule of treasurer reports helps ensure consistent financial governance at your nonprofit. However, these reports can be compiled on either a monthly or annual basis. Here is a quick breakdown of these two potential timeframes.

Monthly Nonprofit Treasurer Reports

If your nonprofit treasurer compiles a report every month, it will likely be:

Highly detailed, breaking down the past month’s major cash flows and budgeted vs. actual revenue and expenses.
Presented at the monthly meetings of the organization’s board and/or finance committee.
Used to track the nonprofit’s progress as compared to its budget and make short-term decisions about spending and fundraising.

Annual Treasurer Reports

On the other hand, a treasurer report that is developed once a year will be:

Broader in its scope, summarizing the financial highlights of the year.
Presented at the nonprofit’s annual financial planning meeting, discussed at gatherings of major donors and stakeholders, and sometimes quoted from in the organization’s annual report.
Used to communicate the nonprofit’s financial performance over the past year to a wide audience and create long-term strategic plans.

Even if your nonprofit has a monthly reporting schedule, the last treasurer report of the fiscal year should have a broader, year-in-review focus so you have that data for both internal and external communication purposes.

Basics of a Treasurer Report for Nonprofits

While the exact content of each treasurer report will vary depending on your nonprofit’s financial data and reporting schedule, there are a few key elements that each one should include. The report should naturally begin with the organization’s name and the time period that the report covers. The treasurer’s signature should also appear either at the top or bottom of the document to confirm its legitimacy.

The body of all nonprofit treasurer reports should include, at minimum, the following information:

The organization’s cash balance at the beginning of the reporting period. This number should only encompass funds that are currently available for the nonprofit to spend. If it would be beneficial to add updates on the organization’s other assets, investments, or predicted funding, those should be mentioned separately.
The revenue the nonprofit brought in during the reporting period. To simplify the process of comparing the organization’s actual funding totals to the predictions in its budget, this section is often categorized according to revenue sources like individual donations, earned income, grants, and corporate contributions.
The expenses the organization incurred during the reporting period. Nonprofits typically organize expenses based on their function in furthering the organization’s mission. Using the functional expense categories of program, administrative, and fundraising costs in treasurer reports will help maintain consistency across all financial documentation.
The nonprofit’s cash balance at the end of the reporting period. To calculate this, the treasurer will just add the total revenue brought in to the initial cash balance, then subtract the total expenses from that number.

When you put these elements together, your nonprofit treasurer report should look something like this:

In this example, there is also a section at the bottom for notes and highlights. This is where the treasurer can add brief analyses of where the organization is doing well financially, recommendations for improvement, budget vs. actual comparisons, and revenue and expense predictions for the upcoming reporting period.

Resources for Compiling a Nonprofit Treasurer Report

Nonprofit treasurers often collaborate with the financial professionals employed or contracted by their organizations, such as bookkeepers, accountants, and chief financial officers (CFOs). This is because treasurers need to pull from the data these individuals collect and analyze as they prepare their reports.

Some nonprofit accounting resources treasurers may leverage for reporting include:

Transaction records. These are typically stored in the organization’s accounting software and track all expenditures and funds received. Depending on the nonprofit’s technology access policies, the treasurer may have full access to the database, be granted limited user permissions, or simply rely on reports pulled by an accountant. But in any case, these records are essential for the treasurer to accurately outline a given time period’s revenue and expenses in their report.
Bank account statements. After reviewing internal transaction records, the treasurer can compare them to the organization’s bank statements to confirm that all deposits and expenditures happened as they were tracked. If the nonprofit’s accountant has completed a bank reconciliation during the reporting period, having access to those results will make this part of the treasurer’s job easier.
Financial statements. Of the four core nonprofit financial statements, the statement of cash flows will be most useful for monthly treasurer reports as it’s pulled on a monthly basis (rather than annually like the other three) to track spending and fundraising. For annual treasurer reports, the statement of activities will provide the most helpful summary of the organization’s revenue and expenses throughout the year.
The nonprofit’s annual operating budget. This resource serves as a key reference for the notes section of the report, where treasurers often compare budgeted vs. actual revenue and expenses and make recommendations based on that information.

Besides these documents, it’s beneficial to establish open communication between your nonprofit’s treasurer and its bookkeeper, accountant, and CFO. This way, if any questions come up during the creation of the treasurer report, they can get answers from the professionals who manage the organization’s finances day to day. Additionally, treasurers should understand the basics of nonprofit accounting so they can more effectively review the above resources and collaborate with the organization’s financial professionals.

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Nonprofit Treasurer Report Example

If you’re a nonprofit treasurer looking to create your first report or improve your process, here is a template to help you get started:

If you’re a nonprofit leader, make sure your treasurer has access to the best possible financial resources and expertise to help them make the most of this template. Since hiring an in-house bookkeeper, accountant, and CFO to lay the groundwork for treasurer reports can be expensive and time-consuming, many organizations choose to outsource one or more of these roles to a nonprofit-specific accounting firm like Jitasa. Jitasa’s experienced team will ensure your treasurer has accurate financial data to pull from and answer any questions as they come up.

Thorough, accurate treasurer reports can increase financial accountability and transparency both internally and externally at your nonprofit. Not only will your entire team be on the same page about your finances, but the treasurer’s report can also serve as a decision-making resource for outside stakeholders, such as grantmakers and major donor prospects, as they consider whether to support your organization.

For more information about nonprofit financial management and the treasurer’s role in it, check out these resources:

Nonprofit Financial Statements: 4 Essential Reports to Know. Discover the fundamentals of four of the key statements your nonprofit treasurer will reference when creating reports.
How Do Nonprofits Make Money? Making Nonprofits Profitable. Learn more about the revenue section of the treasurer report by exploring the different funding sources available to nonprofits.
What Does a Nonprofit Treasurer Do? The Complete Guide. Dive deeper into the additional responsibilities of a nonprofit treasurer, as well as the qualities to look for in a candidate.

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Comprehensive guide for nonprofit statement of activities.

2023-11-28T12:00:00Z

Nonprofit accounting is unique in many ways. While for-profits focus on making as much income as possible to make more money for themselves, nonprofit organizations focus instead on how they can raise additional revenue to further their missions. All of a nonprofit’s funds should be reinvested into the organization and its mission.

For-profit accounting departments have a standard set of reports and statements they run to analyze their finances. Nonprofits have essentially parallel reports, but because their accounting is different, the reports differ slightly as well.

One of these central reports run by nonprofit accountants is the statement of activities, sometimes known as an income statement. In this guide, we’ll walk through the basics of this accounting statement, covering the following topics:

Your organization works hard to raise funds and to use those funds to further your mission. Ensuring your reports are in check will help your nonprofit make the most of your finances moving forward. Let’s dive in to learn more about the specifics of your nonprofit statement of activities.

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What is the nonprofit statement of activities?

The nonprofit statement of activities (or income statement) is a financial report that shows your organization’s revenue and expenses over time, ultimately allowing your organization to analyze your net assets. It’s also used to categorize your nonprofit’s revenue and expenses.

The purpose of the nonprofit statement of activities is to provide detailed information about the organization’s transactions and how those activities help further the organization’s mission through various initiatives and programs.

When your statement of activities is complete, it will look something like this:

As you can see, the report is divided into the revenue and expenses along the vertical axis. Horizontally, the revenue and expenses are further categorized by restrictions placed on the funds. At the bottom of the report, there’s a section dedicated to the organization’s net assets.

The numbers for your statement of activities are pulled from your organization’s chart of accounts, and the net assets are calculated using those numbers after they’re put into the income statement itself. Therefore, you need to make sure that your accounting system is well organized from start to finish, or else you may have errors in your statement.

While for-profits need to compile a profit and loss statement along with their income statement, nonprofits can skip that step because they’re not operating for profit. The statement of activities is simply to show how the organization is using its revenue and expenses to support its mission.

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Is there a difference between a statement of activities and an income statement?

In the broadest sense, the answer is no. The nonprofit statement of activities and the income statement are two different terms that refer to the same report.

The only difference between these terms is that “income statement” is more commonly used by for-profit organizations, while “statement of activities” is more popular among nonprofits. Many nonprofits find that the word “activities” better reflects their focus on mission-driven work and the fact that they bring in revenue from a variety of sources—not just earned income.

The term “statement of activities” is also more in line with the names of the other three financial statements nonprofits compile annually than “income statement” is. These reports include the:

Statement of financial position. Also called a balance sheet, this report breaks down your organization’s assets and liabilities to provide a snapshot of its financial health.
Statement of cash flows. This statement shows how cash moves in and out of your organization through operating, investing, and financing activities to help you stay on track with your spending and fundraising.
Statement of functional expenses. This report organizes your nonprofit’s expenses into the categories of program, administrative, and fundraising costs so you can see how your expenditures are being used to further your mission.

Each of these four statements—including the statement of activities—summarizes your organization’s data differently, providing unique, applicable insight you can use to improve your financial management strategy.

Why the nonprofit statement of activities is important

Nonprofits must compile an income statement every year to be in accordance with the Generally Accepted Accounting Principles (GAAP). However, it’s more than just a requirement. The statement of activities can be incredibly helpful when your nonprofit is analyzing its finances and trying to determine where those hard-earned fundraising dollars go.

When you examine your nonprofit statement of activities, it should be clear that the line items in the statement match up with those in your organization’s budget. This allows your organization to make sure you’re on track with your budgeted regular expenses.

By analyzing your nonprofit’s statement of activities, your organization can determine if the expenditures currently allocated for each of your programs are sustainable for the long run. You can use the information in this statement to better understand if now is the right time to cut expenses, provide membership discounts, or secure additional funding through grants or sponsorships.

The cherry on top is that an accurate income statement can help your organization complete your annual tax return. You’ll need to record information about your organization’s expenses and revenue on your tax forms. Between your statement of activities and statement of functional expenses, you’ll be all set to file your Form 990 accurately each and every year.

Structure of the nonprofit statement of activities

Your nonprofit statement of activities is split into several different sections. Vertically, it’s split into revenue, expenses, and net assets. Meanwhile, horizontally, it’s split into your organization’s unrestricted and restricted revenue.

Revenue

Nonprofits receive revenue from a number of different sources, all of which are essential to helping the organization pursue its mission. The majority of this revenue will be recorded as gross in your statement of activities. However, your investment returns should be recorded as net.

Some of the revenue sources that need to be recorded in the nonprofit statement of activities include the following:

Cash contributions. When nonprofits raise money from individual donors, major supporters, and corporate partners, these are all considered cash contributions.
Donated materials. In-kind donations are often made to nonprofit organizations in support of their missions. While these may be more complex to record in your financial systems, it’s still important to recognize these gifts in your financial statements.
Non-cash contributions. When individuals transfer assets like land and stocks to your organization, these contributions are still worth money, but don’t quite fall under the category of “cash.”
Grants. Whether you’re receiving money from the federal and state governments or a private foundation, you need to record your grant revenue in your statement of activities.
Program fees. Many organizations receive a large portion of their funding as fees charged for their services. For instance, associations require members to pay fees to receive the benefits offered through the organization.
Investment returns. Nonprofits can invest their funds in order to earn interest and multiply their revenue, just as individuals can. However, any funding brought in through this method needs to be reported on the income statement.

Finally, one of the categories often listed as revenue on your statement of activities is your net assets released from restriction. These are the funds that you are now able to use as unrestricted revenue, although they may have been restricted in the past. Because restrictions on revenue are a key element to be recorded in your statement of activities, let’s explore them a bit further.

Revenue With Restrictions vs. Unrestricted Revenue

Sometimes, revenue earned by nonprofit organizations has restrictions placed on it by the revenue source. For example, granting organizations may require the funds provided to be dedicated toward a specific service or purpose.

Restricted revenue must be used for a specific intended purpose. Meanwhile, unrestricted revenue can be allocated toward projects, operations, and other expenses as chosen by the nonprofit itself.

Also included in your restricted revenue is temporarily restricted revenue. These funds are restricted during a certain period of time. After that time elapses, they can be released from restriction and used as the nonprofit sees fit.

The nonprofit statement of activities separates revenue with and without restrictions so that organizations can see the flexibility in their funding in addition to the sheer amount of it.

Expenses

The expenses your organization incurs should all support your mission in some way, whether that’s by funding daily nonprofit operations or a specific project relevant to your mission’s purpose.

You’re required by FASB 117 to report your expenses by functional classification, meaning you’ll need to at least split up your expenses by administrative, fundraising, and program costs.

Some of the operational expenses that your organization will incur include the following:

Salary and wages
Insurance
Rent and utilities
Legal services
Accounting services
Supplies and equipment
Retirement compensation
Fundraising

Meanwhile, program expenses vary drastically between nonprofits. For example, an animal shelter nonprofit organization may incur program expenses such as:

Medical supplies for animals
Leashes, collars, toys, and crates
Food for the animals
Training expenses

Generally, nonprofits try to limit their operating expenses as much as possible to lower their overhead. It’s important to find the balance between reducing overhead to fund your mission and ensuring you dedicate enough funding to your operating activities to continue growing and expanding your organization.

Net Assets

The net assets featured on your nonprofit statement of activities are simply your expenses subtracted from your revenue. This calculation shows the equity of your nonprofit organization and whether you have the revenue to cover expenses, creating a sustainable organization.

Be sure to pay attention to the net assets available to your organization under the “without restrictions” column of your statement of activities when analyzing the document for sustainability. If you were to simply subtract the total expenses from total revenue without taking restrictions into account, you might have a false sense of security.

For instance, if your nonprofit has $55,000 in expenses and $65,000 in total revenue, it would appear that your net assets are positive, at $10,000. However, if $15,000 of your revenue is restricted, you’re actually $5,000 in the red and should cut expenses to maintain a sustainable organization.

Nonprofit statement of activities template

Every nonprofit’s income statement will look a little bit different. If you haven’t seen one for your organization yet or want to try your hand at compiling one, use our template to get started.

Putting together this important resource can be challenging—not to mention checking that the numbers are correct, interpreting your income statement, and coming up with the next actions that your organization should take based on the insights you glean.

To make this process easier, we recommend that your organization partner with a nonprofit accountant like the experts at Jitasa. Our team will meet you where you are in compiling your statement of activities, analyze your financial data, and make tailored recommendations to improve your revenue and expense allocation going forward.

Wrapping up

The nonprofit statement of activities is one of the core accounting documents that your organization creates. It allows you to see how your organization uses its funding to advance its mission and allocate resources. In addition, your income statement can be used to determine how sustainable your organization’s finances are so you can make informed decisions for the future.

If you’re interested in learning more about nonprofit accounting, the statements that you compile, and the conclusions that can be drawn from those statements, check out the following resources:

How Do Nonprofits Make Money? Making Nonprofits Profitable. Explore the different revenue sources that may be included in your nonprofit’s income statement.
Restricted Funds: What Are They? And Why Do They Matter? Dive deeper into the important designation of restricted vs. unrestricted funds that appears on the statement of activities.
Working With a Nonprofit Accountant: What to Expect. Discover what it’s like to work with a nonprofit accountant to compile your statement of activities and interpret your organization’s financial data.

Contact Jitasa’s team of nonprofit accountants to compile your statement of activities.

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Procure With Purpose: 5 Tips to Find Nonprofit Auction Items

2023-10-19T12:00:00Z

When your nonprofit plans an auction fundraising event, you’ll quickly find that there are many decisions involved in the process. You need to choose whether your auction will be live or silent, held in-person or virtually, and most importantly, what items you’ll sell at the event.

Effective auction item procurement involves finding a wide variety of high-value prizes while ensuring you can produce a positive return on investment (ROI). Plus, your items need to cater to your nonprofit’s specific supporter base—after all, your auction’s fundraising success depends on whether participants make purchases!

To help you balance all of these factors, this guide will walk through the following five tips for procuring nonprofit auction items:

The auction item procurement process might seem daunting at first, but remember that careful planning often leads to more profitable fundraisers. Start early, do your research, and play to your nonprofit’s strengths whenever possible. Let’s dive in!

1. Hold a Strategy Session

Before you begin your search for auction items, gather your event planning team and determine the strategic approach you’ll take to procurement. Make sure everyone is on the same page about the answers to the following questions:

What is our event fundraising goal?
Who is our target audience for this auction?
How many items do we need to procure?
What types of items are at the top of our auction wishlist?
What existing connections can we leverage in the procurement process?
What new connections do we want to form?

Once you’ve outlined your strategy, create a full auction item wishlist and assign a specific team member to look for each prize. Winspire’s guide to auction item procurement recommends providing your team with procurement packets that include the wishlist, an in-kind donation form, and a letter explaining the event’s purpose and how to contribute items. This helps everyone stay organized and make a good impression on prospective auction item providers.

2. Choose Items That Sell Well at Auction

Although you could procure practically any type of item to sell at your auction, there are certain categories that tend to be more popular to purchase in that setting. Consider adding the following kinds of items to your wishlist:

Themed gift baskets. Bundling multiple related items to sell as a single unit increases their total value. Plus, they’ll be even more appealing if you package each basket attractively and give it a catchy name.
Unique goods. Auctions are often a good place to buy items that aren’t readily available in retail stores. These items can also spotlight your community—for example, you could sell paintings by a local artist or signed memorabilia from a sports team in your area.
Exclusive tickets. Some auction participants will likely prefer winning experiences over buying physical goods. Look for tickets to popular concerts, plays, or athletic events that might be difficult for supporters to secure on their own.
Travel-related items. Although vacations are often the most challenging auction items to procure, they also sell extremely well and bring in a lot of revenue.

To determine which of these auction items your supporters would most like to win, you could send a survey to your target audience about their preferences and shape your wishlist around the results.

3. Keep Costs as Low as Possible

In addition to finding unique goods and experiences, another reason many people enjoy auctions is because they can often buy these items at a discount. When creating your event budget, keep in mind that you’ll likely sell many items below their fair market value. So, to maximize your ROI, you need to minimize your upfront costs.

Some ways to procure high-quality auction items for little to no cost include:

Taking advantage of nonprofit discounts offered by some event venues.
Seeking out dedicated auction item providers — this method can be especially useful for procuring travel packages.
Soliciting in-kind donations from individual donors or businesses.

No matter which methods you use, it can be helpful to work out an agreement with the provider in case a prize doesn’t sell. Ask them whether you can save the item for your next fundraising event or return it to reduce the risk of your organization losing money on your auction.

4. Establish a Gift Acceptance Policy

The one disadvantage of soliciting in-kind donations of auction items rather than purchasing them is that you have slightly less control over what you receive. This can lead to situations where a well-meaning donor contributes an item that would be extremely difficult to sell or could even be dangerous to offer at your auction, such as cosmetics with broken safety seals or live animals.

To avoid accepting a donation that will just go to waste or potentially coming off as ungrateful by rejecting a gift, develop a gift acceptance policy. One of the core guidelines to include in your nonprofit’s financial management policy handbook, your gift acceptance policy should outline the types of donations—both monetary and in-kind—that your organization can and can’t accept, as well as the procedure for accepting each one.

If your nonprofit has to reject any in-kind donations of auction items, having an official policy to back up your decision can lessen the blow of your “thanks, but no thanks.” Plus, by publicizing your gift acceptance policy in the lead-up to your event, you may encourage more supporters to donate prizes!

5. Acknowledge Item Providers During the Event

Finally, make sure to publicly recognize the individuals and organizations who provided your auction items. On each item’s silent auction bid sheet or under its description in your live auction catalog, include a short blurb that reads something like, “This item was contributed by [donor/business name].” This quick acknowledgement helps thank everyone who made your auction possible, in addition to the individual thank-you notes you’ll send after the event.

If an item was contributed by a corporate sponsor, make sure to add the business’s name and logo to your other auction marketing materials and event signage. Getting Attention’s guide to securing corporate sponsorships explains that the most effective partnerships between businesses and nonprofits are mutually beneficial. Your organization benefits from receiving a free auction item, and they benefit from the free publicity you provide in return.

By acknowledging item providers in these ways, you can cultivate long-term connections that you can leverage the next time you need to procure items for a fundraising auction, making the process even easier for your nonprofit.

Although procuring auction items is an involved process, the first time your nonprofit undertakes it will almost certainly be the hardest. As you continue to host auction fundraising events, your team will gain more insight into which items are most popular with your organization’s unique supporter base and be able to hone your strategy accordingly. Plus, you’ll form more partnerships and discover more nonprofit discounts that can help maximize your ROI.

Nonprofit Financial Statements: 4 Essential Reports to Know

2023-10-04T12:00:00Z

If your nonprofit has a solid accounting system in place, you likely collect a lot of financial data. However, this data is only useful in helping your organization improve its operations if you can effectively analyze it and draw applicable conclusions.

This is where financial statements come into play. Each of the four core reports that nonprofits compile annually summarizes your financial data in a different way, providing unique insights into your organization’s current situation.

In addition to being a helpful management tool, your financial statements are also essential to maintaining compliance with reporting requirements for tax-exempt organizations. They help hold your nonprofit accountable for its use of resources, ensuring you can maintain your 501(c)(3) status.

In this guide, we’ll walk through the basics of the nonprofit financial statements, including:

There are some parallels between nonprofits’ financial statements and those of for-profit organizations—systematic reporting is an important part of complying with the Generally Accepted Accounting Principles (GAAP). However, your organization’s reports will also look different in certain ways because nonprofits are subject to requirements that businesses aren’t. If you need help creating your financial statements, reach out to an accountant who has experience working with nonprofits to ensure you get access to specialized expertise.

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Why are financial statements important for nonprofits?

While the most obvious benefit of compiling nonprofit financial statements is complying with government regulations and GAAP standards, these reports also provide an overview of your organization’s financial health. With this knowledge, you can:

Make data-driven decisions in the short term. These decisions can range from how your nonprofit should generate revenue during the coming year to when to launch certain projects and programs in order to allocate resources most effectively.
Develop a long-term strategic plan for your organization. Your financial situation is a major factor in determining if and how much your nonprofit can grow, so it should influence your overarching goals and the way you conduct multi-year initiatives.
Improve your risk management strategy. Having a detailed but understandable summary of your nonprofit’s finances can help you identify potential financial risks and develop effective methods to prevent or mitigate them.
Be more transparent with supporters. By publicizing your financial statements in your nonprofit’s annual report, you can make clear to donors that you are using their contributions to further your mission. This helps them to be more confident in your organization and therefore more likely to continue supporting you over time.

At its core, nonprofit accounting is about accountability. Financial statements function as an organized system for reporting on your nonprofit’s resources, so your organization is regularly held accountable to itself, its supporters, and its community. Consider developing a financial reporting policy to provide an official reference for how your organization will create and distribute each of the four major statements in a way that maximizes transparency.

Nonprofit Financial Reporting Policy Template

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The 4 Major Nonprofit Financial Statements

Although there are countless ways to organize your nonprofit’s financial information, most organizations compile four main types of reports. Since each of these core financial statements provides a different way to visualize the data you’ve collected, you can glean unique insights about your organization’s financial health from all of them. Let’s walk through the structure and purpose of each of these four reports in more detail.

1. Statement of Activities

The statement of activities is the nonprofit parallel to the for-profit income statement. Its purpose is to provide detailed information about your organization’s transactions, showing how your expense allocation and revenue generation further your mission.

This statement is divided into three main sections:

Revenue. This section is further broken down into your nonprofit’s various funding sources, such as individual donations (both financial and in-kind), grants, earned income such as membership dues or fees charged for services provided, and investment returns.
Expenses. Rather than organizing costs based on the nature of the payment made, nonprofits typically break down the expense section of this report based on the function of each cost as it relates to furthering their mission. Functional expenses will be covered in more detail later, but the three categories to know are program, administrative, and fundraising costs.
Net Assets. To calculate your organization’s net assets, simply subtract your total expenses from your total revenue. Most nonprofits also include their net assets at the beginning of the fiscal year in a separate row so they can compare that number to their change in net assets during the year.

When you combine these sections into a single report, your nonprofit statement of activities should look something like this:

Not only is the revenue section broken down into categories by funding source in this example, but a distinction is also made between unrestricted and restricted funds. Your nonprofit is required to use restricted funds for a specific purpose, usually based on an agreement made with the major donor or grantmaker who provided the funding. Meanwhile, unrestricted funds can be allocated toward any type of expense. This distinction allows you to understand how flexible your nonprofit’s funding is in addition to how much you have.

Additionally, the line items in your organization’s statement of activities should match those in the operating budget you created at the beginning of the fiscal year. By comparing these two documents, you can evaluate your planned versus actual expenses and revenue generation. Then, you can reference your statement of activities to make more accurate predictions when you develop a new operating budget for the coming year.

2. Statement of Financial Position

The nonprofit statement of financial position is also known as a balance sheet, which is what for-profit organizations usually call their equivalent statement. It provides a snapshot of your organization’s financial health, meaning it plays an especially important role in nonprofit financial audits.

Similar to the statement of activities, the balance sheet also has three main sections:

Assets. This section describes everything your nonprofit owns, such as cash, accounts receivable, prepaid expenses, property, and equipment. From top to bottom, these categories are listed in order of liquidity—i.e., how easy they are to convert into cash. Cash comes first because it’s already liquid, and property and equipment come last because your organization would have to sell them for them to become liquid.
Liabilities. This term refers to everything your nonprofit owes, including accounts payable, debt, lease obligations, and any other deferred payments. These are usually organized by due date. For example, invoices from vendors that you’ll repay within the year would be listed above larger debts that will take multiple years to pay back.
Net Assets. Subtract your total liabilities from your total assets to calculate your net assets for your statement of financial position. Make sure to separate restricted net assets from unrestricted ones on this report as well.

With all of the different assets and liabilities your nonprofit might have, your statement of financial position can quickly become complex. However, to give you an idea of what this report could look like, here is a basic example:

Note that this example contains information from two different years: the current fiscal year and the previous year. This allows you to compare your assets and liabilities year over year to see whether your financial health is improving over time.

This statement can also help your nonprofit plan for growth. If you want to expand your organization, you’ll need to have enough cash on hand to cover your usual operating costs and take on additional expenses. The data in your balance sheet can help you figure out the total amount of cash and other liquid assets you have available so you can determine whether your nonprofit has enough financial flexibility to grow.

3. Statement of Cash Flows

Both for-profit and nonprofit organizations use the term “statement of cash flows,” and the report it describes looks fairly similar between the two. This statement shows how cash moves in and out of your organization on a regular basis, so it’s usually pulled monthly, rather than annually like the other three core statements.

This report shows your organization’s cash flows as they relate to:

Operating activities. This section encompasses the revenue and expenses associated with most of your nonprofit’s day-to-day activities, including fundraising, contracting, and employee salary payments.
Investing activities. This information is related to your nonprofit’s long-term assets. For example, if you purchase new office equipment or open a brokerage account that earns interest, those would fall under investing activities.
Financing activities. This section covers your nonprofit’s long-term liabilities, such as the borrowing and repayment of debts and the establishment of endowment funds.

On a basic level, a nonprofit statement of cash flows looks like this:

In addition to the net cash flows from each of the three types of activities, this example includes a summary section comparing the organization’s increase in cash during the month to the amount they already had on hand. This information aligns with the main purpose of a cash flow statement: monitoring your organization’s spending and fundraising from month to month. When you know this information, you can more effectively stay on track with your budget throughout the year and ensure you don’t accidentally overdraft any of your nonprofit’s accounts.

4. Statement of Functional Expenses

The last of the four essential financial statements, the statement of functional expenses, is unique to nonprofits. In most accounting systems, expenditures are typically recorded as natural expenses, which are based on the nature of the payment. Most for-profit organizations stop there, but nonprofits have to go one step further and reorganize their costs based on their function in furthering the organization’s mission, which are known as functional expenses.

The statement of functional expenses is a matrix-style report with natural expense categories listed on the horizontal axis and functional expense categories on the vertical axis. While the natural expenses included in this statement will vary by organization, the three standard categories of functional expenses are:

Program costs. These are also unique to each nonprofit based on its mission, but the term refers to any directly cause-related expenses. For example, an environmental conservation organization would include the costs of hosting educational workshops on natural resource protection and coordinating beach cleanup days in their program expenses.
Administrative costs. These expenses are necessary to keep your organization running day to day. They include staff compensation, rent, utilities, and office supplies, among other expenditures.
Fundraising costs. Bringing in revenue for your nonprofit usually comes with upfront expenses. Spending on event planning, marketing, software to run your campaigns, and fundraising consultant fees would all fall into this category.

Keep in mind that some natural expenses might need to be divided across multiple functional expense categories, as they are in this example:

While the term “overhead expenses” doesn’t appear on this statement, it’s often referenced in the context of functional expenses because it refers to your nonprofit’s administrative and fundraising costs combined. You may have heard of the 65/35 rule, which states that nonprofits should put at least 65% of their funding toward program expenses and spend no more than 35% on overhead:

In reality, this breakdown will look different for every nonprofit. It’s best to treat this “rule” as a guideline—when reviewing your statement of functional expenses, look for areas where you could reduce overhead spending and put more funding toward your programs in the future.

In addition to providing detailed insights into your nonprofit’s spending over the past year, the main purpose of the statement of functional expenses is to help you file your organization’s annual tax return. Although you only need to provide a complete functional expense report if your nonprofit files the full Form 990, the other three variations (Form 990-N, Form 990-EZ, and Form 990-PF) ask some questions about the costs your nonprofit has incurred. Having a detailed report of your expenditures will make it easier to fill out these sections.

How to Create Financial Statements for Your Nonprofit

Because all of the information that goes into the four major nonprofit financial statements should already be stored in your accounting software, there are two main ways to compile these reports. First, you could have someone at your organization pull the data you need and format it using one of the many financial statement templates available online. However, this method takes a lot of time and effort, especially when it comes to ensuring the templates are structured in a way that aligns with your nonprofit’s financial situation.

The best way to create accurate, useful financial statements for your organization is to work with a nonprofit accountant. Since many nonprofits don’t have a full-time accountant on staff, consider outsourcing your accounting needs to a nonprofit-specific firm like Jitasa.

The experienced team at Jitasa has compiled, distributed, and analyzed financial statements for organizations of all sizes. Plus, Jitasa works exclusively with nonprofits, giving you access to the expertise necessary to correctly craft these reports and glean applicable insights from them.

Proper reporting is a key aspect of effective nonprofit financial management. Compiling the four major financial statements for your organization benefits your internal operations, external compliance, and overall level of accountability from year to year. As you begin creating your statement of activities, balance sheet, cash flow statement, and functional expense report, don't hesitate to reach out for expert assistance to ensure accuracy and help you apply the conclusions you draw to your organization's operations.

To learn more about how your financial statements fit into the larger picture of nonprofit accounting, check out these resources:

Fund Accounting 101: The Basics and Best Practices. Explore the nonprofit-specific system of fund accounting that forms the backbone of the four financial statements.
Establishing a Nonprofit Chart of Accounts [+ Template]. Discover the main resource for tracking the data that goes into your nonprofit’s reports: your chart of accounts.
Working With a Nonprofit Accountant: What to Expect. Dive deeper into the various responsibilities of a nonprofit accountant and learn more about what it’s like to partner with one.

Work with the accounting experts at Jitasa to compile and analyze your nonprofit financial statements.

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Three basic steps to guide nonprofit fundraising efforts.

2023-09-13T12:00:00Z

Just last year alone, Americans contributed $499.33 billion to nonprofits. It’s because of this generosity that many organizations can continue operating and making a difference in their communities.

To secure enough revenue for their organizations’ missions, many nonprofit professionals are on the constant lookout for ways to improve their fundraising efforts. One way to build a foundation for success is to define clear, thoughtful goals in advance. In this guide, we’ll explore three basic steps for setting effective fundraising goals:

Whether your nonprofit is preparing for its annual fundraiser or planning to raise more matching gifts, having actionable goals can empower your team to maximize results. Let’s get started.

1. Review Your Past Results

Before you begin your next fundraising campaign, use your past experiences to inform your approach. For instance, take a look at your previous year’s victories and challenges. Ask yourself the following questions to evaluate your results:

What was our fundraising goal? Did we exceed, meet, or fall short of it?
How did we promote our fundraising efforts?
How did we engage donors?
What were some successful strategies we applied?
What were some of the challenges we faced?
Did we gather any donor feedback? If so, what did they say?

By reflecting on these questions, you can determine what areas of strength you should lean into and where you need to adjust your strategy. Consider looking beyond just the past year to understand the bigger picture, and be sure to continue collecting accurate data that you can learn from in the future.

2. Conduct a SWOT Analysis

After examining your past results, conduct a formal SWOT analysis to refine your goals. Getting Attention’s rundown on nonprofit marketing outlines the key areas you’ll inspect during this analysis:

Strengths. Take stock of internal factors that allow your nonprofit to stand out from its competitors in a positive way. For instance, you might have a strong monthly giving program or a particularly high donor retention rate. Acknowledging your organization’s strong points can be a powerful way to avoid burnout and boost motivation among staff members.
Weaknesses. Identify any internal factors that may impede your nonprofit in its fundraising efforts. This could be anything from having a limited number of staff members and resources to not having enough reliable revenue streams. It’s important to recognize that you can address these weaknesses to improve your results moving forward.
Opportunities. These are external trends or changes in the nonprofit landscape that may give your organization an edge over its competitors. For example, there may be new technological advancements that can improve fundraising efficiency or promising grants your organization can pursue to increase its funds. Having these opportunities laid out allows your team to better understand its priorities down the line.
Threats. Make a list of external factors that could present hurdles to your nonprofit in the near future. Some common threats may include recent government legislation that hinders your ability to raise funds or an overall lack of awareness surrounding your cause within the community. Once you’ve identified these, you can start brainstorming how to leverage your strengths to reduce these threats.

At the conclusion of your SWOT analysis, you should have a clearer idea of how your nonprofit is uniquely positioned to reach its supporters and raise revenue for its cause, along with what you should leverage and what you should be aware of as you proceed.

3. Set SMART Goals

Now that you’ve prepared your foundation, use the SMART framework to generate goals that will inspire your staff members and maximize your fundraising results. For instance, let’s say that your nonprofit is hoping to use the Google Ad Grant to secure more donations for its cause. For this example, your SMART goal might look something like this:

Specific. Define the monetary amount you’re trying to raise from donors’ gifts. Sticking with our example, you might decide that your nonprofit will aim to raise $50,000 by using the Google Ad Grant to reach new donors online. According to NXUnite’s donor acquisition guide, this is a highly viable use of the grant’s $10,000 a month in ad funding.
Measurable. How will your nonprofit know whether it’s on track to reach its fundraising goal? Identify metrics, such as your landing page conversion rate, that will allow your team to assess its progress along the way and make adjustments if necessary.
Attainable. While it’s important to set challenging goals for your nonprofit, they should be realistic enough so your team can actually achieve them. Continuing with our example, consider how much staff time and resources you have to effectively manage your Google Ad Grant account and adjust your fundraising goal accordingly.
Relevant. Take the long view with your fundraising goal by considering how it will further your nonprofit’s broader goals and mission. Your team should be able to draw a clear line between your fundraising efforts and your organization’s overarching success. For instance, you might agree that investing energy into the Google Ad Grant will increase your reach and build a strong donor base that you can rely on for years to come.
Time-based. Include a clear deadline in your fundraising goal to propel your efforts forward and encourage your team to act with urgency toward achieving it. With this in mind, your fundraising with the Google Ad Grant goal might look something like this: “Raise $50,000 using the Google Ad Grant to reach new donors online by Christmas of this year.”

There are a variety of SMART fundraising goals you can set for your nonprofit, from retaining a certain percentage of donors to leveraging more social media fundraising opportunities. Just be sure to stick to a reasonable number of goals that will actively benefit your fundraising efforts.

With clear, actionable goals, you’ll be well on your way to fundraising success. Remember to take the time to celebrate and thank everyone, from staff members to donors, once you’ve finished your campaign. Consider sending out a survey to supporters as well. Their direct feedback can produce important insights to inform your future goals. This ensures that you can maintain positive momentum for your next fundraising initiatives.

Learn more about how nonprofits make and allocate money.

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Working With a Nonprofit Accountant: What to Expect

2023-06-27T12:00:00Z

Your nonprofit was founded to make a positive, lasting impact on your community—not to crunch numbers and file paperwork!

However, financial number crunching and paperwork filing is vital for your nonprofit to fund its mission and grow its impact. Because nonprofit organizations’ finances differ greatly from those of for-profit companies, it’s important to have access to a professional who can help interpret data, provide recommendations, and create a strategy that aligns with your organization’s unique financial position—a nonprofit accountant.

In this guide, we’ll cover the basics of what a nonprofit accountant does and what to expect if your organization works with one. We’ll answer the following common questions:

Nonprofit accounting is a unique beast to tackle, so it’s most beneficial to hire an accountant that not only has experience with organizations like yours but specializes in working with them. Let’s get started with an overview of what nonprofit accountants do.

1. What does an accountant do for a nonprofit?

Nonprofit accountants help organizations ensure financial health and stability, analyze financial data, and make decisions based on the nonprofit’s unique financial position.

Some of a nonprofit accountant’s key responsibilities include:

Reviewing all of your organization’s accounts. One of a nonprofit accountant’s most essential resources is the chart of accounts, which serves as a guide to your organization’s financial data. They’ll make sure all of the information in your nonprofit’s various accounts is correct and on track to help you reach your goals.
Balancing transactions. For double-entry accounting systems, nonprofit accountants will record both debit and credit records and make sure both sides of the transaction match. Your accountant will also compare your organization’s ledgers to your bank statements to ensure your records are correct.
Compiling financial statements. Nonprofits have a standard set of reports they compile each year to analyze their finances. A nonprofit accountant will not only pull all of the data needed to create your income statement, balance sheet, and cash flow statement, but also review those reports to draw conclusions about your organization’s financial health.
Preparing for audits. If your nonprofit conducts independent financial audits, an accountant will help you compile all of the necessary documentation and ensure everything in your transaction history is correct and ready to be audited.
Filing tax forms. A nonprofit accountant will collect the necessary information for your annual tax return and file it for you, as well as completing the various tax forms you’re required to issue to your organization’s employees.
Analyzing operating budgets. Your accountant can help you understand where there are differences between your organization’s budgeted and actual income and expenses each year, and they’ll work with you to create new budgets for each fiscal year.
Maintaining compliance with GAAP standards. In order to maintain transparency and accountability in financial reporting, your accountant will review your reports and accounting practices to ensure they adhere to the Generally Accepted Accounting Principles (GAAP).

All of these tasks benefit from an expert’s opinion to make sure they’re completed at the highest quality and lead your nonprofit in the right direction. You might think of your nonprofit accountant like a financial detective, since they conduct the financial data analysis that’s necessary for effective nonprofit decision-making.

The Beginner's Guide to Nonprofit Accounting

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2. How is nonprofit accounting different from bookkeeping?

Both accounting and bookkeeping are essential for your nonprofit’s financial health and ability to grow. The two are separate but related concepts that require different levels of expertise to do well.

To help you understand the roles you’re filling when you bring on a bookkeeper or an accountant, let’s walk through the differences between the two.

Nonprofit Bookkeeper

Nonprofit bookkeepers help your organization track and manage its day-to-day financial activities. Their duties often include tasks such as:

Entering basic financial data into spreadsheets or bookkeeping software.
Writing checks and depositing funds.
Recording single-entry transactions like bills paid.
Allocating expenses for different programs, fundraisers, and administrative needs.
Processing payroll (if this function doesn’t live with a separate HR department.)

Although specialized education and certifications can help bookkeepers do their jobs more effectively, these aren’t required. Basically, bookkeeping lays the foundation for the accounting processes that follow.

Nonprofit Accountant

Nonprofit accountants interpret, classify, and summarize financial data. Through this process, they ensure all information is correct, presented effectively, allocated efficiently, categorized logically, and accurately portrays financial expectations.

Accountants generally have at least a bachelor’s degree in accounting or a related field, and many also obtain master’s degrees. When your nonprofit hires an accountant, make sure the individual has their CPA (certified public accountant) certification, which is given to accountants who take a specialized test that proves their knowledge in the field.

This specialized knowledge helps accountants fulfill all of the duties listed in the previous section. They can help your nonprofit create strategies to boost your financial standing and complete projects in a fiscally responsible way.

3. When should I hire a nonprofit accountant?

Nonprofits often ask the question, “How big does my organization have to get to warrant the expense of an accountant?” The answer is that nonprofits of all sizes need and can benefit from working with an accountant, especially when planning for future growth!

If your nonprofit is on the fence, our advice is to go ahead and seek out an accountant. However, there are some specific indicators that illustrate a nonprofit’s need for one, including:

Wanting to ensure financial transparency. Because nonprofits by definition don’t work to earn a profit, the main purpose of nonprofit accounting is accountability. Being transparent with donors and stakeholders about how your organization is handling the funds they’ve generously provided helps retain their support long-term. Plus, a certain level of accountability is required for your nonprofit to comply with legal requirements.
Filing annual tax returns. Completing the IRS Form 990 each year is critical to your organization’s ability to maintain its tax-exempt status and avoid fines. An accountant will advise you on which type of the Form 990 to file and help you complete it by the deadline. More than that, they’ll ensure your nonprofit fills out the form correctly to prevent sensitive data like social security numbers from becoming publicly available.
Making decisions about major projects and campaigns. Large projects and the fundraising campaigns to support those projects require financial data analysis to make sure your goals and timeline are feasible. Between advice from an accountant and a fundraising consultant, your nonprofit will know if you have the fundraising and financial capabilities for a major project before putting effort and resources into the campaign.

While accountants allow for organizational growth, your collaboration with your accountant will likely look different as your nonprofit expands. For example, an organization that’s just starting out may need extra help filing their first tax return, while an established nonprofit might benefit from more advice on maintaining transparency as their financial situation becomes more complex.

4. What are the types of nonprofit accounting services?

Another way your organization’s relationship with your accountant might change over time is through the type of accounting services you access. Each type has its pros and cons, so weigh your options and choose the solution that will best fulfill your specific needs. Let’s examine each of the three types in more detail.

Hiring an Accountant In-House

Hiring in-house tends to be a good option for enterprise-level, multi-chapter organizations. Your accountant’s dedication and focus allows them to easily manage multiple fundraising campaigns, solve banking or staffing dilemmas, and deal with the additional complexities of large nonprofits’ financial situations.

If your nonprofit decides to hire an accountant in-house, make sure to:

Ask about the accountant’s background. Ensure they have experience working with nonprofits of your size and scale, as well as expertise in fund accounting.
Hire someone reliable. One of the biggest advantages of an in-house accountant is that they are immediately accessible as problems come up, so the person you hire should be able to provide this benefit.
Align passions for your mission. Like any other nonprofit staff member, your accountant will be more motivated to work hard for your organization if they care about the specific impact you’re making in the community.

Despite the benefits of hiring an in-house accountant, it’s a major investment for your nonprofit to take on. Recruiting and training a new staff member is expensive, and your organization would be liable for any mistakes that may occur because this person is on your payroll.

In-Kind Donations of Accounting Services

Nonprofits that are just starting out, especially those in their first year of operations, may not yet be able to invest in a full-scale nonprofit accounting solution. Additionally, small nonprofits often don’t have the manpower required to do effective research about accounting providers and personnel who would fit in well with the organization.

Instead, brand-new nonprofits might seek out relationships with accountants in their area so they can ask for the in-kind donation of nonprofit accounting services. Accepting in-kind donations means you don’t need to pay for the services, which can be a big help as nonprofits start figuring out their accounting systems.

However, donated accounting services usually aren’t sustainable. Because the accountant isn’t getting paid for their work, other responsibilities and paid projects can easily take precedence and eventually end their relationship with your organization. As your nonprofit grows, you’ll need to look into other options to meet your accounting needs.

Outsourced Nonprofit Accountants

For organizations that aren’t among the very largest or very smallest nonprofits, the best option is often to outsource accounting services to a team of experienced professionals. There are a wide variety of benefits to outsourcing, including:

Assured expertise and motivation. Because they have experience working with a range of nonprofits, outsourced accountants are experts in their fields. If your organization finds itself in a particular financial situation, chances are your accountant has seen something similar before and can draw on that knowledge. They’re also the ones liable for any mistakes they make, which motivates them to do high-quality work.
Improved internal controls. Outsourced accountants will work with your nonprofit to establish or update your system of security standards. Their third-party, objective perspective can help your organization see through blindspots and develop internal controls that allow you to better prevent and manage risks.
Cost effectiveness. As stated previously, hiring is expensive, not to mention the complete compensation plan you’d need to offer an in-house accountant. Outsourcing provides access to experts without incurring the additional costs of recruitment, training, and providing benefits. However, because outsourced accountants are paid for their work, they have more long-term motivation than someone donating their time would.
Consistency in relationships. Both in-house and in-kind accounting services have higher potential for turnover than outsourcing does. Instead, you can build a long-term relationship with the accounting firm you outsource services to and maintain consistency.

If you choose to outsource your nonprofit’s accounting services, keep in mind that turnaround times may be slightly longer than if you hired in-house. However, by consistently communicating with your accountant and planning ahead, you can easily make outsourcing work for your organization.

5. How do I get started with a nonprofit accountant?

No matter which of the types of nonprofit accounting services you choose, you need to make sure you’re investing in the right people. Here are four steps you can take to get started:

Consider your organization’s needs. Your nonprofit accountant needs to be able to fulfill those particular needs, so make a list of the tasks you need a financial professional to accomplish. Double-check your list so you know which of those needs require a nonprofit accountant and which are better suited to a bookkeeper.
Begin your research online. Googling your accounting needs or searching for an accountant online can help you learn more about the available options and start making a list of potential accountants. Make a note of each individual’s and firm’s background, services, and pricing.
Ask for referrals. Contact other nonprofits of a similar size and in a similar vertical to yours about their experience working with an accountant. If you’ve worked with an independent auditor in the past, they may also be able to refer you to a nonprofit accounting firm. Although it’s tempting to go with the first “good” accountant you hear about, do some additional research to ensure each reference can meet your needs.
Reach out to your top choices. Narrow down your list, then contact each of your favorite choices individually to discuss your goals and determine whether they would be a good fit for your organization.

After selecting your nonprofit accountant, you’ll be able to work with them to develop the internal controls and financial data analysis you need for your organization to succeed. Then, you and your other staff members can get back to what matters most: furthering your mission!

Working with a nonprofit accountant is a key contributor to your organization’s overall health and ability to grow. They’ll help you do the detective work you need to analyze your financial position, manage your funding effectively, and remain accountable to donors and stakeholders. Keep in mind that every nonprofit is different, and your choice of an accountant needs to align with your organization’s situation and goals for the collaboration to succeed.

For more information on working with a nonprofit accountant, explore these resources:

Nonprofit Bookkeeper vs. Accountant: Who Should You Hire? Dive deeper into the differences between bookkeeping and accounting, and discover why both are essential for your nonprofit.
Restricted Funds: What Are They? And Why Do They Matter? Learn more about an element of your accountant’s work that is highly specific to nonprofits: restricted funds.
Outsourced Accounting for Nonprofits: Top 10+ Firms. Start your research into outsourced nonprofit accounting services with this comprehensive guide.

Jitasa’s bookkeeping and accounting services are affordable and cater to every nonprofit.

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4 Budget-Friendly Ways to Thank Your Nonprofit’s Donors

2023-05-16T12:00:00Z

Running a nonprofit involves a lot of moving parts and consequently, plenty of expenses. From staff salaries to fundraising events to software fees, it can be challenging to fit all the necessary costs into your budget. Any efforts you can make to lessen the burden of these expenses can be a big help.

One cost you can easily take steps to cut down on is your donor appreciation efforts. Showing appreciation frequently and in a variety of ways is vital for retaining donors, but it doesn’t have to be expensive. These low-cost ways to thank donors can make your recognition strategy more sustainable:

As you reevaluate your strategy, take note of how much you’ve spent on donor appreciation efforts in the past. Then, see how much you can reduce that expense going forward with these budget-friendly methods.

1. Personalized emails

Sending thank-you emails is one of the most inexpensive and straightforward ways to show donors your appreciation.

To ensure you’re making the most of these emails, use nonprofit analytics to segment donors and increase personalization. Donor giving data like past donation amounts, giving frequency, and recency of giving should guide your email segmentation strategy. For example, you might create one segment of donors who’ve given gifts over $500 in the past year and another for lapsed donors who gave under $100.

Then, tailor thank-you emails for each group. For instance, you might thank lapsed donors for their past contributions and mention ways they can renew their involvement with your organization. For mid-level donors who gave recently, highlight the progress of the campaign they donated to and thank them for helping you get closer to your goal.

Use these additional tips to personalize your thank-you emails even more:

Address donors by their preferred name in subject lines and the body of emails.
Mention their specific donation amount, which campaigns they supported, and other relevant factors like if the gift was matched by an employer.
Thank donors for any recent involvement, such as event attendance or volunteering.

Then, use donor engagement analytics like email open and click-through rates to evaluate the success of your personalization strategies and adjust your approach as needed. If donors aren’t opening your emails, for example, try changing your subject lines or email cadence.

2. Appreciation eCards

If you usually send thank-you cards through the mail, consider switching to digital cards to save on production and distribution costs. Online greeting cards, or eCards, are a less expensive option that retains the personalization and thoughtfulness of printed greeting cards.

Your nonprofit can easily create your own branded eCard designs and send them directly to donors to show your appreciation. eCardWidget’s guide to eCards for nonprofits emphasizes these key benefits of using eCards to thank donors:

Low cost: Sending cards virtually means you can skip out on the costs of printing and postage. Plus, some eCard platforms offer completely free plans that allow you to design and send a certain number of eCards. Upgrading your plan to send a larger number of cards is still low-cost compared to direct mail.
Convenience: Intuitive platforms make it easy to design, send, and personalize eCards. You can send them via email, text, or social media, and supporters receive them immediately. You can even add a custom personal message to each individual donor.
Customization options: You can create multiple thank-you card designs, add your nonprofit’s logo and branding, and even add animations to your eCards. These customization options give you the flexibility to create different thank-you cards for specific campaigns and donor segments to make the messages more impactful.
Environmentally conscious: Switching from paper to digital thank-you cards cuts down on paper and plastic waste, reducing your nonprofit’s environmental footprint.

If you see success in adding eCards to your donor appreciation strategy, you can even consider expanding their capabilities for your nonprofit down the road. eCards can also be effective as donation appeals, event invitations, and building community with your supporters.

3. Public recognition

Privately thanking supporters is crucial for cultivating relationships, but public recognition can be even more impactful when done well. Not to mention that recognizing donors using your existing communication channels comes at no extra cost to your nonprofit!

Take the following opportunities to publicly thank donors in addition to thanking them via email or eCards:

Shout out individual donors on social media or in your newsletter. Select one supporter to highlight each month. Ask them to send a photo, and conduct a short phone or video interview to get quotes about their experience with your nonprofit.
Recognize donors at events. Kwala’s donor communications guide suggests personally recognizing donors at fundraising events. At in-person events, you can verbally recognize a major donor or sponsor who made the event possible. For virtual events, consider using any existing online event software to show names on screen as attendees make donations.
Create a virtual donor recognition wall on your website. Adding a page to your website just for donor appreciation can make an impact on both current and prospective supporters. A virtual recognition wall publicly shows how much you value your supporters.

When using these or other public recognition methods, remember to always ask for permission beforehand. Some donors may not want to be in the spotlight, and it’s important to respect their wishes and show them appreciation in other ways.

4. Lists in your annual report

Annual reports are optional, public documents that communicate to donors how your nonprofit has managed its finances and put donations to use throughout the year. While publishing annual reports isn’t mandated by the IRS like it is for the Form 990, it is a good practice that promotes financial transparency and cultivates donors’ trust.

Along with disclosing your financial activities, you can use your annual report to thank donors for their support throughout the year. Many nonprofits devote part of their annual reports to listing donors by name.

Depending on the size of your organization, it may be feasible to list every donor. If not, determine eligibility criteria, such as only listing donors who gave above a certain amount. You can also include different sections of the list for in-kind donors, corporate sponsors, and major donors. Respect those who wish to remain anonymous by listing Anonymous as one name at the beginning or end of your donor list.

Annual reports don’t have to be expensive to create, either. Instead of mailing out multi-page reports, consider creating a digital PDF and publishing it on your website. Increase visibility by emailing it directly to supporters and highlighting parts of the report on social media.

With these methods, you’ll be able to create a robust donor appreciation strategy and cut down on costs. Make sure to list donor appreciation efforts as a planned expense in your nonprofit’s next operational budget so you have sufficient funds set aside. Then, calculate how much you can save compared to last year and put those funds to use elsewhere.

5 Pitfalls Between Fundraising & Accounting in Nonprofits

2023-03-21T12:00:00Z

Fundraising and accounting are two essential functions of any nonprofit organization, but they can often come into conflict with each other. Fundraising is focused on bringing in donations, while accounting is focused on managing and tracking the use of those funds.

During a lengthy or high-stakes fundraising project, then, it’s no surprise that conflicts may arise that jeopardize your organization’s ability to keep moving forward in an organized way. We’ll explore these common pitfalls and steps you can take to avoid them from the start.

5 Common Pitfalls to Be Aware Of

Here are 5 common conflicts between fundraising and accounting that nonprofits may encounter during major campaigns (or even just amid day-to-day operations):

1. Timelines

Fundraising and accounting inherently work on different timelines.

Fundraising often requires quick action to respond to opportunities or donor wishes, while accounting requires careful and deliberate planning. Fundraising timelines are driven by seasonal appeals, the timing of special campaigns, and donor preferences. In a capital campaign, for example, donors’ commitments often span more than one year. Accounting prefers clear, predictable patterns that help with building budgets.

2. Priorities

Fundraising and accounting have different priorities. Fundraising focuses on generating revenue and support for the organization, while accounting prioritizes financial reporting, compliance, and risk management.

These priorities can come into conflict when fundraising activities don’t align with the standard financial goals. For example, when a donor steps up to make an unexpectedly large gift for something that wasn’t in the budget or plan for the year, it can throw a curveball to the accounting team.

3. Communication

Communication between fundraising and accounting teams can be a challenge. Fundraising teams may not fully understand accounting requirements, while accounting teams may not fully understand the fundraising strategy. This can easily create cross-team misunderstandings and miscommunications, leading to mistakes and missed opportunities.

4. Metrics

Fundraising and accounting use different metrics to measure success. Fundraising may focus on the number of donations, the size of donations, and donor engagement, while accounting focuses on revenue, expenses, and profitability.

These differences can create conflicts when fundraising activities do not generate enough revenue to cover the associated expenses, or when accounting requirements limit the effectiveness of fundraising activities.

During a capital campaign, for instance, the fundraising office will report not just current contributions, but also commitments that will be paid over time—often several years—as it works its way down the campaign’s gift range chart. Meanwhile, the accounting office reports likely won’t capture those longer-term contributions which can create confusion and misalignment about the campaign’s progress across the organization.

5. Control

Fundraising and accounting require different levels of control. Fundraising often requires flexibility and creativity to respond to opportunities, while accounting requires strict controls to manage risk and ensure compliance.

This can create conflicts when fundraising activities are not properly monitored and accounted for, leading to financial and reputational risk for the organization. For example, the accounting team may overlook fundraising dollars that aren’t reported properly, opening the door for a variety of reputational and compliance issues if not caught and corrected.

How to Get Development and Accounting to Work Together

To overcome and prevent these conflicts, nonprofits must prioritize collaboration and communication between the fundraising and accounting teams.

The heads of both departments should get together to discuss the potential for difficulties and establish the best, most productive ways to work together. These might involve regular meetings and updates, shared metrics and goals, and a clear understanding of each team’s priorities and constraints. Just be sure to remind everyone of your shared goals—growing your nonprofit’s capacity and impact by operating efficiently, forging new connections, and responsibly stewarding the gifts you receive.

Nonprofits should also invest in technology and systems that can help streamline fundraising and accounting activities and improve data hygiene, thereby reducing the risk of errors and improving communication between departments.

Heads of development and accounting should also proactively meet with the executive director and board chair to discuss with them why reports from the two departments don’t always align.

Collaboration and Communication are Key

Conflicts between fundraising and accounting will always create challenges for nonprofits, but by prioritizing collaboration and communication, nonprofits can overcome these challenges and ensure that both functions work together to achieve the organization’s mission.

Work together to find the right balance between fundraising and accounting, and your nonprofit can maximize its impact and ensure that every dollar donated is used to its fullest potential.

Board Member’s Guide to Capital Campaign Fundraising

If you’re on the board of an organization that’s considering a capital campaign, there are things you need to know. This guide will help you understand your own role, and that of the entire board, during a campaign. Download this free guide today!

Amy Eisenstein, ACFRE, and Andrea Kihlstedt are co-founders of the Capital Campaign Toolkit, a virtual support system for nonprofit leaders running successful campaigns. The Toolkit provides all the tools, templates, and guidance you need — without breaking the bank.

Top Tips to Manage Your Sorority or Fraternity's Finances

2023-03-20T12:00:00Z

One of the most important, yet challenging aspects of sorority and fraternity management is maintaining your chapter’s financial wellness. Between budgeting, collecting dues, and fundraising, your leadership team has many financial components to keep track of over the course of a school year. Plus, your success largely relies on your members doing their part, meaning you’ll need a high level of internal organization to achieve your goals.

But, managing your chapter’s finances doesn’t have to be a difficult task. By doing your research, staying organized, and using a powerful management software solution, your chapter’s leadership team can eliminate the guesswork from financial planning and management. Let’s explore some tips to help you improve your money management habits.

1. Create a comprehensive budget

The foundation of any financial management initiative is a detailed budget. A budget allows you to prioritize goals for the coming year and gauge your financial health, so take the time to create an effective one for your chapter.

Consider including the following items in your sorority or fraternity’s budget:

Professional development initiatives (including networking events, career fairs, and conferences)
Social program expenses
Dues revenue
Membership management software license cost
Monthly payments, such as rent and utilities
Recruitment expenses

While you should aim to be as accurate as possible while creating your budget, unexpected circumstances happen every year. Thus, ensure you build room in your budget for unplanned occurrences, such as house maintenance and canceled events. Revisit your budget on a regular basis with your team to log new financial updates.

2. Understand your chapter’s tax status

Did you know that your chapter can save thousands of dollars by filing for tax-exempt status? Most sororities and fraternities are classified as 501(c)(7) organizations by the IRS. According to the IRS, your chapter qualifies if it:

Is supported by membership fees, dues, and assessments
Provides an opportunity for members to socialize
Has selective membership
Doesn’t allow leadership to take the chapter’s financial assets for themselves
Receives less than 35% of its funds from nonmember sources
Doesn’t discriminate against any person on the basis of race, color, or religion

To register for 501(c)(7) status, your chapter must fill out IRS Form 1024 and submit it by the filing deadline. Then, once you’ve incorporated your chapter as a 501(c)(7), your financial team must fill out IRS Form 990 annually to report its income and expenses and maintain your tax-exempt status. If you’re new to tax-exempt filing, consider consulting with a nonprofit accounting expert for professional guidance.

3. Collect dues regularly and promptly

As previously mentioned, the IRS will recognize your tax-exempt status only if you receive revenue from member dues. Since they’re your main revenue source, it’s crucial that you prioritize collecting them on time. Additionally, they fund valuable opportunities for your members, such as social and professional development events.

Dues processing software makes the payment process convenient for you and your members, allowing you to send automatic reminders via email before each payment is due. Some membership management software solutions even have an integrated payment processing system, syncing payment records directly with each member’s profile.

To clarify the dues payment process to your brothers or sisters, standardize it so everyone’s on the same page. Create a dues collection “cheat sheet” that breaks down how you gather dues each payment period. Include information on your cheat sheet such as:

Dues payment deadline and frequency
Dues amount
How to pay dues
Penalties for late payments

To help your members be proactive about their payments, add a to-do list where they can check off action items as they’re completed. You can even host a required financial training session to provide your members with organizational tips as part of the recruitment process each year.

If there are still members who regularly pay late even after fees are issued, meet with them individually and create a plan for helping them pay their dues on time. For example, you might suggest that they put a recurring calendar reminder in their phone or set up autopay through your online payment processor.

4. Practice exceptional data hygiene

With tens or even hundreds of members to account for, your leadership team has a lot of data to store and manage. This data is essential for gauging your chapter’s financial health and budgeting for the future. Therefore, tidying your records and practicing data hygiene should be one of your top priorities.

Primarily, effective data hygiene relies on your technological tools. Paper records are difficult to keep track of and take up space over time. On the other hand, sorority and fraternity management software allows you to centralize your records and conduct data maintenance with ease. For example, OmegaFi states that membership management software will allow you to accomplish the following:

Delete duplicate member records
Pinpoint outdated contact information so you can append it
Instantly update financial records when members submit payments

By leveraging your software’s capabilities to stay organized, you can streamline all of your financial operations and focus more on providing valuable opportunities to your members.

5. Create a financial board on your leadership team

As a leader, you shouldn’t have to try and juggle all of your chapter’s financial responsibilities on your own. Empower qualified members to help out by creating a financial board as an offshoot of your leadership team. Recruit members that are:

Reliable
Trustworthy
Communicative
Financially responsible
Knowledgeable about money management (whether through job experience or their studies)
Able to devote time to board activities
Invested in the chapter’s success

Start determining your list of prospective financial board members by creating an optional application. On the form, ask the applicant to describe why they want to join the board and if they value your success. Then, ask them about their financial management experience or interest.

If you’d like to ask your applicants further questions, read the responses and decide who will move on to the interview stage. To keep the board effective, gauge each member’s contributions over the course of a year and remove anyone who’s slowing your progress.

Wrapping Up

Now that you know how to improve your financial management skills, it’s time to revise your chapter’s approach. First, gauge your chapter’s data hygiene, which, according to NPOInfo, directly impacts financial stability. Then, look into sorority and fraternity management solutions that can help you implement all of the aforementioned tips. Finally, decide which changes will be most beneficial for your chapter and implement them. Throughout the process, be sure to keep your members in the loop and ask them for feedback on the adjustments. They’ll appreciate being listened to and hearing that you’re taking steps to improve your chapter.

How to Communicate Nonprofit Annual Report Data

2023-03-01T12:00:00Z

Like any organization, nonprofits are responsible for keeping track of and communicating a few key metrics of any given year. And while most nonprofits know they’re required to share this information through their form 990, not all take the time and effort to turn those numbers into a fundraising tool. Namely, their annual report.

What is a nonprofit annual report?

A nonprofit annual report is a detailed summary of an organization’s accomplishments and progresses over the course of a year. Unlike form 990, which is required of most nonprofits, an annual report is an optional document created by nonprofits to create a connection with their communities.

While 990s usually include factual information only, annual reports are packed with stories of impact, testimonials, and compelling visual elements. Great reports entertain and engage readers, and even turn them into donors.

Mainly, annual reports serve to:

Create trust and transparency with their communities
Inspire action (donations, volunteerism, etc.)
Celebrate accomplishments and progress
Express gratitude
Set goals for the upcoming year

In essence, an annual report takes otherwise bland data—like revenue and expense—and creates a compelling story.

What most nonprofits get wrong about annual reporting

While annual reports aren’t required, they are standard in the industry. Most nonprofits, if not all, dedicate time and resources to creating one every year and sharing it with stakeholders.

However, though annual reports are standard, not all reporting is the same. Many nonprofits, unfortunately, make a few crucial mistakes when putting together their reports.

The biggest mistake nonprofits make is that they don’t see their report as an opportunity for engagement.

Most nonprofits create their annual reports out of duty. They create their yearly review with minimal effort, in order to check it off of their to-do lists. However, an annual report has the potential to be one of the most essential marketing tools for a nonprofit. It can help recruit supporters and more donations than ever.

And when nonprofits don’t view the annual report as a great opportunity for engagement, they fail to communicate the story behind their findings.

A lot of nonprofits use the data from their 990 forms in their annual reports. But, they do so without using proper storytelling techniques. Instead of providing context for their findings, and adding visual components, they list their revenue and expenses in listicle format. Or, within a paragraph of dense text.

When nonprofits don’t communicate the story behind their numbers—the who, what, where, how, and why—they lose reader interest. This leaves supporters feeling confused, untrusting of your mission, and uninterested in contributing. When a reader’s interest is lost, so is their support of your mission.

Why should nonprofits tell the story behind data?

So what do we really mean when we say that an annual report has the potential to be a great marketing and fundraising tool?

Annual reports reinforce brand identity

There are lots of nonprofits vying for donors’ attention—many with similar missions and values. So how can nonprofits stand out in a crowded marketplace?

An annual report, if designed well, is a great tool for reinforcing brand identity. Images of staff, beneficiaries, and more—all designed with brand colors and fonts—can help remind readers of who you are and why your mission matters. In a crowded marketplace, this kind of reinforcement is essential.

Annual reports create trust

Most nonprofits know that trust is one of the most important barriers to giving.

When supporters trust your mission and your operations, they’re more likely to give. Weary of scam nonprofits and unethical practices, stakeholders are inclined to support organizations that are clear and communicative about their accomplishments.

Annual reports build relationships

The nonprofit industry is all about building relationships. Donor stewardship, fundraising, and even marketing tactics involve creating a bond between a stakeholder and your organization.

An annual report, full of gratitude, evidence of impact, and emotional content, has the power to build long-lasting relationships.

Improves retention and recruitment

All of these benefits of storytelling help improve stakeholder recruitment and retention. Whether those stakeholders are partners, volunteers, or donors, a robust annual report can bring new faces in and keep them—making a nonprofit organization stronger and more resilient than ever.

Above all, storytelling makes your data a tool for emotional connection. Instead of just reading a string of numbers, your nonprofit’s story behind its finding has the ability to inspire readers and encourage them to support your mission.

How to tell the story behind the numbers

As previously mentioned, storytelling is all about identifying the who, what, where, why, and when. Like writing a novel, nonprofits should paint a clear picture of the context around their findings—namely, their quantitative data.

Most nonprofits include a few data points in their annual report:

Revenue
Expenses
Program success/impact measurements
Future forecasts

In order to tell the story behind these numbers, you’ll first need to identify the main components.

The who

When analyzing each data set, consider the “who” behind the numbers. In the case of nonprofit storytelling, there are a few “whos” to consider.

Which stakeholders will be interested in these numbers? (i.e. who is our audience? And why?)
Who do these numbers represent? (Do they represent the number of beneficiaries we’ve helped? Our staff? Our partners?)

The what

A key part of telling the story behind your numbers is providing enough context for stakeholders. Readers should feel confident in understanding the purpose of your findings—or what they mean. When compiling your data, consider these questions:

What does this data mean to our supporters?
What does it say about our mission and values?
What is the purpose of sharing these data points?
What does it accomplish?
What do stakeholders need to know in order to understand these data sets?
What parts of this data will resonate with our readers the most?

The where

Like any great novel or story, it’s important for nonprofits to describe the where. In this context, this might mean considering answering questions like:

For expenses:

Where did we funnel this money?
Where did it make the most impact?
How does this data impact where we’ll be in the future?

For revenue:

Where did we make the most money?
Where did we allocate that money?
How does this data impact where we’ll be in the future?

The when

Timing is everything. When relaying crucial data to your stakeholders, be sure to be clear about when major milestones occurred. Consider questions like:

When did we see the most growth in our revenue?
When did we have the most expenses?
When in the future do we anticipate change to our metrics?
When did our most successful initiatives take place?

The why

When sharing anything about your organization—within your annual report or not—it's important to consider the why behind any action. Successful nonprofits are clear about the purpose and intention behind their actions.

Consider questions like:

Why do we think it’s important to share this information with stakeholders?
Why will they care?
Why did we allocate resources the way we did?
Why does this matter?

Once you’ve decided the who, what, where, when, and why behind your numbers, it’s time to communicate that information.

Putting it all together: creating your annual report

As mentioned before, it’s not enough to simply list data points in your annual report. In order to connect with readers—and turn them into donors—you’ll need to use data visualization. Data visualization, or visual storytelling, is one of the best ways to communicate your data.

By using nonprofit-first tools like Yearly, you can build an award-winning report with expert visual storytelling techniques including:

Infographics

Charts

Timelines

Data visualization allows your nonprofit to create a holistic picture of your findings—and engage readers like never before.

Wrapping it up

When it comes to the success of a nonprofit organization, storytelling is everything. Nonprofits that don’t prioritize connecting and inspiring readers through the story behind their data are often missing out on potential partners, donors, and even volunteers.

To create an award-winning annual report for your nonprofit, check out Yearly’s free 14-day trial —the first-ever digital report builder for nonprofits.

4 financial management tips for small nonprofits to follow.

2023-01-26T12:00:00Z

Effective financial management allows nonprofits to advocate for important causes, pay their employees fair wages, and provide services and resources to their beneficiaries. However, managing overhead costs and finding the right funding sources can be a challenge for nonprofits that operate with limited resources.

In this guide, we’ll explore four financial management tips for small nonprofits so that organizations like yours can succeed well into the future.

1. Maintain a balanced operating budget.

A well-formulated operating budget helps nonprofits set goals for sustainable growth and communicate effective financial management to stakeholders such as corporate sponsors and grantmakers. Plus, breaking down your expected expenses and revenue for a given fiscal year provides insight into how you can make the most of limited resources and invest more strategically in the future.

Your nonprofit budget should include:

Estimated revenue: Review past fundraising data to better understand and predict how much you expect to raise in the coming year. Categorize your funds by revenue stream, including individual donations, grants, earned income, and investments.
Expected overhead costs: Even if you expect to receive a large number of donations in the coming year, you still need to factor in the costs associated with running a nonprofit, including administrative costs and campaign-specific costs such as renting an event space and sending out marketing materials.
Defined activities: Assign a cost and expected return on investment to each activity that you plan on pursuing during the fiscal year. These activities generally include marketing, programming, and fundraising.
Specific timelines: Consider when your organization expects to collect revenue and when you plan to complete each activity outlined in the document. For instance, if your nonprofit generates more funding during year-end activities, you may use Giving Tuesday as the deadline for reaching a major fundraising goal.

Have your board members and any other relevant staff members review your finances regularly throughout the year to ensure that you’re on track to achieving your goals and that your expenses don’t exceed your revenue.

2. Diversify your funding.

Relying on one source of funding to keep your nonprofit afloat is risky. For instance, if you depend solely on major donors to reach your goals and those funders begin to lapse, then you will be left scrambling to find new sources of funding. Diversifying your funding adds greater stability to your finances.

Here are some steps you maintain a diverse revenue stream:

Explore corporate giving. Corporate giving initiatives such as sponsorships, matching gifts, and volunteer grants can provide your nonprofit with the financial backing and visibility needed to extend your reach and attract more supporters.
Conduct prospect research to find major donors. While it’s risky to count on a small handful of donors for your entire fundraising strategy, major gifts should still be a component of your revenue stream. Use direct mail, events, and meetings to connect with individuals who have the capacity to make large contributions.
Strengthen your grant-seeking approach. Including grants management in your financial plan can bring your nonprofit into a new phase of growth. To secure grant funding, you first need to connect with a grantmaker and write a detailed proposal that lays out your need for support.

Although diversification doesn’t entirely eliminate the risk of losses, it can help you sustain your operations and connect with the businesses, government agencies, and individuals that want you to succeed.

3. File tax forms on time.

Filing your tax returns on time is critical for maintaining your organization’s tax-exempt status and avoiding unnecessary late fees. For most nonprofits, your annual Form 990 is due May 15, or five months after your fiscal year ends. As that date approaches, ensure you have the proper paperwork in place and that you’re filing the correct forms for your revenue bracket.

Small to mid-sized nonprofits are eligible for abridged versions of Form 990, which include:

Form 990-N: Also known as the “e-Postcard,” this form is reserved for nonprofits with less than $50,000 in annual revenue. Keep in mind that Form 990-N is ineligible for extensions, so prepare well in advance.
Form 990-EZ: Nonprofits with an annual gross income between between $50,000 and $200,000 may file Form 990-EZ. In addition to the basic information that you would need for the 990-N, you'll also need to provide revenue, expenses, and changes in net assets or fund balance.

Your nonprofit’s financial statements and budget will be helpful resources in filling out any version of the Form 990. Set reminders throughout the year and have regular check-ins with your team to make sure you file the right form before the deadline.

4. Invest in nonprofit-specific accounting resources.

Accounting and bookkeeping can be a challenge, especially when you have limited resources and your staff is overextended. Thankfully, there are software solutions that exist to help small to mid-sized nonprofits optimize their financial practices and streamline their operations.

When searching for nonprofit-specific accounting software, be on the lookout for these essential features:

Automated budgeting: Manual bookkeeping is time-consuming and prone to error. A modern system will allow you to automate tedious tasks like data entry, migration, and reconciliation.
Financial reporting: Your nonprofit accounting software should be able to produce financial reports that meet the reporting requirements set by the IRS.
Data security: Ensure that your sensitive financial information is protected by encryption and handled with the highest level of security.
Deadline reminders: Set reminders for tax deadlines and. Improved internal controls, providing additional safety for financial information
Software integration: Choose a financial management solution that connects with other applications like your payment processor and CRM so that you can seamlessly synchronize data.

In addition to investing in technology-powered tools, you may consider working with a nonprofit accounting firm to organize and maintain your finances. These experts know how to support small nonprofits like your own, ensuring that your compliance with nonprofit tax and accounting regulations are up to par. Plus, outsourcing financial management tends to be more affordable than hiring a new team member to handle your nonprofit accounting needs.

When you follow the steps outlined above and invest in the right resources, you’ll set your organization up for ongoing financial success. As a result, you can continue doing what you do best: making a difference.

4 Tips for Effective Nonprofit Performance Reviews

2022-12-22T12:00:00Z

"Dear Manager,
It's that time again; performance reviews are due by the end of the month. Please make sure you meet with your direct reports and conduct these meetings, complete this form, have the employee complete it, and email the document back to us.
Thanks,
HR"

If you've ever read an email like this and felt a shiver run down your spine, we get it. Performance reviews often seem like an arduous task that requires many hours of commitment without a clear direction or purpose.

Nonprofits, in particular, have a more significant challenge with performance reviews because of the many hats these professionals wear. This article will outline four tips for effective performance reviews to ensure that you are making the most out of your meetings while also providing your employees with opportunities for growth and development.

Most importantly, we must acknowledge and define why these performance reviews are essential to any business. Performance Reviews are a tool to foster growth, allowing managers and employees to reflect on their work to help them become self-aware. They are a commitment from the employer to the employee that they will help develop and mentor their staff, a significant aspect of any company culture.

For the employee who is meeting or exceeding expectations, a performance review is an opportunity to highlight their accomplishments while developing a plan for growth, promotion, and additional responsibilities. This is an insightful time for the underperforming employee to course-correct behavior and clarify expectations.

Employees tend to shy away from these conversations, as they may feel self-conscious about their work or fear reprimand. While some of these conversations may sometimes be uncomfortable, organizations owe it to their employees to be clear and transparent.

Brene Brown has shared some of the most concise and insightful advice that helps illuminate this process; "Clear is kind. Unclear is unkind." We can not expect change without first identifying the expectations and current behavior, so clarity must be the pinnacle of the conversation.

1. Create a Great Process

Creating a process for your performance reviews is essential for your nonprofit organization. For HR departments, this is a project that deserves adequate attention and planning. Plenty of online resources can help organizations facilitate the performance review process; however, developing and facilitating the process internally might be the best option in some instances.

Developing your performance review process includes a review of goals, self-assessments, feedback meetings, compensation review, and strategy. After a performance review period, an organization can review the collected data to gain a broader understanding of the organization's performance. It offers insight into a gap-analysis review to see how the organization can include skill-building to improve performance.

Some organizations lack the bandwidth to create this process and will solicit input from an HR consulting firm specializing in performance review strategy and development.

2. Communicate

Ensure that messaging is transparent and communicated to the employees. We've all felt that sense of anxiety about an upcoming performance review at one time or another, and we need to address that sense of discomfort. How an organization communicates its process and purpose of the performance reviews to its workforce will set the foundation for a successful and productive performance assessment.

Here are a few things to consider including in your messaging to employees:

The performance review process is intended to highlight and celebrate your achievements since the last review.
Performance reviews help management understand how they can improve their leadership and coaching.
These reviews are tools to set goals, track progress, and document growth.
These meetings and discussions help clarify expectations and review job descriptions which can lead to examining and redefining roles.
Performance reviews are used to create supporting narratives for promotion and career growth.

Communication about performance reviews should help alleviate any anxiety or pressure felt during this time. Communication should also be timely and sent out well before the performance review period to allow employees time to self-reflect and prepare for the meetings.

3. Clarify

It can not be overstated that clarity is the ultimate key to a successful performance review. When we clearly define expectations of a role, which starts with a comprehensive job description, only then can we have candid conversations about performance.

Some organizations use performance review matrixes to rate performance in general competence areas, while others take a more holistic approach and view performance as a total package. There are times when one might be more beneficial than the other, but in both instances, neither will be effective unless we are transparent and clear about what we expect and what we are experiencing.

One of the most significant failures of a leader is when they shy away from difficult conversations that could lead to employee growth because they are uncomfortable with those discussions. The onus is on the leader/manager to be able to facilitate a conversation and set boundaries to make the employee feel safe in objectively reviewing their performance and experience.

Nonprofits and mission-driven organizations need absolute clarity on expectation and performance because, as Blaise Pascal once said, "Clarity of mind means clarity of passion, too." Folks working at nonprofits are often driven from the heart center, and they need to align their passions and mission to get everyone "rowing in the same direction."

While a clear and mutual understanding can easily be found regarding deadlines, attendance, time management, and other quantifiable metrics, we need to define and understand a role's more colorful aspects.

Things to consider having transparent conversations about might include the following:

Communication style with coworkers/clients
Willingness and ability to take initiative
Workstyle approach
Employee engagement and passion for the work

Performance reviews are an integral part of talent management to help identify and build leaders in an organization to support business development and organizational competency.

4. Continue the Conversation

Now that you've strategized, created a process, communicated with the workforce, met with the employees, had clear and candid conversations, and completed your documentation, your next step is to continue the conversation.

It would be for naught to put in all this work and not follow through with future conversations to revisit performance, expectations, and goals. During these conversations, you have identified strengths and opportunities for growth and established a plan to course-correct or for continued development. Not only is it in the organization's best interest to monitor the action plan, but it is also a service to the employee to help them along their career path.

It's common for an organization to administer performance reviews annually, bi-annually, or quarterly, but the conversations should always be open for constant feedback and casual check-ins.

Continuing the conversation is arguably the most critical and ongoing step in the performance review process. It sends a clear message to the employees that their managers and the organization are there to support them and want them to be successful. Performance reviews and open dialogue are contributing factors to company culture, and the investment in this process is well received by the workforce when administered holistically and authentically.

Performance reviews are part of a larger Talent Management process and vary in their degree of intricacy. The performance review process is undoubtedly one of the most comprehensive tools that HR departments and nonprofits utilize to inform all other aspects of their work.

While the process can take time to develop and evolve, if you create a solid foundation, communicate the importance, create a safe space, create clear and mutual understanding and continue the conversation, an organization will find that its workforce feels more cohesive and collaborative. Employees will see that they have a more defined role and runway, which will help foster their personal and professional development and support the organization and its mission.

What are some of your pain points regarding the performance review process?

Can you remember when you felt anxious about your own performance review? What would have made it more comfortable for you?

Author: Conor Hughes - RealHR

Conor is a professionally certified consultant (SHRM-CP), Board Member, and marketer. He enjoys managing projects, creating strategies, and brainstorming ways to bring organizations to new heights. With the company in mind, he strives to serve others by building trust and relationships while guiding them through the process of growth. He seeks to use technology to empower organizations and individuals while guiding all steps of change management.

As a board member of the Westchester Human Resource Management Association, he serves as the Social Media and Marketing Chair. He helps foster collaboration and community engagement for HR professionals across Westchester, NY. Conor specializes in communication and relationship building to strengthen teams. He is passionate about workflow optimization and solution-based technology to enhance an organization's mission-driven impact.

Outside of his professional engagements, Conor can be found traveling to unique destinations to hike, camp, and explore. He loses track of time when his camera is in his hands, and he has a passion for poetry and painting. While the Hudson Valley will always be his home, he has now found himself exploring the Rocky Mountains in Denver, Colorado.

4 Ways to Create a Virtual Silent Auction That Guests Enjoy

2022-10-27T12:00:00Z

While it may feel like yesterday, the COVID-19 pandemic’s initial push for nonprofit fundraising events to go virtual happened nearly two years ago. And now, virtual fundraising events—including auctions—are sticking around for the foreseeable future. Somewhat due to the lingering COVID-19 restrictions, but more so because nonprofits surprisingly found them to be an effective and straightforward way to diversify revenue streams.

At this point, your auction’s guests have seen it all—the good, the bad, and the “just alright” of virtual events. And with “Zoom Fatigue,” some of your guests may be getting a tad bit burnt out on virtual experiences, especially ones that prompt attendees to turn on their cameras. So, it’s going to take more than running live auctions over Zoom to set your next virtual charity auction up for success.

We know that a positive guest experience goes hand-in-hand with the success of any fundraising event. After all, have you ever been in a generous mood after fumbling around with outdated technology, chatting with a less-than-helpful representative, and joining an event half an hour late? We’d guess not!

While it can be tempting to worry about the back-end logistics of your event first and foremost, it’s worthwhile to prioritize your guests' experiences. Remember: creating a memorable (in a good way) experience will not only lead to a more successful auction in the immediate future, but also leave your guests with a positive impression of your nonprofit going forward. They might attend next year’s event, bring a friend or two along in support, or even sign up to volunteer to help bring it to life!

This guide will cover four tips to keep in mind when planning your nonprofit’s next virtual silent auction, specifically when it comes to creating a virtual event that your attendees will enjoy. With that in mind, let’s get started.

Outline “rules” in advance.

Handbid’s guide to auction rules notes, “silent auction ‘rules’ are more comparable to the pirate's code in a Disney film than the laws spelled out in the U.S. Constitution—so, ‘more what you’d call ‘guidelines’ than actual rules.’” However, just because the rules governing your auction are not set in stone, that doesn’t mean that it’s not important to outline them well in advance of the event itself!

You see, outlining clear parameters for how your auction functions will help the event run smoothly. For guests, it creates a more streamlined experience and helps them trust your nonprofit to run a fair event. They’ll understand that all guests will be treated equally and expected to follow the same guidelines.

There are a few essential rules to outline in advance of your auction:

Bidding Rules: These are the rules that apply to guests, and most will be handled by choosing the right mobile bidding software. For example, bidding in incorrect bid increments, stealing bid sheets, and placing bids with lousy handwriting are all issues that the right mobile bidding platform can resolve. However, you will want to set rules surrounding how your team will handle requests to “cancel” bids (generally, you shouldn’t allow users to back out of their bid), how and when guests should pay for items they’ve won or purchased, and the contact information guests should provide.
Seller Rules: These are the rules that apply to your nonprofit, who is the “seller” in an auction. For example, Seller Rules dictate that you’ll write true and accurate item descriptions and establish the fair market value of auction items (which are often in-kind donations) to the best of your organization’s knowledge. Further, you won’t artificially manipulate the bidding process and you’ll honor the transaction contract by providing all paid-for items to the purchaser, along with a receipt confirming the purchase.
General Operations: These are rules that govern the general operations of your event. This includes checkout rules, which we’ll cover in a later section, and rules around when the auction opens and closes. You should clearly indicate when bidding will open and close and provide bidders with warnings leading up to the closing time. Avoid extending the auction time. If you absolutely must extend the auction, give all bidders plenty of notice so they know to continue watching the items they’ve bid on.

Bonus! While you don’t need to set any hard and fast rules around your auction itself, your virtual event may fall under some general compliance regulations. Much of this will also vary depending on the state in which you’re hosting the event, so it’s worthwhile to look into the relevant state body for any requirements.

Make it as easy as possible to find items and bid.

Did you ever have an experience (or a fear) of ending up in the wrong classroom in school, but didn’t figure it out until 30 minutes later? Perhaps it’s due to vaguely-labeled classroom doors or unclear instructions from the teacher in the weeks leading up to the start date. Either way, it’s awkward and uncomfortable!

The last thing you want to do is replicate this experience for your adult attendees with a virtual auction that’s hard to “find” online, challenging to navigate, and confusing to bid in.

To create an unforgettable and profitable fundraiser, make it as easy as possible for guests to participate and donate. In the context of an auction, this is where your fundraising software plays a major role. Looks for features such as:

A direct link to your auction event. When participants download your auction app, how will they locate your auction out of all of the events hosted there? Ideally, you should be able to send them a direct link to access your event, or they should be able to view all ongoing events and click through to yours with ease.
Multiple ways to browse items. Guests should be able to scroll through items sorted by category (think experiences, food, baskets, etc.), search items by keyword, item code, or even QR code, and view all items that haven’t yet received bids.
Easy access to details about each item. Guests should be able to access a detailed view of each item, including images, a description, and the bids it has received so far.
Convenient bidding options. Empower guests to place manual bids or max bids. Max bids are set by the bidder and instruct the auction software to bid on behalf of the bidder until the current bid exceeds the max amount. This allows the guest to continue enjoying the event and not have to keep checking on their bids.
A dashboard to monitor personal activity. With a real-time dashboard, bidders can view items they’re winning, items they’re losing, items they’ve directly purchased, as well as any donations.

Of course, making it easy to participate in your auction is only half of the battle. The other half is procuring items your guests want to bid on. For this, remember to get started early, assemble a team for the project, and turn to your existing connections first to see who will be interested in donating items!

Encourage friendly competition.

At most nonprofit events, “teamwork makes the dream work.” Crowdfunding, peer-to-peer fundraising, you name it—the goal is to bring supporters together to raise funds for your cause. With auctions, however, (friendly) competition is the name of the game.

The more that guests bid and outbid one another, the higher the price rises for each item and the more funding you raise for your cause. On the other hand, for participants, this competition is what makes an auction uniquely fun!

Your virtual auction tool should make it easy and quick for guests to know when they’ve been outbid and respond accordingly. Ideally, the tool should empower guests to turn on bid notifications and designate how they prefer to be notified, whether by push alerts or SMS messages. Then, when guests see one of those “losing” notifications, they can open their app and respond quickly with a counter bid!

Another way to encourage friendly competition is to livestream an auctioneer walking through the items and adding some color commentary to the event. There’s something about the excitement generated by a fast-talking auctioneer that can inspire guests to continue bidding.

Re:Charity’s guide to livestreaming for nonprofits lists a number of free tools that can be used to stream an auctioneer and add a bit of excitement to your virtual event. However, even better, you can choose mobile bidding software that has built-in livestreaming tools to provide a more cohesive experience for guests.

End the event with a convenient checkout.

Have you ever spent a significant amount of time shopping for and choosing the right item… only to get to the checkout line and find it so long that you are thinking of putting back that “just right” item to save the hassle of a long wait? Avoid that feeling for your auction guests!

The guest experience doesn’t end the moment that an item is won. Setting up a streamlined checkout experience that makes it easy for guests to pay for items is key.

Your fundraising software can make checkout a breeze by allowing guests to pay directly in the app through their preferred method—whether that be Google Pay, Apple Pay, or a credit or debit card. Ideally, guests should add this information before they bid on items. Then, it’s just the click of a button to check out at the end of the event.

We’re now nearly two years past the mass pivot to virtual events, and it’s looking like they’re sticking around for the foreseeable future.

If you want to host profitable virtual fundraising events— including auctions— it’s worthwhile to consider best practices to shape up the guest experiences at your own event opportunities! These four tips will set you off to a great start. Good luck!

Author: Jeff Porter

Jeff Porter, Founder & CEO of Handbid, has spent 18 years in the nonprofit industry. In 2004 he founded the Prader-Willi Syndrome Association of Colorado where he still resides as board chair. Jeff learned early on that nonprofits desperately needed better and more affordable fundraising solutions. Leveraging his software background, he built most of the tools his charities used, and in 2011 he launched Handbid at his own fundraising event. The goal was to improve the guest experience, reduce administration and increase revenue. Handbid accomplished all of those goals, effectively doubling revenue in its debut. Nine years later, Handbid's suite of tools has delighted over a half-million guests, generated millions of bids, and helped thousands of charities raise well over $100 million.

Your Nonprofit's Guide to Data Hygiene and Data Management

2022-09-21T12:00:00Z

Collecting donor analytics is an essential part of understanding your donors’ behavior and more effectively building relationships with them. However, that data is no good to you if it’s poorly organized and managed. Learning to edit your data to maintain good data hygiene is just as important to your data management as the actual data collection. To ensure that you’re following best practices for data management, we’re sharing four steps to take today to improve your organization’s data hygiene:

When managed correctly, data can be the key to empowering your organization to do more and exceed your goals. Follow the steps in this guide to make sure that your organization is practicing good data hygiene and are using your data effectively. Let’s get started.

1. Audit your current database

Chances are that you are collecting many different types of data, potentially in different systems. For nonprofits, managing donor data is essential to many of your daily operations, but managing financial data is just as important. Whether you’re creating a new data-informed stewardship strategy or preparing to send your financial statements to your nonprofit accountant, you want a clean and organized database. The first step is to audit your existing data collection:

Make sure you’re collecting the kind of data you want. Are there crucial types of data and insights that aren’t currently benign captured in your database? Identify what they are and make a plan for how to begin collecting that type of data.
Identify what data you’re collecting that’s not useful. Just because it’s possible to record information or engagement, doesn’t always mean you should. Make sure you’re only recording data that you gain insights from and use to improve your strategy or take further action.
Weed out your “bad” data. As you’re auditing your database, you might be finding incomplete, duplicate, or otherwise ineffective data entries. Mark these entries and set aside time to clear them out.
Determine if and how your databases or systems can be streamlined. If you’re using a separate system to organize different types of data when there’s a tool that can do it all, it is likely not time or cost effective to continue using separate systems.

Once you’ve identified what is and isn’t working in your current data collection system, you can take next steps to improve your process. This will help you more effectively use your data in the future as well as make better use of your team’s time and resources.

2. Remove bad data

Bad data can be many types of inaccurate information, including missing data, wrong information, inappropriate data, non-conforming data, duplicate data and poor entries like misspellings, typos, and variations in spellings. Making sure that your database is not filled with bad data that oculd negatively impact your organization or donor experience is basic data hygiene that all nonprofits should be following.

While a duplicate entry of a donor might just mean they accidentally receive two of the same email, a mistake in your financial data could throw off your entire nonprofit budget. No matter the severity of the potential consequences, it’s always best practice to regularly remove any bad data that could be negatively impacting your strategy, finances, or other parts of your organization.

3. Standardize your data entry

Now that you’ve identified some of the issues with previous data entry, you can set up a system to avoid them in the future. It’s important to have a standard method for entering and managing data in your system so that everyone is using the same method. Without this, you can end up with bad data that’s simply a result of someone putting in the correct information in the wrong format.

Some adjustments you may want to make to standardize future data entry include:

Define the format of each type of data point.
Create rules or instructions for handling data errors
Edit and streamline your external forms, like the ones that donors fill out

Depending on your organization’s structure, it may be best to assign different people responsibility over certain data sets. For example, one team member might be responsible for managing all membership data. From entering new members contact information to updating member profiles when they change their preferences or take an action that’s not automatically recorded, they would be the primary person handling that data to avoid confusion.

However, it’s not always feasible to have only one person doing data entry and management. It’s always a good idea to standardize and write out your data entry approach, but it’s especially important if more than one person is handling your data. With clear instructions, anyone on your team can ensure that they enter data in an accurate and useful manner.

4. Use the right data management tools

Once you’re working with only clean and useful data, it’s time to make sure that the tools you’re using meet your data management needs.

Simply storing your data is not enough. Your data management tools need to provide you with the capacity you need to store data, as well as functionality for entering, organizing, analyzing, and even visualizing your data. Not all organizations will have the same needs, especially if you’re a very small organization, but it’s important to look for tools that can scale with your organization as you grow.

In addition to using the right tool to manage and store your data, it can be extremely helpful to work with an expert to go through this process of auditing, cleaning, standardizing, and then managing your data on a day-to-day basis. A data expert will be able to help you organize your data in a much more robust and efficient way to make future data usage simpler.

With the right tools and an understanding of data hygiene best practices, you can rest assured that your data is well organized. After all, data is only useful when you can understand it and make use of it to inform your broader strategy. With this guide, your data will be sure to serve you well!

Author: Karin Tracy

Karin Tracy, VP of Marketing at Fíonta, is a seasoned designer and marketer with a passion for serving nonprofit organizations and being a small part of bettering the world. She is a certified Pardot Consultant and Marketing Cloud Email Specialist, a fan of automation and reporting, a lover of animals, and devourer of popcorn.

At Fíonta, Karin drives marketing efforts for all internal and external projects. Her direct service work is focused primarily on marketing strategy and automation for Fíonta’s MCAE (Pardot) clients.

How Do Nonprofits Make Money? Making Nonprofits Profitable

2022-09-07T12:00:00Z

Have you ever really considered what the word “nonprofit” means? Many people know that organizations classified as nonprofits receive benefits like tax exemptions from the government. But if they truly operate without profit, how can the organization function?

Moreover, there is a lot of guidance recommending that nonprofits “operate like businesses.” But if the purpose of a business is to make a profit, what does this guidance actually mean?

These questions and many others are valid, especially if you’re new to the nonprofit world. If you’re considering starting a nonprofit, working with one, or even donating to one, it’s important to better understand what exactly these organizations are and a little bit about how they manage their finances.

In this guide, we’ll cover several key concepts as an introduction to the nonprofit world and the ever-important question: How do nonprofits make money?

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Defining the Term: Nonprofit

Nonprofits are often known for their charitable work, bringing together people who want to work toward something noble.

In a for-profit business, the primary goal is to earn a profit that will be distributed to the owners and shareholders. However, when an organization officially registers to be a federally-recognized nonprofit with federal 501(C)(3) status, they make a promise to reinvest any additional money they make back into the organization itself. In return, they receive a tax exemption.

In non-financial terms, a nonprofit organization is a group of people joining together under a common cause and shared point of view, usually working toward providing a service. In economic terms, it’s an organization that uses surplus revenue to offer more or additional services, for which they are rewarded with tax-exempt status.

Why become a nonprofit?

Nonprofits receive many benefits, especially economic benefits, that may entice an organization to register to become an official 501(C)(3) nonprofit organization. Some of these benefits include:

Tax-exempt status
The ability to obtain private or public grants
A desire to work with an organization that exists as a separate entity from its owner
Status as a limited liability company (LLC), which prevents founders, members, employees, and directors from being held personally responsible for debts incurred by the nonprofit

However, the most common driving factor for an organization to become a nonprofit is to perform meaningful work that makes a difference in the community and the world.

Key Differences Between For-Profit and Nonprofit Organizations

The greatest difference between nonprofit and for-profit organizations is the drive to make a profit. While it’s the primary focus for businesses, it’s not the driving factor for nonprofits. There are other differences in how these two types of organizations operate, however, that are important to take into account.

For-profit organizations:

Are owned by the official owner as well as shareholders who share the profit of the company
Typically pay all of their staff members, except occasionally those hired for an internship
Organize their finances using traditional accounting methods to cover all expenses while still providing a profit for owners and shareholders

Nonprofit organizations:

Have no official owner, but are operated by the executive director who answers to a volunteer board of directors
Typically pay many staff members, but also rely heavily on a network of volunteers who help keep the organization running smoothly while sticking to a tight budget
Organize finances based on a system of fund accounting to ensure all expenses are covered and any restrictions on income are accounted for

Both nonprofit and for-profit organizations must make enough money to cover their expenses and stay afloat. They also both wish to maintain a positive image in the eyes of the public to continue earning money and growing their organizations.

How Do Nonprofits Make Money?

Obviously, nonprofits require money to operate, just as any other business does. Nonprofit organizations must have a reliable income to cover costs related to office space, employee salaries, equipment, marketing, and day-to-day operations — not to mention the services they provide.

There are restrictions on how that money can be made, though, given the organization’s tax-exempt status. Donations, money made from fundraising events, and items sold in the name of fundraising are all fine. And while there are other ways a nonprofit can make money (for example, selling gift baskets that were paid for but never retrieved after a fundraising event), they should be kept to a minimum to avoid losing the tax-exempt status.

Let’s dive deeper into some revenue sources for nonprofit organizations.

Earned Income

While many nonprofits put a great deal of emphasis on donations and fundraising initiatives, these organizations often also make money through earned income. They self-generate funds to contribute to their budget and help the organization stay afloat.

To maintain a 501(C)(3) status, this revenue needs to be directly related to the organization’s mission in order to remain tax-exempt. Earned income can come in many forms, including:

Sales of merchandise
Fees charged for services
Membership fees
Renting out physical space

Earned revenue streams must be reported differently if they don’t share a direct link with the nonprofit’s mission. Therefore, if you work with an organization that relies on earned income and are unsure of its relevance to your cause, always discuss these avenues with an accountant. They’ll help you determine if it falls within the mission and how to report it properly come tax season.

Individual Contributions

If you’ve ever personally donated to a nonprofit, the organization reported your gifts as individual contributions. Individual donations are contributions to nonprofits from general supporters, mid-tier donors, and major givers.

In addition to the range in donation sizes, individual donations may also look different based on what is contributed, how it’s donated, and what the gift even is. For instance, consider the following types of individual donations:

Event contributions. Donations made as a part of event registration or donated at your organization’s fundraising events are given by individual donors and are therefore counted in this category.
Online donations. While it’s easy to think of individual donations as those you solicit via mail or in-person discussions from major donors, the gifts you receive via your online donation page will add up to a significant portion of your individual donations.
Stock donations. Sometimes, supporters will contribute stock holdings to your nonprofit rather than direct funds. These donations are sometimes made through donor-advised funds and often allow the donor to give more compared to if they sold the stock first.
Planned gifts. Planned gifts are those promised to nonprofits but paid out at a later date, often in the form of a will or a trust. These gifts are often large and paid out after a donor passes away.
In-kind contributions. In-kind donations are gifts of items rather than money, but their value must be recorded in your accounting system as donations. They can come either from individual donors or from other organizations.

Nonprofits typically spend a lot of time working to acquire individual donors. They don’t want them to be tempted to take their generosity elsewhere! That’s why nonprofits focus a lot of their efforts on the retention of individual supporters, ensuring they become more and more invested in the cause. Retaining important supporters does wonders to ensure sustainable funds for the future.

Grants

Applying for grants is another important way in which nonprofits make money. Grants are often provided by other organizations to help nonprofits accomplish very specific goals. The grantor needs to make sure that their funding is going to a good cause, that the goal is achievable, and that the interests of the nonprofit align with the mission of the grantmaker. Therefore, your nonprofit needs to consider all of these factors when writing grant proposals.

Some of the organizations that offer grants for nonprofits include:

Government entities
Public charities
Community foundations
Family foundations
Private foundations

One of the most important things nonprofits need to consider when applying for grants is the instructions for the application process. Grantors typically require specific guidelines to be met in the proposals submitted by nonprofits, so they need to carefully ensure they’ve met those guidelines and presented a compelling argument for why they deserve the funds.

Grants can present a challenge as nonprofits are managing their finances. Grant funding is often restricted to the project for which the nonprofit has requested the funds. Therefore, they need a method for tracking the funding they use and ensuring that grant funding is only used for the project at hand.

On top of that, nonprofits need to have an effective management system in place to make sure they can report how funding was spent back to the grantor on the right timeline. This means having a detailed calendar to track deadlines for different grants and effective reporting processes to provide necessary information back to the grantmaking organization.

Investments

One way for nonprofits to make money that is not widely used among organizations is investing. A nonprofit can open a brokerage account just like an individual investor can. Even better, their tax-exempt status means that nonprofits may not even have to pay the income tax on portfolio dividends and gains.

When nonprofits invest their money, they’re usually not doing so as a main source of income. However, it can help organizations build assets. The other reason they may invest is to grow long-term savings and bolster their reserve funds.

The most common form of investment for nonprofits is an endowment. This is a specific type of investment, often restricted by a major donor. They generally require the initial donation be invested, but the nonprofit receives the dividends of that account as regular contributions to the organization. This income may or may not be restricted by the donor, but the dividends provide a sustainable source of income for the nonprofit.

Learn more about how nonprofits make and allocate money.

Talk to a Jitasa accountant

Maintaining the Nonprofit 501(C)(3) Status

When nonprofits register to become 501(C)(3) organizations, they agree to take certain steps to ensure their compliance with federal regulations in return for their tax-exempt status and nonprofit benefits. Essentially, they’re agreeing to reinvest all of their funding back into the organization rather than taking that money straight to the bank for individual gain.

The federal government has requirements to ensure organizations are not abusing their tax-exempt status and are complying with this agreement. To maintain their tax-exempt status, nonprofits must take the following actions:

Always filing their annual tax return with the IRS to report on their gross receipts and how they used their funding over the course of the year.
Acknowledging all donor gifts over $250 by providing a written receipt.
Maintaining a formal process for managing contractors and compensation agreements with outside and inside employees to ensure that it is in service of the public and not private interests.
Familiarizing themselves with and adhering to potential restrictions on lobbying to avoid breaking rules or crossing lines.
Avoiding engaging in political campaign activity that can be construed as favoritism, such as selling mailing lists, renting offices, or paying for political advertising.
Paying taxes on unrelated business income.
Asking the right questions when consulting with a lawyer or nonprofit accountant.

Nonprofits that lose their 501(C)(3) status would need to pay taxes on all of the contributions they receive, so it’s an expensive mistake to make. Not only that, but they would also need to register to become an official 501(C)(3) organization again, which also requires the organization to pay a fee.

Budgeting a Nonprofit’s Money

Just like for-profit companies, nonprofit organizations also allocate their money and create budgets. They do their best to stick to this financial plan, which takes into consideration the estimated revenue the nonprofit expects to receive, their anticipated expenses throughout the year, and the restrictions they encounter with donations and grants.

In addition to planning their finances with an annual budget, nonprofits also create income statements (also called statements of activities), balance sheets (also called statements of financial position), and cash flow statements to better analyze the organization’s financial health and habits.

Any surplus that the nonprofit receives is reinvested back into the nonprofit itself, assuming they don’t use it to pay outstanding debts. Additional funds may also be placed into a reserve fund that the organization can use if they run into financial difficulties.

Nonprofit Budget Template

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How Are Nonprofit Staff Members Paid?

We’ve reviewed a lot about how nonprofits make money as an entire organization, but what about the staff members and founders? At for-profit companies, the owners of the organization and the shareholders split the profit and take it home. But nonprofits work differently.

Remember that nonprofit organizations have founders--not owners. These founders cannot benefit from the net earnings of the organization, although they can collect a salary. Nonprofits can (and do) try to achieve positive revenue with enough leftovers to save for future operational experiences or emergencies. But the profit is never distributed to an individual or private interest.

Nonprofits also often put in place a compensation policy to help them determine how much top executives will be paid in salary and ensure that amount is in line with other similar organizations. This policy outlines the research process for determining salary thresholds.

Past the compensation policy, many nonprofits focus their efforts on offering a well-rounded compensation policy for their staff members. This means they want to offer additional benefits past the monthly paycheck. They also often offer incentives such as:

Increased flexibility. Nonprofits are often more flexible about some day-to-day considerations, including work schedules or work-from-home opportunities.
Better benefits. Nonprofit organizations offer normal benefits for full-time employees (like medical and dental insurance, life insurance, and retirement plans), but they often go above and beyond. Staff members may get opportunities for sabbaticals, tuition reimbursement, or additional vacation time.
Purposeful work. For many people, the opportunity to do important work in service of others is the main driver for joining the staff of a nonprofit.
Good community culture. People like working in environments where they feel respected, valued, and useful to their communities and their leadership. Nonprofits tend to develop a positive company culture that keeps people around.

While nonprofits don’t take home profit in the same way a for-profit does, they still allocate some of their regular funding to take care of staff members. Offering a competitive salary along with the additional benefits of working in the nonprofit sector helps nonprofits keep staff members around longer. Retention is essential for nonprofit financial success as hiring to replace lost staff is so expensive.

The bottom line

Nonprofits don’t make a profit in the same way for-profit companies do. Additional funds aren’t provided back to the owner and shareholders. For nonprofits, it’s ultimately about staying out of the red — having enough money to continue providing services, save for a rainy day, and pay their employees a good wage. Although they aren’t driven by the need to put dollars into executive bank accounts, they do require capital to run and generally act in the interest of continuing service through fundraising.

To talk more about how to transition your nonprofit to a more sustainable financial model or simply discuss your financial situation, contact a nonprofit accountant!

If you’re interested in learning more about how nonprofits make money and how they manage their finances, check out these additional resources:

Nonprofit Financial Management | Best Practices to Know. Once nonprofits have the revenue they’ll use to fund their programs, how do they record it and ensure those funds are used properly? We’ll dive deeper into that question with this article on financial management.
Restricted Funds: What Are They? And Why Do They Matter? Sometimes, nonprofits receive funds from their supporters, but the supporters restrict those funds so they can only be used for certain projects. Learn more about how that impacts nonprofit finances.
4 Types of Donor Analytics and What to Do With Them. Individual donations are a key revenue source for nonprofits, so organizations collect a lot of data about their supporters. See what data they collect and how organizations use this information.

Learn more about how nonprofits make and allocate money.

Talk to a Jitasa accountant

Online auction tools for nonprofits.

2022-08-18T12:00:00Z

Online auctions have shown themselves to be an extremely effective fundraising method for nonprofit organizations. During the COVID-19 pandemic, this method became all the more popular as nonprofits looked for ways to continue their fundraising efforts even when live, physical auction events were not possible. There are many tools now available to facilitate online fundraising events, and they have served to make hosting these events straightforward and manageable. Nonetheless, many nonprofits still hesitate to set up online auctions, uncertain as to how to make them work. To help overcome this hesitance, Auctria presents a guide to online fundraising and online auction tools for nonprofits.

How financial restraints hold nonprofits back from doing more

Financial restraints are an ever-present reality for all nonprofits. As they struggle to build up sufficient financial reserves and raise capital that can be invested in infrastructure and productive activities such as auctions, nonprofits are often hesitant to make financial commitments to resources that could help them advance their cause and ultimately bring in more funds. After analyzing the costs and potential benefits of something like an auction - whether in-person or online - many nonprofits may choose to err on the side of caution and hold back from making the necessary investment. This reluctance to spend precious resources, on something that may or may not bring a return, is entirely understandable, of course. The good news is that online auction tools are extremely affordable and cost-effective, meaning that the overall cost-benefit analysis starts to look a great deal more favorable.

Challenges that nonprofits face with fundraising

Raising funds is a challenge for nonprofits at the best of times, and it is especially so during tough financial times, such as we have experienced over the past two years. Whether at small local charities or major, national and international nonprofits, fundraisers often face the same common challenges. These include:

Reduced individual donations: As donors feel the pinch, they are less likely to give money even to causes they are passionate about. The best way to overcome the resulting drop in income is to look for ways to diversify your income stream.
Relying solely on donations: Closely related to the previous point, many nonprofits make the mistake of depending heavily on donations to raise funds. It is vital to long beyond donations as a revenue-generating tactic. Rather, look at what you have and devise ways to make it work for you. What skills or assets can you monetize? Perhaps a regular online auction will help.
Maintaining trust: For a nonprofit to be a favorable target for any corporation or individual’s patronage, it must always maintain an impeccable record of good governance, financial prudence, transparency and accountability. Sometimes, even those that are very well run, may not do so well at marketing and reputation management. A nonprofit’s image is as important as its day-to-day operations.
Slow digital growth: If your nonprofit does not adapt quickly to the online world, it may lose visibility and support rapidly. This is especially true after the impact of the COVID-19 pandemic, when business, in general, made a mass move into the digital realm. Always look for tools that will enhance your digital fundraising power - such as online auctions - and adopt them as efficiently as possible.

Examples of fundraising events that work for nonprofits

The number of fundraising options at a nonprofit’s disposal depends on the creativity of its leadership. There is any number of events and tools you can utilize to draw in the funds, but here are some of the most popular and effective:

Peer-to-peer (P2P) and community events: P2P fundraising encourages fundraisers to reach out to their communities and engage a larger audience to make contributions to a nonprofit’s cause. Fun, perhaps even competitive events are great examples of P2P fundraising. They include fun runs, walkathons, bikeathons, etc.
Facilitating online donations: Not all potential donors may have the means to hand over large amounts of money at a specific event, but they may be more than happy to make online donations before or after an event. Make sure that your website features easy and secure ways to transfer funds digitally.
Crowdfunding: Looking for a way to bring in a large number of small-amount donors? Crowdfunding is an excellent option. Provided you have a strong cause, compellingly presented, as well as a simple and secure online payment platform, you can raise considerable sums through this method.
Auctions: Auctions are among the most profitable fundraising events around. So long as you have some very appealing wares to sell, donors will be sure to want to get involved. Even if hosting an in-person auction event is not possible, tools such as Auctria make it easy to run successful online auctions.

Why online auctions are a good option for nonprofits

Live, in-person auctions certainly have their advantages, but taking your auction online can also be extremely beneficial. Many nonprofits were compelled to do so due to COVID-19 restrictions, but they have never looked back. Here are some of the benefits of online auctions:

More buyers: With an online auction, you open your event up to an exponentially higher number of potential buyers. Because distance is not a barrier, you appeal, not only to locals, but also to buyers who live miles away, possibly even on the other side of the world.
Convenience: Buyers have the option to bid when and where they want, and even bid on multiple auctions in one day.
Instant engagement: Buyers can go immediately from seeing your advertising - perhaps on your website or a direct email - to making a bid, in a matter of seconds.
Longer bidding window: You can keep your online bidding windows open for as long as you want, which means that buyers have more time to find what they want and make their bids.
Greater choice and control: You get to decide how many items to close over what period. You can close ten items in a few minutes, or you can keep the option open on a handful of items for a few hours.

Why an increasing number of nonprofits are moving towards online auctions

Nonprofits are rapidly beginning to realize the benefits of online auctions. Aside from becoming aware of the advantages listed above, they also understand that online auctions are more affordable and easier to manage. They can access powerful, specialized toolkits, such as Auctria, which make it easy to set up digital auctions. They can potentially increase the number of auctions they host, and thus improve their revenue flow. With the rise in e-commerce, many buyers and donors are also starting to prefer online auctions. Even if the lifting of COVID-19 restrictions means they no longer have to bid online, many of them choose to, because it is so much more convenient and vastly expands their range of choices. This increased choice and convenience provide a win-win scenario that benefits both nonprofits and their bidders.

How nonprofits are making a bigger impact with online auctions

The benefits of online auctions enable nonprofits to plan and strategize auctions that reach a larger audience - or a more carefully targeted audience, whichever is most desirable. As mentioned before, there is no limit to the size of your market when taking an auction online, but also, using online auction tools, you can refine and plan your auctions more effectively.

With online auctions, you will have a precise set of metrics at your fingertips that enable you to review your past auctions and see, for example, which items sold best or how many of your registered bidders actively made bids. You can assess what marketing outlets and tactics draw the most engagement and determine your average donor retention from one campaign to the next.

Using this data, you can plan your marketing and item procurement more carefully and precisely, which empowers you to create more successful and impactful auctions going forward.

Plan and execute a winning online strategy with these tips

Once you get the hang of running online auctions, they become rather effortless to host. Follow these steps to set up your auction.

Choose the right platform: Once you have the right online auction software in place, the rest of the process becomes much simpler. Online auction platforms are specially designed to run these events and build communities of supporters for your nonprofit. There are many options available, so make sure you choose the right one for you.
Establish your fundraising goals beforehand: Set a fundraising goal and aim for it. Once you know where you are going, it becomes easier to know what steps to take. With this knowledge, you can make more precise item procurement and marketing decisions.
Source your sales items: The whole point of a successful charity auction is that you don’t pay for the goods you sell. Unless you already have items in reserve, you will need to canvas donors to provide you with attractive goods and services that you can sell to the highest bidder in the interests of your targeted charity. Almost any desirable item will suffice, from gift certificates to vacation packages.
Plan carefully: Although your auction is taking place in the digital realm, it requires just as much planning as an in-person event. Ask your team the following key questions and have them work together to provide the answers: when is the best time to host the auction? Who should we target with our marketing? What marketing tactics should we use? What items should be included? How long should bidding windows be left open for? Keep your fundraising goals in mind at all times.
Determine fair market values: Ask your donors for the selling prices and market values of the items they give you to sell. You will need this as a benchmark against which to set your starting bids and reserve prices.
Set starting bid amounts: As a rule of thumb, you should set your starting bids at anywhere between 25% and 50% of your items’ market value. You can start even higher on goods such as gift certificates (about 75% of the face value is a good start).
Promote the auction: Create your auction page, complete with listings and photographs of the goods you are selling. You can then use social media and other networks to promote the auction in the build-up to the actual event. Your descriptions should be enticing, yet simple and descriptive. Don’t oversell your items. Instead, focus on providing as much detail and accuracy as you can.
Hold the auction: The most bids will probably come in during the first 48 hours. Be sure to keep promoting it while the bidding is still open, encouraging bidders to continue participating right up to the very end.

Author: Laurie Hochman

Laurie Hochman has a passion for helping groups exceed their fundraising goals. After using Auctria for many auction fundraisers, she joined the team to help others boost their auction fundraising for many wonderful causes.

About Auctria

Auctria is an easy-to-use web-based platform for organizing and running online auctions. You can use the Auctria toolkit to manage the entire process, from first donation to final collection, allowing you to maximize your fundraising. It saves you time and effort, works for the entire team, and easily takes auctions online for the best results. Contact us for more information on our platform and its set of integrated online auction tools for nonprofits.

10 Tips To Create a Profitable Nonprofit Fundraiser

2022-03-01T12:00:00Z

Creating an unforgettable fundraiser that engages your supporters while exceeding your donation goals is what all nonprofits and charities strive for. It means you’re making the most of your initial investment and increasing ROI while bolstering the relationship you have with your supporters. But how do you make this dream a reality?

In this guide, we’ve outlined 10 tips that will help your organization boost your cause’s exposure, generate more donors, and smash your fundraising goals. These tips include the following:

Get started to learn more about how your organization can smash your fundraising goals!

1. Start with a plan and gather your team.

Every fundraiser is different, but they all benefit from having a solid plan in place before your team gets started. Our first essential tip is to gather a great team of motivated people early on, who will ensure the success of your fundraising campaign. Your team will have the following jobs to do:

Handle various planning tasks and all of the event logistics.
Determine your fundraising goals and budget together: Fundraising events with targets raise more than those without.
Brainstorm and create a roadmap to reach your goals (financial and non-financial).
Work out where you can implement diverse multiple streams of income to boost your proceeds.
Decide how and where you will recruit sponsors, obtain in-kind donations and what reward packages you may want to offer.

By recruiting a strong fundraising committee from the get-go, your fundraiser will benefit greatly. Just remember not to overstretch yourself when setting your fundraising goals and be realistic when planning your budget and overhead costs.

2. Get to know your audience.

If you want to get the best out of your fundraiser, it’s essential to understand your target audience’s needs, preferences, and ability to give. Take into consideration your audience’s demographics and engagement history to best promote the opportunity and to determine what activities will engage them.

Demographics

A great place to start researching your target audience is by looking at the demographics. You will gain a valuable insight into your donors by looking at the following indicators:

Age
Gender
Life stage
Geographical location
Employment
Income

Research these points carefully and you'll be able to determine what direction you want to go with your campaign. By applying these demographic indicators when planning the course of your fundraiser, people attending your charity event will be appreciative of you taking their needs into consideration.

For example, you might highlight the wheelchair ramps and accessibility features at your event while promoting it to older audiences. This sensitivity may then demonstrate itself through generous donations, spreading the word about your cause, and growing your audience.

Engagement History

Once you have gathered demographics about your target audience, it’s vital to understand their needs and engagement history with your cause and organization. Factors to consider are:

What are their motivations and ways of thinking? Likes and dislikes?
Do supporters have a history of giving to your cause/organization (one-time, recurrent or major donors)?
What is their prior involvement? Have they volunteered or benefited from your organization’s services?
How did they first find out about the cause?
How have you communicated with them in the past (emails, direct mail, social media)?

Learning about your target audience’s past involvement with your organization or cause will increase the success of your fundraiser by adding a personal and familiar touch to donor engagement.

Whether you are focusing on finding new supporters or concentrating your efforts on building strong relationships and retaining your recurring donors, it’s vital that you get to know your audience well. This will ensure you create a successful and profitable fundraiser that will meet their needs and have them coming back for more.

3. Recruit Great Event Sponsors

When planning a fundraiser, one of the best ways to help finance it, make a profit and expand your outreach is by finding charity event sponsors. Learn to add value to your fundraiser by creating a charity event that builds opportunities for your sponsors and encourages your audience to connect with their brand.

Create event sponsorship packages, which represent donation tiers for sponsors. Sponsorship tiers make your life easier when explaining the rewards and amount of exposure each sponsor is entitled to.

Finally, it’s crucial to remember that the relationship between nonprofits and sponsors should be mutual. While your charity receives funding to help create a successful event, the sponsors should be gaining great exposure and marketing opportunities. If you can grasp how to add value to both your charity event and the sponsor’s brand, your fundraising success will be limitless.

4. Make It Simple To Participate And Donate

People are more likely to give and participate in your fundraiser if it’s simple and convenient. Save your donors time and hassle by offering an easy-to-use, seamless platform that will make them focus on giving generously and having fun participating.

Some of the strategies you can use to make it easy to give to your organization include mobile giving, providing a clear event timeline, and creating contingency plans.

Mobile Giving

Text-To-Donate and mobile giving tools provide a great opportunity to increase donation levels. Text-to-Donate allows your donors to easily give to your organization or charity at any time from anywhere right from their mobile devices.

A Clear Event Timeline

Make life easier for your participants by creating a clear schedule and publishing a program timeline on your fundraising site. Post it on social media, your website, and any other communication platforms you are using.

Contingency Plans

Back-up plans are essential for any fundraising event, especially in the unpredictable times we live in. Make sure you have plan B, C and D - just in case you need them. Offer virtual and hybrid fundraising options so that your donors won’t miss out in the case of an in person event being canceled or for those that just don’t feel comfortable participating in person.

5. Offer Hybrid And Virtual Options To Include Everyone

Consider offering hybrid and virtual participation options to everyone involved. Living in such an uncertain time, it’s crucial to provide alternative models for your registrants to take part and not miss out on anything they’ve signed up for. Don’t forget, the more people that participate, the more likely you are to exceed your fundraising goals.

Inclusivity is key to getting the most out of your fundraiser. Consider that not everyone is mobile or has access to get to an in-person event. Finally, we are still not completely safe from COVID-19 and some supporters may find a live, in-person event daunting. By providing alternative ways to connect, everyone can take part from either their garden, sofa, or office.

Get a clearer idea of how to plan your virtual fundraising budget and revenue with here.

6. Generate Hype On Social Media

Used efficiently when fundraising, a social media campaign can set-off an explosion of energy that boosts awareness of your cause, increases donations, and gains you unlimited and recurrent supporters. Get online and start using some of the social media giants such as Facebook, Instagram, and Twitter to generate hype for your fundraiser and make it an unforgettable event.

Here are a few ideas:

Create engaging and compelling content, which sparks an emotional reaction from your donors and inspires action.
Use Live stream tools to boost awareness for your cause and maximize your outreach among supporters. Most social media platforms have live streaming capabilities such as Facebook Live, YouTube Live, Instagram Live, LinkedIn Live.
Start hashtag challenges to expand your audience, educate your supporters on the story behind your challenge and generate donations for your charity.
Use stories on Facebook and Instagram to engage your supporters and provide an insight of the daily operations of your fundraising event.
Create a sense of urgency - Why not challenge your friends to donate by a certain date? By doing this, you can create an incentive to donate sooner, rather than later.

7. Reward Your Donors And Have Fun With Gamification

Crowdfunding with rewards will motivate your supporters to give more to your nonprofit’s crowdfunding campaigns. If your organization is looking to encourage supporters to donate at a higher level by offering merchandise or other incentives at different donation amounts and increase your fundraiser’s profitability, this is a great way to go about it.

Another way to engage your supporters is to incorporate gamification tools and elements into your campaign. Show them the difference they make, use leaderboards to create friendly competition, or provide prizes to donors who complete certain tasks.

Here are some more gamification ideas that will bring your donors together to give to a good cause, create a healthy sense of competitiveness, and have fun all at the same time:

Free fundraising thermometers are used to monitor the progress of funds raised for an online fundraising campaign
Leaderboards build excitement and competitiveness among your P2P campaign participants.
Online polls are a great tool for audience engagement. Find out what your donors are thinking by simply asking them.
Quizzes are another fun gamification element to boost engagement for your fundraising campaign. You can create quizzes through polls or add the latest ‘quiz stickers’ offered by Instagram Stories, which ask a series of questions and give multiple-choice answers.
It’s human nature to enjoy a little competition, so why not add some fun, interactive games to your campaign to boost donor engagement? Gamification features often increase the sense of urgency when giving, which is great when you want to go beyond your fundraising goals.

8. Host An Unforgettable Event

Creating an unforgettable fundraising event that will stay in the minds of your donors and supporters long after it’s completed is the ultimate goal of any nonprofit event. But how do you make your charity campaign memorable? Consider the following ideas to inspire your team.

Host the event at an interesting or exclusive venue to grab your supporter’s interest.
Create an event theme. Themes help get everyone in the mood with relevant costumes and attire, decorations, and food and drink.
Create personalized merchandise, such as branded t-shirts to sell in your eCommerce store. By doing this your supporters will have something to take away with them and remind them of the event, long after it’s finished. This is also a great opportunity to boost event proceeds.

9. Stay in touch with your donors.

Without generous donors, even the most hyped fundraiser of the year will fail to generate proceeds for its cause. Bear this in mind when thanking your donors for their support throughout the campaign.

During the fundraiser, check in with your supporters with fundraising updates and progress posts, and don’t forget to collect all contact details so that you can personally thank them for their donations and participation. Recognition and validation is priceless in maintaining a fruitful relationship with your donors. Remember that if your followers have had a great fundraising experience once they are sure to return for your future events, so be certain to stay in touch.

10. Show your donors how they are making an impact.

People love to know the impact of their giving, so let them see exactly how their donation will help. Make it clear to your audience what you are raising money for, so they can see exactly how they are personally making an impact. When people can visualize where their money will go and how it will be used, they often feel more comfortable with giving.

Conclusion

All fundraising campaigns are different but one thing they all strive to be is unforgettable. Making your campaign easily accessible to everyone, convenient to donate, popular on social media and engaging will lead you towards creating a memorable and profitable charity event. Remember not to lose sight of your organization’s mission and values and do your best to build lasting relationships with your donors and team in order to host unforgettable fundraisers year after year.

The Employee Retention Tax Credit and Nonprofit Eligibility

2021-07-07T12:00:00Z

The COVID-19 virus brought about unprecedented challenges in every industry. For nonprofits with missions that are directly related to the humanitarian crisis (for instance, those who work with healthcare or to address food insecurity), need spiked. For these organizations, the community rose to the challenge and raised more money than ever before.

However, this need still outshined the revenue raised at times. And on the other end of the spectrum, most organizations with missions that did not immediately correlate with the pandemic experienced a drop in fundraising revenue outright.

Everyone in the industry is, therefore, very grateful for the additional aid provided by the federal government during this challenging time. The federal government passed a series of legislation actions designed to help businesses and nonprofits directly impacted by the negative effects of the virus.

A crucial part of the legislation passed was the Employee Retention Tax Credit (ERTC) and it’s changed slightly throughout the duration of the pandemic.

In this guide, we’ll be covering the background of the ERTC in a general sense and how it impacts your organization.

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Here at Jitasa, our name literally means, “the spirit of serving others.” We recognize that your organization serves your community every day and we want to be a part of that! By providing crucial financial information and services for nonprofits, we want to serve you so that you can serve the world.

That’s why we cover important topics like the Employee Retention Tax Credit for nonprofits. You can use this information to guide your organization to greater success, even though we just experienced one of the most challenging years in recent history. Let’s start at the beginning with a definition of the ERTC.

What is the Employee Retention Tax Credit?

The Employee Retention Tax Credit is a refundable tax credit provided by the federal government to financially assist organizations that have been negatively impacted by the COVID-19 pandemic.

This tax credit is designed to help reward and financially support organizations who are able to retain their employees throughout the challenges of the pandemic. They’ll be able to receive a tax credit when they file their taxes or retroactively adjust their forms for 2020 and 2021. Keep in mind that IRS legislation can and does change, so it’s important to stay updated with the latest information from the source.

History of the ERTC

As we mentioned, the ERTC was developed in response to the COVID-19 pandemic. This means that it came about alongside the various pieces of legislation passed by the government during that time. Here, we’ve gone through a summary of the various pieces of legislation passed and how the ERTC was addressed in each one:

CARES Act

Passed March 27, 2020

This was the first piece of legislation passed in response to the COVID-19 pandemic to help organizations handle the negative financial implications of the virus. The CARES Act implemented certain policies such as the Paycheck Protection Program (PPP), Economic Injury Disaster Loans, additional aid for unemployment benefits, and more.

The CARES Act implemented the first iteration of the Employee Retention Tax Credit. In this version, it was very easy to receive the maximum credit offered as it provided a tax credit of 50% of the wages paid to retained employees up to $10,000. That meant that as long as your employees were paid at least $10,000, your nonprofit could max out the tax credit at $5,000.

Consolidated Appropriation Act

Passed December 27, 2020

The Consolidated Appropriation Act provided additional PPP loans for organizations with a maximum amount of $2 million. This Act also extended other certain programs from the CARES Act into 2021, such as the emergency unemployment relief and (of course) the employee retention tax credit.

This Act extended the ERTC to also include those who receive funds from the PPP, a provision that had not been allowed in the initial CARES Act. Therefore, if you received PPP funds, you can also claim the ERTC on top of that funding. Plus, the potential for credit claims was increased. Nonprofits could claim credit against 70% of wages, up to $10,000 for the first two quarters of 2021.

While the PPP and ERTC were combined in this act, your organization cannot take the ERTC credit against the wages paid with PPP loans. You can qualify for both programs independently, but they’re not able to be overlapped.

American Rescue Plan Act

Passed March 11, 2021

The American Rescue Plan Act is the most recent legislation to go into effect at the time of writing this article. This again extended the PPP to cover organizations of over 500 employees, allowed PPP recipients to obtain Shuttered Venue Operator Grants (SVOG), and provided vaccine funding as part of the benefits for organizations.

In terms of the ERTC, this legislation maintained that organizations could claim 70% of wages per quarter, extending the benefits throughout all of 2021 rather than just the first two quarters. The maximum amount the credit can be taken against is still $10,000 per quarter. This means that organizations can take up to $7,000 total per quarter of 2021, adding up to $28,000 throughout the 2021 calendar year.

While this was how the information was originally presented in the American Rescue Plan legislation, the IRS has released new information regarding the eligibility for ERTC funds in the fourth quarter of 2021. We’ll cover those changes later.

Employee Retention Tax Credit Qualifications for Nonprofits

A maximum tax credit of $28,000 during 2021 sounds like a pretty good deal! Unfortunately, not all nonprofits qualify for the ERTC. In general, there are two qualification standards that organizations have to meet in order to be eligible for this funding:

You’ve experienced a 50% decline in gross receipts in any quarter of 2020.
You’ve experienced a “full or partial suspension of operations during any calendar quarter because of governmental orders that limited commerce, travel, or group meetings due to COVID.”

The first of these qualification standards is fairly easy to determine. You simply have to conduct a calculation to determine if your gross receipts have experienced a decrease steep enough to qualify.

The second qualification is slightly more challenging to determine. There are many questions around what it means to have “fully or partially” suspended your operations. The IRS even compiled an ongoing list of FAQs that help determine this qualification.

If you’re not sure if you qualify for ERTC funds, you can always reach out to a nonprofit accountant to get more information. They’ll be able to help you conduct the calculations to see if you qualify under the first provision.

However, only you will know if you qualify under the second provision. A qualified nonprofit accountant can help you with some leading questions, but you’ll need to determine whether or not you can apply for these funds.

ERTC Changes for Q4 2021

The IRS released guidance on the Infrastructure Investment and Job Act that essentially eliminates the ERTC for virtually all organizations for Q4 of 2021. The only organizations that would qualify are those who are a "recovery startup business", which is defined as follows:

You must have 1 or more employees (other than >50% owners and certain family members of theirs)
You must be a startup company and started operations on or after 2/15/2020
You must have gross receipts under $1 million dollars for 2020 and 2021, each year.

If you have been applying for the credits retroactively, there is no action needed. You simply won't apply for Q4 2021. If you have already applied in advance for the reduced tax withholdings for Q4 with your payroll provider in anticipation of being eligible for the ERC, you will need to pay this money back to the federal government.

Ready to Discuss Qualification for the ERTC?

Contact Jitasa

How to Claim the Employee Retention Tax Credit

At this point, you might already have an inkling about whether or not your organization qualifies for ERTC funding. Now, you’ll be wondering how to claim it.

Work with a nonprofit accountant who can help you retroactively claim the tax credit for 2020. Even if you’ve already filed your tax forms for 2020, that doesn’t mean you can’t claim these funds. You have up to three years to claim the credit, but we recommend that you start talking to an accountant about these funds sooner rather than later.

Why should you go ahead and start discussing your options with an accountant? An effective firm won’t just fill out your forms and go about their business; they’ll talk to you about your options and how you can get the most out of this funding. For example, here at Jitasa, we recommend:

Dispersing your PPP loans throughout the year if possible. Nonprofits that claim the PPP loans are often tempted to use the entire amount at once to pay their employees. However, this could prevent you from paying employees the necessary $10,000 per quarter in out-of-pocket wages to claim your full ERTC funding. When you plan on dispersing your funding throughout the year, you can gain more long-term value by paying the necessary $10,000 out of pocket in wages each quarter that will allow you to claim the maximum 70% of ERTC funds during 2021.
Retroactively claiming the tax credit. If you disperse the PPP loans throughout the year, it works to your advantage to retroactively apply for ERTC funds. You’ll be able to more easily show how you’ve spent funding per quarter to receive as much assistance as possible.

Talk to your accountant about the options available to your organization and the steps that you can take to maximize your funding from this legislation.

Then, when it’s time to claim your tax credit, your accountant will be able to help file your organization’s Form 941 with the IRS. This is the form that allows you to claim your ERTC funding.

The federal government passed legislation to help your organization throughout these challenging times. The pandemic lasted longer than almost anyone could’ve predicted, so it will understandably take some time to recover as well.

Be sure you’re making the most of the funding provided by the federal government, including the employee retention tax credit if you’re eligible. Talk to an accountant today to discuss your various options to maximize your financial situation in 2021 and moving forward. With a solid plan in place, you’ll be able to effectively recover from the hardships of the pandemic.

If you’re interested in learning more about the legislation designed to help organizations during the COVID-19 pandemic, check out these additional resources:

The American Rescue Plan: The Nonprofit Complete Guide. Learn more about the latest of the legislative changes made in response to the pandemic and how it impacts nonprofits.
Jitasa Bookkeeping and Accounting Services. Discuss your options regarding government funding with a professional by reaching out to a trained Jitasa accountant.

T-Shirt Fundraising: What Your Nonprofit Needs to Know

2021-06-15T11:00:00Z

Fundraising is at the heart of any nonprofit’s strategy—not because it’s the most important thing that nonprofits do, but because it enables nonprofits to do the crucial work for their mission through impactful programming.

When your nonprofit designs its fundraising strategy, you initially come up with financial goals that relate directly to the philanthropic objectives for the year. Then, you come up with the fundraising ideas and campaigns that will best help you reach those fundraising goals.

One such fundraising idea that’s proven to be wildly successful for all types of causes is selling t-shirts.

Selling branded merchandise is a classic fundraising idea that nonprofits frequently use to maximize other fundraising opportunities or to raise funds as an independent campaign. Either way, it’s important to recognize how you can leverage these campaigns to the best of your abilities.

That’s why we’ve compiled this guide— to help nonprofit professionals like yourself to maximize your next t-shirt fundraising campaign and get as much from it as possible. Here’s what we recommend:

These types of campaigns have the power to connect you with more supporters and provide donors with something in return for their generous contributions. Let’s dive into these considerations so that you can get started planning your next t-shirt fundraiser.

Choose How You’ll Sell & Distribute Your T-Shirts

When you sell merchandise as a part of your fundraiser, you’ll need to determine how you want to sell and distribute your shirts to your supporters. Depending on your needs, there are two options for you to consider:

Online. When your supporters order your t-shirts directly online as part of an independent fundraiser, they’ll likely expect to receive the t-shirt in the mail. This means it will need to be shipped either from your organization or from the manufacturer.
In-person. Often, organizations like to include a t-shirt fundraiser as a part of an event, like 5K races. In this case, you might decide to include a t-shirt as a part of the event registration package, where the event attendees will either receive the shirt in the mail or pick it up at the event. Or, you might sell t-shirts at the event itself, requiring you to do a bulk order beforehand.

We recommend choosing the online option. When you sell directly online, you won’t have the upfront expenses associated with bulk ordering, creating a risk-free fundraising campaign. Set up an online store with a platform that offers direct shipping. This enables your supporters to order online, pay immediately, and receive their merchandise quickly with minimal effort from your team. You’ll simply need to promote the opportunity among supporters.

The best t-shirt fundraising platforms will allow you to sell directly through their site and ship the shirts directly to your supporters for you. They’ll also provide a bulk ordering option so that you can purchase some shirts ahead of time for events and in-person opportunities.

Consider What to Look for in a T-Shirt Fundraising Platform

If you’re selling your shirts online, then you’ll likely use a platform that specializes in t-shirt and apparel fundraising. But if you’re new to apparel fundraising, then it can be challenging to determine which platform is the best choice for your nonprofit to use.

To start, we recommend considering your own fundraising campaign and how you’re reaching out to your supporters. Then, determine what you’ll need in a platform to meet their needs. You should also consider the potential overhead costs associated with running the campaign because the purchase of a new t-shirt fundraising platform would fall under that category.

All fundraising campaigns have overhead expenses that come from the upfront costs associated with hosting and operating the fundraiser. However, you should try to cut back on these overhead costs where possible (and where it won’t hurt the quality of the fundraiser). Ideally, look for a t-shirt fundraising platform with no upfront costs.

To get the most out of your t-shirt fundraiser, look for the following qualities in your merchandise provider:

No inventory costs
No platform fees
No print minimums
Low payment processing fees
Discounted processing fees for registered 501(c)(3) organizations

All of these features will help you obtain the most revenue possible from your next t-shirt fundraising campaign.

Be sure to also look for a platform that offers robust design options, multiple types of merchandise, and the ability to create your own online store. Between these features and the above financial benefits, you’ll be set to create the best possible campaign for your organization.

Design Your T-Shirt with More Than Your Logo

When you’re designing your t-shirts for the fundraiser, you’ll see a lot of advice telling you to add your logo to your shirt so it’s branded to your organization. This is perfectly good advice! But you should take it a step further and add more than just your logo to your shirt.

T-shirts provide a canvas to inspire change and intrigue donors, encouraging them to get involved with your organization’s activities. They provide a platform for creativity and an opportunity to represent your entire mission. Use the space your t-shirts provide to showcase your nonprofit in new and innovative ways.

Leverage the latest t-shirt design trends to provide additional intrigue for your merchandise and inspire donors. For instance, some of these trends include:

Multicolored words. You don’t need a large portrait or anything to create an intriguing shirt. All you need is a catchy phrase and a color pallet to create an intriguing design. Try to keep the colors within the pallet of your organization’s brand.
Handwritten typography. Again, you can maintain simple text as the primary focus of your t-shirt. To add some visual interest, design this text to look like unique handwriting.
Illustrative figures. While the simplest t-shirt designs might feature a photo of a human figure as the focus of the design, you can add additional interest to your design by making them more illustrative. These figures range on a scale of realism to abstract, providing plenty of choice for your t-shirt design.
Animal portraits. Especially for organizations that work closely with animals, a portrait might be just the thing to engage and intrigue your supporters. Ask a local artist or a talented team member to draw the portrait and add a catchy caption to it for your shirt.

Your brand is more than just your organization’s logo. It’s the words you use, your colors, and the visual portrayal of your mission. Knowing some of the trends and the creative potential for your t-shirt can help you come up with some more visually appealing and unique t-shirt ideas that will engage and draw your audience.

Consider How the Fundraiser Fits into Your Strategy

As you plan your t-shirt fundraiser, you should be sure you understand exactly how this particular fundraiser fits into your larger strategy.

At the start of the year, you put together a budget and designed a fundraising strategy to help guide you toward your goals. What purpose does your t-shirt fundraiser play in this strategy? It might, for instance, play one of the following roles:

Support a campaign for a new program
Diversify your event revenue streams
Contribute to your nonprofit’s annual fund
Provide funds for a specific aspect of your current programming

Understanding how your fundraiser fits into your strategy isn’t just for the good of your nonprofit. It’s also helpful for guiding your communications with your supporters. Your supporters are driven by the impact they can have on your organization’s mission. Explaining how your t-shirt will support the mission is more likely to capture their attention compared to just stating that it will help your nonprofit as a whole.

Additionally, when your t-shirt fundraiser supports a specific program or plays a key role in a particular event, you can incorporate that idea into your t-shirt design. T-shirts that commemorate the fun times a supporter had at your event can make a tempting souvenir, so make the most of it with a specific event-relevant style.

Say Thank You After The Fundraiser Ends

After your t-shirt fundraiser ends, the work isn’t quite over yet. Don’t forget to say thank you to all of your supporters who purchased a shirt. This promotes stewardship of your existing supporters, encouraging them to return time after time to continue supporting your nonprofit. While many organizations are incredibly focused on acquiring new supporters, the real trick to growth and a sustainable strategy is retention.

The first step to retention is appreciation. Make sure your supporters know what their support means to your organization and for your mission. After you’ve sent an immediate thank-you and purchase confirmation, you might decide to leverage appreciation strategies such as:

Writing heartfelt thank you notes to your supporters who participated in the campaign
Calling supporters to say thank you and inform them of other upcoming engagement opportunities
Provide a thank-you note or a small gift in the package with the t-shirt you sell (like a matching face mask)
Invite supporters to post a picture in their new t-shirt on social media platforms, then like and comment on the post from your organization’s account

Growing up, you always learned to say “please” and “thank you,” so you know that showing appreciation is polite. But it’s also a key strategy to help nonprofits retain their supporters and engage them for the long-run.

In Conlcusion

T-shirt fundraising is a classic fundraising idea that’s incredibly helpful as an independent campaign or as an add-on for other fundraising strategies. When you carefully plan and execute your t-shirt fundraising strategy, your campaign will maximize revenue, spread the word about your cause, and help secure long-term support. Happy fundraising!

Author: Kevin Penney

Kevin Penney has been working in digital media for over ten years. He’s the CMO and co-founder of Bonfire, an online platform that’s reinventing the way people create, sell and purchase custom apparel. He enjoys strategizing, working closely with his team, and hockey, exactly in that order.

The American Rescue Plan: The Nonprofit Complete Guide

2021-05-18T12:00:00Z

The COVID-19 pandemic shut down the world as we knew it. All of a sudden, all of our interactions with other people, companies, and nonprofits were forced to take a 180-degree turn. Many organizations and small businesses closed their doors, doomed to never open them again. Luckily, your organization wasn’t one of those unlucky organizations. You kept your doors open and continued moving forward, potentially even thriving during the pandemic.

In an attempt to help the country sustain a healthy economic situation during these challenging times, the government passed legislation to assist small businesses, individuals, and nonprofits, helping them stay on their feet and bounce back in the midst of the pandemic. These acts started with the CARES Act, passed March 27, 2020. Then, the second stimulus bill was passed on December 27, 2020.

Now that we’re knee-deep in 2021, the federal government passed a third stimulus bill, The American Rescue Plan, effective as of March 11, 2021. This act extended some existing programs, like the Paycheck Protection Program, and provided another stimulus check for individuals. But you may be wondering how this legislation impacts your nonprofit.

That’s what we’ll cover in this piece — how nonprofits just like yours have been affected by The American Rescue Plan. Here at Jitasa, we’ve helped organizations just like yours take advantage of each stimulus package, and we’ll continue to do so as the situation evolves.

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Ready to learn more about The American Rescue Plan for nonprofits? Let’s dive deeper.

1. The American Rescue Plan Overview

Let’s start with a large-scale view of The American Rescue Plan. Our mini guide below describes some of the attributes from the act that most affect nonprofits like yours:

A lot of this information may look like arbitrary numbers and metrics. However, it’s important to understand how each of these sections of The American Rescue Plan can impact your nonprofit. That’s why, for the rest of the article, we’ll dive deeper into each of these aspects and discuss how your organization could be impacted.

2. The Latest on the Paycheck Protection Program

One of the ways that the federal government is supporting small businesses and organizations is with the Paycheck Protection Program. In the original CARES Act, this was a maximum loan of $10,000,000 to help support the annual salaries for organizations.

Now, with The American Rescue Act, nonprofits with up to 500 staff members are able to extend their use of the program. The government contributed an additional $7.25 billion to the program. Nonprofits who applied can continue supplementing their funds budgeted for salary with forgivable government loans. Jitasa has even been offering to help nonprofits apply for this program since its enactment.

Upon publishing this piece, the application deadline for this extended program has passed. It ended on March 31st, 2021. However, that doesn’t mean you shouldn’t discuss other finance options with a skilled nonprofit accountant. If you’re working on how to make ends meet, reach out to Jitasa to talk to a professional about your organization’s financial situation to make a plan for the rest of 2021.

Related to the Paycheck Protection Program is the Employee Retention Tax Credit (ERTC). Under the first CARES Act, this program was not applicable to organizations who also received the PPP. However, in December of 2020, this program was extended to also include those who had received PPP funds. The ERTC is also now available from January 1, 2021, through June 30, 2021. The benefits of this program during this time may equal as much as $7,000 per calendar quarter.

Talk to a Jitasa professional today!]

3. Federal Coverage for Unemployment

If your nonprofit self-insures unemployment benefits, you’re in for some good news! The American Rescue Plan will help with these insurance expenses. The act modified the original benefits put in place by the last stimulus package to include the following two changes:

The federal payment for a portion of unemployment insurance expenses has been extended through September 6th, 2021.
The federal coverage for reimbursement of these expenses increased from 50% to 75%.

These changes are enacted for 501(C)(3) classified nonprofit organizations, so organizations outside of this classification should double check their eligibility for this program. Also, don’t forget that this means you’ll still need to pay a portion of the unemployment insurance, so be sure to work that into your budget.

More good news? The federal coverage for reimbursing nonprofits is available for any unemployment claims made during this period, not only those related to COVID-19.

4. Shuttered Venue Operators Grants

The Shuttered Venue Operators Grants (SVOG) consist of funds that are designed to help organizations that have experienced a significant decline in revenue due to the COVID-19 pandemic. It was originally a part of the Economic Aid Act, the second stimulus package signed into effect on December 27,2020.

To be eligible for SVOG funds, your organization must demonstrate a decline of 25% in earned revenue in one calendar quarter of 2020 compared to the same quarter in 2019.

The American Rescue Act amended the original version of SVOG, adding an additional $1.25 billion to the budget and allowing PPP recipients to also apply for these grants. If your organization has also applied for the Paycheck Protection Program, that means you’ll also be eligible to receive funds as a part of the SVOG.

Here are some tips to keep in mind if you decide to apply for SVOG funds:

You might be required to conduct a nonprofit financial audit. The funds you receive through these grants count as aid provided by government agencies. If you receive more than $750,000, according to the Single Audit Act, you’ll need to conduct a financial audit at your organization. Be sure to keep records of your funds and your use of them for this possibility.
There may be limitations on how you can use SVOG funds. These grant monies must be used for payroll costs, rent or utilities, payments to independent contractors reported on a 1099-MISC, and other ordinary and necessary expenses. Be sure you accurately track where all of these funds are allocated using grant management best practices. This will help keep all of the expenses straight and prove you used the funds correctly.

The organizations intended to receive these funds are considered shuttered venues, such as theatrical producers, performing arts organizations, museum operators, talent representatives, and theater operators. If you fall into this category, you could receive some additional grant funds from the American Rescue Act, congratulations!

If you have additional questions regarding SVOG funds, you may find the answers provided on the FAQ sheet provided by the U.S. Small Business Administration.

5. Grants for State and Local Government

Throughout the COVID-19 pandemic, one sector that has been struggling immensely is state and local government. At the height of the pandemic, the sector lost 1.4 million jobs and experienced a steady decline in revenue. That’s why The American Rescue Plan included $350 billion to help state, local, and tribal governments to help support public health needs.

According to the Department of Treasury, these $350 billion in funds will be divided as such:

$195 billion for states with a minimum of $500 million for each.
$130 billion for local governments with a minimum of $1.25 billion per state and allocated to local governments within that state.
$20 billion for tribal governments.
$4.5 billion for U.S. territories.

These funds do have stipulations, but they are intended to help communities recover from the economic downfall during the pandemic. That’s why governments are able to use the monies to support the continuation of a strong public health response, especially as vaccinations are administered.

So how do the grants for state and local governments impact your nonprofit?

Not only will the state and local governments be using these funds to strengthen their crisis response in your community, ultimately helping everyone recover, but they may also provide assistance for nonprofits.

Under the idea of supporting community recovery, state and local governments may use their grant monies to provide assistance to households, small businesses, nonprofits, other impacted industries, and to show support for essential workers.

6. Potential Incentives Past The American Rescue Plan

You may remember that in the CARES Act, there were certain incentives for individuals to continue supporting nonprofit organizations. Individuals who took the standard tax deduction could also take an above-the-line deduction for up to $300 in charitable contributions. This was then extended in the second stimulus package, passed in December 2020.

Unfortunately, The American Rescue Act doesn’t offer this particular incentive for nonprofit contributions. However, another act has been presented that would extend and modify the deduction allowed for charitable contributions during 2021. This piece of legislation is called the Universal Giving Pandemic Response and Recovery Act.

This legislation has not yet been passed into law.

This legislation, if passed, would allow taxpayers who generally take the standard deduction on their returns to take a below-the-line deduction for charitable contributions valued at a third of the standard deduction.

If you’d like to track the progress of this Act, you can do so here.

Even if this is not passed into law, these bipartisan bills are presented in an effort to help nonprofit organizations like yours to stay on your feet despite the negative economic impacts of the pandemic.

Wrapping Up

The American Rescue Plan is designed to help nonprofits, individuals, and businesses all stay afloat during the COVID-19 pandemic. Throughout these challenging times, it’s important that your organization stays on top of all of the relief opportunities and efforts put forward by the federal government. They are only designed to provide assistance!

If you’re not sure how your organization can make the most use of the relief programs or how the different finance opportunities fit into your budget, you can always talk to a professional.

Here at Jitasa, we want to help! Reach out to a trained nonprofit finance expert on our team to discuss The American Rescue Plan and how it can benefit your organization.

If you’re looking for more information about nonprofit finances to help get you through these challenging times, check out the additional resources below:

Nonprofit Accounting: A Guide to Basics and Best Practices. This guide to nonprofit accounting can help determine the impact The American Rescue Plan can have for your organization.
Form 990 Filing: Your Essential Guide to Nonprofit Taxes. Keep accurate records of all of your benefits from The American Rescue Plan to keep them for your Form 990. Learn more about this important form with this guide!

If you are seeking assistance with ERTC filings by becoming a Jitasa Client please contact jon.osterburg@jitasagroup.com

What Nonprofits Should Know About Overhead

2021-03-23T12:00:00Z

Discussions of nonprofit organizations and finances can quickly become murky because so many people simply do not understand that nonprofits still deal with money. In fact, they’re at least as aware of it as their for-profit peers. One area in which nonprofits sometimes struggle is in knowing how to approach and deal with overhead.

If your organization struggles to sell the concept of overhead to donors who delight in offering money for the more “meaningful”, this one’s for you!

The cost of service

Doing the work of your organization takes dollars, and that extends beyond the actual money you use for the flashier aspects of service. Indirect costs make the magic happen, even if they aren’t as easy to sell. The money it takes to operate a nonprofit organization, also called overhead, is an essential consideration for nonprofit budgeters.

Any money spent on things like management, administration, and general costs fall into the overhead category, and these can vary greatly. From paying business consultants to training staff, overhead costs are many. Generally, you can categorize overhead into a few categories, which include indirect costs, administrative costs, shared costs, and fixed costs.

How overhead is calculated

Calculating overhead, like most things in the nonprofit world, is accompanied by a set of rules. Most nonprofits calculate overhead from information gathered from federal Form 990, submitted each year to the IRS. Form 990 categorizes a nonprofit’s expenses into three categories, which are Program Services, Management and General, and Fundraising. By adding Management and General expenses to Fundraising and then dividing by total expenses, you reach an official overhead cost.

Where mistakes happen

Although this formula is fairly simple, people make mistakes regarding how to categorize certain expenses. Things get incorrectly lumped together or carelessly combined, resulting in inaccurate calculations. An example of this might be employees who attribute their time Program time to Admin time, etc. If you aren’t paying close attention, it can be easy to under or overestimate your actual overhead.

When we’re talking about fundraising expenses, there is even more room for error. In the course of offering services, a nonprofit might issue an invitation to a fundraising event. Does this qualify as a program cost? Or is it fundraising? Likely, it is a program cost, but a misattribution can make overhead seem much higher.

Why does it matter?

All organizations, whether for profit or nonprofit, must have overhead. Of course, finding the right balance is key. If a nonprofit spends most of its dollars on a luxurious office far away from the population they serve, it might raise a few eyebrows. However, if a nonprofit frequently reports absent employees because of a recurrent mold problem in their basement office, you’ve also got a problem. Learning to manage your nonprofit budget ensures that your overhead falls exactly where it should. Most nonprofit organizations actually underspend on overhead, but being aware of what it is and how you’re managing it is crucial to your continued success.

Common types of overhead for nonprofits

Although each organization is different, there are some common types of overhead that you can probably expect to see within your nonprofit. If you rent or own office space, it is obviously overhead. But so is insurance, maintenance for your building, utilities, internet, staff, independent contractors, accounting staff, and costs associated with fundraising.

Too much and too little

Especially in the nonprofit world, there’s a lot of talk about too much and too little, and this definitely applies to overhead. In some states, too much overhead will even revoke your nonprofit status. For other nonprofits, the public perception of high overhead damages their reputation and discourages potential donors from writing those checks. Charity watchdog organizations and even the Better Business Bureau can also raise or lower an organization's ratings and rankings based on overhead. This is a tricky area because there is no exact right formula for overhead costs amongst nonprofits, since there is such a range in size, location, and services.

When overhead is a good thing

While supporters understandably want the bulk of their donated dollars to go toward service, overhead costs can signify a well run organization that treats employees well and effectively manages a business. It is often said that you’ve got to spend money to make money, and that is even true in the nonprofit world. Organizations that manage overhead (but still have it), often are better run, have happier employees, and turn those dollars into more dollars that help the community in bigger, substantial ways.

Instead of looking at overhead and questioning an organization, it is useful to shift our thinking to identify how well a nonprofit (or any business, really) turns overhead into services. If things are working efficiently, even a high dollar overhead will make up a very small percentage of money coming in.

The cost of too little

In an article published in Stanford Social Innovation Review, writers Ann Goggins Gregory and Don Howard referred to a focus on extremely low overhead as the nonprofit starvation cycle, noting that it leaves nonprofits “so hungry for decent infrastructure that they can barely function as organizations–let alone serve their beneficiaries.

Indeed, the fear of overhead can often lead to nonprofit organizations that don’t last, which is the last thing we want. Low overhead can result in employees who lack training, workspaces that are unsafe and unpleasant, and computers that can’t accurately meet the needs of the people they’re meant to serve.

This cycle often begins with unrealistic expectations about how much it costs to run an organization, followed by spending too little, and finally, underreporting expenditures to meet the unrealistic expectations of founders. Gregory and Howard suggest that the cycle can be stopped by simply managing expectations about what it costs to run a nonprofit in the very beginning.

The lasting results of low overhead

Extreme caution over managing overhead can lead to drastically underfunded organizations, which often ask too much of employees, who are then quickly taxed into finding a different, less demanding job. High employee turnover is expensive, which leads to–you guessed it–higher overhead costs.

What does it all mean?

Overhead is obviously important, and understanding how it operates within your organization is essential to your success. When you can effectively identify, define, and manage overhead, your nonprofit stands a greater chance of flourishing. With streamlined services that operate efficiently, your overhead becomes more manageable, which is the goal.

But how exactly can a nonprofit do this? It doesn’t have to be complicated.

The path to managing overhead

Lower overhead keeps nonprofits in better standing with the government and community, but it also allows more money to go toward the heart of the nonprofit, which is the services it provides. Imagine if more dollars every single month could go toward those causes–the difference an organization could make becomes limitless.

Check your calculations

Your first step to managing overhead is to make sure that you’re calculating things correctly. Consider a formal policy or handbook that helps define what overhead is and how common things within your organization should be categorized. Set clear rules, and reach out to a nonprofit expert if you aren’t sure about something. Begin your shift toward lower overhead by truly understanding the among of overhead you’re dealing with in the first place.

Open up the conversation

Two brains are usually better than one when it comes to new ideas, so don’t hesitate to get your employees and board members involved in brainstorming ways to reduce or more effectively use overhead. They may be connected to a service provider who can offer a lower rate, know an expert who will increase the speed of a particular operation, or know a cool trick that keeps electricity costs down.

Learn how to communicate

No matter your overhead, you’ll need to be able to effectively tell the story of why your nonprofit spends what it does. Figure out how you can present your expenses in a way that emphasizes their importance to your organization and the services you’re able to provide. Set people up for lasting success by clearly communicating the true cost of running your organization from the very beginning.

A better way to evaluate nonprofit performance

Finally, know that, while looking at overhead is a seemingly easy way to determine how well a nonprofit is doing or whether or not a person’s dollars should find a home there, it isn’t a great way to evaluate nonprofits. Instead, nonprofits should be evaluated based on more complex data, including reach, overall performance, cause you care about.

There are also a breadth of organizations designed to help donors sort through the huge variety of nonprofits out there, and if you’re working for or with a nonprofit, you’ve likely heard of some of them. These include, but certainly aren’t limited to:

BBB Wise Giving Alliance
GuideStar
Charity Navigator

Each of these organizations evaluates nonprofits based on more complex criteria that should give donors and communities a better look at the work they’re doing. Alternatively, a person could simply reach out to an organization to find out more about them and determine whether or not that particular nonprofit is the type of organization they’re looking for.

Nonprofit Cash Flow: Nine Tips for Better Financial Management

2021-02-16T12:00:00Z

Good financial management is a crucial part of nonprofit strategy, ensuring the continued existence of the organization and the services they provide. Budgets can be more complicated because of additional barriers to raising money, regulations governing how money is used, and a focus on service over profit. All of this requires that nonprofits exercise exceptional financial control. Whether you manage all aspects of your finances internally or utilize external contractors and organizations for things like nonprofit accounting, managing your cash flow is crucial.

If you’re looking for some easy ways to better manage your nonprofit finances, read on!

Know your costs

Often, we make guesses about how much things cost and consider it ‘good enough’. When it comes to establishing good finances within your organization, a guess isn’t going to cut it. Spend some time truly identifying what your exact costs are so that you’re in a better position to fundraise appropriately. Plan for your future programs and services and get the best estimate of costs that you’re able to.

Make a budget

We’ve all heard that budgets are important for finances, but people and organizations aren’t always good at enforcing and maintaining a budget. One of the best things you can do to protect your financial health is to be strict about budgeting. Of course, there’s room for some flexibility within a budget (it is only a guide, afterall), but treating it seriously is essential.

Although your internal staff will likely create the budget, once you’ve created it, you’ll need to get board approval. This helps hold organizations accountable and ensures a thoughtful, thorough document. Once your budget passes review, it will guide your decisions in the months to come, especially if you commit to reviewing it with regularity. Build in some space for flexibility, but also approach the year knowing you’re going to do your best to keep close to your budget.

Focus on accountability

One of the places nonprofits get into financial trouble is in having too little visibility in their finances. It might make sense that an organization wouldn’t want to showcase things like budgets and operating expenses, but this isn’t actually the case. One of the ways you can protect your organization is by ensuring that everything happens out in the open. What does this do, exactly? It helps prevent theft, curtail spending, and even enforce federal rules.

When there are a lot of eyes on finances, it can reduce disappearing money, whether from theft or mistakes. This doesn’t mean that your volunteers and employees have access to everything, merely that multiple individuals act as checkpoints at certain places in the budgeting process. This might include contracting with an outside organization for certain aspects of your nonprofit finances, or it may simply be involving board members or leadership in multiple steps. There is no exact right way to do this, as it will depend upon your organization, but ensuring that all the dollars don’t end up under the control of one individual is key for all organizations, big or small.

Share the responsibility

Making sure that every person within your organization is financially literate can be a great way to improve the organization’s finances for a number of reasons. The first is that you’ll be better able to catch mistakes and assign oversight within your organization. The second is that your employees will likely have better control over their own finances, which will make them less likely candidates for internal theft.

Generally, it cannot hurt to make sure each employee and volunteer that spends significant time in your organization has a good handle on money management. Consider hiring a trainer to come in and give a few classes or rely on the plethora of great, free tools available throughout the internet. Often, board members are great resources for this sort of thing, so don’t hesitate to ask for the kind of help you need.

Maintain a reserve

A great way to make sure to limit the chances of being caught in a precarious financial situation is to maintain a financial reserve. For new or small nonprofits, this can feel like an unreachable challenge. If you’re operating on a shoestring budget, saving money feels impossible. But, like many things, financial wellbeing is cyclical. By putting aside a rainy day fund, you’ll reduce the chance of needing to dip into personal accounts, reduce services, or downsize staff.

Make sure you’ve identified how much money you have in your financial reserve and why you have it there so it is clear you aren’t trying to get away with anything. Be transparent here as in every other area of your organization. Finally, don’t overdo it out of an abundance of caution. For some people, the need to protect oneself in case of emergency can overwhelm the more pressing need for dollars that go toward services. Decide what you need (enough to cover an emergency, enough to sustain business in the absence of a grant you usually receive, etc.) and find ways to save a little each month to meet your goal–and then maintain it unless absolutely necessary.

Keep your eyes on funding opportunities

Obviously, nonprofits need to raise money to operate since they aren’t profiting off of the sale of something. Their dollars go right back into the services they’re providing, so evaluating new and old fundraising opportunities is absolutely essential to maintaining financial health. Nonprofits can get into trouble by accepting grants and other funds simply because they are offered. Before you jump in with an enthusiastic yes, make sure you aren’t being held to standards you are unable or uncomfortable with meeting. Often, grants come with a set of rules, so you need to be sure you can accommodate them.

Don’t be afraid to say no if the payoff for a funding source isn’t worth the time and effort it takes to accept it. There are a lot of opportunities available to organizations who are doing good work, so be discerning, even if it feels like walking away from free money.

Make some investments

You’ve probably heard that you have to spend money to make money, and that can be true, even for nonprofit organizations. While you may not be throwing your nonprofit budget at the stock market, it's a good idea to thoroughly evaluate products and services that can help you better manage your organizational finances. Simple and inexpensive software can help monitor cash flow with less human oversight, and a financial accountant can catch mistakes before they become costly. Look at the possible options outside your organization that might be available to help make your life easier and your finances more sound. Don’t rule out paying for something on the basis of potentially being able to do it for free. Time and accuracy are important financial considerations you may not be thinking about, so take them into account.

Stay current

Nonprofit organizations are subject to a lot of rules, and these rules change quite frequently. If you’re handling finances in house, make sure you’re keeping up with potential changes. This is especially important during times in which many things are in flux, as is the case during a global pandemic, for example.

You’ll also want to make sure that the organizational leadership within your nonprofit knows of state, local, or industry changes or fluctuations that might impact your business and the way you spend and receive money. Examples of this can include new nonprofits offering similar services, the implementation of government programs that may change what type of services are needed in your area, local ordinances, or new offerings that accompany the hire of someone with a different skill set. No matter the reason for change, make sure you’re in the know and able to adjust accordingly.

Respond well

No matter how careful and financially literate you are, financial hardships are an inevitable part of all business, even for nonprofits. When mistakes, accidents, or oversights occur, learn to respond well. This can be difficult sometimes, especially depending on the mistake. You can ensure your good reaction by preparing for it and having a gameplan, should something go wrong.

A financial reserve is part of this, but take it a step further and gameplay a few scenarios so that you know how to react. Know how to research transactions to find information, confront employees, and report to (and rely on) your nonprofit board. Focus on maintaining good leadership, practicing solid and open communication, and exercising the decisiveness and generosity that may be required of you.

Finally, in the case of mistakes or success, make sure you’re holding regular evaluations of your process to make sure they’re working for you, your employees and board, and your organization. Regular check-ins help keep policies in place that work for everyone, so take the time to reflect on how things are and are not working.

Financial management requires constant flexibility and a willingness to learn, but ultimately results in stronger, healthier organizations that are better able to help their communities succeed.

Nonprofit Financial Reconciliation: Your Accounting Team's Part

2021-02-01T09:00:00Z

What exactly does it mean to reconcile an account? It isn’t as complicated as it initially seems, referring only to a simple comparison. To reconcile your books, internal financial documents are positioned next to documents from external sources like bank or credit statements. Reconciliation is an excellent way to find errors, catch fraudulent activity, and identify discrepancies.

While companies that are publicly held are required to reconcile on a regular basis, nonprofits can forget this essential part of bookkeeping when resources are thin–but they shouldn’t.

Why reconcile?

Accurate books are important, but they can save your nonprofit a lot of money too. Your budget should never have to make room for completely unnecessary things like overdraft fees, disappearing cash, or accidental errors. When you reconcile your accounts, you keep things accurate and ensure reliability in all accounts and transactions, which leaves you with more money in your budget.

What causes account discrepancies?

There are a variety of reasons your accounts may not match up, ranging from the mundane to the mysterious. Typically, they’ll fall into one of four categories:

Timing. Occasionally, something your accounting department has recorded won’t show in a bank statement because the statement came out before the money cleared. This happens with the increasingly rare paper check, but has become less of a problem with advancing technologies that have increased the speed of most financial transactions.
Accidents. Mistakes happen, even in financial transactions. Someone in accounting may have mistyped a number or made an organizational error. Reconciling is a great chance to catch these small mistakes that can lead to big problems.
Missing Information. Occasionally, transactions won’t get recorded for any number of reasons. People don’t mean to do this, but perhaps they’ve had a busy day or are distracted in the chaos of working from home.
Criminal activity. Fraud can and does happen in all businesses, even nonprofits. Regularly reconciling your accounts decreases the likelihood of fraud occurring or going undetected for too long. Often, criminals are inexperienced at covering their tracks and will be easily caught if you’re paying attention.

More on other places to reconcile

Although looking through bank accounts is great, you should also reconcile other areas of your business to strengthen your finances. Each month, look through these areas too:

Bills. This is an easy place to make mistakes, so look through bills regularly. Sometimes a person will write a check and record a bill, which, on paper, looks like double the expense. Keep a report of unpaid bills to simplify this process.
Invoices. Keep track of invoices, both paid and unpaid, in a central location so that your statement of activities is current and unpaid invoices aren’t left sitting.
Fixed assets. Review your fixed assets on your balance sheet so that you can look at depreciation, update new purchases, or record things you may have gotten rid of.
Balance Sheet Accounts. If the account is on your balance sheet, it should have an accompanying schedule to understand what makes up this balance. This could includes items such as loans, endowment accounts, or inventory accounts.

Remember that this is not a comprehensive list, but a small sampling of reconciliations you might choose to do. Many companies look at things like prepaid expenses and deferred revenue, but finding the right combo will be up to you.

Manual or Automated?

Reconciliation, while vital, can be incredibly time consuming. For many, the idea of manually performing such a task with regularity is too overwhelming, especially in organizations like nonprofits that may operate with smaller staffs. When trying to decide how to tackle reconciliation, it is important to consider a few factors:

Bank. Bank reconciliations can be done manually or using automation, consisting of flagging transactions that don’t match up. Automating is helpful because it allows you, the human, to spend your time only investigating the parts that don’t match up. This is especially helpful if you have multiple bank accounts. By automating part of this process, you’ll give your accounting staff more time to dive into the tricky stuff.
Subledger balances. While this step can be done manually or using automated software, automation will save your accountants a lot of time, especially if you find the right product to work within your existing systems and frameworks (like payroll and human resources). Reconciling various subledgers can get complicated, and if you’ve got multiple sources of data (related entities, etc.) automation is probably the way to go.
Roll-forward schedules. While the other two examples check data against balances, schedules exist on their own, usually as spreadsheets. This can present challenges in things like version control, which can interfere in reconciliation, since it relies upon closing balances matching opening balances. To reconcile, you need only to add all increases and subtract the decreases to find your ending balance.

How to begin the reconciliation process

As with most things, there are a variety of ways to reconcile your accounts, and determining which is right for your organization is the first step. You may choose to use accounting software, which will do a lot of it for you, with human assists in cases where there is a difference in accounts.

You may also choose to do the reconciliation using your accounting department. In this case, you will need to:

Look at your internal accounting documents as compared to your bank statements. Monitor payments and deposits, noting places where they do not match and places where there are inconsistencies for which you have no other proof (like a receipt).
Look for places in your bank records that aren’t reflected on your internal accounting documents. Things like checks that haven’t cleared, autopayments that haven’t cleared, check fees, service charges, and overdraft fees are good examples of this.
Ensure there are no bank errors, which are infrequent, but can happen.
Make sure that incoming dollars show on both your own records and in your bank accounts. Depending on your timing, you may need to manually add these to your bank statements to ensure accuracy.
Finally, look at your balances and make sure they’re a match. Do this often.

What happens next?

After you’ve taken time to thoroughly review your documents, you may be left with some inconsistencies, which is where the real work begins–you haven't reconciled anything yet. If you find a discrepancy as you go through reconciliation, you’ll need to become a bit of a detective.

First, identify what exactly you’re looking at. Earlier, we discussed potential causes for differences in numbers. Make an educated guess about what may be to blame, and then go about proving or disproving your assumptions. Find a paper trail where you can, talk to staff and bank representatives if you need to, and do your best to identify what went wrong and what your books should look like.

Make notes detailing what happened and what should have happened, and share them with appropriate parties. If you’ve solved the problem, congratulations! Take steps to ensure, where possible, that it doesn’t happen again. If you cannot identify what happened, you may be dealing with fraud.

What to do if you suspect fraud

If you’ve reasonably ruled out other reasons for the difference in your records versus your accounts, it is probably time to consider that your nonprofit organization may have been the victim of fraud. To deal with it, you’ll need to follow a few best practices:

Protect the evidence. If you’re suspicious of fraud, the person committing it may know and will try to get rid of evidence. Secure computers, paper, or hard drives/thumb drives as necessary why you (with the help of relevant authorities) conduct an investigation.
Enlist help. You may need to hire a forensic accountant or other specialist to find evidence, depending on how large the fraud is. Hopefully, you’ve been regularly reconciling accounts and you’ve got the issue before it has grown large. You may need to hire a lawyer or involve law enforcement, so make the appropriate phone calls now.
Ask questions. At some point, assuming you’re dealing with internal fraud, you’ll have to confront the employee or volunteer you think may have stolen from you. Don’t come at them with a list of accusations though. Instead, begin asking fact-finding questions that may lead to a reveal. You should also limit their ability to access company data and resources prior to any sort of discussion. As a precaution, you may choose to do so company-wide. Sometimes, you’re dealing with more than one person.
Contact insurance. Let your insurance provider know what’s going on, since they’ll be involved anyway and may have a timeframe in which things must be reported.
Establish loss. If you’re not able to prove loss, you won’t have much of a case. Document everything you know, and officially file a claim with your insurance.

While fraud is rare, it does happen and should always be a consideration. Regular reconciliation helps protect your organization against internal and external fraud, ordinary mistakes, and bank error. While it may seem like a lot of work, there are plenty of ways to go about automating or outsourcing it to ensure accuracy, ease, and an easier year for you.

What is nonprofit journalism?

2020-10-08T15:00:00Z

You may be familiar with journalism and probably even nonprofit organizations, but, when you combine the two, they become another thing entirely. While nonprofit journalism has been around for quite some time, it doesn’t, ironically, get a lot of airtime. That is, nonprofit journalism is all around you, but you might not even know it.

You’ve probably interacted with media put forth by institutions practicing as nonprofit journalists--they’re actually everywhere! Big and little, far and wide, nonprofits and journalism are a natural fit because they combine passionate people with refined skills, creativity, and the desire to work hard under a variety of circumstances.

And, in reality, nonprofit journalism is actually not all that complicated, though the distinctions are many.

The short answer: what is nonprofit journalism?

What is nonprofit journalism? While we’ll get into the specifics later, we’ll begin with a simple definition. Nonprofit journalism is journalistic efforts put forward by organizations who receive nonprofit status. Their nonprofit status means that they are accountable to the public in the same way other types of nonprofit organizations are. Theoretically, they are driven by no other cause than the nobility of journalism because they have nothing to gain.

There are a plethora of organizations performing nonprofit journalism, including many that you’ve heard of. They include National Public Radio (NPR), ProPublica, and Mother Jones. Smaller organizations that have achieved some degree of status include High Country News, The Texas Tribune, The Reentry Project, The Public Herald, and The Marshall Project--although there are countless others doing fine work.

A brief history of nonprofit journalism

Essentially, as long as there has been journalism, there has been nonprofit journalism. In 1846, the Associated Press began when five New York newspapers joined forces to share reports from the Mexican-American War. Today, the AP is still a nonprofit. In 1974, The Chicago Reporter was formed, followed by City Limits Magazine in 1976. In 1977, the Center for Investigative Reporting, and then, in 1989, the Center for Public Integrity.

Since, there has been no shortage of nonprofit journalists and organizations--in 2013, a Pew Research Center identified 172 United States-based nonprofit news organizations in operation. Further research concluded at least one nonprofit news outlet in most US states, with a variety of focuses, including investigative reporting, government, and public and foreign affairs. Around 78% reported less than five full time paid staff members. Most publish online, though some also print.

Why focus on nonprofit journalism?

Journalism in general has experienced a significant decline, with more and more content moving to a less labor intensive online model. Journalists who once worked for major for-profit companies are finding work in other areas. For some, this means work in public relations or communications. For others, the shift to nonprofit journalism is an easy one.

Aside from the general job loss, nonprofit journalism has seen a rise because people are more apt to disbelieve traditional news sources. The idea of a company that doesn’t stand to profit as they report on current events appeals to many Americans who have lost trust in more mainstream media outlets. Organizations who are not subject to external forces, at least in theory, are better able to report the most accurate news.

In reality, nonprofit journalism may still offer biased coverage, especially if their donor base is associated with a particular political party or movement. And, as you may know, acquiring regular funding plays a major role in a nonprofit’s ability to operate. So is nonprofit journalism more trusted than other forms of journalism? Research says that name recognition actually does more for trust than nonprofit status. What does this mean? Nonprofit journalists that market their organization end up in a pretty good place.

Why nonprofit journalism succeeds

Like many nonprofit organizations, nonprofit journalists are used to operating on small budgets with extremely limited staff and help from dedicated contractors. When large for-profit businesses struggle in difficult times, nonprofit journalists don’t know any different. Nonprofit journalists are necessary to fill the gaps left by other journalism organizations, offering the same skills, dedication, and ability to offer fresh and accurate perspectives.

Nonprofit journalists also sometimes have more creative freedom, allowing them to tell stories in more interesting ways--stories that may otherwise never be told in their complexity. Often, nonprofit journalists are able to better tell these stories because they employ subject matter experts who are well equipped to tackle massive issues like climate change or the presence or absence of weapons of mass destruction.

The best of nonprofit news

Although many of us benefit from and often read nonprofit news, it can be hard to gauge just how broad their scope is. The organizations producing nonprofit journalism are doing a great job, garnering a ton of recognition, including Pulitzers.

In 2020, ProPublica received Pulitzers in Public Service for a collaboration with Anchorage Daily News (a for profit paper). They also won for National Reporting for a three-reporter investigation into a naval fleet crashing in the Pacific Ocean.
The Center for Investigative Reporting won for a story through a subsection called Reveal. The story was on worker injuries and the human toll of robotics technology at Amazon warehouses.
Kaiser Health News was a finalist for investigative reporting on a predatory bill collection practice by the University of Virginia Health System.

Overall, many more nonprofits won this year, reflecting a greater recognition of (and perhaps the improving quality of) nonprofit journalism.

More on funding nonprofit journalism

Nonprofit journalism can be difficult to fund, especially in times of economic struggle. Without advertising, they may struggle to cobble together enough money to regularly produce news, especially since much of current events reporting relies on a reporter’s ability to travel. For many nonprofit journalism organizations, funding falls into three categories--circulation revenue, reader donations, and grant and foundation support. Many also choose to advertise, but it accounts for very little of the overall dollars that support an organization.

Circulation revenue can be difficult to predict, and, with so many free news sources available, can be difficult to secure. Grants and foundation support are a great source of funding, but they require research and work to put applications together. There is often a lot of competition for them, and it goes beyond nonprofit journalism organizations to nonprofits working toward other causes. Reader donations, especially when managed correctly, are a great source of funding, though the process of acquiring them can be time consuming and somewhat unpredictable. Still, they help raise organizational awareness (think about the various radio fundraising drives you hear a few times each year).

A diverse revenue stream is helpful for nonprofit journalism because multiple funding sources rarely fail at the same time. Combine a solid fundraising strategy with a sound financial plan and nonprofit journalists are in decent shape.

Not in it for the money

Like all other types of nonprofit professionals, nonprofit journalists are not in it for the money. Odds are, they’ve been forced out of more traditional journalism positions for any of a handful of reasons, deeply care about a particular cause, or feel passionately about creative storytelling. Almost all are committed to journalistic integrity, but they also know how to do it with shocking efficiency.

There’s truly something remarkable about reporting that happens in the absence (or near absence) of money, which can be a powerful sway. It is difficult to say whether or not nonprofit journalism will take over the business of reporting the news in the future, but nonprofit journalists everywhere are making a case for themselves.

3 ways you can support nonprofit journalism

If you, like many of us, benefit from nonprofit journalism, you may consider giving back to the organizations and people driving your content consumption. There are a number of ways you can do this, so there should be something for everyone. If you want to support the organizations that offer up the information you love, consider:

Donating. It is the easiest and most effective way to support your favorite nonprofit journalist right away. Sustaining monthly donations are a great way to go because they fit within most budgets and offer continual support to the nonprofit.
Volunteer. Like all nonprofits, nonprofit journalism needs volunteers. The role of volunteers will vary, but may include things like verifying facts, filing paperwork, or even calling donors. No matter your skill set, most nonprofits will find a way to use your generosity to create even more good.
Listen, read, promote. Journalism is only as good as the number of subscribers and others consuming it, so show our support for these organizations by reading or listening regularly, sharing content, and participating in fundraising or other community events organized by your favorite nonprofit news organization.

Good news travels fast

Likely, nonprofit journalism will continue to grow as our world changes. The flexibility nonprofit journalists often bring to the table is essential in a world with a lot to report and even more ways to report it. From social media outlets to print magazines to daily newspapers and newsletters, nonprofit journalists are carving out spaces for great content. With your support, they’ll continue to flourish without being beholden to the checkbooks that be.

Common Nonprofit Scams and How to Avoid Them

2020-08-13T15:00:00Z

Nonprofit organizations can be especially prone to scams, both internally and externally. Because they tend to be filled with do-gooder types, they’re often taken advantage of by people who perceive them to be easy targets. They’re frequently also small, making them potentially easy targets for people who take advantage of the nonprofit mission to create good in the communities they provide service to.

Fraud risk in nonprofits

A typical organization loses around 5 percent of annual revenue in fraud. For nonprofits, these numbers tend to be lower because they aren’t bringing in as much money. Still, 5 percent of any income can be significant, especially for larger nonprofit organizations. Fraud can go beyond dollars too, hitting nonprofit donor trust, community reputation, and credibility for grant applications.

Common types of fraud or scams in nonprofits

Billing schemes are common in nonprofit fraud, often committed through billing schemes, which require an employee to submit an invoice they are not entitled to be paid for. They may also involve the creation of a fraudulent company or person or fraudulent markups that allow an employee to collect the extra cash. Scams may also be as simple as ordering personal goods with company cash--the sky's the limit. Nonprofit scams can look a lot of different ways, but typically include at least one of the following:

Ghost employees: A ghost employee is someone on the payroll who doesn’t actually work for your nonprofit. Instead, falsified records cause a paycheck to be issued for this “person”, and the checks are later cashed by your scammer.

Misappropriation of funds: This is simply another way of saying embezzlement of money or property, and occurs when a person knowingly takes money or resources and uses it for personal things in a myriad of ways.

Vendor kickbacks: Although there are a few variations on this, the most common form of vendor kickback scam occurs when a vendor submits an invoice that is either inflated or entirely fraudulent. Then, the other scammer (who works within the nonprofit) submits it for payment, splitting or otherwise dividing the overage.

Check fraud: This encompasses a huge variety of nonprofit scams, and refers to using checks to commit fraud. This can mean forgery, theft, paper hanging, check kiting, using chemicals to remove information from a check, or even counterfeiting.

Expense fraud Expense fraud can vary, but it is usually when an employee submits fake expenses, fraudulent personal expenses, multiple reimbursements, or overstated expenses.

Theft of cash or assets: Perhaps the easiest to understand, theft happens when an employee within your nonprofit simply removes cash or assets from the premises with nefarious intent.

Red flags for fraud or scams in your nonprofit

Learning to identify warning signs of fraud can help save your organization before you’re even hit. Scammers can be clever, but well run organizations often thwart fraudulent activity before it even takes place, or soon after.

Look for:

Unclear invoices
Vendors you haven’t heard of or those with unclear information (like no physical address)
Sudden increases in invoices from a specific vendor
Multiple monthly invoices from one vendor
Vendor invoices that list employee addresses as their own
Large vendor amounts divided amongst multiple invoices
Low visibility of employees dealing with payments and vendors

How to protect your nonprofit

The best way to protect your nonprofit from scams is to set in place clear policies that offer increased visibility within your organization. This can include working with an external nonprofit accountant, safeguarding your financials by having multiple people in different departments oversee them, or maintaining a high level of transparency with your board.

Get to know your employees and learn to recognize personal triggers that may make someone increasingly prone to run scams. Extreme personal financial difficulty caused by illness or divorce, legal problems, or a troubled employment history may all indicate that an employee may be more likely to steal. It certainly doesn’t always--but it is better to monitor the situation than to be surprised by it. Organizations that function well and rely on respect and trust are less at risk, so offer a work environment that prioritizes employee wellbeing and solutions for personal issues that may lead to unlawful behavior down the road.

You should also set up a corporate compliance plan, which helps hold nonprofits accountable and offers some extended visibility. Corporate compliance plans for nonprofits usually include a document retention policy, a policy for conflicts of interest, a whistleblower policy, and a detailed code of conduct policy for everyone within the organization. These documents help protect your organization against fraud and other forms of unethical behavior, as well as build your reputation by reassuring donors and board members that you are operating with vision and transparency. Be thorough in crafting, reviewing, and updating your policies, and communicate them with everyone within your nonprofit organization.

Finally, don’t assume that your organization is safe because you’re small, know your employees, or don’t deal with large amounts of cash. Nonprofit scams can and do happen to everyone. By implementing policies that safeguard your organization, you’re not being critical of your employees--you’re protecting them.

Know the Difference: B Corp vs. Nonprofit

2020-04-29T15:00:00Z

As charitable drives take place all over the country and discussions of corporate responsibility preside over our news media, you may frequently hear about nonprofit organizations and benefit corporations (also called b corps) organizations. While both share a commitment to a better world, there can be substantial differences between the two, and they’re important to know as you consider where your money goes, what sort of employment you might want, and even what organizations to prop up in your own community. If you’re wondering how exactly they’re different or similar, read on!

All about ownership

In a nonprofit, there are no owners or shareholders, while a B corp has shareholders. While a nonprofit works toward a public good without the intent of turning a profit, a B corp is a traditional company in that shareholders expect a return. Even if a nonprofit and B corp are working toward similar public goals, the aim of the company is different. Nonprofits must devote 100% of their resources to achieving the work of their mission, while B corps have more freedom.

Of course, when nonprofits need dollars, they can write grant proposals or hold fundraisers. B corps can sell stock or acquire debt, just like other corporations. Nonprofits are governed by a board, and corporations, B corp or not, answer to shareholders, directors, and officers.

Some overlap

The confusion between the two types of organizations happens because, like nonprofits, B corps have undergone lengthy evaluations to prove their commitment to ensuring a better world, and often donate money to nonprofits, though they get to choose when and how much.

Nonprofits don’t have to report progress to members, but most of them do because it can help raise money from donors. B corps, and all other corporations, must report to shareholders. Because they are B corps, they must also update shareholders on progress toward the benefit purpose they have outlined. Neither must share the report publically.

When you’re thinking about companies that do good, it can be easy to assume their designation. Method soap, for example, is in the news a lot for good work, but their goal is to sell soap. They’re a B corp. St. Jude Children's Research Hospital is also frequently in the media, but, although they exchange a lot of money, they’re a nonprofit. Typically, you can ask yourself if someone is trying to profit, and, if it gets confusing, a quick Google search can clear things up. B corps and nonprofits are both doing great work and should be applauded for the extra care they take to support their communities!

The Importance of Goal Setting for Nonprofits

2020-02-20T21:09:15Z

There are a lot of ways to define and measure success in all things, especially nonprofits. For some, working in an industry that is largely service-based makes it difficult to measure success, but this is just a mental hurdle. Sure, you’ve got to think about it a little differently, but success can be measured in the absence of money quite easily.

One way to do this is to set measurable goals and routinely evaluate your progress on them. Goal setting helps define, celebrate, and monitor success in your organization, and every nonprofit should be doing it regularly.

Goals and overall success

Setting goals means that you get to achieve them, or it should, if you do it right. Nonprofit teams (and all teams, really), thrive on the rush of joy you feel when you achieve something you set out to do. Real, measurable goals help reward people who are working hard, and ensure that your strategy is working the way you envision. Think of it as much the same feeling you get when you cross something off your to-do list!

Keep it on track

Another reason goals are great is because they establish a timeline that helps keep your organization on track. You should have short term goals and long term goals, each with clearly defined timelines. And, while things occasionally go askew for a variety of reasons, these goals lay a framework for the work that needs to be done.

Next steps

Sometimes in activities of work or leisure, we struggle to identify next steps. If you have a strong set of individual and organizational goals, you automatically have some guidance on this. Once one goal is achieved, your next job is to achieve another goal. What this might look like may take some figuring out, but you’re at least able to identify the outcome at the very beginning.

More money

Goals related to organizational fundraising typically result in higher dollar amounts raised overall. While a general “we’ll take whatever we can” approach ensures fewer disappointments, it doesn’t allow you to publicize a certain amount that you hope to achieve, which can be helpful in motivating donors.

Of course, not all fundraising goals are related directly to dollar amount. Goal setting the number of events you hope to host or the number of ways available to donors to give can also result in more money for your organization. Think about goals regarding brand awareness, recurring donor numbers, and (of course) dollar amounts with the same mentality.

Why Nonprofits Should Ditch the Extra Bank Accounts

2019-12-10T15:01:15Z

Although your nonprofit organization might be going a million different directions, your finances shouldn’t be. If you’re still using more than one bank account or even institution to control your money, you’re likely costing yourself time and dollars.

Separating dollars from different sources into different places can feel like a way to keep things simple, but it actually complicated your bank accounts and your life--and there are easier ways to create separation within your finances.

How it costs you

When you have multiple accounts, you’re probably paying multiple setup fees, monthly service charges, and even extra check ordering fees. For one account, they don’t amount to much--but when you have two or three or four, it amounts to quite a lot of money.

In addition to the extra dollars, you’re also using valuable time to track your accounts. There’s extra accounting work for each additional account, which also adds up over time. When you’ve got more accounts, you’ve got the potential for more errors, more reconciliations, mistakes in grant-based accounting, and overall difficulty reviewing deposits and withdrawals.

A simple solution

Instead of maintaining multiple accounts, your nonprofit should simplify by going down to one account that utilizes a variety of tools to help keep things running. Programs like QuickBooks help align your finances and track restricted and unrestricted funds. You can also get specific, identifying programs within each category as well as notes that will help anyone with access identify how the money is allocated or possible restrictions on it.

The right software will allow you to keep track of everything in one place, in one account. You can create labels, categorize, and generate easy reports for your organization or board.

You may also consider hiring an outside nonprofit accounting firm to get your accounts in order and keep them there. They’ll have advice about everything from software choices to budget, and can take a lot of pressure off of people in other parts of your organization.

Keep it simple

Having more than one account makes things complicated when they needn’t be. Take advantage of the tools and expertise available to you to simplify your nonprofit and maximize the money you’re bringing in. While you may occasionally encounter grant rules that mandate a separate bank account, it is not the norm, and can typically be avoided.

Make things simple for yourself, your staff, and your board and stick with one easy account.

Can Nonprofit Organizations Unionize?

2019-11-25T15:01:15Z

Despite the historical decrease in worker unions, they’re piquing more interest as of late. Everyone from nurses to day laborers across the country are working to unionize in places where they haven’t previously. And, while nonprofit workers have not sought unionization on a large scale in the past, is it something they can do?

Since they are workers--passionate, awesome ones--they can indeed unionize if they desire.

A brief history

While unions have often been created for blue-color jobs, recent years have brought on a surge of white-collar unions. Workers of all kinds like unions because they shift the power in favor of those on the ground doing the work. In some nonprofit organizations, this isn’t an issue because the power dynamic tends to be different. Still, when the power is given to those performing the work, there is a potential for real change.

Modern examples

In large nonprofits that aren’t working as closely together, power dynamics can be more pronounced. Recently, employees at the National Center for Transgender Equality filed a complaint against the organization for retaliation. Staff initially asked for a voluntary recognition of their union, which was never given. They staged a walkout after a person of color was fired in what the complaint calls “a pattern of unequal treatment of workers of color” within the group. The employees, as the Nonprofit Professional Employees Union, were offered a buyout package (along with the rest of the staff), which they believe to be an effort to get rid of the unionizing staff--a severance for those who chose to go a different direction, according to executive director Mara Keisling. Now, the center has very few employees remaining.

The Southern Poverty Law Center has also been in the news for unionizing after both a co-founder and president left earlier in the year. The organization has said they will not voluntarily recognize the union.

Nonprofit working conditions

While nonprofits mostly do meaningful work, they are not exempt from the same problems that befall other workplaces, which is why unions happen. It can be easy to think that the work is more important than the individual, but those creating the services are important too, which is why nonprofits are wise to think more holistically about the work environment they provide.

There has to be a balance between service and humanity toward workers, that doesn’t overemphasize the nastier aspects of for profit companies, like cost savings, money made, etc. Smart nonprofits treat their employees well because they’re genuinely grateful for the work they’re doing and recognize that committed employees are hard to find. They negate the need for unions by treating their people well and offering good management for both people and finances, often with the help of a nonprofit accountant.

Nonprofit organizations exist because we live in a society that doesn’t provide services to everyone who needs them. Nonprofits bridge the gap, often shifting a balance of power to prevent the abuse of some of the nation’s most vulnerable. Treating nonprofit employees well is the very least we can do.

Understanding Ownership for Nonprofit and For-Profit Business

2019-07-15T09:17:15Z

Humans tend to be very stuck on the idea of ownership. We need to know who owns everything, from the homes we visit to the stores we shop in. For traditional businesses, this setup looks a little different than for nonprofits. If you’ve ever wondered who owns a nonprofit, the answers may confuse you.

Essentially, nobody does. If this is confusing, don’t despair--different businesses are owned in different ways, explained below.

The for-profit model

In a for-profit business, it is much easier to identify an owner, even amongst the various types. In a sole proprietorship, one person owns a business. They typically adhere to other standards of business (like licensing), but the person is the business. They’re responsible for debts, liabilities, and income, which is reported on their tax return.

In a general partnership, at least two people own a business, which requires a bit more formality. The business exists separately from the individuals, including on formal documents like tax returns. These types of businesses are taxed as a partnership, not a business.

In a corporation, the business is a legal person. Ownership is vested in the shareholders. Shares of stock are established when the business is founded, and how many you own determines the percentage of the business that you own. The corporation is responsible for liabilities and debts, not the shareholders themselves.

In an LLC, a general partnership combines with the limited liability of a corporation. There are members (not shareholders), and the percentage of ownership corresponds to the investment made in the business.

The nonprofit model

Nonprofits can sometimes be LLCs, but they do not overlap with other for-profit models of ownership. Typically, nonprofits are corporations, which have no owners (shareholders) at all and thus don’t have stock. They’re committed to a cause that falls outside of commercial use, and the rules are different.

A nonprofit might be an unincorporated association, though nonprofit accountants and experts don’t recommend this. Nonprofits may be LLCs or utilize a trust structure. Even in these cases, there are no stocks allowing for ownership, so responsibility becomes that of the board of directors or trustees, who oversee the legalities of an organization.

And, if something is not really owned, it cannot be sold. This means that, in the event of a nonprofit disbanding, assets must be distributed to another 501(c) (3) after debts have been taken care of. Of course, there may be ways around some of the more stringent formalities, but that’s a more complicated discussion.

Nonprofits aren’t owned by anyone, which allows them to operate in different and meaningful ways.

Social accounting: what is it and why does it matter?

2019-03-11T10:28:59Z

When we hear the word accounting, we conjure up all sorts of things. Books filled with numbers, calculators, software, the idea of accountability. If you’re working as part of a nonprofit, you may think of the differences between nonprofit accounting and more traditional business accounting. It might stress you out or, if you’ve got a handle on your books, bring a feeling of peace.

It’s a pretty loaded word, no matter your stance. But have you heard of social accounting? For many, this lesser known term is a crucial part of evaluating and reporting on nonprofit success.

So what exactly is it?

First, it is important to note that social accounting is still accounting. It might seem a little more complicated than traditional nonprofit accounting at first, but it is simply different. And, while there are many definitions available for social accounting, it is essentially the process of evaluating and publicizing the less measurable parts of an organization’s actions--think social and environmental. Think less books and more people, a look at performance as it relates to service within a community or population.

Perhaps the simplest way to define and describe social accounting is to say that it looks at the less quantitative values of a company—the things that might make us want to work or purchase from an organization.

Measuring the unmeasurable

While it is relatively simply to look at money in versus money out, it is infinitely more difficult to provide an assessment of other factors which may influence environment. Social accounting seeks to reflect on the actions of a company in actual accounting practices, but is more inclusive, including things like in-kind donations and volunteer hours that traditional accounting may leave out.

The goals of social accounting are to honor a stakeholder’s right to information, balance power and responsibility, increase organizational transparency, and identify the social and environmental costs of traditional (economic) success.

What it looks like

In practice, social accounting can look a few different ways. Often, companies who practice social accounting product annual reports that detail corporate responsibility. These reports are presented to board members and are usually published under a “corporate responsibility” tag and are often looked at by donors who hope to support responsible organizations.

Social accounting looks at a company’s social responsibilities, their use of social resources, the relationship between a company and society, the need for the organization in society, and the social costs versus social benefits of an organization.

Benefits of social accounting

As you can imagine, social accounting is especially beneficial to nonprofit organizations, assuming they’re working toward a community driven mission. First, it allows the public to see good work directly from the source. It provides insights to management and forces a company to think about their decisions and make better ones as a result of potential scrutiny. It can improve image, and help with marketing efforts, as well as instill confidence in an organization.

For nonprofits, social accounting can help place value on things that they already value. When we use a term like accounting to describe issues more in line with social science, it creates value, and for nonprofit organizations, this is essential.

How to Prepare to Present Your Nonprofit Financials to Your Board

2017-09-07T09:16:43Z

Are you giving your board the correct information to make accurate, informed decisions for your nonprofit? You should be reporting to your board on a quarterly basis, providing them with a clear financial portrait of your programs and operations. Providing accurate information is critical, as it ensures that your board will be able to provide correct advice and proper strategy.

You’ll need to provide your board members a detailed packet at least one week prior to your meeting. If you utilize this time correctly, you can sync agenda items and highlight the critical points and desired outcomes that you would like to achieve at the meeting.

This packet should include your executive summary, standard financial reports and any additional reports that the board has requested. These reports should include a higher level of reporting (more extensive than what your Executive Director or CFO view on a monthly basis), including supporting detail. Example reports could include your statement of financial position, statement of activities, budget vs. actuals statement, and statement of functional expenses. Below are some more concrete definitions of these documents:

Executive Summary: also known as a management summary, this will summarize your longer, more detailed reports. Simplifying this information for your board will give them a preview of what you’ll discuss in greater detail in your meeting, and allow them to formulate questions that they will want addressed.

Statement of Financial Position: This report is also known as a balance sheet, and will reflect your assets and liabilities.

Statement of Activities: This report will detail your income versus your expenses. It can also be called an income statement.

Budget vs. Actuals Statement: This report functions as another layer of your Statement of Activities. The projection should include your past and future plans, rather than just the reality of your organization. It should also include any major discrepancies in these areas. You should also take this time to review with your board any line item that has been budgeted, but has no actual expenditures.

Statement of Functional Expenses: This report will measure your nonprofit’s efficiency, and is comparative to a net income report in the for-profit world. Its key ratios will measure the percentage your nonprofit spends on programs versus the percentage spent on administration and fundraising expenses.

Providing this information in advance will allow you and your board to make the most of your meeting time. You can also make the most of your presentation by keeping the following tips in mind while you are preparing and presenting to your board:

Plan your approach: Prior to your board meeting, plan in detail what you would like to discuss and focus on the goals you wish to achieve. Writing an outline or story board can help with this difficult task, keep in mind while doing so that context is important. Remember your audience and their backgrounds, and use this information to formulate a PowerPoint that addresses your outline/story board.

Stick with simplicity: Avoid overwhelming your board members with every scenario you’ve encountered during the last quarter. Your PowerPoint presentation should address the requested reports and their findings, and any information that you think members will find relevant.

Discuss executive summary in detail: Do spend time discussing your executive summary as it provides the clearest picture of your nonprofit’s financial health.

Be aware of aesthetics: Keep in mind that your board will not want to be overwhelmed by numbers. Instead of copying entire spreadsheets into your PowerPoint slides, use summary charts and graphs to tell your financial story. Illustrate key performance metrics and ratios with trends and benchmarks, and put the detailed financials in an appendix.

Simplify and educate: Nonprofit accounting is drastically different from for-profit accounting, keep this in mind when addressing your board. If you know that your board consists of predominately for-profit individuals, be prepared to educate or translate nonprofit concepts as you go.

Don’t Get Scammed: Corporate Compliance Center Notice

2016-11-28T00:00:00Z

There's a scam going around that has recorded activity in nearly every state. In this scam, your organization or business will receive a very official looking letter (see below). It will be addressed "Corporate Compliance Center: Annual Minutes Compliance Notice" or something similar. This letter will include important details about your organization, which aid in legitimatizing its appearance.

The most important information on this particular letter and similar scams of its ilk lie in the wording at the bottom. In this case it states in bold, capital letters "THIS PRODUCT OR SERVICE HAS NOT BEEN APPROVED OR ENDORSED BY ANY GOVERNMENTAL AGENCY, AND THIS OFFER IS NOT BEING MADE BY AN AGENCY OF THE GOVERNMENT." A legitimate government entity would not list this information. If you receive any communication with this verbiage or similar rhetoric, please use due diligence and investigate it further.

Just last week, one of clients nearly became the victim of these unconscionable brigands. Luckily, their team was able to assist them before they paid the fee.

What to do if you receive this letter or a similar scam

If you receive a letter such as this, please report it to your State's Attorney General's office, specifically, the consumer protection division. Most State governments have laws that seek to protect consumers from deceptive commercial solicitations. With enough complaints and evidence, it may be possible for the state to pursue legal action against the individuals and business perpetrating the scam. Please do your duty to aid other organizations and businesses by reporting this scam right away.

What's the Difference Between a Contribution and a Grant?

2014-02-07T00:00:00Z

Simply, a contribution is a gift of funds, typically with no stipulations (though more on that later), frequently given by individuals. A grant is funds awarded as part of an application process, usually given by a foundation that sets specific rules for allocating money. Of course, there’s more to it than first meets the eye--knowing the difference between contributions and grants can be difficult because they share many of the same characteristics.

In their accounting policy on the subject, The University of Notre Dame states that, “sponsoring entities, private foundations and/or donors may use the terms [grant and contribution] interchangeably in both conversation and in the donative instruments, contributing to the complexity.” However, while the terms may be used interchangeably, they probably shouldn’t be--the meanings differ greatly.

Defining grant vs. contribution

The University of Notre Dame states that a gift (also called a contribution) is a voluntary and irrevocable transfer of money, services or property from an external donor for either unrestricted or restricted use in promoting the University’s goals. No commitment of resources or services is required other than the stated donor restrictions.

Loyola University Chicago states that a grant (aka sponsored program funding, award) is the transfer of money or property from a sponsor to an institution that may require performance of specific duties such as research, budget reports, progress reports, and return of unused funds.

Despite the similarities between contributions and grants, they are completely different entities and cannot be used as if they are the same. Below are the characteristics of each to further aid you in differentiating them.

Contributions

Individuals and businesses usually make contributions, though they come in several types.

What are the types of contribution transfers?

Unconditional transfer of funds

This means that the donor is giving you funds that you may spend as you wish, and that they have no ability to rescind their gift.

Conditional transfers

These depend upon certain events happening or not happening in the future.
- For example, the donor may state that they will donate $5,000 to your organization, but only after your Saturday program has served 100 children
A condition can also include time. For example, that same donor could state that the program be operational for six months before their funds be used

In either situation, your organization cannot claim rights to the funds or assets until the conditional event/time has occurred.

Understanding contribution classifications:

Contributions fall into one of three classifications:

Unrestricted assets: This is revenue that has no impositions from the donor.
Temporarily restricted assets: This revenue is restricted for one reason or another, on a short-term basis. Once the time or purpose attached to it is fulfilled, it is released.
Permanently restricted assets: This contribution is characterized by a restriction that can never be removed.

Grants

Government entities and foundations usually award grants.
They usually have a contract and budget set.
The frequency of grant reports can vary from monthly to quarterly to yearly; failure to report can cause your funding to stop.
Grantors may audit your organization, and can request a refund if the money is not fully spent.

What types of grants are there?

Pass-through and nondiscretionary assistance grants: This grant is received by a nonprofit and transferred to another entity, or spent on behalf of another entity.
Third-party reimbursements: Payment is made by a third party to a nonprofit for goods delivered or services rendered to the nonprofits beneficiaries.
Cost-reimbursement grants: This type of grant reimburses specified costs incurred by the nonprofit in the performance of a specific program activity.
Program support (operating) grants: These provide funding for the operation of an entire organization or one of its programs. Unless conditions are placed on the grant, it is recognized as revenue at the time it is awarded.
Challenge grants: A nonprofit is required to raise gifts from other contributors in order to receive the challenge grant proceeds. The grant is not reported as revenue until the target level is reached.
Unit of service performance grants: A specified amount is paid by the grantor according to a formula based on units of service provided by the nonprofit organization.
Clinical trial agreements: A grant provided to an institution to test a new drug, process or product.
Research grants: Virtually the same as clinical trial agreements, except funds are used to conduct research and development activities.

Need more clarity?

If you’re still having difficulty telling them apart, you can view a full guide on these differences from Clifton Gunderson LLP.

Jitasa Nonprofit Blog

What Does a Nonprofit Treasurer Do? The Complete Guide

Support your nonprofit treasurer by partnering with Jitasa's expert accountants.

The Role of a Nonprofit Treasurer: Frequently Asked Questions

What is a nonprofit treasurer?

What should a nonprofit look for in a potential treasurer?

Learn financial basics in The Beginner's Guide to Nonprofit Accounting.

Are nonprofit treasurers paid for their work?

Key Responsibilities of a Nonprofit Treasurer

Strategic Planning

Budgeting

Financial Policy Development

Risk Management

Audit Preparation

Reporting

Nonprofit Financial Management Roles

How Well Do You Know the Major Nonprofit Financial Roles?

Your Results

Looking to outsource your nonprofit's financial management?

Learn how Jitasa's nonprofit accounting team can work with your treasurer for improved financial management.

Understanding Your Nonprofit NTEE Code: A Complete Guide

NTEE Code FAQ

What is an NTEE Code?

How do I find my nonprofit’s current NTEE code?

How can I change my nonprofit’s NTEE code?

Why Accurate NTEE Code Classification Matters

How to Determine Your Nonprofit’s NTEE Code

NTEE Codes & Nonprofit Financial Management

Strategic Planning: NTEE Codes’ Influence on Financial Strategies and Funding Opportunities

Fostering Trust: How NTEE Codes Aid in Compliance for Financial Advantage

What Is Fund Accounting? A Guide to Basics & Best Practices

Fund Accounting: Frequently Asked Questions

What is fund accounting?

What types of organizations use fund accounting?

How is fund accounting different from traditional accounting?

How can a fund accounting system benefit my nonprofit?

Types of Funds in Fund Accounting

Unrestricted Funds

Permanently Restricted Funds

Temporarily Restricted Funds

How Well Do You Know Your Nonprofit Funding Restrictions?

Your Results

Fund Accounting Applications

Nonprofit Compensation Policy: What You Need to Know

Get the financial advice you need to master your compensation strategy.

Nonprofit Compensation Policy FAQ

Do nonprofit organizations have paid employees?

What is a nonprofit compensation policy?

What is considered reasonable compensation for nonprofit staff?

Get your finances in order with The Beginner’s Guide to Nonprofit Accounting.

Requirements Regarding Compensation for Nonprofit Employees

Nonprofit executive compensation

Penalties for excessive compensation

Elements of a Nonprofit Compensation Policy

Nonprofit compensation and conflict of interest policies

Conflict of interest policies establish rules to prevent leaders from gaining personal benefits from the organization’s public funds.

Sample Nonprofit Compensation Policy

Setting strategic compensation plans for nonprofits

Manage your finances and make smart compensation decisions by partnering with Jitasa.

In-Kind Donations: The Ultimate Guide + How to Get Started

In-Kind Donations: Frequently Asked Questions

What are in-kind donations?

What are the different types of in-kind donations?

Goods

Services

What are the benefits of in-kind donations?

Are in-kind donations tax-deductible?

Do in-kind donations have to be reported on your nonprofit's Form 990?

In-Kind Donations and Gift Acceptance Policies

Use our customizable template to create your nonprofit's gift acceptance policy.

Recording and Reporting In-Kind Donations

Step 1: Determine the gift's fair market value (FMV).

Fair Market Value Calculator

What type of donation is this?

How to Determine FMV

Need help recording and reporting in-kind donations?

Step 2: Record the FMV as a debit and a credit.

Step 3: Issue a written acknowledgment to the donor.

Step 4: Report the gift with your total revenue on your Form 990.

How to Solicit In-Kind Donations