Jitasa Nonprofit BlogFor informative accounting tips, content, and events read recent posts on Jitasa’s nonprofit blog.2024-03-11T22:02:25Zhttps://www.jitasagroup.com/How to Set up QuickBooks for Nonprofits: The Complete Guide2024-03-11T15:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/how-to-set-up-quickbooks-for-nonprofits/<p>As nonprofits expand and evolve, their financial situations become more complex. While many organizations start out managing their finances in spreadsheets, they eventually outgrow this method. To keep your <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accounting/">nonprofit’s accounting practices</a> on track, it’s best to invest in specialized software as soon as it’s within your organization’s budget and would effectively serve your needs.</p>
<p>One of the best-known accounting solutions that both for-profit and nonprofit organizations leverage is <a href="https://quickbooks.intuit.com/accounting/" target="_blank">QuickBooks Online</a>. In this guide, we’ll explain everything you need to know to configure and leverage QuickBooks at your nonprofit, including</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/how-to-set-up-quickbooks-for-nonprofits/#what">What is QuickBooks Online for Nonprofits?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/how-to-set-up-quickbooks-for-nonprofits/#steps">Steps to Set up QuickBooks for Nonprofits</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/how-to-set-up-quickbooks-for-nonprofits/#how">How to Use QuickBooks at Your Nonprofit</a></li>
</ul>
<p>If you have questions as you go about implementing QuickBooks at your organization, don’t hesitate to <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accountant/">reach out to a nonprofit accountant</a> who has experience using this software. Let’s get started!</p>
<div class="blog-post-callout">
<div class="inner">
<div class="media">
<picture>
<source srcset="https://www.jitasagroup.com/images/blog/flames_circle_lrg.png, https://www.jitasagroup.com/images/blog/flames_circle_lrg@2x.png 2x" media="(min-width: 850px)" />
<img srcset="https://www.jitasagroup.com/images/blog/flames_circle.png, https://www.jitasagroup.com/images/blog/flames_circle@2x.png 2x" alt="Jitasa Flames" />
</picture>
</div>
<div class="text">
<p>Partner with Jitasa’s team of QuickBooks experts to set up your nonprofit’s accounting platform.</p>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button small">Request a Quote</a>
</div>
</div>
</div>
<h2 id="what">What is QuickBooks Online for Nonprofits?</h2>
<p>QuickBooks Online is an accounting solution developed by <a href="https://www.intuit.com/" target="_blank">Intuit</a> and leveraged by organizations in all verticals, including nonprofits. Its main distinguishing feature is that it’s cloud-based, meaning your team can access the platform anywhere they have internet connectivity. This makes it easy for remote team members and <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/outsourced-accounting-for-nonprofits-top-firms/">outsourced financial professionals</a> to collaborate in a secure environment.</p>
<p>While QuickBooks was originally designed for businesses, there are many ways to adapt the platform to the unique aspects of nonprofit accounting. Because your organization by definition can’t turn a profit, its goal in using QuickBooks is different from that of a business—to ensure accountability in financial management rather than to track profitability. QuickBooks has customizable settings that align with the <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/fund-accounting/">fund accounting system</a> nonprofits use to achieve this goal, and we’ll walk through how to configure these in the next section.</p>
<div class="blog-post-callout">
<div class="inner">
<div class="media">
<picture>
<source srcset="https://www.jitasagroup.com/images/blog/flames_circle_lrg.png, https://www.jitasagroup.com/images/blog/flames_circle_lrg@2x.png 2x" media="(min-width: 850px)" />
<img srcset="https://www.jitasagroup.com/images/blog/flames_circle.png, https://www.jitasagroup.com/images/blog/flames_circle@2x.png 2x" alt="Jitasa Flames" />
</picture>
</div>
<div class="text">
<p>Learn financial basics in The Beginner’s Guide to Nonprofit Accounting.</p>
<a href="https://www.jitasagroup.com/nonprofit-resources/nonprofit-free-downloads/beginners-guide-to-nonprofit-accounting/" class="button small">Download for Free</a>
</div>
</div>
</div>
<h2 id="steps">Steps to Set up QuickBooks for Nonprofits</h2>
<p class="mb-0">Although QuickBooks Online is adaptable for nonprofits’ needs, it’s critical to configure it properly so you can keep accurate records and create reports without a hitch. To help you get started, we’ve broken down the setup process into five basic steps:</p>
<img src="https://jitasa.imgix.net/blog/quickbooks_setup_steps.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/quickbooks_setup_steps.jpg?auto=format&w=700&dpr=2&q=40 2x" width="700" height="631" alt="Five steps to set up QuickBooks for nonprofits" loading="lazy" />
<h3>1. Choose a QuickBooks Online Plan</h3>
<p class="mb-0">QuickBooks Online has <a href="https://quickbooks.intuit.com/industry/non-profits/" target="_blank">two plans available for nonprofits</a>: Plus and Advanced. Let’s look at a few of the key differences between these plans.</p>
<img src="https://jitasa.imgix.net/blog/quickbooks_setup_plans.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/quickbooks_setup_plans.jpg?auto=format&w=700&dpr=2&q=40 2x" width="700" height="609" alt="A table comparing the two QuickBooks for nonprofits plans" loading="lazy" />
<h4>QuickBooks Online Plus</h4>
<p>A QuickBooks Online Plus subscription costs $45/month for the first three months and $90/month after that. With this plan, your organization will get access to all of the core nonprofit accounting features for up to five users, such as:</p>
<ul>
<li>Automated record-keeping for various transactions</li>
<li>Revenue and expense categorization</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/">Budget</a>, donation, and grant tracking</li>
<li>Custom report generation</li>
</ul>
<h4>QuickBooks Online Advanced</h4>
<p>QuickBooks Online Advanced costs $100/month for the first three months and then increases to $200/month. In addition to providing access for up to 25 users, some of the additional features that the Advanced plan offers include:</p>
<ul>
<li>Batch invoices and cost reports</li>
<li>Dedicated employee expense records</li>
<li>Auto-tracking for fixed assets</li>
<li>Expanded data storage and restoration capabilities</li>
</ul>
<p>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 the additional user permissions and more extensive functionality that the Advanced plan offers, it’s worth it to upgrade.</p>
<h3>2. Modify Account Settings for Your Nonprofit</h3>
<p>Once you’ve chosen your QuickBooks Online plan, you’re ready to start setting up your account. After answering the initial setup prompts, you’ll land on the main dashboard. Click the gear icon in the top right corner to modify your account settings. Start by customizing your nonprofit’s:</p>
<ul>
<li>Name and logo</li>
<li>Fiscal year start date</li>
<li>Accounting method (<a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/cash-vs-accrual-accounting-for-nonprofits/">cash or accrual</a>)</li>
<li>User permissions</li>
<li>Company type/tax form</li>
</ul>
<p>The most important of these settings to double-check is the company type. Choosing “Nonprofit Organization” from the list ensures that QuickBooks will configure your accounting system to align with the information required on your <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/form-990-filing/">Form 990</a> so you can file your tax return accurately.</p>
<h3>3. Configure Data Storage and Integrations</h3>
<p>Next, there are a few things you should do to ensure data security and streamlined accounting workflows, including:</p>
<ul>
<li>Syncing your nonprofit’s bank accounts with QuickBooks for easy reconciliation.</li>
<li>Connecting QuickBooks to the other software your nonprofit uses, such as your CRM or <a href="https://gettingattention.org/top-online-donation-tools" target="_blank">online donation platform</a>.</li>
<li>Ensuring your information automatically backs up to the QuickBooks Online cloud.</li>
</ul>
<p>Additionally, spend some time familiarizing yourself with the platform to understand where major reports and types of data are stored. That way, it’ll be easier to find specific information later.</p>
<h3>4. Customize the Interface</h3>
<p>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:</p>
<ul>
<li><b>Form styles.</b> QuickBooks’ default sales receipts are very business-oriented, but your nonprofit can customize the templates to turn them into donation acknowledgments. You can even incorporate <a href="https://nxunite.com/nonprofit-branding/" target="_blank">your organization’s branding</a> with just a few clicks!</li>
<li><b>Financial statement terminology.</b> In QuickBooks, the <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-activities/">statement of activities</a> is called the Profit and Loss by Class Report, making it seem very business-specific. However, you can easily change the name to avoid confusion.</li>
<li><b>Classes.</b> If you enable classes in the nonprofit organization interface of QuickBooks, the platform will organize your records based on the <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/statement-of-functional-expenses/">functional expense categories</a> of program, administrative, and fundraising costs, which are required on your Form 990.</li>
</ul>
<p>Setting up classes can also help you organize your nonprofit’s revenue by source. However, QuickBooks doesn’t provide a direct way to track funding restrictions, so you’ll need to manually create two extra classes for permanently and temporarily restricted <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-net-assets/">net assets</a>.</p>
<h3>5. Set up Your Chart of Accounts</h3>
<p>Your nonprofit’s <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-chart-of-accounts/">chart of accounts</a> serves as a directory for all of the financial information stored in QuickBooks Online. When you need to access or report on any details of your organization’s assets, liabilities, net assets, revenue, or expenses, this resource ensures you know exactly where to look.</p>
<p>QuickBooks Online has its own numbering system for charts of accounts. However, for clarity and consistency, we recommend also customizing this resource to align with the numbers on the <a href="https://www.notforprofitaccounting.net/wp-content/uploads/2008/08/ucoa.pdf" target="_blank">Unified Chart of Accounts</a>:</p>
<ul>
<li><b>Assets:</b> account numbers beginning with 1000</li>
<li><b>Liabilities:</b> account numbers beginning with 2000</li>
<li><b>Net </b>assets: account numbers beginning with 3000</li>
<li><b>Revenue:</b> account numbers beginning with 4000-6000</li>
<li><b>Expenses:</b> account numbers beginning with 7000-9000</li>
</ul>
<p class="mb-0">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:</p>
<img src="https://jitasa.imgix.net/blog/quickbooks_setup_coa.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/quickbooks_setup_coa.jpg?auto=format&w=700&dpr=2&q=20 2x" width="700" height="630" alt="A sample chart of accounts" loading="lazy" />
<h2 id="how">How to Use QuickBooks at Your Nonprofit</h2>
<p class="mb-0">Once you set up your chart of accounts, you’re ready to start using QuickBooks Online for your organization’s day-to-day financial management! Here are a few ways your nonprofit can leverage QuickBooks in its bookkeeping and accounting practices:</p>
<img src="https://jitasa.imgix.net/blog/quickbooks_setup_uses.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/quickbooks_setup_uses.jpg?auto=format&w=700&dpr=2&q=40 2x" width="700" height="500" alt="Six uses for QuickBooks Online at nonprofit organizations" loading="lazy" />
<ul>
<li><b>Recording transactions.</b> Whenever your nonprofit spends or brings in money, your bookkeeper will ensure the information is recorded in QuickBooks. While they may need to do some manual data entry, QuickBooks’ integrations and automation can streamline this process and allow them to spend more of their time on complex bookkeeping tasks like allocating expenses and running payroll.</li>
<li><b>Tracking <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/restricted-funds/">restricted funds</a>.</b> 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 check that you’re spending the right money on the right projects.</li>
<li><b>Comparing budgeted vs. actual numbers.</b> By creating your nonprofit’s annual operating budget in QuickBooks, you can always refer back to it to ensure you’re on track with spending and fundraising and make adjustments as needed throughout the year.</li>
<li><b><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/grant-management/">Managing grants</a>.</b> 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 as a part of holistic financial management.</li>
<li><b>Creating financial statements.</b> In addition to the aforementioned statement of activities, your nonprofit can pull its annual <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-financial-position/">balance sheet</a> and functional expense report, as well as monthly <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-cash-flows/">cash flow statements</a>, directly from QuickBooks. These reports are critical for accurately filing Form 990 and can be incorporated into your organization’s annual report to promote financial transparency with supporters.</li>
<li>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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/1099-for-nonprofits/">1099s</a> for each of your nonprofit’s employees and contractors, respectively.</li>
</ul>
<p>Although QuickBooks Online makes all of these processes simpler, it’s still most effective to navigate them with expert help from nonprofit financial professionals, like the team at <a href="https://www.jitasagroup.com/">Jitasa</a>. QuickBooks setup comes standard with our <a href="https://www.jitasagroup.com/nonprofit-solutions/nonprofit-bookkeeping-accounting-services/">bookkeeping and accounting services</a>, 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.</p>
<hr />
<p>QuickBooks Online is a robust accounting software solution that, when leveraged effectively, can provide a variety of benefits for nonprofits of all shapes and sizes. Follow the steps above to get started, and don’t hesitate to reach out to nonprofit finance professionals (like the team at Jitasa) if you have any questions or want to learn more about maximizing your nonprofit’s use of QuickBooks.</p>
<p>For more information on integrating QuickBooks into your nonprofit’s accounting practices, check out these resources:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/gaap-for-nonprofits/">Understanding and Applying GAAP for Nonprofits: FAQ Guide.</a> Leveraging specialized accounting software can help your organization maintain compliance with the Generally Accepted Accounting Principles (GAAP). Discover what GAAP is and why it’s important.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-statements/">Nonprofit Financial Statements: 4 Essential Reports to Know.</a> Dive deeper into the contents of your nonprofit’s statements of activities, financial position, cash flows, and functional expenses—all of which you can compile in QuickBooks.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-bookkeeper-vs-accountant/">Nonprofit Bookkeeper vs. Accountant: What’s the Difference? </a>Explore the differences between the roles of a nonprofit bookkeeper and accountant, the two professionals that will likely work in your organization’s QuickBooks account the most.</li>
</ul>
<div class="blog-post-callout">
<div class="inner">
<div class="media">
<picture>
<source srcset="https://www.jitasagroup.com/images/blog/flames_circle_lrg.png, https://www.jitasagroup.com/images/blog/flames_circle_lrg@2x.png 2x" media="(min-width: 850px)" />
<img srcset="https://www.jitasagroup.com/images/blog/flames_circle.png, https://www.jitasagroup.com/images/blog/flames_circle@2x.png 2x" alt="Jitasa Flames" />
</picture>
</div>
<div class="text">
<p>Work with the experts at Jitasa to simplify QuickBooks Online setup for your nonprofit.</p>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button small">Request a Quote</a>
</div>
</div>
</div>
Nonprofit Bookkeeper vs. Accountant: What’s the Difference?2024-03-10T15:01:15Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-bookkeeper-vs-accountant/<p>When your nonprofit was just starting out, your executive director likely handled your organization’s financial tasks. This means they were essentially a bookkeeper and accountant on top of all of their other duties. As your organization grows and more complex situations arise, having a separate bookkeeper and accountant is essential to ensure thorough and accurate <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-management/">financial management</a>.</p>
<p>However, it’s easy to confuse these two roles and their responsibilities. In this guide, we’ll clear up the confusion by covering the following topics:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-bookkeeper-vs-accountant/#overview">Nonprofit Financial Roles: an Overview</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-bookkeeper-vs-accountant/#compare">Comparing the Nonprofit Bookkeeper vs. Accountant</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-bookkeeper-vs-accountant/#hire">Hiring Nonprofit Bookkeepers and Accountants</a></li>
</ul>
<p>Regardless of whether your bookkeeper and accountant are paid professionals or volunteers, you should know the difference between the two before you start recruiting. Let’s dive in with an overview of the different financial responsibilities nonprofits need to fulfill and who you should task with each one.</p>
<div class="blog-callout-full">
<h2>Partner with Jitasa to get expert nonprofit bookkeeping AND accounting services</h2>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button white">Request a Quote</a>
</div>
<h2 id="overview">Nonprofit Financial Roles: an Overview</h2>
<p>Although this guide will primarily focus on bookkeepers and accountants, there are four essential financial positions that your nonprofit should fill to cover its bases. Each of these professionals has different responsibilities and a different key word to associate with their work.</p>
<p class="mb-0">Here is a quick breakdown of these nonprofit financial roles:</p>
<img src="https://jitasa.imgix.net/blog/bookkeeper_vs_accountant_roles.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/bookkeeper_vs_accountant_roles.jpg?auto=format&w=700&dpr=2&q=20 2x" width="700" height="300" alt="Table comparing the four key nonprofit financial roles" loading="lazy" />
<ul>
<li><b><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-treasurer/">Your nonprofit treasurer</a></b> is the main financial expert on your board of directors, and the word to associate with their work is <em>oversight</em>. Their duties include approving your organization’s financial policies and planning documents, developing risk management strategies, and <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-treasurer-report/">presenting recurring reports</a> to the rest of the board.</li>
<li><b>Your chief financial officer (CFO)</b> is either a full-time member of your nonprofit’s leadership team or an external professional hired on a <a href="https://www.jitasagroup.com/nonprofit-solutions/cfo-services/">fractional basis</a> to work closely with your leaders. They’re responsible for tasks like forecasting cash flows and <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/grant-management/">managing grants</a>. The key word to associate with this role is <em>strategy</em>.</li>
<li><b>Your nonprofit bookkeeper</b> takes care of your organization’s day-to-day financial needs like tracking transactions, writing checks, and processing payroll. Their key word is <em>record-keeping</em>.</li>
<li><b><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accountant/">Your nonprofit accountant</a></b> is responsible for financial <em>analysis</em> 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).</li>
</ul>
<p>Although these professionals have distinct duties, they also collaborate on many projects. For example, your CFO will typically take the lead on creating <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/">your organization’s annual operating budget</a> because they’re in charge of strategic financial planning. But they’ll rely on data recorded by your bookkeeper and analyzed by your accountant to predict the coming year’s revenue and expenses, and your treasurer has to sign off on the budget before it goes into effect.</p>
<h2 id="compare">Comparing the Nonprofit Bookkeeper vs. Accountant</h2>
<p>Since your treasurer is a board member and your CFO works with your nonprofit’s executives, their roles are relatively easy to distinguish. Bookkeepers and accountants are both professionals <em>below</em> the executive level who collaborate even more closely, so their duties can be more challenging to differentiate. We’ll spend some additional time breaking down their responsibilities to help you understand the difference between the two positions.</p>
<h3>Nonprofit Bookkeeper</h3>
<p>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, so your bookkeeper should have enough financial knowledge to effectively track multiple revenue streams and <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/restricted-funds/">funding restrictions</a>.</p>
<p class="mb-0">Your bookkeeper’s main duties include:</p>
<img src="https://jitasa.imgix.net/blog/bookkeeper_vs_accountant_bookkeeper.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/bookkeeper_vs_accountant_bookkeeper.jpg?auto=format&w=700&dpr=2&q=40 2x" width="700" height="467" alt="Mind map showing the main duties of a nonprofit bookkeeper" loading="lazy" />
<ul>
<li><b>Entering basic data.</b> Bookkeepers record all of your organization's key expenditures, income, and other financial data in an organized manner within your accounting software.</li>
<li><b>Writing checks.</b> For example, a bookkeeper will pay rent, utilities, vendor fees, and other basic expenses using checks.</li>
<li><b>Making deposits.</b> Bookkeepers handle general bank transactions and record the basic information associated with them.</li>
<li><b>Processing payroll.</b> There is some overlap between nonprofit bookkeeping and <a href="https://astronsolutions.net/nonprofit-hr/" target="_blank">human resources</a> when it comes to payroll, but most small to mid-sized organizations allow this responsibility to fall to the bookkeeper.</li>
<li><b>Allocating costs.</b> Although your accountant and CFO will handle most of your nonprofit’s expense allocation strategy, your bookkeeper needs to have an understanding of <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/statement-of-functional-expenses/">functional expenses</a> to ensure allocation goes smoothly in practice.</li>
</ul>
<p>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 is, in essence, laying the foundation for the accounting processes that follow.</p>
<h3>Nonprofit Accountant</h3>
<p>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 specialized exam 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 to be able to do well.</p>
<p class="mb-0">At nonprofits like yours, accountants are typically responsible for:</p>
<img src="https://jitasa.imgix.net/blog/bookkeeper_vs_accountant_accountant.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/bookkeeper_vs_accountant_accountant.jpg?auto=format&w=700&dpr=2&q=40 2x" width="700" height="500" alt="Mind map showing the main duties of a nonprofit accountant" loading="lazy" />
<ul>
<li><b>Reviewing all of your organization’s accounts.</b> Accountants make sure everything looks correct in your nonprofit’s accounts to get a better understanding of your financial situation and resolve any discrepancies that may arise.</li>
<li><b>Balancing and reconciling transactions.</b> In double-entry nonprofit accounting systems, bookkeepers typically record one side of a transaction at a time. Then, your accountant will ensure the debit and credit values for various transactions are balanced and match the information on your organization’s bank statements.</li>
<li><b>Compiling <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-statements/">financial statements</a>.</b> 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 pull the data needed to create each of these statements and analyze the reports to draw conclusions about your organization’s financial health.</li>
<li><b>Preparing for audits.</b> If your nonprofit undergoes an <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-audit/">independent financial audit</a> for any reason, your accountant will help you choose the right auditor and compile all of the necessary documentation.</li>
<li><b>Filing tax forms.</b> Although your nonprofit is tax-exempt, you still need to file a federal tax return each year via <a href="https://www.irs.gov/charities-non-profits/required-filing-form-990-series" target="_blank">IRS Form 990</a>, as well as individual W-2s and <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/1099-for-nonprofits/">1099s</a> for your organization’s employees and contractors respectively. Your accountant will ensure that all of these forms are filled out correctly and submitted on time.</li>
<li><b>Analyzing operating budgets.</b> As mentioned above, your accountant will analyze the financial data that goes into your nonprofit’s annual operating budget and review the budget before it’s finalized.</li>
<li><b>Maintaining compliance.</b> Both for-profit and nonprofit organizations are expected to follow the <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/gaap-for-nonprofits/">Generally Accepted Accounting Principles (GAAP)</a> to promote transparency in accounting practices. Nonprofits are also subject to unique government regulations due to their tax-exempt status. As they analyze your nonprofit’s finances, your accountant will ensure your organization follows all of these standards.</li>
</ul>
<p>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 <em>and</em> an accountant—accountants have the expertise to evaluate your finances that bookkeepers may not, while bookkeepers provide your organization with additional bandwidth to ensure accurate financial <a href="https://nxunite.com/nonprofit-data-collection/" target="_blank">data collection</a>.</p>
<div class="blog-post-callout">
<div class="inner">
<div class="media">
<picture>
<source srcset="https://www.jitasagroup.com/images/blog/flames_circle_lrg.png, https://www.jitasagroup.com/images/blog/flames_circle_lrg@2x.png 2x" media="(min-width: 850px)" />
<img srcset="https://www.jitasagroup.com/images/blog/flames_circle.png, https://www.jitasagroup.com/images/blog/flames_circle@2x.png 2x" alt="Jitasa Flames" />
</picture>
</div>
<div class="text">
<p>Learn more about your accountant’s responsibilities in our <b>Beginner’s Guide to Nonprofit Accounting</b>. </p>
<a href="https://www.jitasagroup.com/nonprofit-resources/nonprofit-free-downloads/beginners-guide-to-nonprofit-accounting/" class="button small">Download for Free</a>
</div>
</div>
</div>
<h2 id="hire">Hiring Nonprofit Bookkeepers and Accountants</h2>
<p>The way in which you go about recruiting a bookkeeper and accountant will depend on your nonprofit’s financial needs and hiring budget. Let’s look at the different options you have and the steps for hiring these professionals in more detail.</p>
<h3>Types of Nonprofit Bookkeeping and Accounting Services</h3>
<p>There are three main ways your nonprofit could gain access to a bookkeeper and accountant, each with its own advantages and disadvantages. You could also use one method to hire your bookkeeper and a different one to hire your accountant, depending on your organization’s situation, time, and resources.</p>
<p class="mb-0">Here is an overview of the three types of nonprofit bookkeeping and accounting services:</p>
<img src="https://jitasa.imgix.net/blog/bookkeeper_vs_accountant_services.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/bookkeeper_vs_accountant_services.jpg?auto=format&w=700&dpr=2&q=40 2x" width="700" height="492" alt="Pros and cons of the different ways to hire a nonprofit bookkeeper and accountant" loading="lazy" />
<ul>
<li><b>Hiring in-house.</b> Very large nonprofits with complicated bookkeeping and accounting needs often find hiring full-time professionals to be the best option since they can focus exclusively on that organization’s 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 needs to be prepared to be held liable.</li>
<li><b><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/in-kind-donations/">In-kind donations.</a></b> Small organizations that are just getting started with financial management may ask a local accountant to contribute their services pro bono and recruit a volunteer to do their bookkeeping. This option is completely free and helps new nonprofits establish professional relationships. But when bookkeepers and accountants aren’t paid, their motivation often fades, and they may choose to end their relationship with your organization so they can focus on paid projects.</li>
<li><b><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/outsourced-accounting-for-nonprofits-top-firms/">Outsourcing to an accounting firm.</a></b> For organizations that aren’t among the largest or smallest nonprofits, outsourcing is the option that best balances access to bookkeeping and accounting expertise with cost effectiveness. It still provides consistent professional relationships, and the firm is liable for any mistakes, which often motivates them to produce high-quality work. The only drawback is that turnaround may take longer because the firm has many clients, but effective communication can help with this.</li>
</ul>
<p>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 effective deliverables for your organization.</p>
<h3>How to Hire a Bookkeeper or Accountant</h3>
<p class="mb-0">Once you’ve chosen your hiring method(s) for your nonprofit bookkeeper and accountant, follow these steps:</p>
<img src="https://jitasa.imgix.net/blog/bookkeeper_vs_accountant_steps.png?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/bookkeeper_vs_accountant_steps.png?auto=format&w=700&dpr=2&q=40 2x" width="700" height="840" alt="A checklist of four steps for hiring a nonprofit bookkeeper or accountant" loading="lazy" />
<ol>
<li><b>Finalize your goals.</b> Determine the top two or three responsibilities you need each of your professionals to fulfill so you can hire someone who is willing and able to complete those tasks.</li>
<li><b>Conduct online research.</b> Look up nonprofit bookkeepers and accountants in your area, see what services they provide, and read reviews from past clients. Also, consider reaching out to other nonprofits in your network to see if they have recommendations.</li>
<li><b>Reach out to your top candidates.</b> Narrow down your list, then set up a conversation with each of your top picks to discuss your goals and determine whether they would be a good fit for your organization.</li>
<li><b>Make your final decision.</b> Keep your budget in mind as you do this, and establish a contract with your chosen partner before you start working together.</li>
</ol>
<p>If you’re looking for an outsourced partner in nonprofit bookkeeping and accounting, <a href="https://www.jitasagroup.com/">Jitasa</a> offers affordable, tailored services for both! Our team works exclusively with nonprofits and will rely on their years of experience to meet your organization’s needs and help achieve your financial goals.</p>
<hr />
<p>Both a bookkeeper and an accountant are essential for your nonprofit to manage its finances effectively. With a thorough understanding of each role as outlined above, you can make the right decisions when hiring, soliciting in-kind donations, or outsourcing your bookkeeping and accounting services to find the right fit for your organization.</p>
<p class="mb-0">For more information on nonprofit bookkeeping and accounting, check out these resources:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/fund-accounting/">Fund Accounting 101: The Basics and Best Practices.</a> 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.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-chart-of-accounts/">Nonprofit Chart of Accounts: How to Get Started + Example.</a> Discover a key organizational resource that both your nonprofit bookkeeper and accountant will leverage in their work: the chart of accounts.</li>
<li><a href="https://www.jitasagroup.com/nonprofit-solutions/nonprofit-bookkeeping-accounting-services/">Bookkeeping and Accounting Services Exclusively for Nonprofits.</a> Explore Jitasa’s outsourced nonprofit bookkeeping and accounting services in more detail to see if they would be a good fit for your organization.</li>
</ul>
<div class="blog-post-callout">
<div class="inner">
<div class="media">
<picture>
<source srcset="https://www.jitasagroup.com/images/blog/flames_circle_lrg.png, https://www.jitasagroup.com/images/blog/flames_circle_lrg@2x.png 2x" media="(min-width: 850px)" />
<img srcset="https://www.jitasagroup.com/images/blog/flames_circle.png, https://www.jitasagroup.com/images/blog/flames_circle@2x.png 2x" alt="Jitasa Flames" />
</picture>
</div>
<div class="text">
<p>See how <strong>Jitasa’s</strong> affordable, tailored bookkeeping and accounting services can work for your nonprofit. </p>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button small">Request a Quote</a>
</div>
</div>
</div>Nonprofit Form 990 Filing: FAQ Guide + How to Get Started2024-03-01T15:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/form-990-filing/<p>If your nonprofit has a valid 501(c)(3) status, that means you’re exempt from paying federal income tax, as well as most state taxes. However, this doesn’t mean you can sit back and relax come tax season!</p>
<p><b>To maintain tax-exempt status, nonprofits like yours still have to file an annual tax return via IRS Form 990.</b> In this guide, you’ll learn all you need to know about Form 990 filing for nonprofits like yours. We’ll cover the following topics:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/form-990-filing/#faq">Nonprofit Form 990 FAQ</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/form-990-filing/#why">Why Form 990 Filing is Important</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/form-990-filing/#how">How to File Your Nonprofit’s Form 990</a></li>
</ul>
<p>Rather than determining the taxes your organization owes to the federal government, Form 990 demonstrates that you’re handling funds properly and have sound <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-management/">financial management practices</a> in place. Let’s dive in!</p>
<div class="blog-callout-full">
<h2>File your nonprofit’s Form 990 with the help of <strong>Jitasa’s</strong> expert team. </h2>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button white">Request a Quote</a>
</div>
<h2 id="faq">Nonprofit Form 990 FAQ</h2>
<p>Filing your nonprofit’s Form 990 might seem complicated or confusing at first, so let’s walk through the answers to some of the most common questions about this document.</p>
<h3>What is Form 990?</h3>
<p class="mb-0"><a href="https://www.irs.gov/charities-non-profits/required-filing-form-990-series" target="_blank">Form 990</a> is the tax return document that tax-exempt organizations complete each year and file with the IRS. The IRS uses this form to make sure your nonprofit is legitimate and that you’re being financially honest, which tells them whether you deserve to maintain your tax-exempt status. While the IRS often updates the Form 990 from year to year, yours will probably look something like this example:</p>
<img src="https://jitasa.imgix.net/blog/form_990_sample.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/form_990_sample.jpg?auto=format&w=700&dpr=2&q=10 2x" width="700" height="467" alt="The top part of a blank example of a nonprofit Form 990." loading="lazy" />
<h3>Does My Nonprofit Also File State Tax Returns?</h3>
<p>Each state government has slightly different tax requirements for nonprofits that operate in that state. For example, New York requires nonprofits to file Form CHAR500 (Charities Annual Filing) with the state government to maintain their state tax exemption and charitable solicitation registration. However, some states will accept a copy of an organization’s Form 990 or <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/how-to-communicate-annual-report-data/">annual report</a> to fulfill these purposes. The <a href="https://www.irs.gov/charities-non-profits/state-links" target="_blank">IRS website</a> links out to the requirements necessary for each state so that your organization can stay up to date on your specific tax form requirements.</p>
<h3>Which Version of Form 990 Should I File?</h3>
<p>There are four versions of Form 990, and the one your organization files depends on your annual gross receipts and total assets. In general, the larger your nonprofit is, the longer your Form 990 will be so that you can report all of your financial activities.</p>
<p class="mb-0">Here is a breakdown of the four Form 990 versions and their respective filing requirements:</p>
<img src="https://jitasa.imgix.net/blog/form_990_versions.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/form_990_versions.jpg?auto=format&w=700&dpr=2&q=20 2x" width="700" height="223" alt="Four Form 990 versions" loading="lazy" />
<ul>
<li><b>Form 990-N (e-postcard):</b> 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 employer identification number (EIN), tax year, legal name and address, name and address of the principal officer, website URL, and a confirmation of gross receipts under $50,000.</li>
<li><b>Form 990-EZ:</b> 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.</li>
<li><b>Full Form 990:</b> Your nonprofit has to file the complete 12-page nonprofit 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 rather than your <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-net-assets/">net assets</a>, as your total assets will almost always be a larger number.</li>
<li><b>Form 990-PF:</b> All private foundations must file the 13-page Form 990-PF, regardless of their total assets or gross receipts. This is because the IRS requests additional, consistent information on your foundation’s private assets, trustees, officers, grants awarded, and other financial activities to ensure you’re allocating funds properly.</li>
</ul>
<p>Your nonprofit can save time and resources by ensuring that you’re filing the right size form for your organization. If you’re unsure about which form to file or how to file that form, reach out to a nonprofit accountant. They’ll be able to help you not only determine the correct form, but also file your forms for you!</p>
<div class="blog-post-callout">
<div class="inner">
<div class="media">
<picture>
<source srcset="https://www.jitasagroup.com/images/blog/flames_circle_lrg.png, https://www.jitasagroup.com/images/blog/flames_circle_lrg@2x.png 2x" media="(min-width: 850px)" />
<img srcset="https://www.jitasagroup.com/images/blog/flames_circle.png, https://www.jitasagroup.com/images/blog/flames_circle@2x.png 2x" alt="Jitasa Flames" />
</picture>
</div>
<div class="text">
<p>Jitasa accountants have <b>completed more than 4,000 tax filings</b> for nonprofits of all sizes.</p>
<a href="https://www.jitasagroup.com/nonprofit-solutions/nonprofit-tax-services/" class="button small">Explore Our Tax Services</a>
</div>
</div>
</div>
<h3>When is the Form 990 Filing Deadline?</h3>
<p><b>Your nonprofit’s Form 990 is due on the 15th day of the fifth month after the end of your fiscal year.</b> For most nonprofits, whose fiscal year follows the calendar year, your tax forms are due on May 15.</p>
<p>If for some reason, your nonprofit can’t make its Form 990 filing deadline, you can apply for an extension by filing Form 8868. If approved, your new deadline will be November 15 if you use the calendar fiscal year.</p>
<h3>If My Nonprofit is Conducting an Independent Audit, What Do I Do About My Form 990?</h3>
<p>If your nonprofit is planning to undergo an <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-audit/">independent financial audit</a>, we recommend doing so before completing your Form 990 filing. This is because you’ll need to update your Form 990 with the details of the audit before submitting it. Consider filing for an extension to ensure you still get your tax return in on time.</p>
<p>Collecting financial documentation for your audit also helps your organization pull together everything that you’ll need to file your Form 990, such as your <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-chart-of-accounts/">chart of accounts</a> and financial statements. Make sure all of your audit resources are easily accessible so you can reference them later.</p>
<p><i>Note: An independent financial audit is different from an audit conducted by the IRS, which can be triggered if there is a problem with your Form 990 but is less common for nonprofits than for individuals and for-profit organizations.</i></p>
<h3>What Happens if I File My Form 990 Late?</h3>
<p>If you don’t apply for an official extension to your Form 990 deadline using Form 8868 or provide reasonable cause for filing late as <a href="https://www.irs.gov/charities-non-profits/exempt-organizations-annual-reporting-requirements-filing-procedures-abatement-of-late-filing-penalties" target="_blank">defined by the IRS</a>, your nonprofit may be subject to penalties and fees. Generally, these penalties are as follows:</p>
<ul>
<li>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 penalty is either $12,000 or 5% of your organization’s gross receipts, whichever is less.</li>
<li>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. The maximum penalty in this case is $60,000.</li>
</ul>
If your nonprofit fails to file Form 990 for three years in a row, you run the risk of your 501(c)(3) status being revoked. If this happens, your nonprofit will need to file <a href="https://www.irs.gov/forms-pubs/about-form-1023" target="_blank">Form 1023</a> again and pay additional fees to re-register as a tax-exempt organization.
<h3>Who has Access to My Nonprofit’s Form 990?</h3>
<p>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. Therefore, be careful not to include sensitive information as a part of your forms. For example, the <a href="https://www.irs.gov/pub/irs-tege/Don%27t%20include%20your%20SSN%20on%20publicly%20disclosed%20forms.pdf" target="_blank">IRS specifies that you shouldn’t include Social Security numbers</a> on these forms due to concerns around (and past incidents of) identity theft.</p>
<p>Some companies, like <a href="https://www.guidestar.org/" target="_blank">Guidestar</a>, use Form 990s to provide donors with additional information about the nonprofits they’re interested in supporting. Your nonprofit can choose to register with Guidestar to make this information more easily accessible and increase transparency with your supporters. Additionally, you can publish your Form 990 on <a href="https://cornershopcreative.com/blog/best-nonprofit-websites/" target="_blank">your organization’s website</a> and include data from it in your annual report so it’s even easier for interested donors to find.</p>
<h2 id="why">Why Form 990 Filing is Important</h2>
<p class="mb-0">Your Form 990 is arguably the most essential financial report you compile each year. There are many reasons to take this process seriously and treat it with care, including that:</p>
<img src="https://jitasa.imgix.net/blog/form_990_reasons.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/form_990_reasons.jpg?auto=format&w=700&dpr=2&q=20 2x" width="700" height="314" alt="Four reasons why nonprofit Form 990 filing is important" loading="lazy" />
<ul>
<li><b>It allows you to maintain your nonprofit’s status.</b> As discussed previously, filing a Form 990 each year is essential for keeping your nonprofit’s 501(c)(3) registration. Plus, avoiding the penalties for failing to file is good for your organization’s financial health.</li>
<li><b>It holds your organization accountable.</b> Filing taxes each year is a good opportunity to regularly review your organization’s financial information and identify strengths and areas for improvement.</li>
<li><b>It promotes financial transparency.</b> Because Form 990s are public records, nonprofit supporters can gain valuable information when they look up your past tax forms. This can instill confidence in them and even convince potential donors to support your organization.</li>
<li><b>It proves your nonprofit’s integrity.</b> Unfortunately, nonprofits have historically been used to cover up fraudulent actions (see <a href="https://nonprofitquarterly.org/hiding-in-plain-sight-a-nonprofit-fraud-story/" target="_blank">Nonprofit Quarterly’s coverage of the Key Worldwide Foundation incident</a>). Carefully preparing your Form 990 not only shows that your organization is acting honestly but also can be helpful in uncovering unintentional mistakes that could risk your organization’s reputation if left unchecked.</li>
</ul>
<p>Accurately and effectively filing your nonprofit tax returns is essential for effective financial planning. Check your work carefully and enlist professional help to maximize these benefits and prevent tax-related risks for your organization.</p>
<h2 id="how">How to File Your Nonprofit’s Form 990</h2>
<p>There are two different ways you can go about completing your Form 990: filing on your own or <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accountant/">working with an accountant</a>. 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 now have to be filed electronically (until 2019, this was only a requirement for Form 990-N).</p>
<p class="mb-0">The best way to make sure all documentation is collected and analyzed properly each year is to hire an accountant who has experience working with nonprofits. Since bringing on a new full-time staff member is expensive and time-consuming, many organizations instead choose to outsource their tax preparation and other accounting needs. If you choose this option, look for an accounting firm that offers:</p>
<img src="https://jitasa.imgix.net/blog/form_990_considerations.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/form_990_considerations.jpg?auto=format&w=700&dpr=2&q=20 2x" width="700" height="380" alt="Three considerations for hiring an accountant for nonprofit Form 990 filing" loading="lazy" />
<ul>
<li><b>A flat-rate pricing model.</b> Ensure there are no hidden fees or expenses included in the accountant’s price so you can stay within your budget.</li>
<li><b>Experience working with similar organizations.</b> Besides specializing in nonprofit work, your accountant’s past clients should be comparable in size and mission so that they’ll have ample experience and expertise to help your organization.</li>
<li><b>Positive reviews and recommendations.</b> Read online reviews and reach out to other organizations in your network to see if they’ve worked with or know of your accountant. If the reviews are generally positive, you can likely count on a good experience working with that professional.</li>
</ul>
<p>We may be a little biased, but we recommend <a href="https://www.jitasagroup.com/services-quote-request/">Jitasa</a> as the best nonprofit accounting firm to file your organization’s Form 990. Our experts have filed more than 4,000 tax returns for nonprofits of all sizes and types, meaning they have experience with many different financial situations and can meet your organization’s unique needs—all at an affordable flat rate.</p>
<hr />
<p>Form 990 filing is an unavoidable part of being a financially responsible nonprofit. Learning about your Form 990 is the first step to a successful tax season. The next step will be completing the form, which is much easier when you partner with a nonprofit accounting firm like Jitasa.</p>
<p>For more information on nonprofit taxes and related accounting topics, check out these resources:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/1099-for-nonprofits/">Form 1099 for Nonprofits: How and Why to Issue One.</a> Learn about another important tax form, Form 1099, which your nonprofit will need to issue to any independent contractors who work for you.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/risk-management-for-nonprofits/">Nonprofit Risk Management: Complete Guide + Tips for Success.</a> Filing your Form 990 correctly and on time is the first step in effective nonprofit risk management—discover more risk management tips and strategies in this guide.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/outsourced-accounting-for-nonprofits-top-firms/">Outsourced Accounting for Nonprofits: Top 10+ Firms.</a> Explore our top recommendations for outsourced nonprofit accounting services to help you file your Form 990.</li>
</ul>
<div class="blog-post-callout">
<div class="inner">
<div class="media">
<picture>
<source srcset="https://www.jitasagroup.com/images/blog/flames_circle_lrg.png, https://www.jitasagroup.com/images/blog/flames_circle_lrg@2x.png 2x" media="(min-width: 850px)" />
<img srcset="https://www.jitasagroup.com/images/blog/flames_circle.png, https://www.jitasagroup.com/images/blog/flames_circle@2x.png 2x" alt="Jitasa Flames" />
</picture>
</div>
<div class="text">
<p>Simplify tax season and more with <b>Jitasa’s expert nonprofit accounting services</b>.</p>
<a href="https://www.jitasagroup.com/nonprofit-solutions/nonprofit-tax-services/" class="button small">Request a Quote</a>
</div>
</div>
</div>Understanding and Applying GAAP for Nonprofits: FAQ Guide2024-02-05T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/gaap-for-nonprofits/<p><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accounting/">Nonprofit accounting</a> 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.</p>
<p>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:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/gaap-for-nonprofits/#what">What are the Generally Accepted Accounting Principles?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/gaap-for-nonprofits/#who">Who developed GAAP?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/gaap-for-nonprofits/#why">Why do nonprofits need to comply with GAAP standards?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/gaap-for-nonprofits/#how">How can I apply GAAP for nonprofits?</a></li>
</ul>
<p>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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accountant/">an accountant who specializes in nonprofit work</a>, 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.</p>
<div class="blog-post-callout">
<div class="inner">
<div class="media">
<picture>
<source srcset="https://jitasa.imgix.net/blog/flames_circle_lrg.png?auto=format, https://jitasa.imgix.net/blog/flames_circle_lrg@2x.png?auto=format 2x" media="(min-width: 850px)" />
<img srcset="https://jitasa.imgix.net/blog/flames_circle.png?auto=format, https://jitasa.imgix.net/blog/flames_circle@2x.png?auto=format 2x" alt="Jitasa Flames" width="68" height="68" loading="lazy" />
</picture>
</div>
<div class="text">
<h2 class="text-white mt-0">Work with the team at Jitasa to apply GAAP at your nonprofit.</h2>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button small">Request a Quote</a>
</div>
</div>
</div>
<h2 id="what">What are the Generally Accepted Accounting Principles?</h2>
<p>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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-management/">financial management</a> among all organizations in the United States, both for-profit and nonprofit.</p>
<p class="mb-0">The <a href="https://www.accounting.com/resources/gaap/" target="_blank">10 GAAP standards</a> are as follows:</p>
<img src="https://jitasa.imgix.net/blog/gaap_nonprofit_principles.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/gaap_nonprofit_principles.jpg?auto=format&w=700&dpr=2&q=40 2x" width="700" height="500" alt="10 standards included in GAAP for nonprofits" loading="lazy" />
<ol>
<li><b>Principle of Regularity:</b> GAAP-compliant accounts adhere to established rules and regulations.</li>
<li><b>Principle of Consistency:</b> Financial reports are created according to consistent standards.</li>
<li><b>Principle of Sincerity:</b> Accounting practices are conducted accurately and impartially.</li>
<li><b>Principle of Permanence of Methods:</b> Financial reports are prepared using standardized procedures.</li>
<li><b>Principle of Non-Compensation:</b> All aspects of an organization’s performance—both positive and negative—are reported with no prospect of debt compensation.</li>
<li><b>Principle of Prudence:</b> Reported financial data is not influenced by speculation.</li>
<li><b>Principle of Continuity:</b> Asset values are reported under the assumption that the organization’s operations will continue.</li>
<li><b>Principle of Periodicity:</b> Financial reporting schedules are divided into standard accounting periods, such as fiscal years, quarters, and months.</li>
<li><b>Principle of Materiality:</b> Financial reports fully disclose an organization’s financial situation.</li>
<li><b>Principle of Utmost Good Faith:</b> Everyone involved in the accounting process is assumed to be acting honestly.</li>
</ol>
<p>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.</p>
<h2 id="who">Who developed GAAP?</h2>
<p>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:</p>
<ul>
<li><b><a href="https://www.aicpa-cima.com/home" target="_blank">American Institute of Certified Public Accountants (AICPA)</a>.</b> This organization, which administers the CPA certification exam and establishes various accounting and auditing requirements, laid the foundation for GAAP.</li>
<li><b><a href="https://www.fasb.org/" target="_blank">Financial Accounting Standards Board (FASB)</a>.</b> 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.</li>
<li><b><a href="https://www.sec.gov/" target="_blank">Securities and Exchange Commission (SEC)</a>.</b> This federal government agency regulates the market and protects investors, meaning it’s the most involved organization in maintaining GAAP on a national level.</li>
<li><b>State governments.</b> Individual states also help uphold GAAP through the reporting regulations they set forth, although each government does this slightly differently. Check the <a href="https://www.irs.gov/charities-non-profits/state-links" target="_blank">IRS requirements for your state</a> to stay up-to-date on this aspect of compliance.</li>
</ul>
<p>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.</p>
<h2 id="why">Why do nonprofits need to comply with GAAP standards?</h2>
<p class="mb-0">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:</p>
<img src="https://jitasa.imgix.net/blog/gaap_nonprofit_importance.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/gaap_nonprofit_importance.jpg?auto=format&w=700&dpr=2&q=40 2x" width="700" height="490" alt="Reasons to comply with GAAP" loading="lazy" />
<ul>
<li><b>Complying with legal requirements.</b> 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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/form-990-filing/">file an annual tax return (IRS Form 990)</a> because of the Principles of Consistency and Periodicity.</li>
<li><b>Establishing credibility.</b> 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.</li>
<li><b>Aligning with grantmaker and auditor expectations.</b> If your organization applies for grants or undergoes <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-audit/">financial audits</a>, 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).</li>
<li><b>Standardizing organizational financial management.</b> 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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-treasurer/">treasurer</a>, your bookkeeper, and your accounting team—will be on the same page about these activities.</li>
</ul>
<p>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.</p>
<div class="blog-post-callout">
<div class="inner">
<div class="media">
<picture>
<source srcset="https://jitasa.imgix.net/blog/flames_circle_lrg.png?auto=format, https://jitasa.imgix.net/blog/flames_circle_lrg@2x.png?auto=format 2x" media="(min-width: 850px)" />
<img srcset="https://jitasa.imgix.net/blog/flames_circle.png?auto=format, https://jitasa.imgix.net/blog/flames_circle@2x.png?auto=format 2x" alt="Jitasa Flames" width="68" height="68" loading="lazy" />
</picture>
</div>
<div class="text">
<h2 class="text-white mt-0">Check out our <b>FREE Nonprofit Accounting</b> 101 course</h2>
<a href="https://www.jitasagroup.com/nonprofit-resources/free-courses/nonprofit-accounting-course/" class="button small">Learn More</a>
</div>
</div>
</div>
<h2 id="how">How can I apply GAAP for nonprofits?</h2>
<p class="mb-0">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:</p>
<img src="https://jitasa.imgix.net/blog/gaap_nonprofit_applications.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/gaap_nonprofit_applications.jpg?auto=format&w=700&dpr=2&q=40 2x" width="700" height="635" alt="Five things to do at your organization to apply GAAP" loading="lazy" />
<h3>Use the Accrual Accounting Method</h3>
<p>In an <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/cash-vs-accrual-accounting-for-nonprofits/">accrual accounting system</a>, 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. </p>
<p>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.</p>
<h3>Properly Recognize Different Types of Revenue</h3>
<p>Nonprofits make money from various sources, such as individual donations, grants, investments, and <a href="https://360matchpro.com/corporate-giving/" target="_blank">corporate contributions</a>. 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.</p>
<p>Some contributions have additional requirements for how to recognize them in your accounting system for GAAP compliance. For instance, the monetary value of <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/in-kind-donations/">in-kind gifts</a> is recorded as both a debit <em>and</em> a credit to note that you received it, but the amount of cash your organization has hasn't changed.</p>
<h3>Honor Donor Restrictions on Funding</h3>
<p>Some of the revenue your nonprofit receives will be <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/restricted-funds/">restricted</a>, 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.</p>
<p>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.</p>
<h3>Allocate Expenses by Function</h3>
<p>Generally speaking, there are two ways your organization can allocate expenses in its <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/">budget</a>. 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.</p>
<p class="mb-0">The three categories of functional expenses are:</p>
<img src="https://jitasa.imgix.net/blog/gaap_nonprofit_expenses.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/gaap_nonprofit_expenses.jpg?auto=format&w=700&dpr=2&q=40 2x" width="700" height="500" alt="Three functional expense categories required under GAAP" loading="lazy" />
<ul>
<li><b>Program costs</b>, which are directly related to the activities that further your mission.</li>
<li><b>Administrative costs</b>, which are essential for your nonprofit to operate (such as paying utility bills and <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-compensation-policy/">compensating your staff</a>).</li>
<li><b>Fundraising costs</b>, which are associated with running giving campaigns, planning events, and <a href="https://gettingattention.org/nonprofit-marketing-ideas/" target="_blank">marketing your nonprofit</a>.</li>
</ul>
<p>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.</p>
<h3>Compile Financial Statements</h3>
<p class="mb-0">Since many of the GAAP standards have to do with reporting, ensuring your nonprofit creates accurate <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-statements/">financial statements</a> 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.</p>
<img src="https://jitasa.imgix.net/blog/gaap_nonprofit_statements.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/gaap_nonprofit_statements.jpg?auto=format&w=700&dpr=2&q=40 2x" width="700" height="500" alt="Four financial statements required under GAAP" loading="lazy" />
<p>Under GAAP, both for-profit and nonprofit organizations are required to compile these three financial statements:</p>
<ul>
<li><b>Income statement or <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-activities/">statement of activities</a>. </b>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.</li>
<li><b>Balance sheet or <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-financial-position/">statement of financial position</a>.</b> 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.</li>
<li><b><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-cash-flows/">Statement of cash flows</a>.</b> 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.</li>
</ul>
<p>There is also a fourth type of financial statement that is unique to nonprofits, known as the <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/statement-of-functional-expenses/">statement of functional expenses</a>. 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.</p>
<hr />
<p>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 <a href="https://www.jitasagroup.com/">Jitasa</a>!) with any questions or concerns that come up along the way.</p>
<p>For more information about GAAP and its applications for nonprofits, check out these resources:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/fund-accounting/">Fund Accounting 101: The Basics and Best Practices</a>. Dive deeper into the unique accounting system nonprofits use to transparently track their funds and honor their donors’ wishes.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-chart-of-accounts/">Nonprofit Chart of Accounts: How to Get Started + Example</a>. Discover the ins and outs of the chart of accounts, a key nonprofit accounting resource for GAAP compliance.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/how-do-nonprofits-make-money/">How Do Nonprofits Make Money? Making Nonprofits Profitable</a>. 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.</li>
</ul>
<div class="blog-post-callout">
<div class="inner">
<div class="media">
<picture>
<source srcset="https://jitasa.imgix.net/blog/flames_circle_lrg.png?auto=format, https://jitasa.imgix.net/blog/flames_circle_lrg@2x.png?auto=format 2x" media="(min-width: 850px)" />
<img srcset="https://jitasa.imgix.net/blog/flames_circle.png?auto=format, https://jitasa.imgix.net/blog/flames_circle@2x.png?auto=format 2x" alt="Jitasa Flames" width="68" height="68" loading="lazy" />
</picture>
</div>
<div class="text">
<h2 class="text-white mt-0">Apply GAAP standards at your nonprofit with the help of Jitasa’s experienced team.</h2>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button small">Request a Quote</a>
</div>
</div>
</div>Maximizing Your Capital Campaign Communications Budget2024-02-02T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/maximizing-your-capital-campaign-communications-budget/<p>To get the most out of your <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/">capital campaign communications budget</a> requires you to know what gives you the biggest “<em>bang for the buck</em>,” to use an old expression. And you may be surprised to learn that it’s not a fancy campaign brochure!</p>
<p>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.</p>
<p>But in reality, many capital campaigns are successful without a fancy brochure or high-end video.</p>
<p>It’s a myth that successful campaigns rely on high-end materials. The <a href="https://capitalcampaignpro.com/research-2023/" target="_blank">research shows</a> that nonprofits with small budgets can meet their <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/3-steps-to-guide-nonprofit-fundraising-efforts/">capital campaign fundraising goals</a>, 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 <a href="https://capitalcampaignpro.com/capital-campaign-case-for-support/" target="_blank">your case for support</a>.</p>
<p>So, what <em>do</em> you need to spend communications money on?</p>
<h2>7 Important Capital Campaign Elements to Focus Your Communications Budget On</h2>
<p class="mb-0">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.</p>
<img src="https://jitasa.imgix.net/blog/maximize_capital_campaign_supplementary.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/maximize_capital_campaign_supplementary.jpg?auto=format&w=700&dpr=2&q=40 2x" width="700" height="980" alt="Seven capital campaign elements" loading="lazy" />
<ol>
<li><b>Strategy Development:</b> 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.</li>
<li><b>Graphic Design and Branding:</b> Throughout your campaign, you will want <a href="https://kwala.co/nonprofit-graphic-design/" target="_blank">high-quality design services</a> to develop a consistent identity for your campaign that will be used in all of your campaign materials.</li>
<li><b>Collateral Materials:</b> 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.</li>
<li><b>Digital Presence:</b> 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.</li>
<li><b>Media Relations:</b> You should develop a plan for press releases and media events.</li>
<li><b>Events:</b> 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.</li>
<li><b>Advertising:</b> 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.</li>
</ol>
<hr />
<p>Before you spend any money on communications, apply a <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/4-financial-management-tips-for-small-nonprofits/">financial management best practice</a> 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 <a href="https://doublethedonation.com/nonprofit-marketing-plan/" target="_blank">developing a communications plan</a>? Do you have board members or other active volunteers with communications expertise?</p>
<p>That said, communications are an important aspect of <a href="https://capitalcampaignpro.com/capital-campaigns-ultimate-guide/" target="_blank">a capital campaign</a>, 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.</p>
<p>Remember, while you will need a well-conceived communications plan, you won’t need a costly brochure or video!</p>In-Kind Donations: The Ultimate Guide + How to Get Started2024-01-23T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/in-kind-donations/<p>Imagine you work for a nonprofit that provides relief for communities affected by natural disasters. Much of your fundraising work involves soliciting monetary donations from supporters that are then used to purchase bottled water, nonperishable food, batteries, and personal care items for your team to give to individuals in these impacted areas. Eventually, you start to wonder: <i>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?</i></p>
<p>The answer is absolutely yes! In-kind donations, as these gifts are known, can be extremely useful in meeting the programming and fundraising needs of nonprofits of all sizes and in all verticals. In this guide, you’ll learn everything you need to know to start collecting in-kind donations, including:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/in-kind-donations/#what">What are in-kind donations?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/in-kind-donations/#types">Types of In-Kind Donations</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/in-kind-donations/#benefits">Benefits of In-Kind Donations</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/in-kind-donations/#policy">In-Kind Donations And Gift Acceptance Policies</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/in-kind-donations/#reporting">Recording And Reporting In-Kind Donations</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/in-kind-donations/#solicit">How To Solicit In-Kind Donations</a></li>
</ul>
<p>Let’s begin by making sure we’re all on the same page about what exactly these contributions entail.</p>
<div class="blog-callout-full">
<h2>Work with the nonprofit accountants at Jitasa to successfully navigate in-kind donations.</h2>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button white">Request a Quote</a>
</div>
<h2 id="what">What are in-kind donations?</h2>
<p>In-kind donations include any and all non-monetary donations to nonprofits or causes. They refer to the transfer of any assets, usually goods or services, to your organization from an individual, company, or other nonprofit.</p>
<p>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.</p>
<div class="blog-post-callout">
<div class="inner">
<div class="media">
<picture>
<source srcset="https://jitasa.imgix.net/blog/flames_circle_lrg.png?auto=format, https://jitasa.imgix.net/blog/flames_circle_lrg@2x.png?auto=format 2x" media="(min-width: 850px)" />
<img srcset="https://jitasa.imgix.net/blog/flames_circle.png?auto=format, https://jitasa.imgix.net/blog/flames_circle@2x.png?auto=format 2x" alt="Jitasa Flames" width="68" height="68" loading="lazy" />
</picture>
</div>
<div class="text">
<h2 class="text-white mt-0">Explore the ins and outs of in-kind donations in <b>our FREE course</b>.</h2>
<a href="https://www.jitasagroup.com/nonprofit-resources/free-courses/in-kind-donations/" class="button small">Learn More</a>
</div>
</div>
</div>
<h2 id="types">Types of In-Kind Donations</h2>
<p class="mb-0">As mentioned previously, in-kind donations typically take one of two forms: goods or services. Let’s dive into each type in more detail.</p>
<img src="https://jitasa.imgix.net/blog/in_kind_donations_types.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/in_kind_donations_types.jpg?auto=format&w=700&dpr=2&q=40 2x" width="700" height="300" alt="Comparison of goods and services types of in-kind donations" loading="lazy" />
<h3>Goods</h3>
<p>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:</p>
<ul>
<li><b>Supplies to distribute to beneficiaries</b>, like the disaster relief items discussed in the introduction.</li>
<li><b>Items for organizations to keep and use when delivering services</b>, such as used books for a library or sports equipment for a recreation center.</li>
<li><b>Office equipment</b> like computers and desks to assist with administrative needs.</li>
<li><b>Materials for fundraisers</b> such as <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/5-tips-to-find-nonprofit-auction-items/">auction prizes</a> or tables and chairs for a gala.</li>
</ul>
<p>Although they aren’t physical goods, <a href="https://www.infinitegiving.com/blog/how-to-accept-stock-donations" target="_blank">contributions of stocks</a>, real estate, and cryptocurrency are also considered in-kind donations because they involve the transfer of assets from an individual to your nonprofit.</p>
<h3>Services</h3>
<p>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 can be especially useful when your organization is starting out and doesn’t 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:</p>
<ul>
<li><b>Pro bono legal services</b> from a licensed attorney.</li>
<li><b>Bookkeeping and <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/outsourced-accounting-for-nonprofits-top-firms/">accounting services</a></b> from a CPA.</li>
<li><b>Web development or graphic design</b> to help offset your marketing expenses.</li>
<li><b>Free use of an event space</b> to host a fundraiser, meeting, or conference.</li>
</ul>
<p>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.</p>
<h2 id="benefits">Benefits of In-Kind Donations</h2>
<p class="mb-0">In-kind donations can be incredibly important for furthering your nonprofit’s mission and for engaging your supporters. Some of the benefits for your organization include:</p>
<img src="https://jitasa.imgix.net/blog/in_kind_donations_benefits.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/in_kind_donations_benefits.jpg?auto=format&w=700&dpr=2&q=40 2x" width="700" height="500" alt="Venn diagram comparing benefits of in-kind donations" loading="lazy" />
<ul>
<li><b>Taking out the middleman</b>. Rather than taking the extra effort to purchase items with your nonprofit’s financial resources, you receive exactly what you need up front.</li>
<li><b>Creating a quicker approval and delivery process</b>. 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, allowing you to use the items right away.</li>
<li><b>Allowing for more financial flexibility</b>. You can use the funding you would have spent on the goods or services contributed in-kind for other needs at your organization.</li>
</ul>
<p>In-kind donations also offer advantages for donors, including:</p>
<ul>
<li><b>An additional way to engage with your nonprofit</b>. If donors aren’t able to give money, they can contribute their skills or the unopened and gently used items they already have on hand and still support your mission.</li>
<li><b>A way to live more sustainably</b>. By donating the possessions they don’t use rather than throwing them away, donors can have a more positive impact on the environment in addition to their communities.</li>
<li><b>A more concrete understanding of their impact</b>. 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 <a href="https://gettingattention.org/nonprofit-marketing-ideas/" target="_blank">marketing materials</a> that drive conversions—than it is with financial contributions.</li>
</ul>
<p>While your nonprofit can 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.</p>
<h2 id="policy">In-Kind Donations and Gift Acceptance Policies</h2>
<p>The greatest challenge most organizations face with in-kind donations is this: <b>What happens when you receive a gift you can’t use?</b></p>
<p>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.</p>
<p>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?</p>
<p>The answer is to reference their <b>gift acceptance policy</b>, one of the core <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-management/">financial management guidelines</a> every nonprofit should implement. This policy outlines:</p>
<ul>
<li>The types of gifts (both monetary and in-kind) that your organization can and can’t accept.</li>
<li>The circumstances under which you’ll accept each gift.</li>
<li>The procedure for recording different types of gifts.</li>
</ul>
<p>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.</p>
<p>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.</p>
<div class="blog-post-callout">
<div class="inner">
<div class="media">
<picture>
<source srcset="https://jitasa.imgix.net/blog/flames_circle_lrg.png?auto=format, https://jitasa.imgix.net/blog/flames_circle_lrg@2x.png?auto=format 2x" media="(min-width: 850px)" />
<img srcset="https://jitasa.imgix.net/blog/flames_circle.png?auto=format, https://jitasa.imgix.net/blog/flames_circle@2x.png?auto=format 2x" alt="Jitasa Flames" width="68" height="68" loading="lazy" />
</picture>
</div>
<div class="text">
<h2 class="text-white mt-0">Use our <b>customizable template to create your nonprofit’s gift</b> acceptance policy.</h2>
<a href="https://www.jitasagroup.com/nonprofit-resources/nonprofit-free-downloads/nonprofit-gift-acceptance-policy-template/" class="button small">Download for Free</a>
</div>
</div>
</div>
<h2 id="reporting">Recording and Reporting In-Kind Donations</h2>
<p class="mb-0">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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accounting/">accounting system</a> and how to report them for tax purposes. Fortunately, the experienced team of nonprofit accountants at <a href="https://www.jitasagroup.com/">Jitasa</a> has you covered! We’ll walk through resolving each of these issues in the following sections.</p>
<img src="https://jitasa.imgix.net/blog/in_kind_donations_process.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/in_kind_donations_process.jpg?auto=format&w=700&dpr=2&q=40 2x" width="700" height="300" alt="Process for recording and reporting in-kind donations" loading="lazy" />
<h3>Accounting for In-Kind Donations</h3>
<p>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 <a href="https://www.accounting.com/resources/gaap/" target="_blank">Generally Accepted Accounting Principles (GAAP)</a>. Plus, if your nonprofit conducts an <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-audit/">independent financial audit</a> for any reason, your auditor will want to see a thorough record of <em>all</em> donations—monetary and in-kind.</p>
<p>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:</p>
<ul>
<li><b>Goods with straightforward values:</b> 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.</li>
<li><b>One-of-a-kind goods:</b> 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.</li>
<li><b>Services:</b> 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.</li>
</ul>
<p>From there, record your in-kind donations in a separate revenue account as designated in your organization’s <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-chart-of-accounts/">chart of accounts</a>. <b>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.</b></p>
<h3>In-Kind Donations and Taxes</h3>
<p>There are two aspects to consider when discussing in-kind gifts and taxes. On the donors’ side, the main concern is tax deductibility. On your nonprofit’s end, you have to know how to report these donations on your annual tax return.</p>
<h4>Are in-kind donations tax deductible?</h4>
<p>In most cases, in-kind donations <em>are</em> tax-deductible for donors. However, the IRS requires that your nonprofit provide written acknowledgments in order for your supporters to receive their deductions, which should include:</p>
<ul>
<li>Your nonprofit’s name and employer identification number (EIN)</li>
<li>The date that you received the item or that the service was completed</li>
<li>A description of the goods or services contributed</li>
<li>A statement confirming that the supporter didn’t receive anything in exchange for their gift</li>
</ul>
<p>Unlike the donation acknowledgment for a monetary contribution, your organization isn’t legally allowed to provide the value of the donation for the donor—it’s up to them to provide it. Additionally, remember that this acknowledgment is <a href="https://ecardwidget.com/donor-recognition/" target="_blank">a form of donor recognition</a>, so you should also take the opportunity to show your appreciation for their gift.</p>
<h4>Do in-kind donations have to be reported on your nonprofit’s Form 990?</h4>
<p>In short, <em>yes</em>. 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.</p>
<p>The IRS typically requires additional paperwork for a few types of in-kind donations:</p>
<ul>
<li>Items worth more than $25,000</li>
<li>Historical artifacts or artwork</li>
<li><a href="https://www.irs.gov/charities-non-profits/charitable-organizations/irs-guidance-explains-rules-for-vehicle-donations" target="_blank">Vehicle donations</a> worth $500 or more</li>
</ul>
<p>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, make sure to follow all reporting requirements for the state in which your organization operates.</p>
<h2 id="solicit">How to Solicit In-Kind Donations</h2>
<p class="mb-0">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:</p>
<img src="https://jitasa.imgix.net/blog/in_kind_donations_solicit.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/in_kind_donations_solicit.jpg?auto=format&w=700&dpr=2&q=40 2x" width="700" height="500" alt="Four ways to solicit in-kind donations" loading="lazy" />
<ul>
<li><b>Create a dedicated page on your website.</b> If you need recurring items at your organization, add a permanent page to <a href="https://weareloop.com/best-nonprofit-websites/" target="_blank">your nonprofit’s website</a> 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.</li>
<li><b>Write individual letters asking for the in-kind donations you need.</b> 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.</li>
<li><b>Register for a wish list when starting new initiatives.</b> 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.</li>
<li><b>Reach out to current and potential <a href="https://360matchpro.com/corporate-sponsorships/" target="_blank">corporate sponsors</a>.</b> 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.</li>
</ul>
<p>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.</p>
<hr />
<p>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.</p>
<p>For more information on in-kind donations as they relate to nonprofit finance, check out these resources:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/">Nonprofit Budgeting: Understand the Basics [+ Template]</a>. Learn how to create an effective budget for your organization while taking into account both monetary and in-kind gifts.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/form-990-filing/">Nonprofit Form 990 Filing: An Essential Tax Guide</a>. Dive deeper into the reporting requirements (for in-kind donations and otherwise) on your organization’s annual tax return.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accountant/">Working With a Nonprofit Accountant: What to Expect</a>. Discover what it’s like to partner with a nonprofit accountant to record donations, file tax forms, create reports, and more.</li>
</ul>
<div class="blog-post-callout">
<div class="inner">
<div class="media">
<picture>
<source srcset="https://jitasa.imgix.net/blog/flames_circle_lrg.png?auto=format, https://jitasa.imgix.net/blog/flames_circle_lrg@2x.png?auto=format 2x" media="(min-width: 850px)" />
<img srcset="https://jitasa.imgix.net/blog/flames_circle.png?auto=format, https://jitasa.imgix.net/blog/flames_circle@2x.png?auto=format 2x" alt="Jitasa Flames" width="68" height="68" loading="lazy" />
</picture>
</div>
<div class="text">
<h2 class="text-white mt-0">Jitasa’s nonprofit accounting services make recording and reporting in-kind donations easy.</h2>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button small">Request a Quote</a>
</div>
</div>
</div>
Grant Management: How to Secure and Track Nonprofit Funding2024-01-19T16:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/grant-management/
<p><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/how-do-nonprofits-make-money/">Nonprofits typically bring in revenue</a> from a variety of sources, including individual donations, earned income from membership fees or merchandise sales, investments, and grants. This last source, while competitive to secure, can make a significant difference in your organization’s ability to launch new initiatives and complete projects.</p>
<p>When you apply for a grant, your job is to convince the grantmaker that of all the organizations applying for funding, your nonprofit is the most deserving. A major part of this is effective grant management.</p>
<p>In this guide, you’ll learn all you need to know about grant management, including:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/grant-management/#what">What is Grant Management?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/grant-management/#benefits">Benefits and Challenges of Grant Management</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/grant-management/#cycle">The Grant Management Cycle for Nonprofits</a></li>
</ul>
<p>Grant management can quickly become complicated, which is why it’s important to work with financial professionals to make the process as smooth as possible. At <a href="https://www.jitasagroup.com/">Jitasa</a>, our accountants use their experience working with nonprofits to help you make grants a seamless part of your organization’s funding model. Let’s get started with an overview of what exactly grant management entails.</p>
<div class="blog-callout-full">
<h2>Manage your grants with the help of Jitasa’s nonprofit financial experts.</h2>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button white">Request a Quote</a>
</div>
<h2 id="what">What is Grant Management?</h2>
<p><b>Grant management is the process of securing, tracking, and reporting grant funding awarded to a nonprofit by a government agency, private or public foundation, or corporation.</b> Its goal is to ensure that these funds are used efficiently and in accordance with the grantmaker’s requirements for awarding them.</p>
<p>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 for future change. This is why it’s critical not only to pursue the right grant opportunities, but to demonstrate to the funder through proper management funds that they made a good investment by choosing your organization to receive their grant.</p>
<h2 id="benefits">Benefits and Challenges of Grant Management</h2>
<p class="mb-0">Although grant management can become complicated, especially if your nonprofit is trying to manage multiple grants at the same time, it’s also extremely beneficial when done properly. Here are a few of the main advantages and challenges associated with grant management.</p>
<img src="https://jitasa.imgix.net/blog/grant_management_comparison.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/grant_management_comparison.jpg?auto=format&w=700&dpr=2&q=40 2x" width="700" height="400" alt="Comparing benefits and challenges of grant management" loading="lazy" />
<h3>Grant Management Benefits</h3>
<p>If your nonprofit manages its grants well, you can experience:</p>
<ul>
<li><b>An increased ability to make a difference.</b> This benefit comes not only from ensuring that you get to keep the grant funding awarded to you, but also from allocating that funding effectively as you push initiatives forward.</li>
<li><b>A higher capacity for innovation.</b> Well-managed grant funding can give you additional flexibility in your project and program <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/">budgets</a> to experiment with new approaches to problem-solving as you deliver services in your community.</li>
<li><b>Stronger external relationships.</b> By regularly communicating with funders and thoroughly reporting on your grant progress, you can build trust with them that can lead to securing more funding in the future.</li>
<li><b>A boost to your nonprofit’s reputation.</b> Having complete records of how you used your grant funding can help establish you as a reliable organization that fulfills its mission and commitments, which can catch the attention of other funders.</li>
</ul>
<h3>Grant Management Challenges</h3>
<p>The main difficulties that can get in the way of effective nonprofit grant management include:</p>
<ul>
<li><b>Compliance complications.</b> Some grantmakers have stringent requirements for how their funding is used and reported, which your organization has to put a lot of time and effort into navigating.</li>
<li><b>Inconsistent reporting demands.</b> If your nonprofit is managing multiple grants at once, each funder may ask you to record and report your progress differently, meaning you’ll need to keep all of your information extremely organized.</li>
<li><b>Resource constraints.</b> One grant often won’t cover the full cost of an initiative, so you’ll need to secure several grants and/or allocate revenue from other sources toward the project as well—all of which needs to be budgeted and reported.</li>
<li><b>Uncertainty.</b> Because grants are competitive, you might do all of the work to apply for one and start preparing a management system only to lose out to another organization. (If your nonprofit has the capacity to apply for multiple grants, do so as it’ll increase your chances of securing funding.)</li>
</ul>
<p>However, the biggest issue with grant management is if you fall short in any area of compliance, you <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/risk-management-for-nonprofits/">run the risk</a> of financial penalties, funds being withheld, or even legal consequences depending on the grantmaker’s agreement. Before you apply for a grant, make sure your nonprofit is equipped to manage it correctly if you win it.</p>
<h2 id="cycle">The Grant Management Cycle for Nonprofits</h2>
<p class="mb-0">Grant management is an ongoing process that begins even before you secure funding. Let’s dive deeper into each of the five steps of the nonprofit grant management cycle.</p>
<img src="https://jitasa.imgix.net/blog/grant_management_cycle.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/grant_management_cycle.jpg?auto=format&w=700&dpr=2&q=40 2x" width="700" height="500" alt="Grant management cycle" loading="lazy" />
<h3>Step 1: Identify Grant Opportunities</h3>
<p>Grants are usually intended for a specific purpose, meaning that the best grant opportunities for your nonprofit are the ones that align with your mission and upcoming initiatives. Take some time to define your goals and funding needs before you start looking for grants that will align with your analysis. Fortunately, there are plenty of resources available to help you <a href="https://gettingattention.org/how-to-find-grants/" target="_blank">find the right grants</a> to apply for:</p>
<ul>
<li><b>Online grant research tools.</b> Sites such as <a href="https://fconline.foundationcenter.org/" target="_blank">Candid’s Foundation Directory</a> and <a href="https://grantstation.com/" target="_blank">GrantStation</a> can help you filter down grant opportunities to the ones your nonprofit could feasibly win.</li>
<li><b>Localized online searches.</b> Community foundations and state or local governments provide grants almost exclusively to nonprofits in a specific city or region. Type “Grant opportunities in [your organization’s city]” into your favorite search engine to help locate these offerings.</li>
<li><b>Your organization’s board.</b> Board members often have connections in the community and may know of potential grant opportunities. If so, they can introduce you to the funder and help you build a relationship with them.</li>
<li><b>Grant consultants.</b> If your organization has the resources to outsource some of your grant-seeking work, grant consultants can assess your goals and capabilities, find grants that match your needs, and help you write proposals.</li>
</ul>
<p>An <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/outsourced-accounting-for-nonprofits-top-firms/">outsourced nonprofit accountant</a> can also be a good external resource for evaluating grants and determining whether you’re in the right financial position to win them. Although not every opportunity will be right for your organization, sometimes reaching out now will create a connection that you can leverage in the future when your goals or financial position have changed.</p>
<h3>Step 2: Apply for Grants</h3>
<p>In order to secure the grants you’ve identified as being right for your nonprofit, you’ll need to write a standout proposal for each one. The goal is to make it easy for grantmakers to see why your organization is the most deserving one out there to receive funding.</p>
<p class="mb-0">When <a href="https://www.learngrantwriting.org/grant-writing-basics/" target="_blank">writing grant proposals</a>, follow these tips:</p>
<img src="https://jitasa.imgix.net/blog/grant_management_proposal.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/grant_management_proposal.jpg?auto=format&w=700&dpr=2&q=40 2x" width="700" height="700" alt="Four tips for writing grant proposals" loading="lazy" />
<ul>
<li><b>Build relationships.</b> Take the 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 an event at your organization. Then, use what you’ve learned about what they’re looking for in a grant recipient to inform your proposal.</li>
<li><b>Tell your nonprofit’s story.</b> Include plenty of information about your mission and how the grant will help you make even more of a difference in your community. Incorporate both emotional appeals such as stories from beneficiaries and concrete data about your organization’s accomplishments to make your proposal more persuasive.</li>
<li><b>Be specific.</b> Describe the exact initiative you need funding for and lay out how you plan to use the grant to push that initiative forward within a certain timeframe. Many funders ask for a sample budget to help with this—double-check your calculations and include information about the other revenue you’ll use to supplement the grant funding.</li>
<li><b>Ask for feedback.</b> After you’ve drafted your grant proposal, ask several people at your organization to read over it and offer suggestions for improvement. Try to find someone outside of your organization to provide feedback as well for a more objective perspective.</li>
</ul>
<p>Before you submit your proposal, make sure you’ve followed all of the funder’s rules to the letter and that you’re sending it off before the deadline. Most grantmakers won’t accept late submissions, and obvious deviations from the requirements or mistakes can get your proposal rejected before they even dig into it.</p>
<div class="blog-post-callout">
<div class="inner">
<div class="media">
<picture>
<source srcset="https://jitasa.imgix.net/blog/flames_circle_lrg.png?auto=format, https://jitasa.imgix.net/blog/flames_circle_lrg@2x.png?auto=format 2x" media="(min-width: 850px)" />
<img srcset="https://jitasa.imgix.net/blog/flames_circle.png?auto=format, https://jitasa.imgix.net/blog/flames_circle@2x.png?auto=format 2x" alt="Jitasa Flames" width="68" height="68" loading="lazy" />
</picture>
</div>
<div class="text">
<h2 class="text-white mt-0"><b>Stay on top of grant deadlines</b> with our Month Close Calendar Template.</h2>
<a href="https://www.jitasagroup.com/nonprofit-resources/nonprofit-free-downloads/nonprofit-month-close-calendar-template/" class="button small">Download for Free</a>
</div>
</div>
</div>
<h3>Step 3: Track Your Grant’s Progress</h3>
<p>So, you’ve crafted a well-written proposal and sent it off on time, and it convinced the funder that they should award the funding to your nonprofit. Congratulations!</p>
<p>However, your work is far from finished. <b>Accurately tracking your grant’s progress is critical to show the funder that your organization is financially responsible and takes the grant management process seriously.</b></p>
<p>Use the budget you submitted along with your grant proposal as a guide (or create one in the unlikely event you weren’t required to do so in advance). 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 of your accounting system.</p>
<p>In this documentation system, keep track of the date, amount, and purpose of every expenditure of grant funding, 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 expand on your financial report in that way when you report back to the funder.</p>
<h3>Step 4: Record Grant Funding</h3>
<p class="mb-0">In addition to tracking the progress of your grant for the funder, you also need to accurately record the grant funds that you receive for internal <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accounting/">accounting</a> purposes. There are specific guidelines that you should follow based on the type of grant you receive, of which there are three possibilities:</p>
<img src="https://jitasa.imgix.net/blog/grant_management_types.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/grant_management_types.jpg?auto=format&w=700&dpr=2&q=40 2x" width="700" height="220" alt="Three types of grants" loading="lazy" />
<ul>
<li><b>Unconditional grants</b> are just what they sound like: funds provided with no restrictions. Since these funds are provided upfront and can be used at your nonprofit’s discretion, 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 on February 1 but don’t get the actual check from the grantmaker until March 1, you should record the grant on February 1.</li>
<li><b>Grants with contingencies</b> require that your organization fulfill certain conditions as designed by the funder. Then the money comes in installments as you show that you’ve met those requirements. For these grants, record the first installment when you receive the award letter and each of the subsequent installments as the funding comes.</li>
<li><b>Reimbursable grants</b> are paid out only after your organization has spent the money for an initiative up front (i.e., the funder reimburses you for costs you’ve already incurred). In these situations, you’ll record the expenses as you incur them, both for internal purposes and to be able to give an itemized list of payments to the funder. Then, you’ll record the grant funding when you receive it.</li>
</ul>
<p>When you apply for a grant, take note of the type so that you’ll know exactly when to record the funds. If any difficulties arise, ask your <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-bookkeeper-vs-accountant/">accountant or bookkeeper</a>.</p>
<h3>Step 5: Report Back to the Grantmaker</h3>
<p>Finally, you’ll submit all of your required documentation to the grantmaker to show that you’ve upheld the conditions of the grant 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.</p>
<p>While you’ll at least need to report the financial information from the tracking step (or the recording step for a reimbursable grant), you’ll likely also include information on how the initiative funded by the grant is going. Some grant funding is contingent upon your nonprofit’s progress with the initiative—for example, a funder may only agree to support your program as long as it has a certain number of participants. Or, they may just want reassurance that you’re using their funding to make the intended impact on the community.</p>
<p>Especially for grants with contingencies, you’ll likely have to report your progress multiple times during the grant management process. 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.</p>
<p>After your nonprofit goes through the grant management process once, it’s time to go back to the beginning and start looking for more grant opportunities! As your organization grows, you’ll likely have several grants at different stages of the cycle at any given time. But by that point, you’ll have formed connections that you can leverage to secure more funding, know how to write a strong proposal, and already have your tracking and recording systems set up to make reporting much easier.</p>
<hr />
<p>The grant management process may seem overwhelming, especially if you’re just getting started. However, when you put in the right amount of research and effort, you’ll find the whole process much more manageable. Plus, you can always turn to grant consultants or <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-management/">financial management</a> experts (like the team at Jitasa!) for help along the way.</p>
<p>For more information on grants and how they fit into your nonprofit’s funding model, check out these resources:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/restricted-funds/">Restricted Funds: What Are They? And Why Do They Matter?</a> Grants are a common type of restricted funding for nonprofits. Dive deeper into why restricted funds are important and how to manage them.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-audit/">Nonprofit Audits: A Complete Guide to Financial Auditing</a>. Some grantmakers may require your organization to conduct a financial audit at the application stage. Discover what this process involves and how to prepare for it.</li>
<li><a href="https://www.jitasagroup.com/nonprofit-solutions/cfo-services/">Fractional Nonprofit CFO Services</a>. Setting up your grant management system is a core aspect of our fractional nonprofit CFO services. Learn more about this offering and everything else the Jitasa Strategic Advisory Team can do for your nonprofit.</li>
</ul>
<div class="blog-post-callout">
<div class="inner">
<div class="media">
<picture>
<source srcset="https://jitasa.imgix.net/blog/flames_circle_lrg.png?auto=format, https://jitasa.imgix.net/blog/flames_circle_lrg@2x.png?auto=format 2x" media="(min-width: 850px)" />
<img srcset="https://jitasa.imgix.net/blog/flames_circle.png?auto=format, https://jitasa.imgix.net/blog/flames_circle@2x.png?auto=format 2x" alt="Jitasa Flames" width="68" height="68" loading="lazy" />
</picture>
</div>
<div class="text">
<h2 class="text-white mt-0">Partner with Jitasa to seamlessly navigate grant management at your nonprofit.</h2>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button small">Request a Quote</a>
</div>
</div>
</div>
Cash vs. Accrual Accounting for Nonprofits: The Basics2024-01-16T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/cash-vs-accrual-accounting-for-nonprofits/<p>If you work at a nonprofit, you’ve likely noticed that money moves in and out of your organization frequently, whether through revenue-generating activities like running fundraising campaigns and securing sponsorships or spending on your programs and administrative needs.</p>
<p>It’s important to carefully track all of these transactions so you can ensure you’re using your funding effectively to further your mission, which is where <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accounting/">nonprofit accounting</a> comes in.</p>
<p>While every organization needs to have some kind of accounting system in place, not all nonprofits approach accounting the same way. There are two main accounting methods you can choose from to keep track of your nonprofit’s funds: <b>cash accounting and accrual accounting</b>.</p>
<p>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:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/cash-vs-accrual-accounting-for-nonprofits/#difference">Cash vs. Accrual Accounting: What’s the Difference?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/cash-vs-accrual-accounting-for-nonprofits/#benefits">Benefits of Cash Accounting & Accrual Accounting for Nonprofits</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/cash-vs-accrual-accounting-for-nonprofits/#which">Which Accounting Method Is Right for My Nonprofit?</a></li>
</ul>
<p class="mb-0">Let’s dive in with an overview of how each accounting system works in the context of nonprofit organizations.</p>
<div class="blog-callout-full">
<h2>Work with the experts at Jitasa to set up your nonprofit accounting system.</h2>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button white">Request a Quote</a>
</div>
<h2 id="difference">Cash vs. Accrual Accounting: What’s the Difference?</h2>
<p class="mb-0">Cash accounting and accrual accounting are both systems that nonprofit organizations use to track their transactions. The difference is in the timing of when you recognize your nonprofit’s revenue and expenses.</p>
<img src="https://jitasa.imgix.net/blog/cash_vs_accrual_accounting_comparison.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/cash_vs_accrual_accounting_comparison.jpg?auto=format&w=700&dpr=2&q=40 2x" width="700" height="500" alt="A Venn diagram showing the similarities and differences between cash vs. accrual accounting for nonprofits" loading="lazy" />
<p>In a cash accounting system, your organization will recognize 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.</p>
<p>With accrual accounting, you’ll 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 nonprofit’s financial commitments—both what supporters and stakeholders owe to you and what you owe to external parties.</p>
<p>To understand the difference between these systems, let’s say your nonprofit is planning its annual <a href="https://nxunite.com/walk-a-thons/" target="_blank">walk-a-thon fundraiser</a>, 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.</p>
<p>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.</p>
<p>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. Because you committed to pay for the supplies this year, you’ll record the full amount of the rental (both the deposit and the outstanding balance) under this year’s expenses.</p>
<h2 id="benefits">Benefits of Cash Accounting & Accrual Accounting for Nonprofits</h2>
<p>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.</p>
<h3>Cash Accounting Method</h3>
<img src="https://jitasa.imgix.net/blog/cash_vs_accrual_accounting_cash.jpg?auto=format&width=700" srcset="https://jitasa.imgix.net/blog/cash_vs_accrual_accounting_cash.jpg?auto=format&width=700&dpr=2&q=40 2x" width="700" height="430" alt="A side-by-side list of the benefits and drawbacks of cash accounting for nonprofits" loading="lazy" class="mt-0" />
<p>The main benefit of cash accounting is its simplicity. As previously mentioned, cash accounting is dependent on the <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-cash-flows/">cash flow</a> 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.</p>
<p>However, there are several notable drawbacks to the cash accounting method, including that:</p>
<ul>
<li><b>It doesn’t comply with nonprofit reporting requirements.</b> If you fill out <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/form-990-filing/">your nonprofit’s annual Form 990</a> 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 <a href="https://www.accounting.com/resources/gaap/" target="_blank">Generally Accepted Accounting Principles (GAAP)</a>.</li>
<li><b>It doesn’t include tracking for assets, accounts receivable, or accounts payable.</b> These financials are associated with commitments rather than cash flow, so the basic cash accounting system doesn’t account for them.</li>
<li><b>It’s less useful for future planning.</b> When you don’t have a record of expected revenue and outstanding liabilities, it’s difficult to pinpoint your exact <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-financial-position/">financial position</a>, which is essential to develop multi-year strategic plans for your organization.</li>
</ul>
<p>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.</p>
<h3>Accrual Accounting Method</h3>
<img src="https://jitasa.imgix.net/blog/cash_vs_accrual_accounting_accrual.jpg?auto=format&width=700" srcset="https://jitasa.imgix.net/blog/cash_vs_accrual_accounting_accrual.jpg?auto=format&width=700&dpr=2&q=40 2x" width="700" height="430" alt="A side-by-side list of the benefits and drawbacks of accrual accounting for nonprofits" loading="lazy" class="mt-0" />
<p>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:</p>
<ul>
<li><b>GAAP compliance.</b> 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.</li>
<li><b>More accurate reporting.</b> 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.</li>
<li><b>Better financial planning.</b> This complete financial dataset will also be useful in <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/">creating budgets</a>, setting financial goals, and developing long-term strategic plans for your organization.</li>
<li><b>Increased transparency.</b> 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.</li>
</ul>
<p>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.</p>
<div class="blog-post-callout">
<div class="inner">
<div class="media">
<picture>
<source srcset="https://jitasa.imgix.net/blog/flames_circle_lrg.png?auto=format, https://jitasa.imgix.net/blog/flames_circle_lrg@2x.png?auto=format 2x" media="(min-width: 850px)" />
<img srcset="https://jitasa.imgix.net/blog/flames_circle.png?auto=format, https://jitasa.imgix.net/blog/flames_circle@2x.png?auto=format 2x" alt="Jitasa Flames" width="68" height="68" loading="lazy" />
</picture>
</div>
<div class="text">
<h2 class="text-white mt-0">Learn financial basics in The Beginner’s Guide to Nonprofit Accounting.</h2>
<a href="https://www.jitasagroup.com/nonprofit-resources/nonprofit-free-downloads/beginners-guide-to-nonprofit-accounting/" class="button small">Download for Free</a>
</div>
</div>
</div>
<h2 id="which">Which Accounting Method Is Right for My Nonprofit?</h2>
<p>In many cases, very small nonprofits find the cash accounting method to be a good starting point as they take their first steps into <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-management/" target="_blank">financial management</a>. 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.</p>
<p>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.</p>
<p class="mb-0">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:</p>
<img src="https://jitasa.imgix.net/blog/cash_vs_accrual_accounting_signs.jpg?auto=format" srcset="https://jitasa.imgix.net/blog/cash_vs_accrual_accounting_signs.jpg?auto=format&dpr=2&q=40 2x" width="700" height="631" alt="A checklist of signs to switch from cash accounting to accrual accounting" loading="lazy" />
<ul>
<li>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.</li>
<li>You’re planning a long-term project like a <a href="https://donorly.com/thedonorlyblog/capital-campaign-guide" target="_blank">capital campaign</a> that will require you to track many types of expenses and contributions throughout its duration.</li>
<li>You’re required to conduct a <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-audit/">financial audit</a> and are trying to make the process go as smoothly as possible.</li>
<li>You’re considering applying for more competitive grants where the funders want to see accurate details of your organization’s financial situation.</li>
<li>You want to make better financial decisions as you plan for growth at your nonprofit.</li>
</ul>
<p>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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accountant/">work with a nonprofit accountant</a> on your accrual system early (such as the team at <a href="https://www.jitasagroup.com/">Jitasa</a>!) can prepare you to manage more complex financial records as your organization grows.</p>
<hr />
<p>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.</p>
<p>To learn more about getting started with nonprofit accounting, check out these resources:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/fund-accounting/">Fund Accounting 101: The Basics and Best Practices.</a> 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.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-chart-of-accounts/">Nonprofit Chart of Accounts: How to Get Started + Example.</a> Discover a key nonprofit accounting resource that is especially important for tracking all of the types of transactions involved in an accrual system.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/outsourced-accounting-for-nonprofits-top-firms/">Outsourced Accounting for Nonprofits: Top 10+ Firms.</a> 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.</li>
</ul>
<div class="blog-post-callout">
<div class="inner">
<div class="media">
<picture>
<source srcset="https://jitasa.imgix.net/blog/flames_circle_lrg.png?auto=format, https://jitasa.imgix.net/blog/flames_circle_lrg@2x.png?auto=format 2x" media="(min-width: 850px)" />
<img srcset="https://jitasa.imgix.net/blog/flames_circle.png?auto=format, https://jitasa.imgix.net/blog/flames_circle@2x.png?auto=format 2x" alt="Jitasa Flames" width="68" height="68" loading="lazy" />
</picture>
</div>
<div class="text">
<h2 class="text-white mt-0">Get started with accrual accounting by partnering with the experts at Jitasa.</h2>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button small">Request a Quote</a>
</div>
</div>
</div>
How to Create a Budget for Your Children's Ministry2024-01-15T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/childrens-ministry-budget/<p>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.</p>
<p>To do so, you’ll need to <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/">understand the basics of budgeting</a> 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:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/childrens-ministry-budget/#analyze">Analyze Your Expenses</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/childrens-ministry-budget/#determine">Determine Expected Budget</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/childrens-ministry-budget/#goals">Set Your Goals Within the Budget</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/childrens-ministry-budget/#plan">Create a Plan</a></li>
</ul>
<p>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.</p>
<h2 id="analyze">Analyze Your Expenses</h2>
<p>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?</p>
<p>This includes all expenses associated with your children’s ministry, which might be broken down into the following categories:</p>
<ul>
<li><b>General fund</b>: 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 <a href="https://wonderink.org/" target="_blank">children’s ministry curriculum</a> or Sunday school supplies.</li>
<li><b>Missions or Community fund</b>: 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.</li>
<li><b>Special Programming fund</b>: This might include special holiday plans, events you plan for your ministry, and anything in between!</li>
</ul>
<p>This organization of expenses is often referred to as fund accounting. <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/fund-accounting/">Fund accounting for churches</a> 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.</p>
<h2 id="determine">Determine Expected Budget</h2>
<p>Whether your children’s ministry hosts <a href="https://funds2orgs.com/church-fundraising-ideas-guide/" target="_blank">fundraising events</a>, 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.</p>
<p>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.</p>
<p>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.</p>
<p>Plus, evaluating your budget can help you manage restricted funds. According to <a href="https://doublethedonation.com/nonprofit-basics-nonprofit-accounting/" target="_blank">Double the Donation’s guide to nonprofit accounting</a>, 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.</p>
<h2 id="goals">Set Your Goals Within the Budget</h2>
<p>Equipped with an overview of your ministry’s current finances, it’s time to get specific about how your funds should be allocated for <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-management/">effective financial management</a>. For example, <a href="https://bristolstrategygroup.com/how-much-should-a-development-director-raise-it-depends/" target="_blank">how much should you raise</a> for your budget for the year, or is your budget fixed? How much do you plan to spend on children’s holiday parties?</p>
<p class="mb-0">To structure your financial goals, use the SMART framework:</p>
<img src="https://jitasa.imgix.net/blog/childrens_ministry_budget_smart_goals.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/childrens_ministry_budget_smart_goals.jpg?auto=format&w=700&dpr=2&q=40 2x" width="700" height="164" alt="SMART Goal framework" loading="lazy" />
<ul>
<li>Specific</li>
<li>Measurable</li>
<li>Achievable</li>
<li>Relevant</li>
<li>Time-bound</li>
</ul>
<p>Instead of profitability, your <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/church-accounting-guide/">ministry’s accounting</a> 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.</p>
<p>For example, you might want to focus your teaching more on pointing kids back to the Bible in the coming year. In this case, <a href="https://wonderink.org/childrens-bible-curriculum/" target="_blank">Wonder Ink’s guide to children’s curriculum</a> 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.</p>
<h2 id="plan">Create a Plan</h2>
<p>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.</p>
<p>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 <a href="https://wonderink.org/about/childrens-church-curriculum/" target="_blank">look for a children’s church curriculum</a> 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.</p>
<p>Use the following tips to develop a financial plan for your budget:</p>
<ul>
<li><b>Prioritize your expenses.</b> 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.</li>
<li><b>Measure your income.</b> 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.</li>
<li><b>Expect the unexpected.</b> Throughout the year, your ministry will encounter unexpected costs. Leave room in your budget for the unexpected, such as broken or lost supplies.</li>
</ul>
<p>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. </p>
<hr />
<p>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.</p>
<p>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.</p>
Nonprofit Net Assets: What They Are and Why They Matter2024-01-03T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-net-assets/<p>A major aspect of effective nonprofit management is knowing whether your organization is financially healthy. The better financial shape your organization is in, the better equipped it will be to fulfill its mission. Plus, if you’re planning for growth, your nonprofit has to have enough resources on hand to add new team members, launch large-scale initiatives, and <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/risk-management-for-nonprofits/">manage the risks associated with expansion</a>.</p>
<p>One key indicator of your nonprofit’s financial health is its net assets. While the basic calculation to determine where your organization stands with its net assets is fairly straightforward, 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:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-net-assets/#what">What Are Nonprofit Net Assets?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-net-assets/#types">Types of Nonprofit Net Assets</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-net-assets/#applications">Applications of Nonprofit Net Assets</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-net-assets/#calculate">How to Calculate Your Nonprofit’s Net Assets</a></li>
</ul>
<p>In addition to providing internal insights, understanding your organization’s net assets is important for compliance reasons, as they appear on multiple required nonprofit financial reports. Let’s get started by defining “net assets” and some related terms. </p>
<div class="blog-callout-full">
<h2>Learn how Jitasa's nonprofit accounting team can help you properly report your net assets.</h2>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button white">Request a Quote</a>
</div>
<h2 id="what">What Are Nonprofit Net Assets?</h2>
<b>Your nonprofit’s net assets are the financial resources you have available to fund your <p>operations and mission-related activities.</p></b> They include both monetary resources like cash and investments as well as assets that aren’t monetary but still have financial value for your organization, such as property and equipment.<p></p>
<p class="mb-0">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 take 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.</p>
<img src="https://jitasa.imgix.net/blog/nonprofit_net_assets_definition.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/nonprofit_net_assets_definition.jpg?auto=format&w=700&dpr=2&q=40 2x" width="700" height="152" alt="Definitions for nonprofit assets, nonprofit liabilities, and nonprofit net assets" loading="lazy" />
<p>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 more informed decisions about how to allocate available funds at your organization.</p>
<h3>Net Assets vs. Equity for Nonprofits </h3>
<p>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 its financial resources. The main difference between the terms is semantic: nonprofits tend to use “net assets” more often, while for-profit organizations use “equity.” </p>
<h2 id="types">Types of Nonprofit Net Assets</h2>
<p>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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/fund-accounting/">fund accounting</a> that nonprofits use, some funding has specific requirements for how you can use it. These restrictions need to be reflected in the way your organization reports its net assets to remain accountable to the donors who imposed those funding restrictions.</p>
<p class="mb-0">Let’s look at the three types of nonprofit net assets—unrestricted, permanently restricted, and temporarily restricted—in more detail.</p>
<img src="https://jitasa.imgix.net/blog/nonprofit_net_assets_types.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/nonprofit_net_assets_types.jpg?auto=format&w=700&dpr=2&q=40 2x" width="700" height="410" alt="Three types of nonprofit net assets" loading="lazy" />
<h3>Unrestricted Net Assets </h3>
<p>Unrestricted net assets refer to financial resources that have no requirements 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.</p>
<p>Some types of <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/how-do-nonprofits-make-money/">nonprofit revenue</a> that tend to be unrestricted include:</p>
<ul>
<li>Small and mid-sized gifts with no donor designations</li>
<li>Fundraising event revenue</li>
<li>Earned income from sales of merchandise or services, membership fees, or renting out your organization’s facilities or equipment</li>
</ul>
<p>Although these are the most common types of unrestricted funding, be careful as you record and spend them to make absolutely certain that there are no obligations associated with them. You should track unrestricted net assets separately from net assets with restrictions so that when bills need to be paid and money needs to be spent, you know how much your nonprofit has to cover those expenses. </p>
<h3>Net Assets With Restrictions </h3>
<p>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 fairly large, and funders want to make sure that their money will be used to further mission-related initiatives that align with their interests and values before agreeing to give a significant amount to your organization.</p>
<p>Within the category of net assets with restrictions, there are two additional designations to know: </p>
<ul>
<li><b>Permanently restricted net assets</b> most commonly take the form of <a href="https://www.infinitegiving.com/blog/nonprofit-endowments" target="_blank">endowments</a>. Your nonprofit doesn’t spend these gifts directly but instead places them in an investment account. The money then generates interest, which is then put toward a specific program or annual initiative such as a scholarship fund.</li>
<li><b>Temporarily restricted net assets</b> often include grant funding, major and <a href="https://resources.freewill.com/planned-giving-guide" target="_blank">planned gifts</a>, 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 can be released from restriction. For example, if a major donor gives $50,000 toward your nonprofit’s facility renovation project and you only end up needing $48,000 of it, the remaining $2,000 will be transferred to your organization’s unrestricted funds once the renovation is complete.</li>
</ul>
<p>In addition to reporting restricted and unrestricted net assets separately, it’s important to consider them separately when creating your <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/">nonprofit’s annual operating budget</a>. 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.</p>
<p>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.</p>
<p>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.</p>
<div class="blog-post-callout">
<div class="inner">
<div class="media">
<picture>
<source srcset="https://jitasa.imgix.net/blog/flames_circle_lrg.png?auto=format, https://jitasa.imgix.net/blog/flames_circle_lrg@2x.png?auto=format 2x" media="(min-width: 850px)" />
<img srcset="https://jitasa.imgix.net/blog/flames_circle.png?auto=format, https://jitasa.imgix.net/blog/flames_circle@2x.png?auto=format 2x" alt="Jitasa Flames" width="68" height="68" loading="lazy" />
</picture>
</div>
<div class="text">
<h2 class="text-white mt-0">Dive deeper into restricted funds with our FREE course!</h2>
<a href="https://www.jitasagroup.com/nonprofit-resources/free-courses/nonprofit-restricted-funds-course/" class="button small">Get Started</a>
</div>
</div>
</div>
<h2 id="applications">Applications of Nonprofit Net Assets</h2>
<p class="mb-0">While your nonprofit’s net assets inform the creation of its 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:</p>
<img src="https://jitasa.imgix.net/blog/nonprofit_net_assets_applications.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/nonprofit_net_assets_applications.jpg?auto=format&w=700&dpr=2&q=40 2x" width="700" height="500" alt="Four major applications of nonprofit net assets" loading="lazy" />
<ul>
<li><b><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-chart-of-accounts/">Chart of accounts.</a></b> 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 your nonprofit’s net assets are being tracked whenever you need to reference those numbers.</li>
<li><b><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-financial-position/">Statement of financial position.</a></b> Also known as a balance sheet, this report is one of the four core financial statements nonprofits compile each year. It breaks down 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.</li>
<li><b><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-activities/">Statement of activities.</a></b> 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.</li>
<li><b><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/form-990-filing/">IRS Form 990.</a></b> If 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.</li>
</ul>
<p>All of these resources are important for your organization to comply with the <a href="https://www.accounting.com/resources/gaap/" target="_blank">Generally Accepted Accounting Principles</a> and government regulations for nonprofits. They’re also useful for internal decision-making as they show where your organization stands and what it has to do to work toward financial sustainability and growth. Lastly, when your nonprofit makes information about its net assets publicly available by sharing its financial statements and tax returns, it builds trust with donors and stakeholders that can lead to increased support. </p>
<h2 id="calculate">How to Calculate Your Nonprofit’s Net Assets</h2>
<p>To determine your nonprofit’s total net assets, you just have to: </p>
<ol class="mb-0">
<li>Add up your organization’s total assets.</li>
<li>Figure out your total liabilities.</li>
<li>Subtract your total liabilities from your total assets.</li>
</ol>
<img src="https://jitasa.imgix.net/blog/nonprofit_net_assets_calculation.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/nonprofit_net_assets_calculation.jpg?auto=format&w=700&dpr=2&q=40 2x" width="700" height="250" alt="Nonprofit net assets equation" loading="lazy" />
<p>From there, subtract the net assets with donor restrictions from your total to separate the two categories.</p>
<p>While this calculation 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 <a href="https://www.jitasagroup.com/">Jitasa</a>. Our expert financial professionals will ensure your unrestricted and restricted net assets are calculated accurately and properly applied to your budget, chart of accounts, financial statements, tax returns, and more.</p>
<hr />
<p>Your nonprofit’s net assets figure into a wide range of <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-management/">financial management activities</a> 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.</p>
<p>To learn more about analyzing and utilizing your nonprofit’s net assets, check out these resources:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-statements/">Nonprofit Financial Statements: 4 Essential Reports to Know.</a> Dive deeper into the core nonprofit financial statements, several of which require you to report your organization’s net assets.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/restricted-funds/">Restricted Funds: What Are They? And Why Do They Matter?</a> Discover the ins and outs of restricted funds, including how to account for them and what challenges and opportunities they pose.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/outsourced-accounting-for-nonprofits-top-firms/">Outsourced Accounting for Nonprofits: Top 10+ Firms.</a> Explore our top recommendations for outsourced nonprofit accounting services to help your organization understand and apply the concept of net assets.</li>
</ul>
<div class="blog-post-callout">
<div class="inner">
<div class="media">
<picture>
<source srcset="https://jitasa.imgix.net/blog/flames_circle_lrg.png?auto=format, https://jitasa.imgix.net/blog/flames_circle_lrg@2x.png?auto=format 2x" media="(min-width: 850px)" />
<img srcset="https://jitasa.imgix.net/blog/flames_circle.png?auto=format, https://jitasa.imgix.net/blog/flames_circle@2x.png?auto=format 2x" alt="Jitasa Flames" width="68" height="68" loading="lazy" />
</picture>
</div>
<div class="text">
<h2 class="text-white mt-0">Work with Jitasa’s nonprofit accountants to understand and apply your organization’s net assets</h2>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button small">Request a Quote</a>
</div>
</div>
</div>What Is a Nonprofit Treasurer Report? Overview + Example2023-12-21T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-treasurer-report/<p>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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-management/">manages its finances</a>. 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.</p>
<p>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:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-treasurer-report/#what">What Is A Nonprofit Treasurer Report?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-treasurer-report/#basics">Basics of a Treasurer Report for Nonprofits</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-treasurer-report/#resources">Resources for Compiling a Nonprofit Treasurer Report</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-treasurer-report/#example">Nonprofit Treasurer Report Example</a></li>
</ul>
<p>Let’s dive in with an overview of what this report is and when it is compiled.</p>
<div class="blog-callout-full">
<h2>Work with an accountant to compile accurate data for nonprofit treasurer reports.</h2>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button white">Request a Quote</a>
</div>
<h2 id="what">What Is A Nonprofit Treasurer Report?</h2>
<p><b>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</b>. Its purpose is to update the board, organizational leaders, and outside stakeholders on the nonprofit’s financial situation over a given period of time.</p>
<p class="mb-0">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.</p>
<img src="https://jitasa.imgix.net/blog/nonprofit_treasurer_report_comparison.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/nonprofit_treasurer_report_comparison.jpg?auto=format&w=700&dpr=2&q=40 2x" width="700" height="449" alt="Comparison of monthly and annual nonprofit treasurer reports" loading="lazy" />
<h3>Monthly Nonprofit Treasurer Reports</h3>
<p>If your nonprofit treasurer compiles a report every month, it will likely be:</p>
<ul>
<li>Highly detailed, breaking down the past month’s major cash flows and budgeted vs. actual revenue and expenses.</li>
<li>Presented at the monthly meetings of the organization’s board and/or finance committee.</li>
<li>Used to track the nonprofit’s progress as compared to its <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/">budget</a> and make short-term decisions about spending and fundraising.</li>
</ul>
<h3>Annual Treasurer Reports</h3>
<p>On the other hand, a treasurer report that is developed once a year will be:</p>
<ul>
<li>Broader in its scope, summarizing the financial highlights of the year.</li>
<li>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.</li>
<li>Used to communicate the nonprofit’s financial performance over the past year to a wide audience and create long-term <a href="https://nxunite.com/nonprofit-strategic-plan/" target="_blank">strategic plans</a>.</li>
</ul>
<p>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.</p>
<h2 id="basics">Basics of a Treasurer Report for Nonprofits</h2>
<p>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.</p>
<p>The body of all nonprofit treasurer reports should include, at minimum, the following information:</p>
<ul>
<li><b>The organization’s cash balance at the beginning of the reporting period.</b> 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.</li>
<li><b>The revenue the nonprofit brought in during the reporting period.</b> 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 <a href="https://doublethedonation.com/types-of-corporate-philanthropy/" target="_blank">corporate contributions</a>.</li>
<li><b>The expenses the organization incurred during the reporting period.</b> Nonprofits typically organize expenses based on their function in furthering the organization’s mission. Using the <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/statement-of-functional-expenses/">functional expense categories</a> of program, administrative, and fundraising costs in treasurer reports will help maintain consistency across all financial documentation.</li>
<li><b>The nonprofit’s cash balance at the end of the reporting period.</b> 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.</li>
</ul>
<p class="mb-0">When you put these elements together, your nonprofit treasurer report should look something like this:</p>
<img src="https://jitasa.imgix.net/blog/nonprofit_treasurer_report_example.png?auto=format" srcset="https://jitasa.imgix.net/blog/nonprofit_treasurer_report_example.png?auto=format&dpr=2&q=40 2x" width="700" height="1336" alt="Example of a completed nonprofit treasurer report" loading="lazy" />
<p>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.</p>
<h2 id="resources">Resources for Compiling a Nonprofit Treasurer Report</h2>
<p>Nonprofit treasurers often collaborate with the financial professionals employed or contracted by their organizations, such as bookkeepers, <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accountant/">accountants</a>, 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.</p>
<p class="mb-0">Some <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accounting/">nonprofit accounting resources</a> treasurers may leverage for reporting include:</p>
<img src="https://jitasa.imgix.net/blog/nonprofit_treasurer_report_resources.jpg?auto=format" srcset="https://jitasa.imgix.net/blog/nonprofit_treasurer_report_resources.jpg?auto=format&dpr=2&q=40 2x" width="700" height="482" alt="Four resources utilized in the creation of a nonprofit treasurer report" loading="lazy" />
<ul>
<li><b>Transaction records</b>. 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.</li>
<li><b>Bank account statements</b>. 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.</li>
<li><b>Financial statements</b>. Of the four core nonprofit financial statements, the <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-cash-flows/">statement of cash flows</a> 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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-activities/">statement of activities</a> will provide the most helpful summary of the organization’s revenue and expenses throughout the year.</li>
<li><b>The nonprofit’s annual operating budget</b>. 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.</li>
</ul>
<p>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.</p>
<div class="blog-post-callout">
<div class="inner">
<div class="media">
<picture>
<source srcset="https://jitasa.imgix.net/blog/flames_circle_lrg.png?auto=format, https://jitasa.imgix.net/blog/flames_circle_lrg@2x.png?auto=format 2x" media="(min-width: 850px)" />
<img srcset="https://jitasa.imgix.net/blog/flames_circle.png?auto=format, https://jitasa.imgix.net/blog/flames_circle@2x.png?auto=format 2x" alt="Jitasa Flames" width="68" height="68" loading="lazy" />
</picture>
</div>
<div class="text">
<h2 class="text-white mt-0">Check out our <b>FREE Nonprofit Accounting 101</b> course!</h2>
<a href="https://www.jitasagroup.com/nonprofit-resources/free-courses/nonprofit-accounting-course/" class="button small">Learn More</a>
</div>
</div>
</div>
<h2 id="example">Nonprofit Treasurer Report Example</h2>
<p>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:</p>
<img src="https://jitasa.imgix.net/blog/nonprofit_treasurer_report_blank.png?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/nonprofit_treasurer_report_blank.png?auto=format&w=700&dpr=2&q=40 2x" width="700" height="1330" alt="Blank nonprofit treasurer report" loading="lazy" />
<p>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 <a href="https://www.jitasagroup.com/">Jitasa</a>. Jitasa’s experienced team will ensure your treasurer has accurate financial data to pull from and answer any questions as they come up.</p>
<hr />
<p>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.</p>
<p>For more information about nonprofit financial management and the treasurer’s role in it, check out these resources:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-statements/">Nonprofit Financial Statements: 4 Essential Reports to Know</a>. Discover the fundamentals of four of the key statements your nonprofit treasurer will reference when creating reports.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/how-do-nonprofits-make-money/">How Do Nonprofits Make Money? Making Nonprofits Profitable</a>. Learn more about the revenue section of the treasurer report by exploring the different funding sources available to nonprofits.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-treasurer/">What Does a Nonprofit Treasurer Do? The Complete Guide</a>. Dive deeper into the additional responsibilities of a nonprofit treasurer, as well as the qualities to look for in a candidate.</li>
</ul>
<div class="blog-post-callout">
<div class="inner">
<div class="media">
<picture>
<source srcset="https://jitasa.imgix.net/blog/flames_circle_lrg.png?auto=format, https://jitasa.imgix.net/blog/flames_circle_lrg@2x.png?auto=format 2x" media="(min-width: 850px)" />
<img srcset="https://jitasa.imgix.net/blog/flames_circle.png?auto=format, https://jitasa.imgix.net/blog/flames_circle@2x.png?auto=format 2x" alt="Jitasa Flames" width="68" height="68" loading="lazy" />
</picture>
</div>
<div class="text">
<h2 class="text-white mt-0">Set your nonprofit treasurer up for reporting success by partnering with <b>Jitasa</b>.</h2>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button small">Request a Quote</a>
</div>
</div>
</div>Restricted Funds: What Are They? And Why Do They Matter?2023-12-14T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/restricted-funds/<p>Imagine a nonprofit organization that has fallen on hard times (a problem that many nonprofits encountered in the beginning stages of the pandemic). This organization is struggling to come up with the funds to continue paying for the operational expenses and scrambling to come up with the money to make rent. However, their bank account shows a balance of $500,000. How can this be?</p>
<p>This type of situation is possible when the $500,000 the organization has in the bank is <i>restricted</i> for a specific purpose. When a donor designates their gift to be used for a particular project or campaign, the nonprofit must honor that. Therefore, this organization must try to raise additional <i>unrestricted</i> funds in order to generate the funds necessary for their rent payment.</p>
<p>In this guide, we’ll discuss restrictions on nonprofit funding and why they must be accounted for in each organization’s <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-management/">financial management</a> system. We’ll cover the following points:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/restricted-funds/#what%20are">What are restricted funds?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/restricted-funds/#why%20are">Why are restricted funds important?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/restricted-funds/#types">Types of Restricted Funds</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/restricted-funds/#accounting">Accounting for Restricted Funds</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/restricted-funds/#challenges">Challenges and Opportunities of Restricted Funds</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/restricted-funds/#managing">Managing Your Restricted Funds</a></li>
</ul>
<p id="what are">No nonprofit should need to fall into the situation described above. That’s why it’s so important to understand restricted funds and the part they play in your organization’s budget. That way, you can make sure there is a balance between restricted and unrestricted funding, allowing your organization to prepare adequately and prevent misallocation of funding.</p>
<div class="blog-callout-full full-width-text">
<h2>Need help managing your nonprofit’s restricted funds? We can help!</h2>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button white">Contact Jitasa</a>
</div>
<h2>What are restricted funds?</h2>
<p><b>Restricted funds are any donations made and earmarked for a specific purpose by the donor.</b> Donors have the legal right to restrict the donations they contribute to organizations (typically nonprofits) and require that their gifts be used only for very limited and specific purposes.</p>
<p>For example, a major donor might decide to give a gift of $650,000 to an organization but require the funds be placed in an endowment. The money they contribute would then be considered permanently restricted. That donor may further restrict the interest made off of the contribution and require it to be used for a scholarship program.</p>
<h3>What is the difference between restricted and unrestricted funds?</h3>
<p>On the flip side of restricted funds are unrestricted funds. These are the donations and contributions made to organizations without any earmarked direction. The organization can choose what their greatest need is for those funds, and allocate them as they see fit.</p>
<p>For example, while the major donor in the previous example gave a restricted gift of $650,000, another donor might give a smaller contribution of $1,000 and not specify where the gift will go at all. This means the nonprofit may decide to use the funding to finance a program, pay their rent, contribute toward employee salaries, and more.</p>
<div class="text-center"><img alt="Restricted funds make up a part of your organization’s total funding and can only be used for specific purposes." src="https://jitasa.imgix.net/blog/restricted_funds_vs_unrestricted_funds.png?auto=format&w=450" width="450" height="450" /></div>
<p id="why are">Typically, nonprofits prefer to ask for more unrestricted contributions than restricted ones because it provides the flexibility they need to allocate money to the programs and projects with the greatest need. However, major donors are more likely to restrict their contributions to ensure the money is going toward the program or cause they’re most passionate about.</p>
<h2>Why are restricted funds important?</h2>
<p>Restricted funds are important from a number of perspectives.</p>
<p><b>To donors, restricted funds are important because they can ensure they understand exactly where their contribution is going and can dedicate it towards the program they’re most passionate about.</b></p>
<p>For example, let’s say a donor contributes a gift to an organization that specializes in helping the homeless population. The donor’s friend struggled with homelessness and confided in them about the challenges of getting food on a regular basis, so the donor wants to be sure their contribution is dedicated toward the serving kitchen at the organization. This donor is able to help the cause while ensuring their contribution is going toward the program that means the most to them.</p>
<p><b>To nonprofits, restricted funds are important because many major donations that help fund large initiatives are restricted by the contributor.</b></p>
<p>Major donations can make a huge impact on your organization’s various programs. For example, let’s say the same organization that helps address homelessness needs a total of $500,000 to fund their service kitchen and food pantry for the year. If a major donor contributed $250,000 to this program, the organization has already funded half of the year’s program!</p>
<p><b>Finally, restricted donations are incredibly important to the IRS, which tries its hardest to make sure nonprofits remain financially accountable to donors and those they serve.</b></p>
<p>If a nonprofit fails to honor restrictions and these indiscretions are discovered via <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-audit/">financial audit</a> or annual tax forms, they may face major penalties from the IRS, including the potential loss of their exempt status. They may also face legal action from the donor who restricted the gift, who can sue the organization for misallocation of funds.</p>
<h3>Gifts with Restrictions</h3>
<p>Most often, when we discuss the different gifts with restrictions, we’re talking about donor-restricted gifts. These are generally large donations made by individual contributors that are restricted by the individual donor for specific purposes.</p>
<p>Usually, the restriction is either brought up by the donor or by the nonprofit itself. Donors may give unsolicited restricted contributions to nonprofits, but more often, they arise out of ongoing conversations between the donor and the organization.</p>
<p>For example, during a capital campaign, the nonprofit may self-restrict the donations coming from major contributors during the quiet phase of the campaign. These funds must be used to fund the program or project that the capital campaign is dedicated to.</p>
<p><b>Keep in mind, however, that individual contributions aren’t the only revenue that can be restricted.</b></p>
<p>More and more commonly, the grants that nonprofits receive from other organizations and foundations are also restricted to specific purposes. Unrestricted grants do exist, but they’re not as common as restricted ones. When nonprofits write grant proposals, they should be specific when describing how the funds will help the organization and appeal to the grantor’s guidelines.</p>
<p>If your organization wins multiple grants, you’ll need to keep up with all of the restrictions placed on different grant monies and manage the follow-up expectations with the funders. They may require you to send updates and reports about how you’re using the funding to accomplish the goals set out in your grant proposal. That’s why <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/grant-management/">grant management</a> is such an important aspect of restricted funds as well.</p>
<h2 id="types">Types of Restricted Funds</h2>
<p>There are two primary types of restrictions that nonprofits will encounter in the contributions made from donors and grants. These contributions are either permanently or temporarily restricted for the organization.</p>
<div class="text-center"><img alt="Permanently restricted funds can never be spent directly, but temporarily restricted funds are only bound by time or purpose." src="https://jitasa.imgix.net/blog/restricted_funds_permanent_vs_temporary.png?auto=format&w=600" width="600" height="380" /></div>
<h3>Permanently Restricted Funds</h3>
<p>Permanently restricted funds are assets given to a nonprofit organization that are not to be spent directly on various projects or initiatives. These funds are instead used in endowments to garner interest for the organization and that interest is used to fund projects or programs.</p>
<p>A common example of this type of restricted fund is a scholarship fund. A major donor might contribute a gift of $50,000 to set up an endowment fund to fund several scholarships over time. Let’s say the fund yields around 4% interest every year. This means the fund will generate $2,000 in interest annually, allowing the organization to set up an annual, ongoing scholarship using that interest.</p>
<h3>Temporarily Restricted Funds</h3>
<p>Meanwhile, temporarily restricted funds are bound either by a time limit or a specific purpose. Once the purpose is fulfilled or the time expires, these funds are released from restriction and placed in the unrestricted funding category. Whether you’re allowed to do this will depend on the agreement made between your nonprofit and the donor upon receiving the contribution.</p>
<p>Let’s say an education-focused nonprofit built a new center for their children’s program, a project for which the budget was originally set at $200,000. However, it ended up under budget, only requiring $190,000 to complete. The additional $10,000 was part of a major donor’s contribution that was temporarily restricted to complete the project, but the donor agreed to release it from restriction when the project was completed. So, the additional $10,000 could be added to the organization’s unrestricted funding and used for other initiatives.</p>
<p>When reporting on your organization’s finances, temporarily restricted funding should be recorded in the category of temporarily restricted net assets, a term used across various <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-statements/">financial statements</a> to refer to the portion of your nonprofit’s available resources that have donor restrictions. Once funds are released from restriction, they’re recorded under your unrestricted net assets.</p>
<h3>Temporarily Restricted Net Assets vs. Deferred Revenue</h3>
<p>Temporarily restricted net assets are sometimes confused with deferred revenue in the context of a nonprofit's finances. However, the two terms aren’t synonymous—although they both describe revenue your organization isn’t allowed to freely spend at this time, they’re treated differently both in their practical application and in financial reports.</p>
<p><b>Deferred revenue refers to funding that your organization has received but isn’t yet allowed to recognize as income in your accounting system</b>. This occurs when the agreement between your nonprofit and the donor is conditional upon your organization providing goods or services to the donor. By contrast, the donor’s conditions for temporarily restricted net assets are related to how you’ll use the funding, and you can record the contribution as income right</p>
<p>Until you deliver the goods or services, deferred revenue is seen as a liability and is recorded as such on your <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-statements/">statement of financial position</a>. Once the obligation is met, the revenue becomes an asset and is typically unrestricted.</p>
<p>For example, let’s say a science museum with a 501(c)(3) designation offers week-long summer day camps for children. To make advance planning easier for the organization, 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 in their financial reports until the summer because that is when they’ll provide the parents the promised service of a week of camp for their children. Therefore, until the actual summer camp session rolls around, the registration fees are considered deferred revenue.</p>
<h2 id="accounting">Accounting for Restricted Funds</h2>
<p>Not accounting for restricted funds can result in nonprofits being sued by their contributors for misuse of funding or the loss of their tax-exempt status. Therefore, organizations must keep a close eye on their restricted funds, ensuring they earmark these funds for their dedicated purpose, and don’t misallocate funding.</p>
<p>That’s why certain measures have been taken to keep restrictions in mind when operating with fund accounting. Various statements and reports all take into account the restrictions placed on funding so that organizations can view these restrictions and make financial decisions based on their actual funding rather than an inflated amount when restrictions are not taken into account.</p>
<p>Notably, restrictions are specifically noted in your organization’s statement of activities, statement of financial position, and must be referenced when creating your organization’s budget.</p>
<h3>Statement of activities</h3>
<p>Your nonprofit’s <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-activities/">statement of activities</a> shows how different revenues and expenses are categorized by your organization. It’s split into three sections—revenue, expenses, and net assets. Then, it’s further divided into three columns—unrestricted, temporarily restricted, and total funds.</p>
<p>When the statement of activities is completed, it will look something like this:</p>
<div class="text-center"><img alt="Your statement of activities categorizes unrestricted funds and restricted funds for your reference." src="https://jitasa.imgix.net/blog/nonprofit_financial_management_statement_of_activities_example_statement.png?auto=format&w=600" width="600" height="700" /></div>
<p>This statement is designed to show organizations how they’re allocating their resources and how their use of funding helps advance the organization’s core initiatives. In the example above, you can see that $150,000 of the funds for this organization are restricted and must be used for a specific purpose.</p>
<p>Their other funding can be used for other expenses like programs, administrative costs, and fundraising. <b>By separating the restricted funds from the unrestricted, this organization can see what funds they have the capacity to move around and use for various purposes and which ones cannot be moved around.</b></p>
<div class="blog-callout-full">
<h2>Nonprofit Statement of Financial Activities Template</h2>
<p>This template provides a clear and organized way to present financial information, including revenues, expenses, and net change in financial position, by class, location, and project.</p>
<a href="https://www.jitasagroup.com/nonprofit-resources/nonprofit-free-downloads/nonprofit-statement-of-financial-activities-template/" class="button white">Free Download</a>
</div>
<h3>Statement of financial position</h3>
<p>Your nonprofit’s statement of financial position is used to help your organization determine its liquidity and represent your financial health. The statement shows the organization’s assets, liabilities, and resulting net assets.</p>
<p>As you can see in the following image, the net assets section further breaks down the funding into assets with donor restrictions, those without, and the total for the organization.</p>
<div class="text-center"><img alt="The nonprofit statement of financial position shows your net assets including restricted funds as well as your net assets without donor restrictions." src="https://jitasa.imgix.net/blog/nonprofit_financial_management_statement_of_financial_position_example_statement.png?auto=format&w=600" width="600" height="700" /></div>
<p>From this statement, nonprofits can calculate their months of LUNA (liquid unrestricted net assets) to determine their liquidity and flexibility to assume risk and expand their operations. You can find this calculation by subtracting the property and equipment (non-liquid assets) from the net assets without donor restrictions.</p>
<p><b>This allows you to take restricted funds out of the equation, as they only have very particular uses and are therefore not considered as “liquid.”</b></p>
<h3>Nonprofit budget</h3>
<p><b>When your nonprofit <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/">creates a budget</a>, you need to allocate funds according to the restrictions and exempt those with permanent restrictions.</b> You must take these into account as you create your budget to ensure you have the funds necessary to cover your expenses and can allocate enough funding for each program.</p>
<p>Imagine this: you estimate that your nonprofit will receive $2,000,000 total in your bank accounts for the year. Your expenses you need to cover include the following:</p>
<ul>
<li><b>Operational expenses.</b> This includes your rent, utilities, employee salaries, and other general expenses. To fund the organization for one year, you need $475,000.</li>
<li><b>Fundraising expenses.</b> Fundraising expenses include the events you host, the acquisition of fundraising technology, and the cost of running campaigns. To fund your fundraising expenses for a year, you need $200,000.</li>
<li><b>Program A.</b> This program costs your organization an average of $500,000 per year.</li>
<li><b>Program B.</b> This program costs your organization an average of $450,000 per year.</li>
<li><b>Program C.</b> This program costs your organization an average of $300,000 per year.</li>
</ul>
<p>All told, this means your organization will incur $1,925,000 per year. However, let’s say $100,000 of your nonprofit’s funding is permanently restricted. This means your organization will need to raise an additional $25,000 or find an opportunity to cut that amount from the expense budget to meet the $2,000,000 that you expect to raise throughout the year.</p>
<p>Use your various statements and the information in your <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-chart-of-accounts/">chart of accounts</a> to be sure your budget adequately reflects the unrestricted funds in your system and leverages the temporarily restricted funds as they’re designed to be used.</p>
<div class="blog-callout-full">
<h2>Nonprofit Budgeting Course</h2>
<p>This nonprofit budgeting course is designed to teach nonprofit organizations how to effectively allocate their resources in order to achieve their missions.</p>
<a href="https://www.jitasagroup.com/nonprofit-resources/free-courses/nonprofit-budgeting-course/" class="button white">Free Course</a>
</div>
<h2 id="challenges">Challenges and Opportunities of Restricted Funds</h2>
<p>Restricted funds present both challenges and opportunities for organizations. It’s important to recognize the value they can bring to your organization as well as how to react to these challenges so that you can effectively manage your nonprofit’s financial resources.</p>
<h3>Challenges</h3>
<p>If your organization raised only unrestricted funds, budgeting and allocation would be much easier! You would be able to allocate your funds easily based on the discretion of your nonprofit and based on which programs have the greatest need at your organization. <b>One of the challenges of restricted funds is that they present another factor to take into account when making these allocations.</b></p>
<p>This means you might need to raise a little more than originally planned to cover your expenses or that your accounting information may look misleading before taking a deep dive into the more specific statements and reports.</p>
<p><b>Another challenge that your organization may encounter is an unsolicited gift with restrictions that aren’t in line with your organization’s strategy.</b> Let’s say you’ve already received a $400,000 restricted gift to cover a program that will cost $450,000. If another donor offers a $200,000 gift for the same program, you’ll have limited use for the gift. In this case, you have two potential solutions:</p>
<ul>
<li>Ask the donor if they’d be willing to change the restrictions. Most supporters are willing to make these types of changes because their primary goal is to simply help the cause succeed.</li>
<li>Refuse the gift altogether. If an individual refuses to change their restrictions or if it becomes clear they have a selfish purpose for restricting it in the way they did, you can always turn them away.</li>
</ul>
<p>This doesn’t mean restricted funds are always a major challenge or hassle for your organization! The benefits of these funds often outweigh the challenges they present.</p>
<h3>Opportunities</h3>
<p>The primary benefit of restricted funds is that they usually make up the largest donations made to nonprofits. While it would be great to receive a major gift for your organization that is entirely unrestricted, most individuals wish to place restrictions on these contributions.</p>
<p>This means that restricted funds that are allocated toward real needs at your organization can make a big difference and cover a large portion of your budget. <b>This requires you to work closely with your supporters and collaborate to find a cause or program at your organization that both sparks their interest and satisfies your needs.</b></p>
<p>Luckily, this usually isn’t too challenging! Those who give your largest (usually restricted) gifts are donors with whom your organization has strong relationships. Therefore, setting up a meeting with each supporter to discuss options for gift restrictions can be pretty simple. As mentioned, most of your donors want to help in any way possible.</p>
<h2 id="managing">Managing Your Restricted Funds</h2>
<p>As we mentioned, one of the challenges associated with restricted funds is the management of those funds. It can be difficult to make sure that all funds are allocated to the right purpose and to ensure you’re remaining compliant with the IRS and accountable to your donors.</p>
<p>However, it’s expensive, time-consuming, and reputation damaging if you misallocate and misuse your funds, even by mistake! Not only could you risk your tax-exempt status, but you also risk legal fees and potentially having to provide a refund to the original donor. That’s why it pays to have a nonprofit accountant on your side to help manage these funds.</p>
<p><b>Our fund <a href="https://www.jitasagroup.com/nonprofit-solutions/nonprofit-bookkeeping-accounting-services/">accounting experts here at Jitasa</a> specialize in helping nonprofits and other organizations in the social good sector keep their finances well-organized and maintained.</b></p>
<p>Your dedicated accountant will help your organization craft a budget that takes into account your restricted funds, pull reports that provide insights into how restrictions impact your financial management, and more.</p>
<p>If you’re interested in learning more about how nonprofit accounting is unique and the impact restricted funds have on finances, check out these additional resources:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accounting/">Nonprofit Accounting: A Guide to Basics and Best Practices</a>. Restricted funds are only one aspect that makes nonprofit accounting unique and different from for-profit accounting. Learn more about what else makes it different in this guide.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/">Nonprofit Budgeting: Understand the Basics + Template</a>. Want to take a deeper dive into how your budget takes into account your various restrictions and unique financial needs? Check out this nonprofit budgeting guide to learn more.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accountant/">Working with a Nonprofit Accountant: What to Expect</a>. Nonprofit accountants are there to help you manage your organization’s finances appropriately. Learn more about what it’s like to work with a dedicated accountant on your side.</li>
</ul>
<div class="blog-callout-media-object">
<div class="media">
<img src="https://jitasa.imgix.net/blog/flames_white_circle.png?auto=format&w=196&q=70" srcset="https://jitasa.imgix.net/blog/flames_white_circle.png?auto=format&w=196&q=70, https://jitasa.imgix.net/blog/flames_white_circle.png?auto=format&w=196&q=70&dpr=2 2x" alt="Jitasa Logo" width="196" height="196" />
</div>
<div class="text">
<h2>Need help managing your nonprofit’s restricted funds? </h2>
<p>Your dedicated Jitasa accounting expert can help!</p>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button white">Learn more</a>
</div>
</div>Form 1099 for Nonprofits: How and Why to Issue One2023-12-11T15:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/1099-for-nonprofits/<div class="blog-callout-full">
<h2>See how a nonprofit accountant can help you issue 1099s this year.</h2>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button white">Contact Jitasa</a>
</div>
<p>Each of your nonprofit’s staff members has a specific job description that dictates how their role should be performed. Contractors, on the other hand, provide a specialized service for your organization and have full control over how their work is accomplished. This role distinction not only impacts how work gets done—it also makes a big difference when it comes to tax season.</p>
<p><b>At the end of every year, you’ll provide each employee with a W-2 to help them complete their taxes. However, if you worked with contractors, you may need to issue a 1099 to them instead.</b></p>
<p><a href="https://www.jitasagroup.com/">Jitasa</a> accountants prepare more than 20,000 Form 1099s for nonprofits every year! With this firsthand experience, we’ve compiled a guide to help organizations better understand what 1099s are, why they’re important, and how to issue one. Here is what we’ll cover:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/1099-for-nonprofits/#what">What Is Form 1099?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/1099-for-nonprofits/#why">Why Do Nonprofits Need To Issue 1099s?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/1099-for-nonprofits/#how">How Does A Nonprofit Issue Form 1099?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/1099-for-nonprofits/#timeline">What Is The Timeline For Issuing 1099s For Nonprofits?</a></li>
</ul>
<p>As a nonprofit professional, your primary focus should be your organization’s mission. That is why thousands of nonprofits trust Jitasa to take care of their required tax documentation, reducing stress and saving their teams time. However, it’s still important for you to understand what these forms are and how they’re used.</p>
<h2 class="mb-0" id="what">What Is Form 1099?</h2>
<img src="https://jitasa.imgix.net/blog/nonprofit_1099_definition.png?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/nonprofit_1099_definition.png?auto=format&w=700&dpr=2&q=40 2x" width="700" height="351" alt="Definition of a 1099 for nonprofits" loading="lazy" />
<p><b>The <a href="https://www.irs.gov/forms-pubs/about-form-1099-misc" target="_blank">IRS Form 1099</a> (or 1099-NEC) is the miscellaneous income tax form which is used to prepare and file income information that is separate from wages, salaries, or tips.</b> Nonprofits like yours need to issue this form when you contract individual workers and vendors to complete work for your organization.</p>
<p>According to the IRS, “an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done.”</p>
<p>Many types of nonprofit work don’t need to be completed by brand-new internal employees. Of course, hiring is essential if you want to grow your organization. But you’ll need to be strategic about when and why you hire new staff members. Necessary hiring processes such as recruiting, onboarding, and keeping up with <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-compensation-policy/">compensation</a>, benefits, and employee retention strategies can become very expensive very quickly.</p>
<p><b>If you don’t have quite enough work to warrant hiring a new employee, contracting might be the best answer for your organization.</b> This is especially true when you only need extra help for one particular project. For instance, you might contract a web developer to redesign and relaunch <a href="https://nonprofitssource.com/nonprofit-web-design/" target="_blank">your nonprofit’s website</a> or a construction company to renovate your facility.</p>
<p>Once you decide to hire a contractor, securely store all of the information regarding the work they completed for your organization and the payments you issued to them. This data will be useful if and when you need to issue 1099s for your nonprofit.</p>
<h2 id="why">Why Do Nonprofits Need To Issue 1099s?</h2>
<p class="mb-0">You’ll know that you’ll need to issue a form 1099 when the following four conditions are met:</p>
<img src="https://jitasa.imgix.net/blog/nonprofit_1099_conditions.png?auto=format" srcset="https://jitasa.imgix.net/blog/nonprofit_1099_conditions.png?auto=format&dpr=2&q=40 2x" width="700" height="283" alt="Four conditions that prompt the need for a 1099" loading="lazy" />
<ul>
<li>You made a payment to someone who is not your employee.</li>
<li>You made a payment to an individual, partnership, vendor, or estate.</li>
<li>You made a payment for services in the course of your nonprofit organization.</li>
<li>You made payments amounting to at least $600 during one calendar year.</li>
</ul>
<p>Take, for example, a graphic designer who you contracted to help create marketing materials for your nonprofit’s GivingTuesday campaign. Let’s say 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 issue a form 1099 for that individual to remain tax compliant. <b>They’re an individual who isn’t your employee, and they provided a service to your nonprofit that you paid more than $600 for.</b></p>
<p>Just as important as understanding when you should issue a 1099 is knowing when you don’t need to issue one. For example, in the case of scholarships or fellowship grants, you won’t need to issue a 1099. These funding sources are considered wages and are reported on the recipient’s <a href="https://www.irs.gov/forms-pubs/about-form-w-2" target="_blank">IRS Form W-2</a>.</p>
<p>Other payments for which Form 1099-NEC is not required include:</p>
<ul>
<li>Most payments to corporations (although there are always exceptions)</li>
<li>Payments for merchandise, computers, storage, and similar items</li>
<li>Payments of rent to real estate agents</li>
<li>Wages paid to employees (report on Form W-2)</li>
<li>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)</li>
<li>Business travel allowances paid to employees (report on Form W-2)</li>
<li>Cost of current life insurance protection (report on Form W-2 or <a href="https://www.irs.gov/forms-pubs/about-form-1099-r" target="_blank">Form 1099-R</a>)</li>
<li>Payments to tax-exempt organizations including tax-exempt trusts (IRAs, HSAs, Archer MSAs, and Coverdell ESAs), the United States, a state government, the District of Columbia, a U.S. possession, or a foreign government</li>
</ul>
<p>Form 1099 may seem a bit confusing at first glance. However, if you follow the four guidelines listed above, you should have no trouble determining when it’s appropriate for your nonprofit to issue that form.</p>
<p>If you have a confusing situation or want some assistance with the issuing process, we recommend <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accountant/">working with a nonprofit accountant</a>. Jitasa’s expert accounting team will help your organization determine the exact situations when a 1099 is necessary and fill out the required paperwork for you.</p>
<div class="blog-callout-full">
<h2>See how a nonprofit accountant can help you issue 1099s this year.</h2>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button white">Contact Jitasa</a>
</div>
<h2 id="how">How Does A Nonprofit Issue Form 1099?</h2>
<p>In order to issue your 1099s properly, your nonprofit needs to have <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-bookkeeper-vs-accountant/">top-notch bookkeeping systems</a>. You’ll need to track the payments you make to all vendors (who are treated as independent contractors), individuals, subcontractors, and other independent contractors to ensure all of your forms are accurate.</p>
<p>Additionally, your organization won’t have all of the information you need without the contractor’s input. <b>Before you begin filling out any of your nonprofit’s 1099s, you have to ask each of your contracted workers to provide you with a W-9.</b></p>
<h3>What is a W-9 and how does it relate to Form 1099?</h3>
<p><b>A <a href="https://www.irs.gov/forms-pubs/about-form-w-9" target="_blank">W-9</a> is a simple form that you ask contracted workers to fill out so you have the information you need to issue them a 1099.</b> It also allows the IRS to match up each Form 1099 that you report with the right contracted individual’s tax returns.</p>
<p>Form W-9 is only one page long, and it asks for the following information:</p>
<ul>
<li>Business and/or Individual’s Name and Address</li>
<li>Business and/or Individual’s status (i.e., corporation, LLC, sole proprietor, etc.)</li>
<li>Social Security Number (for sole proprietorships and individuals)</li>
<li>Tax ID Number (for applicable business entities)</li>
</ul>
<p>We recommend that you ask contracted workers to fill out their W-9 at the very beginning of your working relationship with them. This will save your organization time and energy when it comes time to issue 1099s.</p>
<h3>What information do you need to issue a 1099?</h3>
<p class="mb-0">When you issue 1099s for your nonprofit, you’ll need to include the information requested in the W-9s, so make sure to keep these forms organized for easy access! Additionally, you’ll need to track information throughout your relationship with the contracted individual to complete all sections of the form.</p>
<img src="https://jitasa.imgix.net/blog/nonprofit_1099_information.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/nonprofit_1099_information.jpg?auto=format&w=700&dpr=2&q=40 2x" width="700" height="308" alt="W-9 forms and your nonprofit's systems are both 1099 information sources" loading="lazy" />
<p>Specifically, you’ll have to figure out the following information from the data in your nonprofit’s system:</p>
<ul>
<li>The category of the payments made to the contractor</li>
<li>Federal and state tax withholding information</li>
<li>The total non-employee compensation the contractor received</li>
</ul>
<p>Form 1099 is fairly short, but there are penalties for including incorrect information or leaving anything out, so double-check that you have everything you need before you start. Here is an example of what the form will look like:</p>
<img alt="Example of Form 1099 for nonprofits" src="https://jitasa.imgix.net/blog/form_1099_nec.png?auto=format&w=600" width="600" height="303" class="img-full img-center" loading="lazy" />
<h2 id="timeline">What Is The Timeline For Issuing 1099s For Nonprofits?</h2>
<p>Because each contractor will need to use their Form 1099 to file their own taxes, your nonprofit will have to complete these forms fairly early in the tax preparation process. <b>The deadline for payers to file all of their 1099s for the previous calendar year is January 31</b>. Of course, the earlier you can get them done, the better.</p>
<p>When you purchase your 1099s for your nonprofit to fill out, you’ll also find a copy of <a href="https://www.irs.gov/forms-pubs/about-form-1096" target="_blank">Form 1096</a> and related instructions in the pack. This form is essentially a compiled list of all the 1099s your organization issues and should also be filed by January 31.</p>
<h3>What happens if you don’t file your 1099s on time?</h3>
<p>There are penalties if your organization fails to file your 1099 on time or files it incorrectly. They also apply per 1099 form that your organization issues.</p>
<p>Here is a breakdown of the fines for filing each required 1099 late:</p>
<ul>
<li>$30 penalty for filing up to 30 days late</li>
<li>$60 penalty for filing more than 30 days late and before August 1</li>
<li>$100 penalty for filing a 1099 on or after August 1</li>
<li>$250 penalty for intentional failure to file</li>
</ul>
<p>If you file more than one 1099 late in a given year, the fees can really add up. The best way to avoid these penalties is to file correctly and on time.</p>
<div class="blog-callout-full">
<h2>Want to master 1099’s? Check out our FREE course!</h2>
<a href="https://jitasauniversity.thinkific.com/courses/1099-s-for-nonprofits" class="button white" target="_blank" rel="noopener noreferrer">Enroll Here</a>
</div>
<hr />
<p>By becoming familiar with what Form 1099 entails and why to issue one, you’ll be able to maintain compliance when it comes to your organization’s contracted workers, and you might just find tax season a bit less overwhelming. However, it always helps to have experts on your side—like Jitasa’s experienced nonprofit accounting team!</p>
<p>For more information on filing tax forms for your nonprofit, check out these resources:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/how-to-fill-out-a-w9-for-nonprofits/">How to Fill out a W-9 for Nonprofits and When It’s Necessary.</a> Dive deeper into the requirements and best practices for requesting taxpayer information from contracted workers using Form W-9.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/form-990-filing/">Nonprofit Form 990 Filing: An Essential Tax Guide.</a> Learn everything you need to know about filing your nonprofit’s most important annual tax form—the IRS Form 990.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/outsourced-accounting-for-nonprofits-top-firms/">Outsourced Accounting for Nonprofits: Top 10+ Firms.</a> Discover the benefits of working with an outsourced nonprofit accountant during tax season and beyond and explore our top recommendations.</li>
</ul>
<div class="blog-post-callout">
<div class="inner">
<div class="media">
<picture>
<source srcset="https://jitasa.imgix.net/blog/flames_circle_lrg.png?auto=format, https://jitasa.imgix.net/blog/flames_circle_lrg@2x.png?auto=format 2x" media="(min-width: 850px)" />
<img srcset="https://jitasa.imgix.net/blog/flames_circle.png?auto=format, https://jitasa.imgix.net/blog/flames_circle@2x.png?auto=format 2x" alt="Jitasa Flames" width="68" height="68" loading="lazy" />
</picture>
</div>
<div class="text">
<h2 class="text-white mt-0">File your nonprofit's 1099s with the help of <b>Jitasa's</b> expert accountants.</h2>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button small">Request a Quote</a>
</div>
</div>
</div>What Does a Nonprofit Treasurer Do? The Complete Guide2023-12-05T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-treasurer/<p>For nonprofits like yours, financial oversight is an essential part of effective management. Your organization needs to stay accountable to the donors and stakeholders who provide critical funding for your mission, and establishing oversight helps ensure that those funds are properly allocated and <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/fund-accounting/">accounted for</a>.</p>
<p>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 to your organization, including:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-treasurer/#what">What is a Nonprofit Treasurer?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-treasurer/#responsibilities">Key Responsibilities of a Nonprofit Treasurer</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-treasurer/#roles">Nonprofit Financial Management Roles</a></li>
</ul>
<p>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 effective reports for the board and collaborate with your nonprofit’s financial professionals to complete a variety of tasks. Let’s dive in!</p>
<div class="blog-callout-full">
<h2>Support your nonprofit treasurer by partnering with Jitasa's expert accountants.</h2>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button white">Request a Quote</a>
</div>
<h2 id="what">What is a Nonprofit Treasurer?</h2>
<p>A nonprofit treasurer is a team member who provides financial oversight for an organization. In most cases (although not all), the treasurer is a member of the board of directors and serves as the financial liaison between the nonprofit’s board and staff.</p>
<p>For someone to become a nonprofit treasurer, they usually need to be nominated by a specialized committee, another board member, or one of the organization’s leaders. Then, the board has to confirm the nomination, typically by voting.</p>
<p class="mb-0">To help your nonprofit choose a treasurer who will perform well in the role, look for these key qualities in your nominee:</p>
<img src="https://jitasa.imgix.net/blog/nonprofit_treasurer_qualities.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/nonprofit_treasurer_qualities.jpg?auto=format&w=700&dpr=2&q=40 2x" width="700" height="500" alt="Mind map showing four qualities to look for in a nonprofit treasurer" loading="lazy" />
<ul>
<li><b>Leadership.</b> A nonprofit treasurer will often chair the finance or audit committee of the organization’s board, so they need to be good leaders to be effective in the role.</li>
<li><b>Communication.</b> The treasurer should be able to communicate clearly in both oral and written formats in order to collaborate with other board and staff members and create strong reports.</li>
<li><b>Organization.</b> Treasurers need to be able to keep track of multiple financial projects and datasets at any given time and pay attention to detail to ensure accuracy in their work.</li>
<li><b>Financial expertise.</b> 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.</li>
</ul>
<p>Additionally, make sure to choose someone for the treasurer role who is trustworthy. They’ll need access to potentially sensitive financial information in order to complete their tasks, so it’s important that they always take security precautions and are fully committed to acting in your organization’s best interest.</p>
<h2 id="responsibilities">Key Responsibilities of a Nonprofit Treasurer</h2>
<p class="mb-0">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.</p>
<img src="https://jitasa.imgix.net/blog/nonprofit_treasurer_responsibilities.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/nonprofit_treasurer_responsibilities.jpg?auto=format&w=700&dpr=2&q=40 2x" width="700" height="500" alt="Six major responsibilities of a nonprofit treasurer" loading="lazy" />
<h3>Strategic Planning</h3>
<p>Developing a <a href="https://nxunite.com/nonprofit-strategic-plan/" target="_blank">strategic plan</a> 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.</p>
<p>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.</p>
<h3>Budgeting</h3>
<p>Like strategic planning, <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/">creating budgets</a> 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.</p>
<p>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.</p>
<h3>Financial Policy Development</h3>
<p>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:</p>
<ul>
<li><b>A gift acceptance policy</b> that defines the types of gifts (both monetary and <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/in-kind-donations/">in-kind</a>) your nonprofit can and can’t accept.</li>
<li><b>An expense reimbursement policy</b>, which outlines when and how staff and volunteers can be reimbursed for spending their personal money on behalf of your mission.</li>
<li><b>A <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-compensation-policy/">compensation policy</a></b> to ensure all of your employees, and especially organizational leaders, are paid fairly but not excessively.</li>
</ul>
<p>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.</p>
<h3>Risk Management</h3>
<p>At most nonprofits, the people most involved in creating and executing a <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/risk-management-for-nonprofits/">risk management plan</a> 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:</p>
<ul>
<li><b>Fraud</b>, whether it’s committed intentionally or unintentionally.</li>
<li><b>Theft</b> of your organization’s money or equipment.</li>
<li><b>Non-compliance</b> with federal and state regulations for nonprofit fundraising and reporting.</li>
</ul>
<p>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.</p>
<h3>Audit Preparation</h3>
<p>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:</p>
<ul>
<li>Researching potential auditors and narrowing down your top candidates.</li>
<li>Gathering materials for the audit, such as bank reconciliations, <a href="https://www.infinitegiving.com/blog/nonprofit-investing" target="_blank">investment statements</a>, and details of grants received.</li>
<li>Reviewing the auditor’s recommendations and overseeing their implementation.</li>
</ul>
<p>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.</p>
<h3>Reporting</h3>
<p>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.</p>
<p>When creating their report, the treasurer will pull information from a variety of sources, including:</p>
<ul>
<li><b><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-statements/">Financial statements</a></b> like your organization’s income statement, balance sheet, cash flow statement, and functional expense report.</li>
<li><b>Budget vs. actual comparisons</b> of your nonprofit’s revenue and expenses.</li>
<li><b>Bank account statements</b>, along with relevant reconciliation reports.</li>
<li><b>Investment updates</b> on endowments, donor advised funds, and brokerage accounts.</li>
</ul>
<p>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.</p>
<p>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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/form-990-filing/">Form 990</a> 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.</p>
<div class="blog-post-callout">
<div class="inner">
<div class="media">
<picture>
<source srcset="https://jitasa.imgix.net/blog/flames_circle_lrg.png?auto=format, https://jitasa.imgix.net/blog/flames_circle_lrg@2x.png?auto=format 2x" media="(min-width: 850px)" />
<img srcset="https://jitasa.imgix.net/blog/flames_circle.png?auto=format, https://jitasa.imgix.net/blog/flames_circle@2x.png?auto=format 2x" alt="Jitasa Flames" width="68" height="68" loading="lazy" />
</picture>
</div>
<div class="text">
<h2 class="text-white mt-0"><b>NonProfit Financial Reporting</b> policy template</h2>
<a href="https://www.jitasagroup.com/nonprofit-resources/nonprofit-free-downloads/nonprofit-financial-reporting-policy-template/" class="button small">Download for Free</a>
</div>
</div>
</div>
<h2 id="roles">Nonprofit Financial Management Roles</h2>
<p>In some ways, treasurers’ duties and abilities overlap with those of other nonprofit financial professionals. Because of this, you may be thinking: <i>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?</i></p>
<p class="mb-0">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:</p>
<img src="https://jitasa.imgix.net/blog/nonprofit_treasurer_roles.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/nonprofit_treasurer_roles.jpg?auto=format&w=700&dpr=2&q=40 2x" width="700" height="300" alt="Breakdown of four major nonprofit financial management roles" loading="lazy" />
<ul>
<li><b>Nonprofit treasurers</b> 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.</li>
<li><b>Chief financial officers (CFOs)</b> 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!) <a href="https://www.jitasagroup.com/nonprofit-solutions/cfo-services/">fractional CFO services</a>.</li>
<li><b>Nonprofit bookkeepers</b> 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.</li>
<li><b><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accountant/">Nonprofit accountants</a></b> 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 <a href="https://www.jitasagroup.com/">Jitasa</a>!).</li>
</ul>
<p>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.</p>
<p>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.</p>
<hr />
<p>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.</p>
<p>For more information on how the nonprofit treasurer role fits into your organization’s financial strategy, check out these resources:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-management/">Nonprofit Financial Management | Best Practices to Know.</a> Explore the core areas of nonprofit financial management that treasurers oversee, from budgeting to revenue generation to policy development.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-audit/">Nonprofit Audits: A Complete Guide to Financial Auditing.</a> Discover the ins and outs of the nonprofit auditing process, which treasurers play a key role in managing.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-bookkeeper-vs-accountant/">Nonprofit Bookkeeper vs. Accountant: Who Should You Hire?</a> Dive deeper into the differences between the roles of two key nonprofit financial professionals your treasurer will frequently collaborate with.</li>
</ul>
<div class="blog-post-callout">
<div class="inner">
<div class="media">
<picture>
<source srcset="https://jitasa.imgix.net/blog/flames_circle_lrg.png?auto=format, https://jitasa.imgix.net/blog/flames_circle_lrg@2x.png?auto=format 2x" media="(min-width: 850px)" />
<img srcset="https://jitasa.imgix.net/blog/flames_circle.png?auto=format, https://jitasa.imgix.net/blog/flames_circle@2x.png?auto=format 2x" alt="Jitasa Flames" width="68" height="68" loading="lazy" />
</picture>
</div>
<div class="text">
<h2 class="text-white mt-0">Learn how <b>Jitasa's</b> nonprofit accounting team can work with your treasurer for improved financial management.</h2>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button small">Request a Quote</a>
</div>
</div>
</div>Nonprofit Chart of Accounts: How to Get Started + Example2023-12-04T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-chart-of-accounts/<p><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accounting/">Nonprofit accounting</a> is a unique beast to tackle. While for-profit organizations’ accounting practices focus on profitability, nonprofits like yours have to reinvest all of your funding back into your organization and its mission. This requirement combined with the need to honor donors’ and funders’ <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/restricted-funds/">restrictions on their contributions</a> means that the core of nonprofit accounting is accountability.</p>
<p>There are a variety of reports and systems you can leverage to keep your nonprofit’s financial information organized and transparent. The most foundational of these tools is the chart of accounts (COA).</p>
<p>Although it forms the backbone of your nonprofit’s accounting system, the COA can be a challenging resource to understand, create, and maintain. Fortunately, the experts at <a href="https://www.jitasagroup.com/">Jitasa</a> are here to help! In this guide, we’ll cover the basics of the nonprofit chart of accounts, including:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-chart-of-accounts/#what">What is a Nonprofit Chart of Accounts?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-chart-of-accounts/#purpose">Purpose of the Nonprofit Chart of Accounts</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-chart-of-accounts/#example">Nonprofit Chart of Accounts Example</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-chart-of-accounts/#tips">Tips for Maintaining Your Chart of Accounts</a></li>
</ul>
<p>Let’s dive in with an overview of what your nonprofit’s COA is and how it’s structured.</p>
<div class="blog-callout-full">
<h2>Contact Jitasa's experts about setting up and reviewing your chart of accounts.</h2>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button white">Request a Quote</a>
</div>
<h2 id="what">What is a Nonprofit Chart of Accounts?</h2>
<p>A nonprofit chart of accounts is a table-style list of all of your organization’s financial accounts and ledgers. It functions as a directory of these records, making it the backbone of all accounting procedures at your nonprofit.</p>
<p>Typically, your nonprofit’s COA will be divided into the following five categories:</p>
<img src="https://jitasa.imgix.net/blog/nonprofit_chart_of_accounts_categories.jpg?auto=format" srcset="https://jitasa.imgix.net/blog/nonprofit_chart_of_accounts_categories.jpg?auto=format&dpr=2&q=40 2x" width="700" height="200" alt="Five categories of the nonprofit chart of accounts" loading="lazy" />
<ul>
<li><b>Assets</b>: This section lists what your nonprofit owns, such as cash, property, and accounts receivable.</li>
<li><b>Liabilities</b>: This category includes everything your organization owes, including accounts payable, deferred revenue, and debt.</li>
<li><b>Net Assets</b>: This equals the value of your assets minus your liabilities, indicating the total amount your nonprofit is worth.</li>
<li><b>Revenue</b>: This category includes all of the funding your organization brings in through individual donations, <a href="https://doublethedonation.com/types-of-corporate-philanthropy/" target="_blank">corporate philanthropy</a>, grants, and other income sources.</li>
<li><b>Expenses</b>: This section lists all of your nonprofit’s expenditures on your programs, fundraising initiatives, and administrative needs like utility bills and <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-compensation-policy/">staff compensation</a>.</li>
</ul>
<p>Although most organizations use this basic structure, your chart of accounts should be tailored to your nonprofit’s unique position. Customize your spreadsheet to create a record of all of your financial activities.</p>
<h2 id="purpose">Purpose of the Nonprofit Chart of Accounts</h2>
<p>Your nonprofit chart of accounts is essentially an extensive filing cabinet. It organizes all of the accounts and ledgers your organization uses into a list format, helping you find information about everything from bank deposits to investment growth to payroll records.</p>
<p class="mb-0">While your COA stores all of the data you need about your nonprofit’s finances, it can be too comprehensive to directly draw specific insights from. However, it forms the foundation for other 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 the:</p>
<img src="https://jitasa.imgix.net/blog/nonprofit_statement_activities_types.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/nonprofit_statement_activities_types.jpg?auto=format&w=700&dpr=2&q=40 2x" width="700" height="500" alt="Four core financial statements based on the nonprofit chart of accounts" loading="lazy" />
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-activities/"><b>Statement of activities</b>.</a> 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.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-financial-position/"><b>Statement of financial position.</b></a> 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.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-cash-flows/"><b>Statement of cash flows.</b></a> This report shows how cash (one of your core assets) moves in and out of your nonprofit through operating, investing, and financing activities to keep you on track with spending and fundraising throughout the year.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/statement-of-functional-expenses/"><b>Statement of functional expenses.</b></a> This statement divides your organization’s expenditures into the categories of program, administrative, and fundraising costs to show how your funding is being used to further your mission.</li>
</ul>
<p>All of these reports provide essential information for <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/form-990-filing/">completing your nonprofit’s annual Form 990</a>. However, if you want to look back at your original financial records as you prepare this form for any reason, your chart of accounts can help you find the information you need.</p>
<p>Additionally, your COA will play an important role if your nonprofit undergoes a <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-audit/">financial audit</a>. 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.</p>
<h2 id="example">Nonprofit Chart of Accounts Example</h2>
<p>The <a href="https://www.notforprofitaccounting.net/wp-content/uploads/2008/08/ucoa.pdf" target="_blank">Unified Chart of Accounts (UCOA)</a> is a standardized nonprofit chart of accounts that aligns with the Form 990 reporting requirements. 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 effective to use one of the many other templates available online that you can customize to include only the accounts your nonprofit actually needs.</p>
<div class="blog-post-callout">
<div class="inner">
<div class="media">
<picture>
<source srcset="https://jitasa.imgix.net/blog/flames_circle_lrg.png?auto=format, https://jitasa.imgix.net/blog/flames_circle_lrg@2x.png?auto=format 2x" media="(min-width: 850px)" />
<img srcset="https://jitasa.imgix.net/blog/flames_circle.png?auto=format, https://jitasa.imgix.net/blog/flames_circle@2x.png?auto=format 2x" alt="Jitasa Flames" width="68" height="68" loading="lazy" />
</picture>
</div>
<div class="text">
<h2 class="text-white mt-0"><b>NonProfit Statement of Activities Template.</b></h2>
<a href="https://www.jitasagroup.com/nonprofit-resources/nonprofit-free-downloads/nonprofit-statement-of-financial-activities-template/" class="button small">Download for Free</a>
</div>
</div>
</div>
<p>To begin filling in your template, go through all of your organization’s accounts and assign numbers to them. Don’t confuse these with your bank account numbers, as those are a completely separate entity. Rather, COA account numbering makes it easier to find specific accounts as you record transactions and pull reports.</p>
<p>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—just include the accounts that are relevant to your financial activities.</p>
<h3>Assets (account numbers beginning with 1000)</h3>
<ul>
<li>1100 - Checking</li>
<li>1200 - Savings</li>
<li>1300 - <a href="https://nxunite.com/nonprofit-investment-policy/" target="_blank">Investments</a></li>
<li>1400 - Accounts Receivable</li>
<li>1410 - Grants Receivable</li>
<li>1420 - Pledges Receivable</li>
<li>1500 - Property</li>
<li>1600 - Equipment</li>
<li>1700 - Petty Cash</li>
<li>1800 - Notes/Loans Receivable</li>
</ul>
<h3>Liabilities (account numbers beginning with 2000)</h3>
<ul>
<li>2100 - Accounts Payable</li>
<li>2200 - Accrued Salaries</li>
<li>2300 - Accrued Employee Benefits</li>
<li>2400 - Accrued Payroll Taxes</li>
<li>2500 - Accrued Property Taxes</li>
<li>2600 - Unearned/Deferred Revenue</li>
<li>2700 - Short-Term Notes & Loans Payable</li>
<li>2800 - Line of Credit</li>
<li>2900 - Government Owned Fixed Liabilities</li>
</ul>
<h3>Net Assets (account numbers beginning with 3000)</h3>
<ul>
<li>3100 - Unrestricted Net Assets</li>
<li>3200 - Temporarily Restricted Net Assets</li>
<li>3300 - Permanently Restricted Net Assets</li>
</ul>
<h3>Revenue (account numbers beginning with 4000-6000)</h3>
<ul>
<li>4100 - Individual Contributions</li>
<li>4200 - Corporate Contributions</li>
<li>4300 - Legacies and Bequests</li>
<li>4400 - Federal Grants</li>
<li>4500 - State Grants</li>
<li>4600 - Local Government Grants</li>
<li>4700 - Foundation Grants</li>
<li>4800 - <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/in-kind-donations/">In-Kind Contributions</a></li>
<li>5100 - Program Service Fees</li>
<li>5200 - Membership Dues</li>
<li>5300 - Investment Revenue</li>
<li>5400 - Event Sponsorships</li>
<li>5410 - Event Ticket Revenue</li>
<li>5420 - Event Auction</li>
<li>6100 - Net Assets Released From Restriction</li>
<li>6200 - Unrealized Gain</li>
<li>6300 - Miscellaneous Revenue</li>
</ul>
<h3>Expenses (account numbers beginning with 7000-9000)</h3>
<ul>
<li>7100 - Salaries and Payroll</li>
<li>7110 - Payroll Taxes</li>
<li>7120 - Health Insurance</li>
<li>7130 - Retirement Benefits</li>
<li>7200 - Depreciation Expense</li>
<li>7300 - Contract Services</li>
<li>8100 - Office Supplies</li>
<li>8200 - Rent</li>
<li>8210 - Utilities</li>
<li>8220 - Real Estate Taxes</li>
<li>8230 - Equipment Purchase and Maintenance</li>
<li>8300 - Travel</li>
<li>8400 - Fundraising Expenses</li>
<li>8500 - Marketing and Promotion</li>
<li>9100 - Fixed Asset Purchases</li>
<li>9200 - Payment to Affiliates</li>
</ul>
<p>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.</p>
<p>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.</p>
<p class="mb-0">When you put all of this information together in a table format, your nonprofit chart of accounts should look something like this:</p>
<img alt="All account designations listed above into a sample nonprofit chart of accounts" src="https://jitasa.imgix.net/blog/nonprofit_chart_of_accounts_example.png?auto=format&w=700" width="700" height="630" loading="lazy" />
<h2 id="tips">Tips for Maintaining Your Chart of Accounts</h2>
<p>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.</p>
<p class="mb-0">To effectively maintain your nonprofit’s chart of accounts, try these tips:</p>
<img src="https://jitasa.imgix.net/blog/nonprofit_chart_of_accounts_tips.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/nonprofit_chart_of_accounts_tips.jpg?auto=format&w=700&dpr=2&q=40 2x" width="700" height="508" alt="Checklist with five tips for maintaining your nonprofit chart of accounts" loading="lazy" />
<ul>
<li><b>Keep your accounts as simple as possible.</b> 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 <a href="https://gettingattention.org/nonprofit-marketing/" target="_blank">marketing costs</a>. Your COA should contain enough detail to accurately reflect your organization’s financial activities, but not so much that it becomes overwhelming to navigate.</li>
<li><b>Remove any unused accounts from your chart.</b> 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.</li>
<li><b>Allow room for growth.</b> 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.</li>
<li><b>Leverage specialized accounting software.</b> Although you might create your first chart of accounts in a spreadsheet, using an accounting platform like <a href="https://quickbooks.intuit.com/industry/non-profits/" target="_blank">QuickBooks</a> or <a href="https://www.sage.com/en-us/industry/nonprofit/" target="_blank">Sage Intacct</a> 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.</li>
<li><b>Work with a nonprofit accountant.</b> 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.</li>
</ul>
<p>Because hiring an in-house accountant can be expensive and time-consuming, many nonprofits choose to <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/outsourced-accounting-for-nonprofits-top-firms/">outsource their accounting services</a> to an external firm like <a href="https://www.jitasagroup.com/">Jitasa</a>. 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.</p>
<hr />
<p>Understanding, developing, and maintaining an accurate nonprofit chart of accounts is essential for effective <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-management/">financial management</a> at your organization, as this resource is foundational to all other accounting reports and activities. Use the strategies in this guide to get started, and don’t hesitate to reach out to Jitasa’s team of expert nonprofit accountants with any questions or concerns that come up along the way.</p>
<p>For more information about your COA’s structure and applications, check out these resources:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/fund-accounting/">Fund Accounting 101: The Basics and Best Practices.</a> Explore the ins and outs of fund accounting, the unique system nonprofits use to track their finances and prioritize accountability.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-statements/">Nonprofit Financial Statements: 4 Essential Reports to Know.</a> Learn more about the creation and purpose of the financial reports your COA most directly informs.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/how-do-nonprofits-make-money/">How Do Nonprofits Make Money? Making Nonprofits Profitable.</a> Dive deeper into the revenue section of your COA with this guide to the most common nonprofit funding sources.</li>
</ul>
<div class="blog-post-callout">
<div class="inner">
<div class="media">
<picture>
<source srcset="https://jitasa.imgix.net/blog/flames_circle_lrg.png?auto=format, https://jitasa.imgix.net/blog/flames_circle_lrg@2x.png?auto=format 2x" media="(min-width: 850px)" />
<img srcset="https://jitasa.imgix.net/blog/flames_circle.png?auto=format, https://jitasa.imgix.net/blog/flames_circle@2x.png?auto=format 2x" alt="Jitasa Flames" width="68" height="68" loading="lazy" />
</picture>
</div>
<div class="text">
<h2 class="text-white mt-0">Work with the experts at Jitasa to create your nonprofit chart of accounts</h2>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button small">Request a Quote</a>
</div>
</div>
</div>Comprehensive guide for nonprofit statement of activities.2023-11-28T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-activities/<p>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.</p>
<p>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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accounting/">accounting is different</a>, the reports differ slightly as well.</p>
<p>One of these central reports run by nonprofit accountants is the <b>statement of activities</b>, sometimes known as an income statement. In this guide, we’ll walk through the basics of this accounting statement, covering the following topics:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-activities/#what">What is the nonprofit statement of activities?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-activities/#difference">Is there a difference between a statement of activities and an income statement?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-activities/#why">Why the nonprofit statement of activities is important</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-activities/#structure">Structure of the nonprofit statement of activities</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-activities/#nonprofit">Nonprofit statement of activities template</a></li>
</ul>
<p>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.</p>
<div class="blog-callout-full">
<h2>Work with the experts at Jitasa to compile your statement of activities.</h2>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button white">Request a Quote</a>
</div>
<h2 id="what">What is the nonprofit statement of activities?</h2>
<p>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.</p>
<p><b>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.</b></p>
<p class="mb-0">When your statement of activities is complete, it will look something like this:</p>
<img alt="A completed example of a nonprofit statement of activities or income statement" src="https://jitasa.imgix.net/blog/nonprofit_financial_management_statement_of_activities.png?auto=format&w=600" width="600" height="700" />
<p>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.</p>
<p>The numbers for your statement of activities are pulled from your organization’s <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-chart-of-accounts/">chart of accounts</a>, 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.</p>
<p>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.</p>
<div class="blog-post-callout">
<div class="inner">
<div class="media">
<picture>
<source srcset="https://jitasa.imgix.net/blog/flames_circle_lrg.png?auto=format, https://jitasa.imgix.net/blog/flames_circle_lrg@2x.png?auto=format 2x" media="(min-width: 850px)" />
<img srcset="https://jitasa.imgix.net/blog/flames_circle.png?auto=format, https://jitasa.imgix.net/blog/flames_circle@2x.png?auto=format 2x" alt="Jitasa Flames" width="68" height="68" loading="lazy" />
</picture>
</div>
<div class="text">
<h2 class="text-white mt-0"><b>NonProfit Statement of Activities Template.</b></h2>
<a href="https://www.jitasagroup.com/nonprofit-resources/nonprofit-free-downloads/nonprofit-statement-of-financial-activities-template/" class="button small">Download for Free</a>
</div>
</div>
</div>
<h2 id="difference">Is there a difference between a statement of activities and an income statement?</h2>
<p>In the broadest sense, the answer is no. <b>The nonprofit statement of activities and the income statement are two different terms that refer to the same report</b>.</p>
<p>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.</p>
<p class="mb-0">The term “statement of activities” is also more in line with the names of the other three <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-statements/">financial statements</a> nonprofits compile annually than “income statement” is. These reports include the:</p>
<img src="https://jitasa.imgix.net/blog/nonprofit_statement_activities_types.jpg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/nonprofit_statement_activities_types.jpg?auto=format&w=700&dpr=2&q=40 2x" width="700" height="500" alt="Four nonprofit financial statements: income statement, balance sheet, cash flow statement, and functional expense report" loading="lazy" />
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-financial-position/">Statement of financial position</a>. Also called a balance sheet, this report breaks down your organization’s assets and liabilities to provide a snapshot of its financial health.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-cash-flows/">Statement of cash flows</a>. 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.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/statement-of-functional-expenses/">Statement of functional expenses</a>. 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.</li>
</ul>
<p>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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-management/">financial management strategy</a>.</p>
<h2 id="why">Why the nonprofit statement of activities is important</h2>
<p>Nonprofits must compile an income statement every year to be in accordance with the <a href="https://www.accounting.com/resources/gaap/" target="_blank">Generally Accepted Accounting Principles</a> (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.</p>
<p>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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/">organization’s budget</a>. This allows your organization to make sure you’re on track with your budgeted regular expenses.</p>
<p>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.</p>
<p>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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/form-990-filing/">file your Form 990</a> accurately each and every year.</p>
<h2 id="structure">Structure of the nonprofit statement of activities</h2>
<p>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.</p>
<h3>Revenue</h3>
<p>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.</p>
<p>Some of the revenue sources that need to be recorded in the nonprofit statement of activities include the following:</p>
<ul>
<li><b>Cash contributions.</b> When nonprofits raise money from individual donors, major supporters, and corporate partners, these are all considered cash contributions.</li>
<li><b>Donated materials.</b> <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/in-kind-donations/">In-kind donations</a> 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.</li>
<li><b>Non-cash contributions.</b> 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.”</li>
<li><b>Grants.</b> Whether you’re receiving money from the federal and state governments or a private foundation, you need to <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/grant-management/">record your grant revenue</a> in your statement of activities.</li>
<li><b>Program fees.</b> 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.</li>
<li><b>Investment returns.</b> 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.</li>
</ul>
<p>Finally, one of the categories often listed as revenue on your statement of activities is your <b>net assets released from restriction</b>. 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.</p>
<h4>Revenue With Restrictions vs. Unrestricted Revenue</h4>
<p>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.</p>
<p><b>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.</b></p>
<p>Also included in your restricted revenue is <i>temporarily</i> 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.</p>
<p>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.</p>
<h3>Expenses</h3>
<p>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.</p>
<p><b>You’re required by <a href="https://fasb.org/page/PageContent?pageId=/reference-library/superseded-standards/summary-of-statement-no-117.html" target="_blank">FASB 117</a> to report your expenses by functional classification, meaning you’ll need to at least split up your expenses by administrative, fundraising, and program costs.</b></p>
<p>Some of the operational expenses that your organization will incur include the following:</p>
<ul>
<li>Salary and wages</li>
<li>Insurance</li>
<li>Rent and utilities</li>
<li>Legal services</li>
<li>Accounting services</li>
<li>Supplies and equipment</li>
<li>Retirement compensation</li>
<li>Fundraising</li>
</ul>
<p>Meanwhile, program expenses vary drastically between nonprofits. For example, an animal shelter nonprofit organization may incur program expenses such as:</p>
<ul>
<li>Medical supplies for animals</li>
<li>Leashes, collars, toys, and crates</li>
<li>Food for the animals</li>
<li>Training expenses</li>
</ul>
<p>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.</p>
<h3>Net Assets</h3>
<p>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.</p>
<p>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.</p>
<p>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.</p>
<h2 id="nonprofit">Nonprofit statement of activities template</h2>
<p class="mb-0">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.</p>
<img src="https://jitasa.imgix.net/blog/nonprofit-statement-of-activities-template.png?auto=format" srcset="https://jitasa.imgix.net/blog/nonprofit-statement-of-activities-template.png?auto=format&dpr=2&q=40 2x" width="600" height="700" alt="A template for nonprofit statement of activities or income statements" loading="lazy" />
<p>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.</p>
<p>To make this process easier, we recommend that your organization partner with a nonprofit accountant like the experts at <a href="https://www.jitasagroup.com/">Jitasa</a>. 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.</p>
<h2>Wrapping up</h2>
<p>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.</p>
<p>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:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/how-do-nonprofits-make-money/">How Do Nonprofits Make Money? Making Nonprofits Profitable.</a> Explore the different revenue sources that may be included in your nonprofit’s income statement.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/restricted-funds/">Restricted Funds: What Are They? And Why Do They Matter?</a> Dive deeper into the important designation of restricted vs. unrestricted funds that appears on the statement of activities.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accountant/">Working With a Nonprofit Accountant: What to Expect.</a> Discover what it’s like to work with a nonprofit accountant to compile your statement of activities and interpret your organization’s financial data.</li>
</ul>
<div class="blog-post-callout">
<div class="inner">
<div class="media">
<picture>
<source srcset="https://jitasa.imgix.net/blog/flames_circle_lrg.png?auto=format, https://jitasa.imgix.net/blog/flames_circle_lrg@2x.png?auto=format 2x" media="(min-width: 850px)" />
<img srcset="https://jitasa.imgix.net/blog/flames_circle.png?auto=format, https://jitasa.imgix.net/blog/flames_circle@2x.png?auto=format 2x" alt="Jitasa Flames" width="68" height="68" loading="lazy" />
</picture>
</div>
<div class="text">
<p>Contact Jitasa’s team of nonprofit accountants to compile your statement of activities.</p>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button small">Request a Quote</a>
</div>
</div>
</div>Procure With Purpose: 5 Tips to Find Nonprofit Auction Items2023-10-19T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/5-tips-to-find-nonprofit-auction-items/<p>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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/overcoming-financial-restraints-with-online-auctions/">virtually</a>, and most importantly, what items you’ll sell at the event.</p>
<p>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!</p>
<p>To help you balance all of these factors, this guide will walk through the following five tips for procuring nonprofit auction items:</p>
<ol>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/5-tips-to-find-nonprofit-auction-items/#hold-a-strategy-session">Hold a Strategy Session</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/5-tips-to-find-nonprofit-auction-items/#choose-items-that-sell-well">Choose Items That Sell Well at Auction</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/5-tips-to-find-nonprofit-auction-items/#keep-costs-low">Keep Costs as Low as Possible</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/5-tips-to-find-nonprofit-auction-items/#establish-gift-acceptance-policy">Establish a Gift Acceptance Policy</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/5-tips-to-find-nonprofit-auction-items/#acknowledge-item-providers">Acknowledge Item Providers During the Event</a></li>
</ol>
<p>The auction item procurement process might seem daunting at first, but remember that careful planning often leads to more <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/how-do-nonprofits-make-money/">profitable</a> fundraisers. Start early, do your research, and play to your nonprofit’s strengths whenever possible. Let’s dive in!</p>
<h2 id="hold-a-strategy-session">1. Hold a Strategy Session</h2>
<p>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:</p>
<ul>
<li>What is our event fundraising goal?</li>
<li>Who is our target audience for this auction?</li>
<li>How many items do we need to procure?</li>
<li>What types of items are at the top of our auction wishlist?</li>
<li>What existing connections can we leverage in the procurement process?</li>
<li>What new connections do we want to form?</li>
</ul>
<p>Once you’ve outlined your strategy, create a full auction item wishlist and assign a specific team member to look for each prize. <a href="https://blog.winspireme.com/how-to-procure-auction-items" target="_blank" rel="noopener noreferrer">Winspire’s guide to auction item procurement</a> 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.</p>
<h2 id="choose-items-that-sell-well">2. Choose Items That Sell Well at Auction</h2>
<p>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:</p>
<ul>
<li><b>Themed <a href="https://blog.winspireme.com/silent-auction-basket-ideas" target="_blank" rel="noopener noreferrer">gift baskets</a>.</b> 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.</li>
<li><b>Unique goods.</b> 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.</li>
<li><b>Exclusive tickets</b>. 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.</li>
<li><b>Travel-related items.</b> Although vacations are often the most challenging auction items to procure, they also sell extremely well and bring in a lot of revenue.</li>
</ul>
<p>To determine which of these auction items <em>your</em> 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.</p>
<h2 id="keep-costs-low">3. Keep Costs as Low as Possible</h2>
<p>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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/">budget</a>, 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.</p>
<p>Some ways to procure high-quality auction items for little to no cost include:</p>
<ul>
<li><b>Taking advantage</b> of nonprofit discounts offered by some event venues.</li>
<li><b>Seeking out dedicated auction item providers</b> — this method can be especially useful for procuring travel packages.</li>
<li><b>Soliciting <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/in-kind-donations/">in-kind donations</a></b> from individual donors or businesses.</li>
</ul>
<p>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.</p>
<h2 id="establish-gift-acceptance-policy">4. Establish a Gift Acceptance Policy</h2>
<p>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.</p>
<p>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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-management/">financial management</a> 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.</p>
<p>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!</p>
<h2 id="acknowledge-item-providers">5. Acknowledge Item Providers During the Event</h2>
<p>Finally, make sure to publicly recognize the individuals and organizations who provided your auction items. On <a href="https://blog.winspireme.com/silent-auction-bid-sheets" target="_blank" rel="noopener noreferrer">each item’s silent auction bid sheet</a> 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.</p>
<p>If an item was contributed by a corporate sponsor, make sure to add the business’s name and logo to your other auction <a href="https://doublethedonation.com/nonprofit-marketing/" target="_blank" rel="noopener noreferrer">marketing materials</a> and event signage. <a href="https://gettingattention.org/securing-corporate-sponsorships/" target="_blank" rel="noopener noreferrer">Getting Attention’s guide to securing corporate sponsorships</a> 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.</p>
<p>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.</p>
<hr />
<p>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.</p>Nonprofit Statement of Financial Position (or Balance Sheet)2023-10-05T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-financial-position/<p>There are several documents that nonprofits leverage to determine the best future financial decisions. Each one has a specific purpose and can provide important insights about your organization. The one that gives the most insight about the overall financial health of your nonprofit is known as the statement of financial position, also known as the nonprofit balance sheet.</p>
<p>Your <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accounting/">nonprofit accountant</a> or accounting team has likely put one together in the past. If not, it’s time to get started! This can help determine your capacity for growth and if your nonprofit is ready to take on new financial initiatives. It can also be used to help spot potential or current financial concerns.</p>
<div class="blog-callout-full">
<h2>Nonprofit Accounting 101 Course</h2>
<p>Take a deep dive into some of the basics of nonprofit accounting.</p>
<a href="https://www.jitasagroup.com/nonprofit-resources/free-courses/nonprofit-accounting-course/" class="button white">Free Course</a>
</div>
<p>In this guide we’ll discuss what a nonprofit balance sheet is and how you can use your statement of financial position to make the best decisions for your organization’s finances. We’ll cover the following questions:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-financial-position/#what-is">What is the nonprofit statement of financial position?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-financial-position/#difference">Is there a difference between a statement of financial position and a balance sheet?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-financial-position/#what-makes">What makes up your nonprofit statement of financial position?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-financial-position/#what-insights">What insights can be determined from your nonprofit balance sheet?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-financial-position/#template">Nonprofit Statement of Financial Position Template</a></li>
</ul>
<p>Ready to dive deeper into this important nonprofit financial statement? Let’s get started.</p>
<div class="blog-callout-full full-width-text">
<h2>Contact a nonprofit accountant to <b>craft and interpret your statement</b> of financial position.</h2>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button white">Contact Jitasa</a>
</div>
<h2 id="what-is">What is the nonprofit statement of financial position?</h2>
<p>The nonprofit statement of financial position - also called a balance sheet - is essentially a report that shows a snapshot of your organization’s financial health. It measures your nonprofit’s assets, liabilities, and net assets in a single document.</p>
<p><b>Keep in mind that this report is more accurate and helpful if your organization uses an accrual method of accounting rather than the cash method</b>. Accrual accounting allows nonprofits to record revenue when earned and expenses when incurred rather than when the money actually enters or leaves the account (which is how cash accounting works). It provides a more accurate statement about when financial changes occurred, creating a more exact report to work off of.</p>
<p>Your statement of financial position will be made up of three main sections:</p>
<ul>
<li>Assets (what your organization owns)</li>
<li>Liabilities (what your organization owes)</li>
<li>Net assets (your organization’s equity)</li>
</ul>
<p>We’ll dive deeper into these three components later on. When it’s completed, your final balance sheet will look something like this:</p>
<div class="text-center"><img alt="This sample nonprofit statement of financial position, or balance sheet, shows an organization’s assets and liabilities over two years." src="https://jitasa.imgix.net/blog/statement_of_financial_position_examples.png?auto=format&w=600" width="600" height="700" /></div>
<p>Keep in mind that your statement of financial position is a key document for the <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-audit/">nonprofit auditing process</a>. Whenever you pull the report, double and triple check the numbers to be sure they’re correct. That way, when it’s time for an audit, you’ll know you’re giving them the most accurate information possible.</p>
<h2 id="difference">Is there a difference between a statement of financial position and a balance sheet?</h2>
<p>The short answer is <i>no</i>. <b>The statement of financial position and the balance sheet are two different terms that refer to the same report</b>. 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.</p>
<p>While “balance sheet” has been commonly used for many years, the term “statement of financial position” is more aligned with the other <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-statements/">major nonprofit financial statements</a>, which include the:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-activities/">Statement of activities</a>. The nonprofit parallel to the for-profit income statement, this report summarizes your organization’s annual revenue, expenses, and net assets.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-cash-flows/">Statement of cash flows</a>. This statement shows how money moves in and out of your nonprofit through operating, investing, and financing activities.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/statement-of-functional-expenses/">Statement of functional expenses</a>. This report categorizes your organization’s expenditures based on the way in which each one furthers your mission.</li>
</ul>
<p>Each of these statements is essential to provide different insights into your organization’s financial situation. Plus, they’re all useful resources when it comes to <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/form-990-filing/">filing your organization’s annual Form 990</a> with the IRS.</p>
<h2 id="what-makes">What makes up your nonprofit statement of financial position?</h2>
<p>The numbers pulled for your nonprofit balance sheet all come from your organization’s <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-chart-of-accounts/">chart of accounts</a>, which lists out all of your accounts and ledgers to keep your finances in order. Then, these numbers are organized into the three sections of the report (assets, liabilities, and net assets).</p>
<h3>Assets</h3>
<p>The assets section of your nonprofit balance sheet defines what your nonprofit owns. It includes items like your cash assets, accounts receivable, property and equipment investments, long-term receivables, prepaid expenses, and more.</p>
<p>Generally, these assets are listed in order of the amount of time that it would take for them to become liquid assets. For example, cash is already liquid, so it’s listed first in the assets section. Meanwhile, investments in property and equipment (like the computers you purchased to complete work) would require sale to become liquid, making them more challenging (if not impossible) to use for operating expenses.</p>
<div class="text-center"><img alt="This graphic highlights the assets on a nonprofit statement of financial position, the part of the balance sheet that shows what you own." src="https://jitasa.imgix.net/blog/nonprofit_statement_of_financial_position_assets.png?auto=format&w=600" width="600" height="700" /></div>
<h3>Liabilities</h3>
<p>In a nutshell, the liabilities section of your nonprofit statement of financial position sums up what your organization owes. This will include your accounts payable, debt, and other expenses. For instance, this is where you’ll add expenses owed to your employees, vendors, and contractors, as well as any debt your organization may have as an entity.</p>
<p>While your assets are generally organized by liquidity, your liabilities are usually organized by due date. Short-term investments are usually labeled as <i>current liabilities</i> and should be owed within the year. Meanwhile, <i>long-term liabilities</i> represent the obligations that can be paid over multiple years.</p>
<div class="text-center"><img alt="This graphic highlights the liabilities on a nonprofit statement of financial position, the balance sheet section that shows what you owe." src="https://jitasa.imgix.net/blog/nonprofit_statement_of_financial_position_liabilities.png?auto=format&w=600" width="600" height="700" /></div>
<h3>Net Assets</h3>
<p>The third and final section of your statement of financial position is the net assets section. This part of the report shows the equity of your organization (your total assets minus your total liabilities).</p>
<p><i>Net Assets = Total Assets - Total Liabilities</i></p>
<p>These net assets are then split up and organized according to the restrictions placed on them. Donors, grant-makers, and government entities all reserve the right to restrict the contributions made to nonprofits so that it can only be used for certain activities or programs. That’s why it’s so important to <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/grant-management/">manage grants and other restricted contributions</a> carefully in your accounting system.</p>
<p>This section splits the net assets into the following restriction categories:</p>
<ul>
<li><b>Without donor restrictions</b>. This defines the cash and assets that you have on hand and can be used at your own discretion. Much of this is found in your annual fund and can be used to fund operational expenses like salaries, rent, and utilities.</li>
<li><b>With donor restrictions: purpose or timing</b>. Some funds might have temporary restrictions related to a certain purpose or timing. After that purpose is no longer needed or the timing is up, the funds can be released from restriction and added to your non-restricted assets.</li>
<li><b>With donor restrictions: held in perpetuity</b>. These are the funds that must be held for a certain purpose no matter how much time passes. You will not be able to use this money to fund operational expenses at your organization.</li>
</ul>
<p>This is an incredibly important part of the nonprofit balance sheet. It defines the net assets that you have available to conduct operations at your organization. For example, if you have a donation that’s restricted permanently for a certain program, you won’t have the flexibility to use that funding to increase a valuable employee’s salary or support other pressing operational expenses.</p>
<div class="text-center"><img alt="This graphic highlights the net assets on a nonprofit statement of financial position, the part of the balance sheet that shows equity." src="https://jitasa.imgix.net/blog/nonprofit_statement_of_financial_position_net_assets.png?auto=format&w=600" width="600" height="700" /></div>
<h2 id="what-insights">What insights can be determined from your nonprofit balance sheet?</h2>
<p>There are several insights that you can pull from your nonprofit statement of financial position. It provides information about the overall financial health of your nonprofit. That’s because it shows the amount of flexibility you have in your funding to pay for additional operating expenses necessary for growth.</p>
<p>If you pull the financial information from both this year and the year prior in your nonprofit balance sheet, you can compare your financial health between the two years.</p>
<p>You can also measure the current liquidity of your nonprofit. Doing so can help you better understand which funds are a leverageable <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/">part of your operational budget</a> and can be used to take on additional risk, such as expanding the organization. You can do this by calculating the months of cash and assets that your organization has on hand to pay for items outside of your usual expenses.</p>
<p>There are two different equations you can use to calculate this: the <i>months of liquid unrestricted net assets (months of LUNA)</i> and the <i>months of cash on hand</i>. Both are calculated using the information located in your nonprofit statement of financial position.</p>
<h3>Months of Liquid Unrestricted Net Assets (LUNA)</h3>
<p>To calculate your months of LUNA, you’ll need to take the total unrestricted net assets found on your nonprofit balance sheet and subtract the property and equipment assets (found in the first section). This is because those assets are tied up in physical belongings (property, software, etc.) and cannot be liquidated to cover additional liabilities. Then, divide this number by the average monthly expenses incurred by your organization. The result is the number of months that you can cover with the liquid assets you have on hand.</p>
<div class="text-center"><img alt="This graphic shows how to use a nonprofit statement of financial position to calculate months of LUNA, which is based on balance sheet data." src="https://jitasa.imgix.net/blog/nonprofit_statement_financial_position_months_of_luna.png?auto=format&w=530" width="530" height="216" /></div>
<p>It’s generally recommended that organizations have the assets on hand to cover at least three months of operating expenses. Here’s what to consider when calculating months of LUNA:</p>
<ul>
<li><b>Months of LUNA < 0</b>: This result requires immediate attention. Essentially, it means that your organization doesn’t have the cash on hand to cover your current expenses.</li> <li><b>0 < Months of LUNA < 3</b>: This result is something to keep an eye on for a single year. But if you’ve been in this position for multiple years, start considering how you can readdress your financial positioning.</li> <li><b>Months of LUNA = 3</b>: This is what’s generally recommended and signifies strong financial health and stability at your organization.</li>
<li><b>Months of LUNA > 3</b>: This result means you have additional cash on hand, providing additional flexibility, the ability to take on new risks, and growth opportunities.</li>
</ul>
<p>Months of LUNA is the most accurate way you can calculate the liquidity of your organization and the potential risk that you can take on because it takes into account the restricted assets at your organization, ensuring they’re only used for their intended purpose. However, you can also use the next calculation (months of cash on hand) to calculate the liquidity of your nonprofit.</p>
<h3>Months of Cash on Hand</h3>
<p>The second equation you can use to find the liquidity of your organization - which is also based on blance sheet data - is the months of cash on hand. Unlike the months of LUNA, this calculation doesn’t take into account the restrictions of assets. However, it is a simpler equation to calculate. You can find it by dividing the average monthly expenses by your total cash and cash equivalents.</p>
<div class="text-center"><img alt="This graphic shows how to use your nonprofit statement of financial position (or balance sheet) to find your months of cash on hand." src="https://jitasa.imgix.net/blog/nonprofit_statement_financial_position_months_cash_on_hand.png?auto=format&w=530" width="530" height="216" /></div>
<p>Generally, you’ll want to have between three and six months of cash on hand to determine that your organization is in a financially stable and healthy position.</p>
<div class="blog-callout-full full-width-text">
<h2>Contact a nonprofit accountant to <b>craft and interpret your statement</b> of financial position.</h2>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button white">Contact Jitasa</a>
</div>
<h2 id="template">Nonprofit Statement of Financial Position Template</h2>
<p>Here is a blank template that can be used to determine your own nonprofit’s statement of financial position. It can be confusing to fill this out on your own, and can indicate improper financial management if done incorrectly, which is why we recommend reaching out to an accountant to help create a balance sheet for your organization.</p>
<div class="text-center"><img alt="This blank balance sheet template can be used to create your own nonprofit statement of financial position." src="https://jitasa.imgix.net/blog/nonprofit_statement_of_financial_position_template.png?auto=format&w=600" width="600" height="700" /></div>
<h2>Wrapping Up</h2>
<p>Your nonprofit needs to create several statements and reports to better understand your organization’s financial health and well-being. The nonprofit statement of financial position is a big one!</p>
<p>Reach out to a professional nonprofit accountant for help creating and interpreting your nonprofit’s balance sheet. Then, you can discuss potential next steps for your organization, whether it’s to grow and expand or to reevaluate your revenue generation and <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-management/">financial management</a>.</p>
<p>If you want to learn more about financial statements and accounting, check out these resources:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-chart-of-accounts/">Establishing a Nonprofit Chart of Accounts</a>. Learn more about the backbone of effective financial statements, your chart of accounts, with this complete guide for nonprofits.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/restricted-funds/">Restricted Funds: What Are They? And Why Do They Matter?</a> Dive deeper into a highly nonprofit-specific element of your organization’s balance sheet: the inclusion of restricted funds.</li>
<li><a href="https://www.jitasagroup.com/nonprofit-solutions/nonprofit-bookkeeping-accounting-services/">Bookkeeping and Accounting Services Exclusively for Nonprofits</a>. Get in touch with a nonprofit accountant to help with your statement of financial position.</li>
</ul>
<div class="blog-callout-media-object">
<div class="media">
<img src="https://jitasa.imgix.net/blog/callouts/ill_clipboard_calculator.png?auto=format&w=250" srcset="https://jitasa.imgix.net/blog/callouts/ill_clipboard_calculator.png?auto=format&w=250, https://jitasa.imgix.net/blog/callouts/ill_clipboard_calculator.png?auto=format&w=250&dpr=2 2x" alt="Illustration of clipboard and calculator" width="250" height="162" />
</div>
<div class="text">
<h2>Want to make the most of your nonprofit statement of financial position?</h2>
<p>
Get in touch with a
<b>Jitasa</b>
expert today.
</p>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button white">Learn more</a>
</div>
</div>Nonprofit Financial Statements: 4 Essential Reports to Know2023-10-04T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-statements/<p>If your nonprofit has a solid <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accounting/">accounting system</a> 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.</p>
<p>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.</p>
<p>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.</p>
<p>In this guide, we’ll walk through the basics of the nonprofit financial statements, including:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-statements/#why-important">Why are financial statements important for nonprofits?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-statements/#major-statements">The 4 Major Nonprofit Financial Statements</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-statements/#how-create">How to Create Financial Statements for Your Nonprofit</a></li>
</ul>
<p>There are some parallels between nonprofits’ financial statements and those of for-profit organizations—systematic reporting is an important part of complying with the <a href="https://www.accounting.com/resources/gaap/" target="_blank">Generally Accepted Accounting Principles (GAAP)</a>. 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.</p>
<div class="blog-callout-full">
<h2>Contact the experts at Jitasa to compile your nonprofit financial statements.</h2>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button white">Request a Quote</a>
</div>
<h2 id="why-important">Why are financial statements important for nonprofits?</h2>
<p>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:</p>
<img src="https://jitasa.imgix.net/blog/nonprofit_financial_statements_benefits.png?auto=format" width="700" height="310" alt="Mindmap showing the 4 main benefits of nonprofit financial statements" loading="lazy" class="mt-10 mb-20" />
<ul>
<li><b>Make data-driven decisions in the short term.</b> These decisions can range from how your nonprofit should <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/how-do-nonprofits-make-money/">generate revenue</a> during the coming year to when to launch certain projects and programs in order to allocate resources most effectively.</li>
<li><b>Develop a long-term strategic plan for your organization.</b> 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.</li>
<li><b>Improve your <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/risk-management-for-nonprofits/">risk management</a> strategy.</b> 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.</li>
<li><b>Be more transparent with supporters.</b> By publicizing your financial statements in your nonprofit’s <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/how-to-communicate-annual-report-data/">annual report</a>, 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.</li>
</ul>
<p>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.</p>
<div class="blog-post-callout">
<div class="inner">
<div class="media">
<picture>
<source srcset="https://jitasa.imgix.net/blog/flames_circle_lrg.png, https://jitasa.imgix.net/blog/flames_circle_lrg@2x.png 2x" media="(min-width: 850px)" />
<img srcset="https://jitasa.imgix.net/blog/flames_circle.png, https://jitasa.imgix.net/blog/flames_circle@2x.png 2x" alt="Jitasa Flames" width="68" height="68" loading="lazy" />
</picture>
</div>
<div class="text">
<p>Nonprofit Financial Reporting Policy Template</p>
<a href="https://www.jitasagroup.com/nonprofit-resources/nonprofit-free-downloads/nonprofit-financial-reporting-policy-template/" class="button small">Download for Free</a>
</div>
</div>
</div>
<h2 id="major-statements">The 4 Major Nonprofit Financial Statements</h2>
<p>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 <a href="https://nxunite.com/nonprofit-data-collection/" target="_blank">data you’ve collected</a>, 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.</p>
<h3>1. Statement of Activities</h3>
<p>The <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-activities/">statement of activities</a> 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.</p>
<p>This statement is divided into three main sections:</p>
<ul>
<li><b>Revenue.</b> This section is further broken down into your nonprofit’s various funding sources, such as individual donations (both financial and <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/in-kind-donations/">in-kind</a>), grants, earned income such as membership dues or fees charged for services provided, and <a href="https://www.infinitegiving.com/blog/nonprofit-investing" target="_blank">investment returns</a>.</li>
<li><b>Expenses.</b> 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.</li>
<li><b>Net Assets.</b> 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.</li>
</ul>
<p>When you combine these sections into a single report, your nonprofit statement of activities should look something like this:</p>
<div class="text-center">
<img src="https://jitasa.imgix.net/blog/nonprofit_financial_statements_activities.png?auto=format" alt="Nonprofit statement of activities" width="600" height="700" loading="lazy" class="mt-20 mb-40" />
</div>
<p>Not only is the revenue section broken down into categories by funding source in this example, but a distinction is also made between <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/restricted-funds/">unrestricted and restricted funds</a>. 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.</p>
<p>Additionally, the line items in your organization’s statement of activities should match those in the operating <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/">budget</a> 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.</p>
<h3>2. Statement of Financial Position</h3>
<p>The nonprofit <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-financial-position/">statement of financial position</a> 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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-audit/">nonprofit financial audits</a>.</p>
<p>Similar to the statement of activities, the balance sheet also has three main sections:</p>
<ul>
<li><b>Assets.</b> 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.</li>
<li><b>Liabilities.</b> 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.</li>
<li><b>Net Assets.</b> 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.</li>
</ul>
<p>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:</p>
<div class="text-center">
<img src="https://jitasa.imgix.net/blog/nonprofit_financial_statements_financial_position.png?auto=format&w=600" srcset="https://jitasa.imgix.net/blog/nonprofit_financial_statements_financial_position.png?auto=format&w=600&dpr=2&q=40 2x" width="600" height="700" alt="Nonprofit statement of financial positions example" loading="lazy" class="mt-20 mb-40" />
</div>
<p>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.</p>
<p>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.</p>
<h3>3. Statement of Cash Flows</h3>
<p>Both for-profit and nonprofit organizations use the term “<a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-cash-flows/">statement of cash flows</a>,” 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.</p>
<p>This report shows your organization’s cash flows as they relate to:</p>
<ul>
<li><b>Operating activities.</b> 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.</li>
<li><b>Investing activities.</b> 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.</li>
<li><b>Financing activities.</b> This section covers your nonprofit’s long-term liabilities, such as the borrowing and repayment of debts and the establishment of endowment funds.</li>
</ul>
<p>On a basic level, a nonprofit statement of cash flows looks like this:</p>
<div class="text-center">
<img src="https://jitasa.imgix.net/blog/nonprofit_financial_statements_cash%20flows.png?auto=format" width="600" height="700" alt="Nonprofit statement of cash flows" loading="lazy" class="mt-20 mb-40" />
</div>
<p>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.</p>
<h3>4. Statement of Functional Expenses</h3>
<p>The last of the four essential financial statements, the <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/statement-of-functional-expenses/">statement of functional expenses</a>, is unique to nonprofits. In most accounting systems, expenditures are typically recorded as <em>natural expenses</em>, 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 <em>functional expenses</em>.</p>
<p>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:</p>
<ul>
<li><b>Program costs.</b> 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.</li>
<li><b>Administrative costs.</b> These expenses are necessary to keep your organization running day to day. They include <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-compensation-policy/">staff compensation</a>, rent, utilities, and office supplies, among other expenditures.</li>
<li><b>Fundraising costs.</b> Bringing in revenue for your nonprofit usually comes with upfront expenses. Spending on event planning, marketing, software to run your campaigns, and <a href="https://averillsolutions.com/fundraising-consultant-hiring-guide/" target="_blank">fundraising consultant fees</a> would all fall into this category.</li>
</ul>
<p>Keep in mind that some natural expenses might need to be divided across multiple functional expense categories, as they are in this example:</p>
<div class="text-center">
<img src="https://jitasa.imgix.net/blog/nonprofit_financial_statements_functional_expenses.png?auto=format&w=600" srcset="https://jitasa.imgix.net/blog/nonprofit_financial_statements_functional_expenses.png?auto=format&w=600&dpr=2&q=40 2x" width="600" height="636" alt="Nonprofit statement of functional expenses" loading="lazy" class="mt-20 mb-40" />
</div>
<p>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:</p>
<div class="text-center">
<img src="https://jitasa.imgix.net/blog/nonprofit_financial_statements_breakdown.png?auto=format" width="300" height="300" alt="Pie chart of financial statements breakdown" loading="lazy" class="mt-20 mb-40" />
</div>
<p><b>In reality, this breakdown will look different for every nonprofit.</b> 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.</p>
<p>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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/form-990-filing/">file your organization’s annual tax return</a>. 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.</p>
<h2 id="how-create">How to Create Financial Statements for Your Nonprofit</h2>
<p>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 <a href="https://www.jitasagroup.com/nonprofit-resources/nonprofit-free-downloads/nonprofit-statement-of-financial-activities-template/">financial statement templates</a> 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.</p>
<p><b>The best way to create accurate, useful financial statements for your organization is to work with a nonprofit accountant.</b> Since many nonprofits don’t have a full-time accountant on staff, consider <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/outsourced-accounting-for-nonprofits-top-firms/">outsourcing your accounting needs</a> to a nonprofit-specific firm like Jitasa.</p>
<p>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.</p>
<hr />
<p>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.</p>
<p>To learn more about how your financial statements fit into the larger picture of nonprofit accounting, check out these resources:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/fund-accounting/">Fund Accounting 101: The Basics and Best Practices</a>. Explore the nonprofit-specific system of fund accounting that forms the backbone of the four financial statements.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-chart-of-accounts/">Establishing a Nonprofit Chart of Accounts [+ Template]</a>. Discover the main resource for tracking the data that goes into your nonprofit’s reports: your chart of accounts.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accountant/">Working With a Nonprofit Accountant: What to Expect</a>. Dive deeper into the various responsibilities of a nonprofit accountant and learn more about what it’s like to partner with one.</li>
</ul>
<div class="blog-post-callout">
<div class="inner">
<div class="media">
<picture>
<source srcset="https://jitasa.imgix.net/blog/flames_circle_lrg.png?auto=format, https://jitasa.imgix.net/blog/flames_circle_lrg@2x.png?auto=format 2x" media="(min-width: 850px)" />
<img srcset="https://jitasa.imgix.net/blog/flames_circle.png?auto=format, https://jitasa.imgix.net/blog/flames_circle@2x.png?auto=format 2x" alt="Jitasa Flames" width="68" height="68" loading="lazy" />
</picture>
</div>
<div class="text">
<p>Work with the accounting experts at Jitasa to compile and analyze your nonprofit financial statements.</p>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button small">Request a Quote</a>
</div>
</div>
</div>Three basic steps to guide nonprofit fundraising efforts.2023-09-13T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/3-steps-to-guide-nonprofit-fundraising-efforts/<p>Just last year alone, Americans contributed <a href="https://doublethedonation.com/nonprofit-fundraising-statistics/" target="_blank" rel="noopener noreferrer">$499.33 billion</a> to nonprofits. It’s because of this generosity that many organizations can continue operating and making a difference in their communities.</p>
<p>To <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/how-do-nonprofits-make-money/">secure enough revenue</a> 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:</p>
<ol>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/3-steps-to-guide-nonprofit-fundraising-efforts/#review">Review Your Past Results</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/3-steps-to-guide-nonprofit-fundraising-efforts/#conduct">Conduct a SWOT Analysis</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/3-steps-to-guide-nonprofit-fundraising-efforts/#set">Set SMART Goals</a></li>
</ol>
<p>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.</p>
<h2 id="review">1. Review Your Past Results</h2>
<p>Before you begin your next <a href="https://gettingattention.org/digital-fundraising-campaigns" target="_blank" rel="noopener noreferrer">fundraising campaign</a>, 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:</p>
<ul>
<li>What was our fundraising goal? Did we exceed, meet, or fall short of it?</li>
<li>How did we promote our fundraising efforts?</li>
<li>How did we engage donors?</li>
<li>What were some successful strategies we applied?</li>
<li>What were some of the challenges we faced?</li>
<li>Did we gather any donor feedback? If so, what did they say?</li>
</ul>
<p>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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-guide-to-data-hygiene-and-data-management/">accurate data</a> that you can learn from in the future.</p>
<h2 id="conduct">2. Conduct a SWOT Analysis</h2>
<p>After examining your past results, conduct a formal SWOT analysis to refine your goals. <a href="https://gettingattention.org/nonprofit-marketing/" target="_blank" rel="noopener noreferrer">Getting Attention’s rundown on nonprofit marketing</a> outlines the key areas you’ll inspect during this analysis:</p>
<ul>
<li><b>Strengths.</b> 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.</li>
<li><b>Weaknesses.</b> 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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-revenue-streams-to-diversify-proceeds/">enough reliable revenue streams</a>. It’s important to recognize that you can address these weaknesses to improve your results moving forward.</li>
<li><b>Opportunities.</b> 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.</li>
<li><b>Threats.</b> 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.</li>
</ul>
<p>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.</p>
<h2 id="set">3. Set SMART Goals</h2>
<p>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 <a href="https://gettingattention.org/google-ad-grants/" target="_blank" rel="noopener noreferrer">use the Google Ad Grant</a> to secure more donations for its cause. For this example, your SMART goal might look something like this:</p>
<ul>
<li><b>Specific.</b> 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 <a href="https://nxunite.com/donor-acquisition/" target="_blank" rel="noopener noreferrer">NXUnite’s donor acquisition guide</a>, this is a highly viable use of the grant’s $10,000 a month in ad funding.</li>
<li><b>Measurable.</b> 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.</li>
<li><b>Attainable.</b> 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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/grant-management/">manage your Google Ad Grant account</a> and adjust your fundraising goal accordingly.</li>
<li><b>Relevant.</b> 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.</li>
<li><b>Time-based.</b> 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 <a href="https://ecardwidget.com/christmas-fundraising-ideas/" target="_blank" rel="noopener noreferrer">Christmas</a> of this year.”</li>
</ul>
<p>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.</p>
<hr />
<p>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.</p>
<div class="blog-post-callout">
<div class="inner">
<div class="media">
<picture>
<source srcset="https://www.jitasagroup.com/images/blog/flames_circle_lrg.png, https://www.jitasagroup.com/images/blog/flames_circle_lrg@2x.png 2x" media="(min-width: 850px)" />
<img srcset="https://www.jitasagroup.com/images/blog/flames_circle.png, https://www.jitasagroup.com/images/blog/flames_circle@2x.png 2x" alt="Jitasa Flames" />
</picture>
</div>
<div class="text">
<p>
Learn more about how nonprofits make and allocate money.
</p>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button small"> Talk to a Jitasa accountant </a>
</div>
</div>
</div>
Statement of Functional Expenses: A Complete Nonprofit Guide2023-07-19T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/statement-of-functional-expenses/<p>Accountability is at the core of <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accounting/">nonprofit accounting</a>. While for-profit organizations leverage accounting practices to maximize their profits, nonprofits like yours record and report on their finances to demonstrate that the funds donors and stakeholders contribute are being reinvested into the organization in order to further its mission.</p>
<p>A key component of this accountability-focused approach to accounting is compiling financial statements, which are documents that summarize your nonprofit’s use of funds. In addition to helping you draw actionable conclusions from financial data, these statements are required for your organization to comply with the <a href="https://www.accounting.com/resources/gaap/" target="_blank" rel="noopener noreferrer">Generally Accepted Accounting Principles (GAAP)</a>, as well as state and federal regulations for nonprofits.</p>
<p>The statement of functional expenses is one of the financial statements fundamental to nonprofit accounting. In this guide, we’ll cover the basics of this report, including:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/statement-of-functional-expenses/#what">What is the nonprofit statement of functional expenses?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/statement-of-functional-expenses/#categories">Categories of Functional Expenses for Nonprofits</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/statement-of-functional-expenses/#purpose">Purpose of the Statement of Functional Expenses</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/statement-of-functional-expenses/#template">Nonprofit Statement of Functional Expenses Template</a></li>
</ul>
<p>Let’s get started with an overview of the statement of functional expenses and how it fits into your nonprofit’s financial management practices.</p>
<div class="blog-post-callout">
<div class="inner">
<div class="media">
<picture>
<source srcset="https://www.jitasagroup.com/images/blog/flames_circle_lrg.png, https://www.jitasagroup.com/images/blog/flames_circle_lrg@2x.png 2x" media="(min-width: 850px)" />
<img srcset="https://www.jitasagroup.com/images/blog/flames_circle.png, https://www.jitasagroup.com/images/blog/flames_circle@2x.png 2x" alt="Jitasa Flames" />
</picture>
</div>
<div class="text">
<p>
Contact the experts at Jitasa to compile your nonprofit’s statement of functional expenses.
</p>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button small">Request a Quote</a>
</div>
</div>
</div>
<h2 id="what">What is the nonprofit statement of functional expenses?</h2>
<p><b>The nonprofit statement of functional expenses is a table- or matrix-style report that breaks down your organization’s expenditures into categories based on what purpose the money was used to accomplish.</b> Typically, the three categories of functional expenses are program, administrative, and fundraising expenses (which will be covered in more detail later).</p>
<p>The statement of functional expenses is one of four financial reports that your nonprofit should compile annually. The other three statements are the:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-activities/">Statement of activities</a>, which categorizes your nonprofit’s revenue and expenses to give an overview of your organization’s transactions for a given year.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-financial-position/">Statement of financial position</a>, which provides a snapshot of your nonprofit’s financial health by breaking down your assets and liabilities.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-cash-flows/">Statement of cash flows</a>, which shows how money moves in and out of your organization through operating, investing, and financing activities.</li>
</ul>
<p>While each of these reports has a direct for-profit parallel—the income statement, balance sheet, and cash flow statement respectively—the statement of functional expenses is unique to nonprofits. Some businesses compile a statement of costs of goods sold, which is somewhat similar in purpose to a nonprofit’s functional expense report. However, the for-profit version typically only includes costs related to production, not management or selling.</p>
<p>The statement of functional expenses is a much more comprehensive breakdown of your nonprofit’s expenditures. Here is an example of what the report might look like:</p>
<img src="https://jitasa.imgix.net/blog/statement_of_functional_expenses_example.png?auto=format&w=600" srcset="https://jitasa.imgix.net/blog/statement_of_functional_expenses_example.png?auto=format&w=600&dpr=2&fit=auto 2x" alt="This is an example of a statement of functional expenses with functional costs on the vertical axis and natural costs on the horizontal." width="600" height="636" />
<p>In this sample statement, the columns of the table represent the three categories of <i>functional expenses</i>. The categories represented by the rows are often referred to as <i>natural expenses</i>, which organize expenditures based on the nature of the payment rather than its end goal. Additionally, this is often how transactions are recorded in your accounting system as they occur.</p>
<h2 id="categories">Categories of Functional Expenses for Nonprofits</h2>
<p>If your nonprofit records expenditures based on natural categories, why do you need to report on your functional expenses? There are two main reasons. First, most state and federal documents that your organization has to file to maintain its 501(c)(3) status ask that you categorize expenses by function rather than nature. Second, functional categories promote transparency by showing how much of your funding is spent on mission-related activities and how much is used to run the organization.</p>
<p>With that in mind, here is a breakdown of the three categories of functional expenses:</p>
<img src="https://jitasa.imgix.net/blog/statement_of_functional_expenses_categories.svg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/statement_of_functional_expenses_categories.svg?auto=format&w=700&dpr=2&fit=auto 2x" alt="This graphic differentiates the three categories of functional expenses: program, administrative, and fundraising (detailed below)." width="700" height="500" />
<ul>
<li><b>Program expenses</b> are directly related to your organization’s work to make a difference in your community. The nature of these expenditures varies widely among nonprofits depending on their missions. For example, an animal shelter would include the costs of veterinary care supplies and pet food under its program expenses, while an organization that provided free after-school tutoring would include the cost of books and school supplies for participating students.</li>
<li><b>Administrative expenses</b> are sometimes also called “management and general expenses,” but both terms refer to the costs of operating your nonprofit day to day. Office equipment, rent, utilities, property insurance, and <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-compensation-policy/">staff compensation</a> are a few of the administrative expenses your organization may incur.</li>
<li><b>Fundraising expenses</b> are the costs associated with launching initiatives to generate revenue for your organization. These may involve investing in <a href="https://recharity.ca/top-fundraising-software/" target="_blank" rel="noopener noreferrer">fundraising software solutions</a>, creating <a href="https://doublethedonation.com/nonprofit-marketing/" target="_blank" rel="noopener noreferrer">marketing materials</a>, planning events, and paying fees to fundraising consultants.</li>
</ul>
<p>The term “overhead expenses” is often used in the context of budgeting, which for nonprofits refers to the administrative and fundraising categories of functional expenses combined. You may also have heard of the 65/35 rule, which states that at least 65% of nonprofits’ spending should go toward program expenses and overhead expenses should comprise 35% or less of the total:</p>
<img src="https://jitasa.imgix.net/blog/statement_of_functional_expenses_breakdown.svg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/statement_of_functional_expenses_breakdown.svg?auto=format&w=700&dpr=2&fit=auto 2x" alt="This pie chart demonstrates the 65/35 rule, which states that nonprofits should spend 65% of their funds on programming and 35% on overhead." width="700" height="500" />
<p><b>In reality, this breakdown will look different for every nonprofit.</b> As you review your organization’s statement of functional expenses, don’t worry if it doesn’t exactly follow the 65/35 rule. Instead, focus on finding ways to put more funding toward programming and reducing unnecessary administrative or fundraising costs.</p>
<h2 id="purpose">Purpose of the Statement of Functional Expenses</h2>
<p>Analyzing each nonprofit financial statement provides unique insights into your organization’s financial situation and allows you to make data-driven decisions about how to manage funding. As we alluded to in the previous section, a major area of decision-making that the statement of functional expenses informs is the creation of <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/">your nonprofit’s annual operating budget</a>. By comparing the report with your predictions from the previous year, you can make more accurate projections when allocating expenses for the coming year.</p>
<p>The main practical purpose of the statement of functional expenses is to assist in filing your nonprofit’s annual tax return. Your organization may be required to complete a statement of functional expenses depending on which version of the IRS Form 990 you file:</p>
<ul>
<li><b>The full <a href="https://www.irs.gov/pub/irs-pdf/f990.pdf" target="_blank" rel="noopener noreferrer">Form 990</a></b> includes a statement of functional expenses as one section of the 12-page document. If your nonprofit’s annual gross receipts exceed $200,000 or your total assets are greater than $500,000, filling out this report is essential for your organization to maintain its tax-exempt status.</li>
<li><b>Forms <a href="https://www.irs.gov/charities-non-profits/annual-electronic-filing-requirement-for-small-exempt-organizations-form-990-n-e-postcard" target="_blank" rel="noopener noreferrer">990-N</a>, <a href="https://www.irs.gov/pub/irs-pdf/f990ez.pdf" target="_blank" rel="noopener noreferrer">990-EZ</a>, and <a href="https://www.irs.gov/pub/irs-pdf/f990pf.pdf" target="_blank" rel="noopener noreferrer">990-PF</a></b> (designed for small shops, midsize nonprofits, and private foundations respectively) don’t ask for a full functional expense report. However, the 990-EZ and 990-PF versions require different, abbreviated expenditure reports, and your statement of functional expenses can guide you in completing that section. Additionally, check your state’s requirements to determine if your nonprofit needs to submit any financial statements separately to your state government.</li>
</ul>
<p>In addition to these direct purposes, the indirect benefit that the statement of functional expenses provides is increased transparency with donors and other stakeholders in your organization. Whether the statement automatically becomes publicly available with the rest of your Form 990 or you choose to include it in your <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/how-to-communicate-annual-report-data/">annual report</a>, communicating your functional expenses demonstrates how your organization uses its funding to further its mission. This helps donors trust that you’ll handle their contributions appropriately, encouraging them to continue supporting you.</p>
<div class="blog-callout-full">
<h2>Nonprofit Accounting 101 Course.</h2>
<p>Take a deep dive into some of the basics of nonprofit accounting. Click to access the free course.</p>
<a href="https://www.jitasagroup.com/nonprofit-resources/free-courses/nonprofit-accounting-course/" class="button white">Free Course</a>
</div>
<h2 id="template">Nonprofit Statement of Functional Expenses Template</h2>
<p>Each organization’s statement of functional expenses will look slightly different depending on what natural expenses they incur and how resources are allocated. However, the functional expense categories of program, administrative, and fundraising costs are consistent for all nonprofits.</p>
<p>Here is a basic template to help you get started with compiling your nonprofit’s statement of functional expenses:</p>
<img src="https://jitasa.imgix.net/blog/statement_of_functional_expenses_blank.png?auto=format&w=600" srcset="https://jitasa.imgix.net/blog/statement_of_functional_expenses_blank.png?auto=format&w=600&dpr=2&fit=auto 2x" alt="This is a blank template that your nonprofit can use to begin compiling your statement of functional expenses." width="600" height="636" />
<p>Because the details of this report are highly dependent on your organization’s unique financial situation, pulling it together can be challenging. <b>The best way to ensure your statement of functional expenses meets reporting requirements and accurately represents your nonprofit’s spending is to <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accountant/">work with a nonprofit accountant</a>.</b></p>
<p>An accountant has the expertise to compile your statement of functional expenses, analyze the data it contains, and determine next steps that will allow your organization to manage its finances more effectively. Your organization can save time, energy, and money by outsourcing these tasks to an accounting firm that specializes in working with nonprofits, like <a href="https://www.jitasagroup.com/">Jitasa</a>.</p>
<h2>Wrapping Up</h2>
<p>Your nonprofit’s statement of functional expenses is vital to an effective <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-management/">financial management strategy</a>. While its main purpose is to ensure compliance with federal and state regulations, analyzing it and applying the insights you glean to your expense allocation and budgeting provides even more value for your organization. As you organize your expenditures into the categories of program, administrative, and fundraising spending, don’t hesitate to reach out to a nonprofit accountant who can answer your questions and help you make the most of this report.</p>
<p>If you’d like to learn more about the statement of functional expenses and related nonprofit accounting topics, check out these resources:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-chart-of-accounts/">Establishing a Nonprofit Chart of Accounts [+ Example]</a>. Your statement of functional expenses is based on data stored in your chart of accounts. Learn more about this resource in our complete guide.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/form-990-filing/">Nonprofit Form 990 Filing: An Essential Tax Guide</a>. Dive deeper into the process of filing your nonprofit’s annual federal tax return and how your statement of functional expenses can support your efforts.</li>
<li><a href="https://www.jitasagroup.com/nonprofit-solutions/nonprofit-bookkeeping-accounting-services/">Bookkeeping and Accounting Services Exclusively for Nonprofits</a>. Discover what working with an outsourced accountant looks like and explore Jitasa’s services, which are tailored to nonprofits’ needs.</li>
</ul>
<div class="blog-post-callout">
<div class="inner">
<div class="media">
<picture>
<source srcset="https://www.jitasagroup.com/images/blog/flames_circle_lrg.png, https://www.jitasagroup.com/images/blog/flames_circle_lrg@2x.png 2x" media="(min-width: 850px)" />
<img srcset="https://www.jitasagroup.com/images/blog/flames_circle.png, https://www.jitasagroup.com/images/blog/flames_circle@2x.png 2x" alt="Jitasa Flames" />
</picture>
</div>
<div class="text">
<p>
Work with the accounting experts at Jitasa to compile and analyze your nonprofit statement of functional expenses.
</p>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button small">Request a Quote</a>
</div>
</div>
</div>
Working With a Nonprofit Accountant: What to Expect2023-06-27T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accountant/<p>Your nonprofit was founded to make a positive, lasting impact on your community—not to crunch numbers and file paperwork!</p>
<p>However, financial number crunching and paperwork filing is vital for your nonprofit to fund its mission and grow its impact. Because <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-management/">nonprofit organizations’ finances</a> 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.</p>
<p>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:</p>
<ol>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accountant/#what">What does an accountant do for a nonprofit?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accountant/#how">How is nonprofit accounting different from bookkeeping?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accountant/#when">When should I hire a nonprofit accountant?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accountant/#types">What are the types of nonprofit accounting services?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accountant/#start">How do I get started with a nonprofit accountant?</a></li>
</ol>
<p><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accounting/">Nonprofit accounting</a> 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.</p>
<h2 id="what">1. What does an accountant do for a nonprofit?</h2>
<p><b>Nonprofit accountants help organizations ensure financial health and stability, analyze financial data, and make decisions based on the nonprofit’s unique financial position.</b></p>
<p>Some of a nonprofit accountant’s key responsibilities include:</p>
<img src="https://jitasa.imgix.net/blog/nonprofit_accountant_responsibilities.svg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/nonprofit_accountant_responsibilities.svg?auto=format&w=700&dpr=2&fit=auto 2x" alt="This mind map shows nonprofit accountants’ duties: account review, transactions, statements, audit prep, tax forms, budgets, and compliance." width="700" height="500" />
<ul>
<li><b>Reviewing all of your organization’s accounts.</b> One of a nonprofit accountant’s most essential resources is the <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-chart-of-accounts/">chart of accounts</a>, 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.</li>
<li><b>Balancing transactions.</b> 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.</li>
<li><b>Compiling financial statements.</b> 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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-activities/">income statement</a>, <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-financial-position/">balance sheet</a>, and <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-cash-flows/">cash flow statement</a>, but also review those reports to draw conclusions about your organization’s financial health.</li>
<li><b>Preparing for audits.</b> If your nonprofit conducts <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-audit/">independent financial audits</a>, 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.</li>
<li><b>Filing tax forms.</b> 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.</li>
<li><b>Analyzing operating budgets.</b> 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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/">create new budgets</a> for each fiscal year.</li>
<li><b>Maintaining compliance with GAAP standards.</b> 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 <a href="https://www.accounting.com/resources/gaap/" target="_blank" rel="noopener noreferrer">Generally Accepted Accounting Principles (GAAP)</a>.</li>
</ul>
<p>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.</p>
<a href="https://www.jitasagroup.com/nonprofit-resources/nonprofit-free-downloads/beginners-guide-to-nonprofit-accounting/"><img src="https://jitasa.imgix.net/blog/nonprofit_accountant_skinny_cta.png?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/nonprofit_accountant_skinny_cta.png?auto=format&w=700&dpr=2&fit=auto 2x" alt="Download Jitasa’s free guide to nonprofit accounting to better understand what a nonprofit accountant does." width="700" height="200" /></a>
<h2 id="how">2. How is nonprofit accounting different from bookkeeping?</h2>
<p>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.</p>
<p>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.</p>
<img src="https://jitasa.imgix.net/blog/nonprofit_accountant_comparison.svg?auto=format&w=644" srcset="https://jitasa.imgix.net/blog/nonprofit_accountant_comparison.svg?auto=format&w=644&dpr=2&fit=auto 2x" alt="This chart compares and contrasts nonprofit accountants and bookkeepers, which are discussed in more detail below." width="644" height="250" />
<h3>Nonprofit Bookkeeper</h3>
<p><b>Nonprofit bookkeepers help your organization track and manage its day-to-day financial activities.</b> Their duties often include tasks such as:</p>
<ul>
<li>Entering basic financial data into spreadsheets or bookkeeping software.</li>
<li>Writing checks and depositing funds.</li>
<li>Recording single-entry transactions like bills paid.</li>
<li>Allocating expenses for different programs, fundraisers, and administrative needs.</li>
<li>Processing payroll (if this function doesn’t live with a separate <a href="https://astronsolutions.net/nonprofit-hr/" target="_blank" rel="noopener noreferrer">HR department</a>.)</li>
</ul>
<p>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.</p>
<h3>Nonprofit Accountant</h3>
<p><b>Nonprofit accountants interpret, classify, and summarize financial data.</b> Through this process, they ensure all information is correct, presented effectively, allocated efficiently, categorized logically, and accurately portrays financial expectations.</p>
<p>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.</p>
<p>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.</p>
<h2 id="when">3. When should I hire a nonprofit accountant?</h2>
<p>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!</p>
<p>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:</p>
<img src="https://jitasa.imgix.net/blog/nonprofit_accountant_indicators.svg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/nonprofit_accountant_indicators.svg?auto=format&w=700&dpr=2&fit=auto 2x" alt="This list gives three reasons a nonprofit accountant may be needed: financial transparency, tax returns, and major projects and campaigns." width="700" height="160" />
<ul>
<li><b>Wanting to ensure financial transparency.</b> 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.</li>
<li><b>Filing annual tax returns.</b> <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/form-990-filing/">Completing the IRS Form 990</a> 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.</li>
<li><b>Making decisions about major projects and campaigns.</b> 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 <a href="https://recharity.ca/top-nonprofit-consulting-firms/" target="_blank" rel="noopener noreferrer">fundraising consultant</a>, your nonprofit will know if you have the fundraising and financial capabilities for a major project before putting effort and resources into the campaign.</li>
</ul>
<p>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.</p>
<h2 id="types">4. What are the types of nonprofit accounting services?</h2>
<p>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.</p>
<img src="https://jitasa.imgix.net/blog/nonprofit_accountant_services.svg?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/nonprofit_accountant_services.svg?auto=format&w=700&dpr=2&fit=auto 2x" alt="This chart illustrates the pros and cons of each of the three types of nonprofit accounting services: in-house, in-kind, and outsourced." width="700" height="408" />
<h3>Hiring an Accountant In-House</h3>
<p>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.</p>
<p>If your nonprofit decides to hire an accountant in-house, make sure to:</p>
<ul>
<li><b>Ask about the accountant’s background.</b> Ensure they have experience working with nonprofits of your size and scale, as well as expertise in <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/fund-accounting/">fund accounting</a>.</li>
<li><b>Hire someone reliable.</b> 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.</li>
<li><b>Align passions for your mission.</b> 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.</li>
</ul>
<p>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.</p>
<h3>In-Kind Donations of Accounting Services</h3>
<p>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.</p>
<p>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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/in-kind-donations/">in-kind donations</a> means you don’t need to pay for the services, which can be a big help as nonprofits start figuring out their accounting systems.</p>
<p>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.</p>
<h3>Outsourced Nonprofit Accountants</h3>
<p>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:</p>
<ul>
<li><b>Assured expertise and motivation.</b> 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.</li>
<li><b>Improved internal controls.</b> 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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/risk-management-for-nonprofits/">manage risks</a>.</li>
<li><b>Cost effectiveness.</b> As stated previously, hiring is expensive, not to mention the <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-compensation-policy/">complete compensation plan</a> 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.</li>
<li><b>Consistency in relationships.</b> 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.</li>
</ul>
<p>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.</p>
<h2 id="start">5. How do I get started with a nonprofit accountant?</h2>
<p>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:</p>
<img src="https://jitasa.imgix.net/blog/nonprofit_accountant_checklist.png?auto=format&w=500" srcset="https://jitasa.imgix.net/blog/nonprofit_accountant_checklist.png?auto=format&w=500&dpr=2&fit=auto 2x" alt="This checklist outlines four steps to get started with a nonprofit accountant, which are discussed in the copy below." width="500" height="396" />
<ol>
<li><b>Consider your organization’s needs.</b> 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.</li>
<li><b>Begin your research online.</b> 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.</li>
<li><b>Ask for referrals.</b> 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.</li>
<li><b>Reach out to your top choices.</b> 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.</li>
</ol>
<p>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!</p>
<hr />
<p>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.</p>
<p>For more information on working with a nonprofit accountant, explore these resources:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-bookkeeper-vs-accountant/">Nonprofit Bookkeeper vs. Accountant: Who Should You Hire?</a> Dive deeper into the differences between bookkeeping and accounting, and discover why both are essential for your nonprofit.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/restricted-funds/">Restricted Funds: What Are They? And Why Do They Matter?</a> Learn more about an element of your accountant’s work that is highly specific to nonprofits: restricted funds.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/outsourced-accounting-for-nonprofits-top-firms/">Outsourced Accounting for Nonprofits: Top 10+ Firms.</a> Start your research into outsourced nonprofit accounting services with this comprehensive guide.</li>
</ul>
<div class="blog-post-callout">
<div class="inner">
<div class="media">
<picture>
<source srcset="https://www.jitasagroup.com/images/blog/flames_circle_lrg.png, https://www.jitasagroup.com/images/blog/flames_circle_lrg@2x.png 2x" media="(min-width: 850px)" />
<img srcset="https://www.jitasagroup.com/images/blog/flames_circle.png, https://www.jitasagroup.com/images/blog/flames_circle@2x.png 2x" alt="Jitasa Flames" />
</picture>
</div>
<div class="text">
<p>
Jitasa’s
<b>bookkeeping and accounting</b>
services are affordable and cater to every nonprofit.
</p>
<a href="https://www.jitasagroup.com/nonprofit-solutions/nonprofit-bookkeeping-accounting-services/" class="button small">Learn More</a>
</div>
</div>
</div>
Nonprofit Budgeting: Understand the Basics2023-06-20T15:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/<p>You’ve likely organized a budget for your household before. You’ve averaged your expenses, calculated your income, and determined how much you can save on a monthly or annual basis. Budgeting for nonprofit organizations requires a similar process.</p>
<p>Nonprofit budgets are the backbone of effective <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-management/">financial management strategies</a>, allowing your organization to estimate your various sources of income and plan your expenses in order to create a plan for growth and advancement.</p>
<p>You’ve also probably noticed that even creating your personal budget can be stressful. Nonprofits have many more elements to consider, from multiple sources of income to the combination of overhead and program expenses, making the budgeting process even more overwhelming. That’s why we created this guide—as a helpful resource for nonprofits trying to learn more about budgeting and discover best practices for financial planning.</p>
<p>We’ll cover everything from the basics to professional tips that will help you maximize your nonprofit budget.</p>
<h2>Table of Contents</h2>
<ol>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/#nonprofit-budget">What is a Nonprofit Budget?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/#features-effective-budget">Features of Effective Budgets</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/#budget-components">Budget Components</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/#nonprofit-budget-template">Nonprofit Budget Template</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/#budget-reviews">Budget Reviews</a></li>
</ol>
<p>Budgeting is a key piece of <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/fund-accounting/">nonprofit accounting</a>. While you probably didn’t get into the nonprofit industry to become an expert in accounting, understanding how to manage your money effectively will lead to growth, expansion, and better fulfillment of your mission. Join the other <a href="https://www.jitasagroup.com/clients/success-stories/">nonprofit success stories</a> by implementing the budgeting best practices in this guide. Let's get started.</p>
<div class="blog-callout-full">
<h2>Nonprofit Budgeting Course</h2>
<p>This nonprofit budgeting course is designed to teach nonprofit organizations how to effectively allocate their resources in order to achieve their missions.</p>
<a href="https://www.jitasagroup.com/nonprofit-resources/free-courses/nonprofit-budgeting-course/" class="button white">Free Course</a>
</div>
<h2 id="nonprofit-budget">What is a Nonprofit Budget?</h2>
<p><b>A nonprofit budget is a planning document used to predict expenses and allocate resources for your organization. It details both the costs that your organization will incur as well as the revenue you expect to receive over a set period of time.</b></p>
<div class="text-center"><img src="https://jitasa.imgix.net/blog/nonprofit_budget_definition.jpg" srcset="https://jitasa.imgix.net/blog/nonprofit_budget_definition.jpg, https://jitasa.imgix.net/blog/nonprofit_budget_definition@2x.jpg 2x" alt="A nonprofit budget is a planning document used to predict expenses and allocate resources for your organization." /></div>
<p>Generally, when nonprofit organizations consider their budget, they immediately think of their annual budget plan that they finalize between December of the previous year and January of the current one. While this is the master financial plan that the nonprofit will follow throughout the year, it’s not the only budget that nonprofits need to be aware of. </p>
<p>Nonprofits looking to learn more about creating an accurate and useful budget can always ask questions of their accounting professionals. You can also get an in-depth look at these documents with online resources like <a href="https://jitasauniversity.thinkific.com/courses/nonprofit-budgeting" target="_blank" rel="noopener noreferrer">Jitasa’s nonprofit budgeting course</a>.</p>
<h3>Types of Nonprofit Budgets</h3>
<p>There are a variety of budget types that your nonprofit will use. Of course, you’ll create your annual budget, or <b>operating budget</b>, as all nonprofits should. This is the budget that breaks down your annual projected revenue and expenses for the organization. It categorizes your revenue by different funding sources and your operating expenses by program and overhead costs.</p>
<p>Depending on your organization’s operations and plans, it may also be helpful to create budgets focused on specific aspects of your organization to ensure everything is in order. For example, you might create the following budgets:</p>
<div class="text-center"><img src="https://jitasa.imgix.net/blog/nonprofit_budget_types.png?auto=format" srcset="https://jitasa.imgix.net/blog/nonprofit_budget_types.png?auto=format, https://jitasa.imgix.net/blog/nonprofit_budget_types@2x.png?auto=format 2x" alt="There are four different types of budgets: operating, capital, program, and grant proposal." /></div>
<ul>
<li><b>Capital budget:</b> This budget projects the expenses and revenue associated with multi-year, long-term projects. It tends to cover your nonprofit’s capital campaigns and other major expense campaigns.</li>
<li><b>Program budget:</b> If your organization is launching a new project or program, you may create a separate budget that covers the specific revenue you’ll need and the expenses you expect to incur while launching the program. Be sure to consider both the one-time expenses involved with launching the program as well as those that you’ll need to incorporate into your operating budget from year to year to maintain it.</li>
<li><b>Grant proposal budget:</b> When you <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/grant-management/">apply for a grant</a>, you may need to develop a budget describing how you will use the grant funds to advance your organization’s mission.</li>
</ul>
<p>Throughout the year, you’ll review these budgets regularly to monitor the process of your various projects, your fundraising success, and your general financial standing. This means your budget isn’t something that you create but never look at again. Instead, it’s a living document that should be at the center of your organization’s financial activities.</p>
<h2 id="features-effective-budget">Features of Effective Nonprofit Budgets</h2>
<p>Whether your nonprofit has never had an effective budget in the past or you’re a seasoned veteran trying to perfect your budgeting capabilities, by reviewing your budgets from the last several years, you can make your financial plan more effective. Review the budgets you made during strong economic times as well as those created during the years of the pandemic and resulting economic downturn. What went well? Which opportunities could've been improved upon?</p>
<p>You can also look at past <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-audit/">financial audits</a> at your organization. If any comments or concerns were lifted about your budgeting strategy, you can implement those to create a more effective budget in the future.</p>
<p>Novices at budgeting or new organizations may not have access to these resources. Luckily, in this section, we’ll cover some of the features of effective nonprofit budgets, so that anyone can improve their financial planning. Let’s dive into each of those features.</p>
<h3>Defined Activities</h3>
<p>Your nonprofit’s budget and your strategic plan should go hand-in-hand. Every aspect of your budget should be directly associated with a specific activity that you’re looking to accomplish in the given year.</p>
<p>In addition, each of these activities should have a defined separate budget. When you’ve developed a program budget for each of these activities, you’ll then use that information in your larger operational budget.</p>
<p><b>For example, <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/goal-setting-for-nonprofits/">your nonprofit may set a goal</a> to raise $15,000 to build a computer lab at an inner-city school.</b></p>
<p>You’ll need to put together a budget that plans out all of the necessary expenses to build such a computer lab. For instance, you should estimate the cost it will take to buy the computers, invest in effective wifi, and gather miscellaneous equipment (like insurance) necessary for such an investment. All of these elements will be spelled out in your program or project budget, defining which of these expenses will be one-time costs or recurring expenses over the years.</p>
<p>Then, in your operational budget for the year, you’ll include your $15,000 computer lab program expense. You’ll also need to determine how you’ll raise that funding and what sources of revenue will help you fund the project.</p>
<h3>Specific Time Period</h3>
<p>When your nonprofit <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/3-steps-to-guide-nonprofit-fundraising-efforts/">sets goals for your organization’s strategic or development plan</a>, you make sure that those goals are specific, measurable, attainable, realistic, and time-based (or SMART). The measure we want to emphasize here is the <b>time-based</b> aspect. Your nonprofit should be very mindful of time as you craft your budget.</p>
<p>Nonprofits usually devise an operational budget for a single year. However, it’s important to consider when your organization expects to collect revenue to determine when you want to complete the activities outlined in the document. For example, if you know that #GivingTuesday and year-end giving are major revenue sources for your nonprofit, you may decide to complete a larger project directly after these campaigns.</p>
<p>Another reason time is important? Getting the budget approved and setting check-ins for your team. Before you even start the budgeting process, you should set a day and time when you want your nonprofit board to approve the document. This holds you accountable by providing a due date to complete the plan.</p>
<p>Finally, time is an essential component if you're devising a capital budget. While operational budgets cover the span of a year, your capital budget expands beyond that timeframe. These budgets cover growth initiatives that take several years to complete, such as capital campaigns or building plans.</p>
<h3>Realistic and Measurable Metrics</h3>
<p>The idea of defining realistic and measurable metrics goes along with categorizing the activities in your organization’s budget. Each of your activities should be associated with a specific dollar amount for each expense and revenue source.</p>
<p>This is especially important when your organization develops the revenue portion of your budget. Your nonprofit brings in different amounts from a <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/how-do-nonprofits-make-money/">variety of revenue sources</a>, each of which should be specifically defined in your budget.</p>
<p>For example, if you’re expecting to receive $100,000 from individual fundraising this year, you may determine that $50,000 will come from major donors, $20,000 from peer-to-peer campaigns, $20,000 from your online donation page, and $10,000 from direct mail fundraising.</p>
<p>As you make these determinations, remember that each funding metric should be realistic for your team. Analyze your past fundraising successes to estimate your revenue for upcoming years or initiatives. However, you may also choose a more aspirational goal to push your team to raise more. Just don’t set it too high to make sure you don’t discourage your team. <b>Find a balance between stretching your team’s fundraising abilities and setting realistic goals that you’ll be able to reach.</b></p>
<h2 id="budget-components">Nonprofit Budget Components</h2>
<p>When crafting your personal budget, you likely focus more heavily on your expenses than on your revenue. Most individuals have only a few sources of income, which stay fairly consistent from month to month. However, because nonprofits have <i>many</i> types of revenue, it’s important that their budget focuses equally on both revenue and expenses.</p>
<p>Therefore, your nonprofit’s expected revenue and expenses are the two main components of your organization’s budget. Let’s dive a little deeper into each.</p>
<h3>Expected Revenue</h3>
<p>Your expected revenue should be separated and allocated by each fundraising source. Use past data from your development team to better understand and predict how much you’ll raise from each source. This should include your fundraising revenue, grant funds, <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/in-kind-donations/">in-kind donations</a>, corporate sponsorships, and other income.</p>
<p>There are two methods of forecasting that you can use to predict your nonprofit's future revenue. Each of these forecasting methods creates some flexibility in the budget so that your organization is more likely to be on target throughout the year. These two methods are called the discount method and the cutoff method:</p>
<ul>
<li><b>Discount method</b>: Using this method, your team identifies the dollar amount that you expect to receive from each fundraising source and then multiplies that dollar amount by the fundraising probability percentage. For example, if you’re applying for a $10,000 grant and have a 75% probability of receiving the grant, you’d update the forecasted revenue to $7,500.</li>
<li><b>Cutoff method</b>: Using this method, your team identifies the total amount of predicted fundraising revenue, then multiplies this number by your overall probability estimation. If you had a successful history in fundraising and expected an 80% chance of success in bringing in your predicted $100,000 of revenue, you would forecast $80,0000.</li>
</ul>
<p>Whichever method you choose, know that can be dangerous to predict that you’ll have 100% success with all of your anticipated revenue. <b>It’s better to be cautious when planning ahead so that you’re more certain that you’ll have the funding you need to achieve your goals, no matter what external circumstances occur.</b></p>
<p>A <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accountant/">nonprofit accountant</a> will be able to help walk your team through the decision of which forecasting method is best for your budget. Plus, they’ll be able to work with you to determine the probability rates for your forecasting.</p>
<h3>Nonprofit Expenses</h3>
<p>The second component of an effective nonprofit budget is your expenses. You’ll use this section to determine and predict the costs your nonprofit will incur when funding your various projects, programs, and campaigns.</p>
<p>Expenses are usually broken down into fundraising, administrative, and program categories. The combination of your fundraising and administrative expenses makes up your nonprofit’s overhead. While every nonprofit’s expense budget will look slightly different, the <a href="https://www.bbb.org/globalassets/local-bbbs/dayton-oh-51/charities-and-donors/standards-for-charity-accountability.pdf" target="_blank" rel="noopener noreferrer">Better Business Bureau</a> recommends that organizations don’t spend more than 35% of their funding on their overhead expenses and spend at least 65% on their programs.</p>
<div class="text-center"><img src="https://jitasa.imgix.net/blog/nonprofit_budget_expenses_chart.jpg" srcset="https://jitasa.imgix.net/blog/nonprofit_budget_expenses_chart.jpg, https://jitasa.imgix.net/blog/nonprofit_budget_expenses_chart@2x.jpg 2x" alt="the Better Business Bureau recommends that nonprofits budget no more than 35% of their funding to overhead expenses and spend at least 65% on their programs." /></div>
<p>However, as we mentioned, the exact breakdown will look different for each nonprofit. It’s important to discuss your organization’s unique expenses with an accountant who has experience <a href="https://www.jitasagroup.com/nonprofit-solutions/nonprofit-bookkeeping-accounting-services/">working with nonprofits</a>, as they can help make sure your expenses are in check.</p>
<p>As we mentioned before, your expenses will fall under the following categories:</p>
<ul>
<li><b>Fundraising expenses</b> can be categorized by campaign marketing costs, fundraising event venue or virtual software investments, and fundraising technology costs.</li>
<li><b>Administrative expenses</b> can be broken down into things like <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-compensation-policy/">employee compensation</a>, the investments you make to organize data, the rent for your office space, and the bills you pay for your organization.</li>
<li><b>Program expenses</b> are those that are necessary to conduct your work in the community. For instance, an organization that encourages music education for underprivileged kids might invest in classroom space, instruments, and music books for their program.</li>
</ul>
<p><b>The best way to estimate what your nonprofit’s expenses will be is by examining what you’ve spent in the past and by collecting quotes for new expenses.</b> Consider which of these recurring expenses are fixed and which ones are variable.</p>
<p>Fixed expenses are those that are constant from year to year, like your organization’s office rent. You can count on this to be the same price from year to year due to the contract you have with your management company. Meanwhile, variable expenses are those that change from year to year. For example, your fundraising expenses might vary depending on the campaigns you’re running.</p>
<p>There are many misconceptions about nonprofit expenses. People tend to think that nonprofit employees shouldn’t make great salaries and that overhead is inherently bad. However, this mindset isn’t accurate. The expense portion of your budget should ensure a healthy financial balance for your organization.</p>
<h2 id="nonprofit-budget-template">Nonprofit Budgeting Template + Example</h2>
<p>We recommend reaching out to a trained <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accounting/">nonprofit accountant</a> to craft your budgets from year to year. An accountant will help lead you in the right direction when it comes to discovering opportunities to cut back on various expenses and boost fundraising revenue.</p>
<p>You can take a stab at creating your organization’s own budget with the right templates and resources. Jitasa has put together a free budgeting template that you can use to get started.</p>
<div class="blog-callout-full">
<h2>Download a free nonprofit budgeting template.</h2>
<a href="https://www.jitasagroup.com/nonprofit-resources/nonprofit-free-downloads/nonprofit-budget-template/" class="button white">Get it now!</a>
</div>
<p>After you’ve put together your budget for the year, it will have information about your various revenue streams as well as a categorized view of your expenses. This data may look something like this:</p>
<img src="https://jitasa.imgix.net/blog/nonprofit_budget_example.png?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/nonprofit_budget_example.png?auto=format&w=700&dpr=2&fit=auto 2x" alt="This example nonprofit budget shows how revenue and expenses can be broken down throughout the year." width="700" height="850" />
<p>After you’ve completed your nonprofit budget for the year, you’ll need to send it to your board of directors for approval. Make sure that the person who presents your budget to the board understands the elements of the budget well enough to answer any questions that come up about it.</p>
<h2 id="budget-reviews">Review Your Nonprofit Budget</h2>
<p><a href="https://www.dummies.com/business/nonprofits/how-to-work-with-your-nonprofit-budget/" target="_blank" rel="noopener noreferrer">Dummies.com</a> explains, “A good budget is crumpled, coffee stained, and much scrutinized. A good budget guides and predicts.” This means that your nonprofit should be frequently checking in on your budget to monitor your progress throughout the year. Rather than your budget becoming just another item on your to-do list, it should be a useful document that you reference often and use to make decisions.</p>
<p><b>Hold nonprofit budget check-ins regularly. Many experts recommend that you review your budget annually, quarterly, and monthly to make sure your organization is on track.</b></p>
<ul>
<li>The <b>annual review</b> of your nonprofit budget generally occurs when you’re writing the next year’s budget. You (and your accountant) will review the budgeted finances from the past year and determine where the budget stayed on course and where your finances strayed from the path. You’ll then use this information to inform your predicted revenue and expenses for the next fiscal year.</li>
<li>When your team <b>meets quarterly</b> to review your budget, you should compare your budgeted revenue and expenses for that quarter and compare that information to the actual amounts. You should also review your grant budgets and determine which funds were won, used, left unused, etc. Finally, review the entirety of the budget and look for any discrepancies. It’s better to catch these early and make note of them for future budgets.</li>
<li><b>Monthly budget reviews</b> allow your team to meet together frequently and regularly to look over your finances for the month and determine the budgeted vs. actual expenses and revenue for individual projects. You can also review balance sheets for any discrepancies and look ahead to ensure that future budgetary items appear to be in line.</li>
</ul>
<p>A trained accountant can help you make sure everything is in order during any of these budget reviews. <a href="https://www.jitasagroup.com/about/contact/">Reach out to the accountants at Jitasa</a> to ask about how their trained financial professionals can help your nonprofit review and craft the best budget to help you succeed.</p>
<p>The beauty of your nonprofit budget is that it allows your nonprofit to remain transparent with your team, your board members, and your supporters. Transparency in finances is key for instilling trust and confidence in everyone involved with the organization.</p>
<p>If you’re interested in working with a nonprofit accountant to help your organization ensure transparency and accountability in finances, conduct your research. Here are some additional resources you can explore for more guidance:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accountant/">Working With a Nonprofit Accountant: What to Expect.</a> 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.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/outsourced-accounting-for-nonprofits-top-firms/">Outsourced Accounting for Nonprofits: Top Firms.</a> 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.</li>
<li><a href="https://www.jitasagroup.com/nonprofit-resources/nonprofit-financial-ratios/">Nonprofit Financial Ratios: Definitions & Calculators.</a> 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.</li>
</ul>
<div class="blog-callout-media-object">
<div class="media">
<img src="https://jitasa.imgix.net/blog/callouts/ill_woman_tablet.png?auto=format&w=260" srcset="https://jitasa.imgix.net/blog/callouts/ill_woman_tablet.png?auto=format&w=260, https://jitasa.imgix.net/blog/callouts/ill_woman_tablet.png?auto=format&w=260&dpr=2 2x" alt="Illustration of woman looking at a tablet" width="260" height="137" />
</div>
<div class="text">
<h2>Need help putting together a nonprofit budget for your organization?</h2>
<p>See how <b>Jitasa’s</b> dedicated accountants can help!</p>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button white">Learn more</a>
</div>
</div>Nonprofit Accounting: A Guide to Basics and Best Practices2023-06-05T16:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accounting/<p>When you first started working at your nonprofit, what entranced you? What was the driving force behind your starting work there? Chances are, it wasn’t tedious paperwork, challenging calculations, and compliance regulations. What likely drove you to join was (and continues to be), the nonprofit’s mission.</p>
<p>However, that paperwork, number crunching, and other tedious tasks come with the territory of running an effective nonprofit organization. One such activity that many nonprofit professionals don’t want to deal with is <b>nonprofit accounting</b>.</p>
<p>Luckily, here at <a href="https://www.jitasagroup.com/">Jitasa</a>, we don’t think nonprofit accounting is tedious at all! We’ve loved helping over a thousand organizations organize and maintain their finances. Due to this love of the craft and experience in the field, we decided to put together this guide to help nonprofits like yours better understand their accounting needs.</p>
<p>But first thing’s first, let’s make sure we’re all on the same page about nonprofit accounting:</p>
<h2 class="h3">What is Nonprofit Accounting?</h2>
<p>Nonprofit accounting is the unique process by which nonprofits plan, record, and report upon their finances. While for-profits primarily focus on earning a profit, nonprofits focus more on the <i>accountability</i> aspect of accounting. They follow a specific set of rules and procedures that help them stay accountable to their donors and contributors.</p>
<img src="https://www.jitasagroup.com/images/blog/nonprofit_accounting_definition_new.png" srcset="https://www.jitasagroup.com/images/blog/nonprofit_accounting_definition_new@2x.png 2x" width="500" height="215" alt="Nonprofit accounting is the unique process by which nonprofit’s plan, record, and report upon their finances." loading="lazy" class="img-center img-full" />
<p>In the rest of this article, we’ll cover the basics and best practices that all nonprofit professionals should know about accounting. Understanding the basics will help you better manage and plan your programs in a way that brings the most value from your finances.</p>
<div class="blog-post-callout">
<div class="inner">
<div class="media">
<picture>
<source srcset="https://www.jitasagroup.com/images/blog/flames_circle_lrg.png, https://www.jitasagroup.com/images/blog/flames_circle_lrg@2x.png 2x" media="(min-width: 850px)" />
<img srcset="https://www.jitasagroup.com/images/blog/flames_circle.png, https://www.jitasagroup.com/images/blog/flames_circle@2x.png 2x" alt="Jitasa Flames" width="196" height="196" />
</picture>
</div>
<div class="text">
<p>Jitasa’s nonprofit accounting experts can help your team get your finances in order.</p>
<a href="https://www.jitasagroup.com/nonprofit-solutions/nonprofit-bookkeeping-accounting-services/" class="button small">Learn More</a>
</div>
</div>
</div>
<h2 class="h3">Basics and Best Practices of Nonprofit Accounting:</h2>
<ol>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accounting/#nonprofit-accounting">How Nonprofit Accounting is Different</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accounting/#statements-reports">Nonprofit Accounting Statements and Reports</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accounting/#best-practices">Best Practices for Nonprofit Accounting</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accounting/#hire-oursource">To Hire or Outsource for Nonprofit Accounting</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accounting/#accounting-firm">Our Nonprofit Accounting Recommendations</a></li>
</ol>
<p id="nonprofit-accounting">Ready to learn more about your nonprofit’s finances? Let’s get started.</p>
<h2>1. How Nonprofit Accounting is Different</h2>
<p>As we mentioned before, nonprofit accounting focuses on the <i>accountability</i> aspect of finances. Your nonprofit’s donors have the right to set restrictions on the donations they contribute to your organization and grant funders want to make sure their funds are spent on the agreed-upon programs. These restrictions mean that you have to ensure their funds are spent in a way that the supporters approve of. That’s why nonprofits employ a type of accounting known as <b>fund accounting</b>.</p>
<p><b>Fund accounting enables nonprofits to allocate their money into different groups or “funds” in order to keep them organized and only spend funds on what they’re designated for.</b></p>
<p>Nonprofits will commonly separate their money into groups such as:</p>
<ul>
<li><b>Restricted funds</b>. These are the funds that must be spent on certain projects and activities at your organization.</li>
<li><b>Temporarily restricted funds</b>. These funds should be spent on certain projects and activities at your nonprofit until a certain time period. After that time, they become unrestricted funds.</li>
<li><b>Unrestricted funds</b>. This is also known as your annual fund. It can be spent on whatever aspects of your organization require the greatest need.</li>
</ul>
<p>Another aspect of nonprofit accounting that helps organizations stay <i>accountable</i> to their finances is the nondistribution constraint. This is a vital aspect of accounting that helps define nonprofits. Unlike for-profits, nonprofits are required not to distribute their net earnings to the leaders at the organization.</p>
<p id="statements-reports">For example, if The Good Dog Animal Shelter found an extra $10,000 in their budget, they wouldn’t be able to distribute these funds to the executives and board members. That additional funding needs to be reinvested in the mission.</p>
<h2>2. Nonprofit Accounting Statements and Reports</h2>
<p>Nonprofit accounting isn’t a free-for-all. Nonprofit accounting professionals must adhere to specific guidelines when they create reports. The primary guidelines your organization should know about are the GAAP standards.</p>
<p><b>GAAP</b> stands for Generally Accepted Accounting Principles. These are (as the name states) general principles accepted by accountants in all sectors. These guidelines are set by an organization called the Financial Accounting Standards Board (FASB).</p>
<p>In accordance with these standards, there are several types of documentation that your organization should be aware of. We’ll walk through the various types of documents that your finance department will likely be working with most frequently.</p>
<h3>Nonprofit Budget</h3>
<p>Your nonprofit’s budget is the document that individuals at your organization are more likely to be familiar with. This document is created by your leadership or finance team using information from your development team and historic spending habits from your organization.</p>
<p>Your <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/">nonprofit budget</a> is the planning document used to predict expenses and allocate resources for your organization. It details both the costs that your organization will incur as well as the revenue you expect to receive over a set period of time, usually a year.</p>
<p>When you analyze each aspect of your budget, you’ll need to understand how they’re figured and calculated:</p>
<ul>
<li><b>Expected revenue</b>. Your expected revenue can be calculated using historical figures and two different calculations: the cutoff method and the discount method.
<ul>
<li>The cutoff method requires you to take each separate revenue stream and multiply it by the probability that you’ll receive the funding. For instance, if you have an 80% chance of receiving a certain grant, you’d multiply the grant funding by 0.8.</li>
<li>Meanwhile, the discount method requires you to take the entire expected revenue, but factor it by the probability of receiving the revenue. For instance, if you expect to receive a total of $500,000 in revenue, but believe you have a 75% chance of achieving that revenue amount, you’d enter $375,000 in your budget.</li>
</ul>
</li>
<li><b>Expense budget</b>. Your expense budget will divvy up the expenditures for your organization into different categories (and further if you so decide). These categories will include but are not limited to fundraising expenses, administrative expenses, and program expenses.</li>
</ul>
<p>The finished budget will look something like the one below:</p>
<img src="https://www.jitasagroup.com/images/blog/nonprofit_accounting_sample_budget.png" srcset="https://www.jitasagroup.com/images/blog/nonprofit_accounting_sample_budget@2x.png 2x" width="600" height="700" alt="One of the most notable parts of nonprofit accounting is the formation of your budget." class="img-center img-full" loading="lazy" />
<h3>Statement of Financial Position</h3>
<p>Your nonprofit’s balance sheet is also known as the statement of financial position. This is the document that most represents the financial health of your nonprofit.</p>
<p>This document is where you can find the lists of assets and liabilities for your nonprofit. When you boil it down, the statement of financial position in nonprofit accounting can be summarized by one simple equation:</p>
<img src="https://www.jitasagroup.com/images/blog/nonprofit_accounting_net_assets_calculation.png" srcset="https://www.jitasagroup.com/images/blog/nonprofit_accounting_net_assets_calculation@2x.png 2x" width="500" height="140" alt="In nonprofit accounting, one of the calculations you’ll need to remember is that net assets equals assets minus liabilities." class="img-center img-full" loading="lazy" />
<p>Net Assets = Assets - Liabilities</p>
<p>By understanding how these variables work together, you’ll be able to better understand the general financial health of your organization using this valuable document. Positive net assets indicate healthier financials at your organization while negative net assets mean that you probably have some reprioritizing to do. We’ve created an example of what this report might look like for nonprofit organizations:</p>
<img src="https://www.jitasagroup.com/images/blog/nonprofit_accounting_sample_statement_of_financial_position.png" srcset="https://www.jitasagroup.com/images/blog/nonprofit_accounting_sample_statement_of_financial_position@2x.png 2x" width="600" height="700" alt="This sample statement of financial position shows a nonprofit with total liabilities and net assets of $277,000." class="img-center img-full" loading="lazy" />
<h3>Statement of Activities</h3>
<p>Your nonprofit’s statement of activities is also known as your income statement. This report shows the revenue and expenses over time at your organization. It’s used to categorize your different revenue sources and expenses. Plus, you can use this document to review your change in net assets from the beginning of the year to the end of the year.</p>
<p>For example, if you have $50,000 of restricted assets set aside for your scholarship program, then decide to provide a $5,000 scholarship, you’re not losing those funds. Rather, you’re using them for their intended purpose. This expenditure will be reflected on your statement of activities.</p>
<p>The example below provides an example of what a statement of activities could look like for your nonprofit:</p>
<img src="https://jitasa.imgix.net/blog/nonprofit_financial_management_statement_of_activities.png?auto=format&w=600" width="600" height="700" class="img-full img-center" alt="Statement of Activities example" />
<h3>Statement of Functional Expense</h3>
<p>Your nonprofit’s statement of functional expense breaks down your expenditures into various common categories, providing a “function” for each expense. This categorization will separate expenses into one of three operational functions: program expenses, administrative expenses, or fundraising activity expenses.</p>
<p>Providing detailed information on your statement of functional expenses also helps when it’s time to complete your annual Form 990 which requires expenses to be separated in a similar fashion.</p>
<p>Since 2017, you’re also required to disclose the “nature” of the activities your nonprofit lists on this report. For example, what percentage of your postage needs are for marketing materials and direct mail fundraising versus administrative duties like paying bills.</p>
<p>Here’s an example of what your statement of financial expenses might look similar to:</p>
<img src="https://www.jitasagroup.com/images/blog/nonprofit_accounting_sample_statement_of_functional_expense.png" srcset="https://www.jitasagroup.com/images/blog/nonprofit_accounting_sample_statement_of_functional_expense@2x.png 2x" width="600" height="700" alt="In this nonprofit accounting report of functional expenses shows that an organization has a total of $237,500 in expenses." class="img-center img-full" loading="lazy" />
<h3>Statement of Cash Flow</h3>
<p>Your nonprofit’s statement of cash flow shows how funding and cash moves in and out of the organization. It allows you to gauge how much is available to pay your expenses at any given time.</p>
<p>This nonprofit accounting statement breaks down the operating, financing, and investing activities to show how cash moves at the organization. You can easily see how your nonprofit uses the funding it receives from fundraising, grant seeking, and other revenue streams by analyzing this statement.</p>
<p>For an example of a statement of cash flow, check out the image below:</p>
<img src="https://www.jitasagroup.com/images/blog/nonprofit_accounting_sample_cash_flow.png" srcset="https://www.jitasagroup.com/images/blog/nonprofit_accounting_sample_cash_flow@2x.png 2x" width="600" height="700" alt="This nonprofit accounting report of cash flows shows that the organization will have a total of $10,500 at the end of the year." class="img-center img-full" loading="lazy" />
<h3>Form 990</h3>
<p>Filing the annual Form 990 is a key aspect of nonprofit accounting, and one that can’t be overlooked. Form 990 is the annual tax form that tax-exempt (e.g. 501(c)3) organizations are required to file each year to remain compliant with the regulations and requirements set by the IRS.</p>
<p>In this document, you’ll record your nonprofit’s revenue and expenses from the year, to demonstrate how finances have been utilized. Essentially, the Form 990 is the IRS’s method of evaluation to make sure your nonprofit is financially honest and legitimate.</p>
<p>For a comprehensive overview of tax regulations for nonprofits, check out <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/form-990-filing/">our comprehensive guide on Form 990 Filing</a>. An example of this necessary nonprofit accounting document can be found below:</p>
<img src="https://www.jitasagroup.com/images/blog/nonprofit_accounting_sample_form_990.png" srcset="https://www.jitasagroup.com/images/blog/nonprofit_accounting_sample_form_990@2x.png 2x" width="600" height="400" alt="Your nonprofit accounting team will need to file an annual Form 990 to the IRS." class="img-center img-full" loading="lazy" />
<p>Nonprofit accounting may seem overwhelming at times. But, when you grasp how to read various accounting documents, it becomes much easier to understand how finances function and move at your organization.</p>
<p id="best-practices">However, nonprofit accounting isn’t just about pulling important information. You also need to understand how to use this information to implement best practices for effective accounting decisions.</p>
<div class="blog-callout-full">
<h2>The Beginner’s Guide to Nonprofit Accounting</h2>
<p>This nonprofit accounting guide is great for anyone wanting to learn the foundation of nonprofit accounting.</p>
<a href="https://www.jitasagroup.com/nonprofit-resources/nonprofit-free-downloads/beginners-guide-to-nonprofit-accounting/" class="button white">Free Download</a>
</div>
<h2>3. Best Practices for Nonprofit Accounting</h2>
<p>While your <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-bookkeeper-vs-accountant/">nonprofit bookkeeper</a> records day-to-day financial information for your organization, your nonprofit accountant is responsible for reviewing bookkeeping entries, performing account and balance sheet reconciliations, preparing financial statements and reports, and reviewing the financials with you prior to closing the monthly period, so you can make the best financial decisions in managing your nonprofit.</p>
<p>In order to make the best financial decisions, nonprofit professionals should understand some accounting best practices. In this section, we’ll cover some best practices that nonprofit accountants can use to better handle their finances.</p>
<h3>Don’t overthink overhead expenses.</h3>
<p>Public viewpoints on overhead expenses hurt the nonprofit industry a great deal. Overhead includes those expenses that nonprofits use to cover administrative costs, market their mission for fundraising, and pay for other internal expenses that help the organization grow. Essentially, overhead expenses are those that nonprofits use to pay for anything that isn’t a program directly related to the organization’s mission.</p>
<p>Because nonprofits operate the same as a for-profit business, overhead is necessary for any nonprofit organization to function. For example, you have to pay people to run the nonprofit, dedicate an office space to get work done, and invest in a website to reach the public.</p>
<p>Some donors choose to judge nonprofits based solely on their overhead expenses. However, <a href="https://www.councilofnonprofits.org/tools-resources/misunderstanding-overhead" target="_blank" rel="noopener noreferrer">this narrative is changing</a> in the sector as more people become aware that overhead is a necessary expense for growth. Encourage your donors to judge your organization based on your impact in the community rather than how much you spend on fundraising and administrative expenses.</p>
<p>While some nonprofits unfortunately are scams, the majority are trying to do real work to make a positive impact in the world. To qualify as a “nonprofit,” organizations must meet certain IRS requirements. If they fail to maintain a certain percentage of revenue spent on programs, they lose their nonprofit status, meaning that the majority of organizations are truly working to make a difference. If a donor has reservations about the nonprofit they’re donating to, they should speak with the organization directly about their financials. Encourage your supporters to come to you with any questions they may have!</p>
<h3>Reference your budget frequently.</h3>
<p>While your board members (who should be totally independently of your organization, meaning they, or their family members, should not be employed by the nonprofit) are involved in the annual budget approval process, this shouldn’t be the only time during the year that you take a deep dive into your budget.</p>
<p><b>You should check in with your budget monthly, comparing and evaluating your budgeted revenue and expenses against your actual revenue and expenses. This will ensure that your organization is staying on track to achieve your goals.</b></p>
<p>In addition, checking in on the budget one or more times each month will allow you to adapt to change. For instance, if programs or projects are discontinued, funding falls through, or your funding increases, you can address the issues and adapt your strategy right away. It’s important to review and adjust the spending budget for the remainder of the year to cut back expenses if necessary, or to further fund your mission if you receive unexpected funding.</p>
<h3>Establish concrete internal controls.</h3>
<p>Internal controls not only limit cases of fraud, but often aid in catching errors. Even if your nonprofit consists of only two employees, there should still be a “checks and balances” system in place. No matter how big or small nonprofits are, internal controls are essential for effective nonprofit accounting.</p>
<p>Small nonprofits especially struggle with implementing internal controls, but there are some specific guidelines you can follow such as:</p>
<ul>
<li><b>Share financial duties</b>. For instance, if your bookkeeper records all incoming revenue for your organization, someone else should be the one to approve write-offs. This creates a system of checks and balances between roles at the organization.</li>
<li><b>Instill security policies</b>. Nonprofit cybersecurity can easily become a major risk to organizations, especially when you handle sensitive transactional information. Implement specific policies at your organization for the handling of this data.</li>
<li><b>Take inventory of fixed assets</b>. Some items are easily taken home from the office and forgotten about. Take regular inventory of the computers, cell phones, and other items that you allow your organization’s staff members to work with.</li>
</ul>
<p>Internal controls don’t mean that you don’t trust your organization’s staff members. It really helps to catch any mistakes and prevent inadvertent wrongdoing.</p>
<h3>Conduct regular audits.</h3>
<p>Not only is a financial audit NOT a bad thing, it can actually be a <i>very good</i> thing. A <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-audit/">nonprofit audit</a> is meant to ensure the accuracy of the organization’s financials, as well as the financial health of the organization. In addition, when audit results are published for the public, the results aid in financial transparency with your current and future donors.</p>
<p>In addition, audits provide insight into the various opportunities that your organization has for financial stability and recording improvements. By addressing these opportunities for improvement now, you’ll help keep financial data secure and well-reported in the future.</p>
<h3>Use specialized software.</h3>
<p>Nonprofit accounting isn’t like all other accounting. Equipping yourself with the best software and people can make a world of difference for your organization. When you set up your software to record and safeguard your financial information, be sure you choose a solution that has specific configurations for nonprofit accounting, such as <a href="https://quickbooks.intuit.com/industry/non-profits/" target="_blank" rel="noopener noreferrer">Quickbooks</a>.</p>
<p id="hire-oursource">If you choose to outsource your accounting needs, be careful to choose experts or accounting firms that specialize in nonprofit bookkeeping and accounting, which can streamline your processes and make your life easier both now and in the future. The right nonprofit accounting experts ensure your knowledge of and compliance with nonprofit tax and accounting regulations is up to par, preventing costly mistakes from ever happening. Choose experts, and watch your nonprofit flourish.</p>
<h2>4. To Hire or Outsource for Nonprofit Accounting</h2>
<p>Does your nonprofit have a dedicated team member with both the skillset and capacity to handle your accounting needs? Many small to midsize organizations struggle to find someone to fill this role. Actually, <a href="https://www.statista.com/statistics/502411/us-nonprofit-organizations-biggest-challenges-for-fundraising/" target="_blank" rel="noopener noreferrer">18% of nonprofits</a> listed limited staff as their greatest challenge in 2019. This means that finding someone to take on these responsibilities (especially as you grow) can be immensely challenging.</p>
<p>Luckily, there are options that nonprofits can take into consideration when they’re looking for someone to fill the role of the nonprofit accounting professional. Consider the following:</p>
<img src="https://www.jitasagroup.com/images/blog/nonprofit_accounting_responsibilities_options.png" srcset="https://www.jitasagroup.com/images/blog/nonprofit_accounting_responsibilities_options@2x.png 2x" width="700" height="210" alt="The nonprofit accounting responsibilities could lie with your executive, a new accountant hire, or an outsourced firm." class="img-center img-full" loading="lazy" />
<ul>
<li><b>Roll the responsibilities up under an executive</b>. Many brand-new organizations take this approach and simply allow their executive director to take on all financial responsibilities for the organization. However, the problem occurs when it’s time for the organization to grow. Not only will the accounting needs become more complex, but your executives will have other responsibilities and priorities on their minds.</li>
<li><b>Hire a full-time accountant to join the team</b>. Hiring a dedicated team member is definitely an option, and one that many large organizations have taken advantage of. However, for small nonprofits with limited resources, hiring additional staff members is an expense that needs to be carefully considered. Often, it’s not quite time to hire just yet.</li>
<li><b>Outsource your accounting needs to an expert firm</b>. The majority of nonprofits fall into the category of organizations who would benefit from outsourcing their accounting needs. These firms offer experts who have seen all sorts of nonprofit accounting needs and addressed them accordingly. Plus, they tend to be more affordable than hiring a new team member for your nonprofit accounting needs.</li>
</ul>
<p>Our professional opinion is that the majority of nonprofits will benefit from outsourcing their bookkeeping and accounting needs, working directly with nonprofit accounting experts. It’s an affordable option that can provide access to deep nonprofit accounting experience and expertise.</p>
<p id="accounting-firm">If outsourcing your accounting needs sounds like a tempting option for your organization, be sure to look for a firm that works specifically with nonprofits. That way you can rest assured that they’ll be well-versed in fund accounting and able to answer nonprofit-specific questions.</p>
<h2>5. Our Nonprofit Accounting Firm Recommendation</h2>
<p><a href="https://www.jitasagroup.com/nonprofit-solutions/nonprofit-bookkeeping-accounting-services/">Jitasa’s accounting services</a> are designed specifically for nonprofits. When you outsource your finances to us, you’ll have access to professionals who are not only experts in finance, but also understand the intricacies of the nonprofit world.</p>
<p>All Jitasa clients receive numerous benefits from our services, including:</p>
<ul>
<li><b>Access to experts</b>. No matter what the situation is, our nonprofit accounting experts can, and <i>want</i> to help. Not only that, but it’s probably not the first time we’ve run into whatever issue you’re experiencing. Our experience in the field means that we have tried-and-true solutions to the common issues that nonprofits face.</li>
<li><b>Enhanced internal controls</b>. Your data security is our number one priority. We’ll work with you to establish policies that secure data at your organization. Plus, we have our own policies, procedures, and systems that are designed to keep your financial information safe.</li>
<li><b>Access to Quickbooks</b>. Fund accounting requires specific software to make sure everything is organized and easy to work with. That’s why we’ll get your nonprofit set up with Quickbooks Online’s fund accounting solution in order to store and report on all of your nonprofit accounting information.</li>
</ul>
<p>As we said before, here at Jitasa, <i>we love accounting!</i> But we also love making a difference and driving good in the world. By working with nonprofit organizations, we get to do both. We’ll handle the finances so that you can focus on driving your mission and making an impact!</p>
<div class="text-center mb-0">
<a href="https://www.jitasagroup.com/nonprofit-solutions/nonprofit-bookkeeping-accounting-services/" class="button">Learn more about Jitasa</a>
</div>
<hr />
<p>Nonprofit accounting is a unique field of finance. Understanding the key aspects of accounting will help your nonprofit better recognize the financial situation of your own organization.</p>
<p>If your accounting responsibilities still roll up under your executives, consider outsourcing your accounting to the experts at a firm. They’ll help make sure all best practices and internal controls are implemented, ensuring smarter finances.</p>
<p>If you’re looking for more information about nonprofit finances, we recommend diving deeper with the following resources:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accountant/">Working With a Nonprofit Accountant: What to Expect</a>. Understanding how accounting works is only the first step to ensuring a positive relationship with your accountant. Learn more about what to expect with this comprehensive article.</li>
<li><a href="https://www.jitasagroup.com/nonprofit-solutions/nonprofit-bookkeeping-accounting-services/">Bookkeeping and Accounting Services for Nonprofits</a>. Learn more about what Jitasa can do for you when you choose to outsource your nonprofit accounting needs.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/outsourced-accounting-for-nonprofits-top-firms/">Top 10+ Outsourced Nonprofit Accounting Firms</a>. Check out these favorite nonprofit accounting providers to see which firm would be the best match for your nonprofit (and keep an eye out for Jitasa at #1!).</li>
</ul>
<div class="blog-callout-full">
<h2>Nonprofit Accounting 101 Course</h2>
<p>Take a deep dive into some of the basics of nonprofit accounting.</p>
<a href="https://www.jitasagroup.com/nonprofit-resources/free-courses/nonprofit-accounting-course/" class="button white">Free Course</a>
</div>4 Budget-Friendly Ways to Thank Your Nonprofit’s Donors2023-05-16T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/4-budget-friendly-ways-to-thank-your-nonprofit-donors/<p>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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/">budget</a>. Any efforts you can make to lessen the burden of these expenses can be a big help.</p>
<p>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 <a href="https://ecardwidget.com/donor-retention/" target="_blank" rel="noopener noreferrer">retaining donors</a>, but it doesn’t have to be expensive. These low-cost ways to thank donors can make your recognition strategy more sustainable:</p>
<ol>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/4-budget-friendly-ways-to-thank-your-nonprofit-donors/#emails">Personalized emails</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/4-budget-friendly-ways-to-thank-your-nonprofit-donors/#ecards">Appreciation eCards</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/4-budget-friendly-ways-to-thank-your-nonprofit-donors/#recognition">Public recognition</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/4-budget-friendly-ways-to-thank-your-nonprofit-donors/#annual">Lists in your annual report</a></li>
</ol>
<p>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.</p>
<h2 id="emails">1. Personalized emails</h2>
<p>Sending <a href="https://ecardwidget.com/donor-thank-you-email/" target="_blank" rel="noopener noreferrer">thank-you emails</a> is one of the most inexpensive and straightforward ways to show donors your appreciation.</p>
<p>To ensure you’re making the most of these emails, use <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/donor-analytics/">nonprofit analytics</a> 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.</p>
<p>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.</p>
<p>Use these additional tips to personalize your thank-you emails even more:</p>
<ul>
<li>Address donors by their preferred name in subject lines and the body of emails.</li>
<li>Mention their specific donation amount, which campaigns they supported, and other relevant factors like <a href="https://nxunite.com/matching-gifts/" target="_blank">if the gift was matched by an employer</a>.</li>
<li>Thank donors for any recent involvement, such as event attendance or volunteering.</li>
</ul>
<p>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.</p>
<h2 id="ecards">2. Appreciation eCards</h2>
<p>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.</p>
<p>Your nonprofit can easily create your own branded eCard designs and send them directly to donors to show your appreciation. <a href="https://nxunite.com/matching-gifts/" target="_blank" rel="noopener noreferrer">eCardWidget’s guide to eCards for nonprofits</a> emphasizes these key benefits of using eCards to thank donors:</p>
<ul>
<li><b>Low cost:</b> 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.</li>
<li><b>Convenience:</b> 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.</li>
<li><b>Customization options:</b> 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.</li>
<li><b>Environmentally conscious:</b> Switching from paper to digital thank-you cards cuts down on paper and plastic waste, reducing your nonprofit’s environmental footprint.</li>
</ul>
<p>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.</p>
<h2 id="recognition">3. Public recognition</h2>
<p>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!</p>
<p>Take the following opportunities to publicly thank donors in addition to thanking them via email or eCards:</p>
<ul>
<li><b>Shout out individual donors on social media or in your newsletter.</b> 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.</li>
<li><b>Recognize donors at events.</b> <a href="https://kwala.co/donor-communications/" target="_blank" rel="noopener noreferrer">Kwala’s donor communications guide</a> 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.</li>
<li><b>Create a virtual donor recognition wall on your website.</b> 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.</li>
</ul>
<p>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.</p>
<h2 id="annual">4. Lists in your annual report</h2>
<p><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/how-to-communicate-annual-report-data/">Annual reports</a> 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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/form-990-filing/">Form 990</a>, it is a good practice that promotes financial transparency and cultivates donors’ trust.</p>
<p>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.</p>
<p>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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/in-kind-donations/">in-kind donors</a>, 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.</p>
<p>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.</p>
<hr />
<p>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.</p>5 Pitfalls Between Fundraising & Accounting in Nonprofits2023-03-21T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/bridging-the-development-and-accounting-office-gap-for-nonprofits/<p>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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-management/">managing and tracking the use of those funds</a>.</p>
<p>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.</p>
<h2>5 Common Pitfalls to Be Aware Of</h2>
<p><b>Here are 5 common conflicts between fundraising and accounting that nonprofits may encounter <a href="https://capitalcampaignpro.com/capital-campaigns-ultimate-guide/" target="_blank" rel="noopener noreferrer">during major campaigns</a> (or even just amid day-to-day operations):</b></p>
<h3>1. Timelines</h3>
<p>Fundraising and accounting inherently work on different timelines.</p>
<p>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.</p>
<h3>2. Priorities</h3>
<p>Fundraising and accounting have different priorities. Fundraising focuses on generating revenue and support for the organization, while accounting prioritizes financial reporting, compliance, and <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/risk-management-for-nonprofits/">risk management</a>.</p>
<p>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.</p>
<h3>3. Communication</h3>
<p>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.</p>
<h3>4. Metrics</h3>
<p>Fundraising and accounting use different <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/donor-analytics/">metrics</a> 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.</p>
<p>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.</p>
<p>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 <a href="https://capitalcampaignpro.com/capital-campaign-gift-range-chart/" target="_blank" rel="noopener noreferrer">the campaign’s gift range chart</a>. 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.</p>
<h3>5. Control</h3>
<p>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.</p>
<p>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.</p>
<h2>How to Get Development and Accounting to Work Together</h2>
<p><b>To overcome and prevent these conflicts, nonprofits must prioritize collaboration and communication between the fundraising and accounting teams.</b></p>
<p>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—<a href="https://capitalcampaignpro.com/capital-campaign-capacity-building/" target="_blank" rel="noopener noreferrer">growing your nonprofit’s capacity</a> and impact by operating efficiently, forging new connections, and responsibly stewarding the gifts you receive.</p>
<p>Nonprofits should also invest in technology and systems that can help streamline fundraising and accounting activities and <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-guide-to-data-hygiene-and-data-management/">improve data hygiene</a>, thereby reducing the risk of errors and improving communication between departments.</p>
<p>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.</p>
<h2>Collaboration and Communication are Key</h2>
<p>Conflicts between fundraising and accounting will always create challenges for nonprofits, but by prioritizing collaboration and communication, nonprofits can <a href="https://capitalcampaignpro.com/podcast-kent-stroman-on-getting-cfo-and-dd-to-cooperate/" target="_blank" rel="noopener noreferrer">overcome these challenges</a> and ensure that both functions work together to achieve the organization’s mission.</p>
<p>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.</p>
<hr />
<h2>Board Member’s Guide to Capital Campaign Fundraising</h2>
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. <a href="https://capitalcampaignpro.com/board-members-guide/" target="_blank" rel="noopener noreferrer">Download this free guide today!</a>
<hr />
<p>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.</p>
10 Tips To Create a Profitable Nonprofit Fundraiser2023-03-20T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/tips-for-managing-your-sorority-or-fraternity-finances/<p>One of the most important, yet challenging aspects of sorority and fraternity management is maintaining your chapter’s <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-management/">financial wellness</a>. 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.</p>
<p>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 <a href="https://blog.omegafi.com/fraternity-sorority-management-the-essential-guide" target="_blank" rel="noopener noreferrer">chapter’s leadership team</a> can eliminate the guesswork from financial planning and management. Let’s explore some tips to help you improve your money management habits.</p>
<h2>1. Create a comprehensive budget</h2>
<p>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.</p>
<p>Consider including the following items in your sorority or fraternity’s budget:</p>
<ul>
<li>Professional development initiatives (including networking events, career fairs, and conferences)</li>
<li>Social program expenses</li>
<li>Dues revenue</li>
<li>Membership management software license cost</li>
<li>Monthly payments, such as rent and utilities</li>
<li><a href="https://blog.omegafi.com/fraternity-and-sorority-recruitment" target="_blank" rel="noopener noreferrer">Recruitment expenses</a></li>
</ul>
<p>While you should aim to be as accurate as possible while <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/">creating your budget</a>, 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.</p>
<h2>2. Understand your chapter’s tax status</h2>
<p>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. <a href="https://www.irs.gov/charities-non-profits/other-non-profits/social-clubs" target="_blank" rel="noopener noreferrer">According to the IRS</a>, your chapter qualifies if it:</p>
<ul>
<li>Is supported by membership fees, dues, and assessments</li>
<li>Provides an opportunity for members to socialize</li>
<li>Has selective membership</li>
<li>Doesn’t allow leadership to take the chapter’s financial assets for themselves</li>
<li>Receives less than 35% of its funds from nonmember sources</li>
<li>Doesn’t discriminate against any person on the basis of race, color, or religion</li>
</ul>
<p>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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/form-990-filing/">Form 990</a> 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 <a href="https://doublethedonation.com/nonprofit-basics-nonprofit-accounting/" target="_blank" rel="noopener noreferrer">nonprofit accounting expert</a> for professional guidance.</p>
<h2>3. Collect dues regularly and promptly</h2>
<p>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.</p>
<p>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.</p>
<p>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:</p>
<ul>
<li>Dues payment deadline and frequency</li>
<li>Dues amount</li>
<li>How to pay dues</li>
<li>Penalties for late payments</li>
</ul>
<p>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.</p>
<p>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.</p>
<h2>4. Practice exceptional data hygiene</h2>
<p>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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-guide-to-data-hygiene-and-data-management/">practicing data hygiene</a> should be one of your top priorities.</p>
<p>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, <a href="https://blog.omegafi.com/fraternity-and-sorority-management-software" target="_blank" rel="noopener noreferrer">OmegaFi states</a> that membership management software will allow you to accomplish the following:</p>
<ul>
<li>Delete duplicate member records</li>
<li>Pinpoint outdated contact information so you can append it</li>
<li>Instantly update financial records when members submit payments</li>
</ul>
<p>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.</p>
<h2>5. Create a financial board on your leadership team</h2>
<p>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:</p>
<ul>
<li>Reliable</li>
<li>Trustworthy</li>
<li>Communicative</li>
<li>Financially responsible</li>
<li>Knowledgeable about money management (whether through job experience or their studies)</li>
<li>Able to devote time to board activities</li>
<li>Invested in the chapter’s success</li>
</ul>
<p>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.</p>
<p>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.</p>
<h2>Wrapping Up</h2>
<p>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, <a href="https://npoinfo.com/nonprofit-data-hygiene/" target="_blank" rel="noopener noreferrer">according to NPOInfo</a>, 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.</p>
How to Communicate Nonprofit Annual Report Data2023-03-01T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/how-to-communicate-annual-report-data/<p>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, <a href="https://yearly.report/how-to-write-an-annual-report-for-a-nonprofit/" target="_blank" rel="noopener noreferrer">their annual report</a>.</p>
<h2>What is a nonprofit annual report?</h2>
<p>A <a href="https://yearly.report/getting-back-to-basics-what-is-an-annual-report-and-why-is-it-important/" target="_blank" rel="noopener noreferrer">nonprofit annual report</a> 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.</p>
<p>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.</p>
<p>Mainly, annual reports serve to:</p>
<ul>
<li>Create trust and transparency with their communities</li>
<li>Inspire action (donations, volunteerism, etc.)</li>
<li>Celebrate accomplishments and progress</li>
<li>Express gratitude</li>
<li>Set goals for the upcoming year</li>
</ul>
<p>In essence, an annual report takes otherwise bland data—like revenue and expense—and creates a compelling story.</p>
<h2>What most nonprofits get wrong about annual reporting</h2>
<p>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.</p>
<p>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.</p>
<p>The biggest mistake nonprofits make is that they don’t see their report as an opportunity for engagement.</p>
<p>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.</p>
<p>And when nonprofits don’t view the annual report as a great opportunity for engagement, they fail to communicate the story behind their findings.</p>
<p>A lot of nonprofits use the data from their <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/form-990-filing/">990 forms</a> 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.</p>
<p>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.</p>
<h2>Why should nonprofits tell the story behind data?</h2>
<p>So what do we really mean when we say that an annual report has the potential to be a great marketing and fundraising tool?</p>
<h3>Annual reports reinforce brand identity</h3>
<p>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?</p>
<p>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.</p>
<h3>Annual reports create trust</h3>
<p>Most nonprofits know that trust is one of the most important barriers to giving.</p>
<p>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.</p>
<h3>Annual reports build relationships</h3>
<p>The nonprofit industry is all about building relationships. Donor stewardship, <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/10-tips-to-create-an-unforgettable-and-profitable-fundraiser/">fundraising</a>, and even marketing tactics involve creating a bond between a stakeholder and your organization.</p>
<p>An annual report, full of gratitude, evidence of impact, and emotional content, has the power to build long-lasting relationships.</p>
<h3>Improves retention and recruitment</h3>
<p>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.</p>
<p>Above all, storytelling makes your data a tool for <b>emotional connection</b>. 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.</p>
<h2>How to tell the story behind the numbers</h2>
<p>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.</p>
<p>Most nonprofits include a few data points in their annual report:</p>
<ul>
<li>Revenue</li>
<li>Expenses</li>
<li>Program success/impact measurements</li>
<li>Future forecasts</li>
</ul>
<p>In order to tell the story behind these numbers, you’ll first need to identify the main components.</p>
<h3>The who</h3>
<p>When analyzing each data set, consider the “who” behind the numbers. In the case of nonprofit storytelling, there are a few “whos” to consider.</p>
<ul>
<li>Which stakeholders will be interested in these numbers? (i.e. who is our audience? And why?)</li>
<li>Who do these numbers represent? (Do they represent the number of beneficiaries we’ve helped? Our staff? Our partners?)</li>
</ul>
<h3>The what</h3>
<p>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:</p>
<ul>
<li>What does this data mean to our supporters?</li>
<li>What does it say about our mission and values?</li>
<li>What is the purpose of sharing these data points?</li>
<li>What does it accomplish?</li>
<li>What do stakeholders need to know in order to understand these data sets?</li>
<li>What parts of this data will resonate with our readers the most?</li>
</ul>
<h3>The where</h3>
<p>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:</p>
<p><b>For expenses:</b></p>
<ul>
<li>Where did we funnel this money?</li>
<li>Where did it make the most impact?</li>
<li>How does this data impact where we’ll be in the future?</li>
</ul>
<p><b>For revenue:</b></p>
<ul>
<li>Where did we make the most money?</li>
<li>Where did we allocate that money?</li>
<li>How does this data impact where we’ll be in the future?</li>
</ul>
<h3>The when</h3>
<p>Timing is everything. When relaying crucial data to your stakeholders, be sure to be clear about when major milestones occurred. Consider questions like:</p>
<ul>
<li>When did we see the most growth in our revenue?</li>
<li>When did we have the most expenses?</li>
<li>When in the future do we anticipate change to our metrics?</li>
<li>When did our most successful initiatives take place?</li>
</ul>
<h3>The why</h3>
<p>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.</p>
<p><b>Consider questions like:</b></p>
<ul>
<li>Why do we think it’s important to share this information with stakeholders?</li>
<li>Why will they care?</li>
<li>Why did we allocate resources the way we did?</li>
<li>Why does this matter?</li>
</ul>
<p>Once you’ve decided the who, what, where, when, and why behind your numbers, it’s time to communicate that information.</p>
<h2>Putting it all together: creating your annual report</h2>
<p>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.</p>
<p>By using nonprofit-first tools like Yearly, you can build an award-winning report with expert visual storytelling techniques including:</p>
<h3>Infographics</h3>
<img src="https://jitasa.imgix.net/blog/nonprofit_infographic_example.png?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/nonprofit_infographic_example.png?auto=format&w=700&dpr=2&fit=auto 2x" alt="Nonprofit annual report infographic example." width="700" height="420" />
<h3>Charts</h3>
<img src="https://jitasa.imgix.net/blog/nonprofit_chart_example.png?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/nonprofit_chart_example.png?auto=format&w=700&dpr=2&fit=auto 2x" alt="Nonprofit annual report chart example." width="700" height="380" />
<h3>Timelines</h3>
<img src="https://jitasa.imgix.net/blog/nonprofit_timeline_example.png?auto=format&w=700" srcset="https://jitasa.imgix.net/blog/nonprofit_timeline_example.png?auto=format&w=700&dpr=2&fit=auto 2x" alt="Nonprofit annual report timeline example." width="700" height="328" />
<p>Data visualization allows your nonprofit to create a holistic picture of your findings—and engage readers like never before.</p>
<h2>Wrapping it up</h2>
<p>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.</p>
<p>To create an award-winning annual report for your nonprofit, check out <a href="https://yearly.report/partner-jitasa/" target="_blank" rel="noopener noreferrer">Yearly’s free 14-day trial</a> —the first-ever digital report builder for nonprofits.</p>
4 financial management tips for small nonprofits to follow.2023-01-26T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/4-financial-management-tips-for-small-nonprofits/<p><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-management/">Effective financial management</a> 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.</p>
<p>In this guide, we’ll explore four financial management tips for small nonprofits so that organizations like yours can succeed well into the future.</p>
<h2>1. Maintain a balanced operating budget.</h2>
<p>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.</p>
<p>Your <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/">nonprofit budget</a> should include:</p>
<ul>
<li><b>Estimated revenue:</b> 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.</li>
<li><b>Expected overhead costs:</b> 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.</li>
<li><b>Defined activities:</b> 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.</li>
<li><b>Specific timelines:</b> 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 <a href="https://info.givegab.com/blog/what-is-a-giving-day/" target="_blank" rel="noopener noreferrer">Giving Tuesday</a> as the deadline for reaching a major fundraising goal.</li>
</ul>
<p>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.</p>
<h2>2. Diversify your funding.</h2>
<p>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.</p>
<p>Here are some steps you maintain a diverse <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/how-do-nonprofits-make-money/">revenue stream:</a></p>
<ul>
<li><b>Explore corporate giving.</b> <a href="https://impact.cybergrants.com/solutions/employee-giving/" target="_blank" rel="noopener noreferrer">Corporate giving</a> 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.</li>
<li><b>Conduct prospect research to find major donors.</b> 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.</li>
<li><b>Strengthen your grant-seeking approach.</b> <a href="https://impact.cybergrants.com/solutions/grants-management-grantmaking/" target="_blank" rel="noopener noreferrer">Including grants management</a> 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.</li>
</ul>
<p>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.</p>
<h2>3. File tax forms on time.</h2>
<p>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 <a href="https://www.networkforgood.com/resource/form-990s-and-more-a-quick-tax-guide-for-small-nonprofits/" target="_blank" rel="noopener noreferrer">annual Form 990</a> 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.</p>
<p>Small to mid-sized nonprofits are eligible for abridged versions of Form 990, which include:</p>
<ul>
<li><b>Form 990-N:</b> 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.</li>
<li><b>Form 990-EZ:</b> 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.</li>
</ul>
<p>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.</p>
<h2>4. Invest in nonprofit-specific accounting resources.</h2>
<p>Accounting and bookkeeping can be a challenge, especially when you have limited resources and your staff is overextended. Thankfully, there are <a href="https://www.everyaction.com/blog/nonprofit-software/" target="_blank" rel="noopener noreferrer">software solutions</a> that exist to help small to mid-sized nonprofits optimize their financial practices and streamline their operations.</p>
<p>When searching for nonprofit-specific accounting software, be on the lookout for these essential features:</p>
<ul>
<li><b>Automated budgeting:</b> 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.</li>
<li><b>Financial reporting:</b> Your nonprofit accounting software should be able to produce financial reports that meet the reporting requirements set by the IRS.</li>
<li><b>Data security:</b> Ensure that your sensitive financial information is protected by encryption and handled with the highest level of security.</li>
<li><b>Deadline reminders:</b> Set reminders for tax deadlines and. Improved internal controls, providing additional safety for financial information</li>
<li><b>Software integration:</b> Choose a financial management solution that connects with other applications like your payment processor and CRM so that you can seamlessly synchronize data.</li>
</ul>
<p>In addition to investing in technology-powered tools, you may consider working with a <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accounting/">nonprofit accounting firm</a> 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.</p>
<hr />
<p>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.</p>
4 Tips for Effective Nonprofit Performance Reviews2022-12-22T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/4-tips-for-effective-nonprofit-performance-reviews/<p><i>"Dear Manager,<br />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.<br /> Thanks, <br />HR"</i></p>
<p>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.</p>
<p>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.</p>
<p>Most importantly, we must acknowledge and define why these performance reviews are essential to any business. <a href="https://realhrsolutions.com/performance-review/" target="_blank" rel="noopener noreferrer">Performance Reviews</a> 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 <a href="https://realhrsolutions.com/employee-retention/#growth:~:text=Employee%20Growth%2C%20Engagement%2C%20and%20Recognition" target="_blank" rel="noopener noreferrer">significant aspect of any company culture</a>.</p>
<p>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.</p>
<p>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.</p>
<p>Brene Brown has shared some of the most concise and insightful advice that helps illuminate this process; "<a href="https://brenebrown.com/articles/2018/10/15/clear-is-kind-unclear-is-unkind/" target="_blank" rel="noopener noreferrer">Clear is kind. Unclear is unkind</a>." We can not expect change without first identifying the expectations and current behavior, so clarity must be the pinnacle of the conversation.</p>
<h2>1. Create a Great Process</h2>
<p>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.</p>
<p><a href="https://realhrsolutions.com/performance-review/" target="_blank" rel="noopener noreferrer">Developing your performance review process</a> includes a review of goals, self-assessments, feedback meetings, <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-compensation-policy/">compensation review</a>, and strategy. After a performance review period, an organization can review the <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-guide-to-data-hygiene-and-data-management/">collected data</a> 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.</p>
<p>Some organizations lack the bandwidth to create this process and will solicit input from an <a href="https://realhrsolutions.com/hr-consulting-firms/" target="_blank" rel="noopener noreferrer">HR consulting firm specializing in performance review strategy and development</a>.</p>
<h2>2. Communicate</h2>
<p>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.</p>
<p>Here are a few things to consider including in your messaging to employees:</p>
<ul>
<li>The performance review process is intended to highlight and celebrate your achievements since the last review.</li>
<li>Performance reviews help management understand how they can improve their leadership and coaching.</li>
<li>These reviews are tools to set goals, track progress, and document growth.</li>
<li>These meetings and discussions help clarify expectations and review job descriptions which can lead to examining and redefining roles.</li>
<li>Performance reviews are used to create supporting narratives for promotion and career growth.</li>
</ul>
<p>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.</p>
<h2>3. Clarify</h2>
<p>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.</p>
<p>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.</p>
<p>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.</p>
<p>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."</p>
<p>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.</p>
<p>Things to consider having transparent conversations about might include the following:</p>
<ul>
<li>Communication style with coworkers/clients</li>
<li>Willingness and ability to take initiative</li>
<li>Workstyle approach</li>
<li>Employee engagement and passion for the work</li>
</ul>
<p>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.</p>
<h2>4. Continue the Conversation</h2>
<p>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.</p>
<p>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.</p>
<p>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.</p>
<p>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.</p>
<hr />
<p>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.</p>
<p>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.</p>
<p><i>What are some of your pain points regarding the performance review process?</i></p>
<p><i>Can you remember when you felt anxious about your own performance review? What would have made it more comfortable for you?</i></p>
<h2>Author: Conor Hughes - RealHR</h2>
<div class="clearfix">
<img alt="Conor Hughes of RealHR" src="https://jitasa.imgix.net/blog/conor_hughes_realhr.jpg?auto=format&w=300" class="img-left mt-0" srcset="https://jitasa.imgix.net/blog/conor_hughes_realhr.jpg?auto=format&w=300&dpr=2&q=20 2x" width="300" height="300" loading="lazy" />
<p>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.</p>
<p>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.</p>
<p>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.</p>
</div>Complete guide + tips for nonprofit risk management.2022-12-15T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/risk-management-for-nonprofits/<p>Nonprofit organizations often feel comfortable in their relationships and regular practices, meaning they sometimes overlook inherent risks associated with organizational operations. The increased reliance on technology over the last several years has helped nonprofits everywhere better recognize the value of developing nonprofit risk management policies.</p>
<p>When circumstances are good, risk management plans seem unnecessary. No nonprofit wants to use this plan. However, when there’s economic turbulence, natural disasters, mistakes, or even errors in management, your risk management policies can become your nonprofit’s saving grace.</p>
<p>Our experts at Jitasa have developed nine smart strategies that your organization can use to prepare for the worst, while always hoping for the best. Let’s dive deeper into risk management strategies for your nonprofit.</p>
<h2>Common Types of Nonprofit Risk</h2>
<p>Nonprofit risk refers to the probability that something bad (damage, injury, liability, loss, etc.) might occur. This might be due to internal circumstances at the organization itself or external factors that pose a greater social risk.</p>
<p>While commonly used interchangeably, nonprofit <b>risk</b> and <b>uncertainty</b> are two different ideas. Uncertainty can turn into risk once a certain threshold is reached, but it’s not necessarily the case. There will always be times when it is difficult to predict an outcome, but whether or not it is considered a risk is up for debate.</p>
<img alt="It’s important to remember the difference between nonprofit uncertainty and risk. Nonprofit risk management helps to mitigate risks and to keep them at a level of uncertainty rather than letting them get too out of hand." src="https://jitasa.imgix.net/blog/nonprofit_risk_management_uncertainty_threshold.png?auto=format&w=600" width="600" height="500" class="img-full img-center" loading="lazy" />
<p>The risks nonprofits face may be slightly different than the risks other businesses face, although there will be some overlap between the two industries. Potential risks can vary significantly, but may include:</p>
<h3>Violations of cybersecurity</h3>
<p>Nowadays, we rely more heavily on online networks than ever before. Especially since the shift to more virtual interactions, we tend to use our computers (and smartphones) to give donations, attend events, and otherwise interact with nonprofits. Therefore, your nonprofit needs to ensure your cybersecurity policies are up to date and you don’t risk losing donor and organizational information due to online practices that leave your data vulnerable.</p>
<p><b>Violations of cybersecurity can include data breaches that expose donor names, addresses, credit card numbers, or even bank account information.</b> If these breaches occur, your nonprofit may lose trust and credibility in the community which can lead to fewer donations and supporter engagement in the future.</p>
<p>Policies around cybersecurity risk for nonprofits should encompass protections for your CRM data, online donation payment processor, financial system, and your organization’s own bank account information. While <a href="https://relayfi.com/blog/choosing-business-bank-account#security" target="_blank" rel="noopener noreferrer">banks have security features</a> in place, it's important to double-check that you're taking advantage of them and using your own protocols to minimize risk wherever possible.</p>
<h3>Fraud by impersonation</h3>
<p>While there are many types of fraud, nonprofits often fall victim to people impersonating the organization. These impersonators hope to profit off the community-minded work and credibility of the nonprofit. While personal identification can be protected through the secrecy of social security numbers, there is often little protection around an organization’s employer identification number (EIN). Therefore, <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/common-nonprofit-scams/">scammers can obtain that number</a> and pose as your nonprofit.</p>
<p>By using your EIN, any available logos, taglines, and other brand materials (often available on your website), these scammers can raise money under the guise of charity while pocketing the cash themselves. If this happens, your nonprofit will need to report it to the Federal Trade Commission as soon as possible to avoid any negative repercussions.</p>
<h3>Theft</h3>
<p>Nonprofits tend to be composed of good, trusting individuals, which can make them especially vulnerable to theft. Employees in a tough spot, new recruits or volunteers with access to important resources, and faulty systems can lead to situations where someone close to the organization steals money or technology.</p>
<p>Make sure you know who has access to what materials at your nonprofit. Conduct background checks on your employees and immediately remove access to resources from employees who leave their jobs with your organization. This will help mitigate risk when it comes to theft.</p>
<h3>Compliance</h3>
<p>Although this one is a little less exciting, it is an important part of risk management. To maintain their 501(c)(3) registration and tax-exempt status, nonprofits are subject to some specific rules and regulations that for-profit businesses are not. Making sure all rules are followed should be a key part of your risk management plan.</p>
<p id="identify">Of course, you mitigate your risk by implementing some strategies to protect yourself. Often, they aren’t complicated or expensive, but they can save you a lot of heartache–and money–in the long run.</p>
<h2>Identifying Your Nonprofit’s Risk</h2>
<p>It can be difficult to plan for potential risks if you haven’t identified them. And, while generally knowing what could happen is useful, it is more beneficial to know what exactly your specific organization is susceptible to. You can begin to do this by performing a nonprofit risk assessment, which will be the first step in developing a comprehensive nonprofit risk management plan.</p>
<p>Because the acquisition and management of data impacts all businesses, it provides a great starting point. Begin by looking at all the data that your nonprofit collects. Identify where and how it is stored, and consider reorganizing if necessary.</p>
<p>There are three potential ways you can complete a risk assessment for your own nonprofit organization:</p>
<ol>
<li><b>Self-evaluation:</b> A self-evaluation allows your organization to review your organization piece by piece, asking yourselves, “What risks are associated with this?” Then, you can take appropriate action based on your findings.</li>
<li><b>Using a checklist:</b> There are risk assessment checklists available online, through auditing firms, and in books, that your nonprofit can follow to evaluate your organization’s risks. For example, <a href="https://boardleadershipcalgary.ca/wp-content/uploads/2016/06/Risk-Vol-AB-Org-Risk-Assessment.pdf" target="_blank" rel="noopener noreferrer">this one</a> is from Board Leadership Calgary.</li>
<li><b>Recruiting a third party:</b> If you’re struggling to create your own risk assessment, you can hire professional help to determine the places you are weak and identify effective strategies to minimize these situations. You might start with your <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-audit/">nonprofit financial auditing firm</a> as they may conduct these assessments themselves or refer you to another firm to do so.</li>
</ol>
<p>Whether you hire someone to help or assemble your own internal risk management team, plan on spending some time (more than just a one-hour meeting) to assess risk and formulate a thorough nonprofit risk management plan. Just as your nonprofit has a <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-management/">financial plan</a>, you should have a risk management plan that guides your operations and service.</p>
<p>All nonprofits are different. So if you’re still unsure about how to best proceed to analyze your nonprofit’s own risk, try discussing the options with your accounting firm. Nonprofit risk management and finances often go hand-in-hand, so your accountant experts and advisory team should be able to help you determine the best course of action for your nonprofit.</p>
<div class="blog-callout-full">
<h2>Ask the experts at Jitasa about risk management for your nonprofit</h2>
<a href="https://www.jitasagroup.com/about/contact/" class="button white">Contact Jitasa</a>
</div>
<h2>What makes a good nonprofit risk management strategy?</h2>
<p>Although a good nonprofit risk management strategy will look different based on your individual organization, good ones have a few things in common. First, they approach risk proactively instead of reactively. They identify potential risks and take actionable steps that help avoid them ever happening.</p>
<p>For example, an effective nonprofit risk management strategy might include items like:</p>
<ul class="mb-20">
<li><b>Definitions of each risk you identify.</b> Define what the risk is, whether it’s internal or external, how much you can control it, and if it’s inherent to your organization or residual from addressing another issue.</li>
<li><b>Protections from human biases.</b> Human biases can occur easily, whether because we’re blinded by ambition while starting a new project or simply don’t take all of the possible outcomes into consideration. The best way to avoid this is to ensure your risk management policy has built-in requirements for open communication between staff, stakeholders, and other parties.</li>
<li><b>Different categories of risk.</b> Each risk you identify should also include the category under which the risk falls. For example, you might have categories like cybersecurity, data governance, third-party risk, financial, programmatic, or operational risks.</li>
<li><b>Assurances that financial responsibilities are segregated.</b> Simple measures like asking two people to sign for large purchases ensure that your organization’s financial eggs aren’t all in one basket.</li>
</ul>
<p>The majority of risk management plans also include emergency plans in case there is a data breach, theft, or other emergencies. It outlines the actions the organization takes in the event of these emergencies and who is responsible for each of those actions.</p>
<p>Of course, this is just a sample of what may be included in your risk management plan. The top priority is to make sure your plan takes a detailed, proactive approach to reduce risk at your organization. Emergency measures are a last resort in these plans. Then, make sure all employees are aware of these procedures and follow them regularly.</p>
<h2>Whose job is it to manage nonprofit risk?</h2>
<p>As you can imagine, risk management does not fall to just one person within your organization. In reality, it is the responsibility of your management team, staff members, and even your nonprofit board.</p>
<p>The people most involved with your nonprofit risk management strategy will be your board of directors. The board may serve as an oversight committee themselves, or they, along with leadership, may appoint a committee to manage risk at the organization. The following tasks may fall under the responsibility of the board or committee:</p>
<ul class="mb-20">
<li>Identifying and assessing risk, prioritizing by likelihood and severity</li>
<li>Overseeing and evaluating current risk mitigation</li>
<li>Reducing risk by implementing management plans</li>
<li>Implementing preventive risk measures to protect the nonprofit in the future</li>
<li>Maintaining administrative oversight to ensure organizational compliance</li>
</ul>
<p>Not all risk management tasks will fall to your board or committee members. The day-to-day responsibilities associated with your nonprofit’s risk management plan will be overseen by leadership within your organization. For example, your leadership will be in charge of ensuring that all staff members use secure passwords and update them regularly.</p>
<p>Because nonprofit risk management falls on so many parties, it’s essential that everyone communicates about this issue openly and frequently. For example, let’s say your nonprofit is <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/27-questions-to-ask-an-outsourcing-agency/">outsourcing a new accountant</a>. Your leadership will be in charge of issuing an RFP, part of which collects information to ensure the accounting firm’s financial, privacy, and security practices are within your organization’s risk appetite. Then, the board will use this information to approve or deny hiring that particular firm. Open communication and sharing of resources between departments are essential to choosing the right accounting firm.</p>
<h2>Nonprofit Risk Management Checklist</h2>
<p>Once you’ve identified what risks you may be susceptible to, you can start managing them. Nonprofit risk management doesn’t just begin once a negative event has occurred—instead, it’s a year-round process that seeks to prevent negative things from ever occurring.</p>
<p>The first step in any good risk management plan is performing a risk assessment, which we covered <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/risk-management-for-nonprofits/#identify">earlier</a>. Then, you’ll follow these steps to round out your strategy.</p>
<img alt="Follow this checklist to ensure your nonprofit risk management is addressed in full." src="https://jitasa.imgix.net/blog/nonprofit_risk_management_checklist.png?auto=format&w=600" width="600" height="600" class="img-full img-center" loading="lazy" />
<h3>Prioritize risk at your nonprofit</h3>
<p>We can’t protect ourselves against every possible risk at all times, so select the risks from your assessment that you would most like to avoid and are most likely to befall your nonprofit. Start by ranking the risks you identified in your organization’s risk assessment.</p>
<p><b>Prioritizing your risks will help your nonprofit focus your attention and energy on the most important and most likely risks.</b></p>
<p>For example, a nonprofit with a <a href="https://www.jitasagroup.com/nonprofit-resources/nonprofit-financial-ratios/">shrinking reserve ratio</a> might flag their emergency fund as a significant risk for the organization. Meanwhile, if they’ve already taken action to ensure all staff members follow specific guidelines for password security, that might fall lower on the list.</p>
<p>Once you’ve ranked your risks, consider if there are any current policies or procedures that can help prevent them. List out any resources that your organization will need if you were to fall victim to the risks you’ve outlined.</p>
<h3>Define your comfort level</h3>
<p>Some risk is inevitable, so it is important to determine what risks are worth taking and which are not. In some cases, the risk is worth the reward, so you may be fine with engaging in some riskier behavior.</p>
<p>For example, nonprofits with additional funds in their reserve fund might find it valuable to <a href="https://www.infinitegiving.com/blog/nonprofit-investing" target="_blank" rel="noopener noreferrer">invest those funds</a> in a brokerage account with the hope that they grow over time, further bolstering the organization’s savings.</p>
<p>Meanwhile, if you’re evaluating third-party vendors with different security policies, you may find that the more secure vendor is worth a few extra dollars. You might decide the risk of losing credibility in the community due to a data breach would be massively detrimental to your nonprofit.</p>
<h3>Assign an owner for tasks</h3>
<p>Put someone in charge of your top five or so risks, and consider putting different people in charge of each one to spread out the responsibility across your organization. While these individuals won’t mitigate their assigned task on their own, they’ll serve as the point persons and lead the effort to mitigate risk. When people feel they have ownership over something, they’re more likely to give it their all, which is especially helpful in managing nonprofit risk.</p>
<h3>Establish oversight</h3>
<p><b>Make risk review an integral part of your operational planning, and check-in regularly.</b></p>
<p>Your nonprofit should build in regular review periods to oversee the progress made to each of the risks and evaluate how things are working. Conduct an audit either internally or externally with your risk owners to determine the effectiveness of your risk management strategy.</p>
<p>In this audit, you should review the actions taken by risk owners, the level of importance and threat still associated with each identified risk, and whether any new risks have emerged that should be accounted for in your strategy.</p>
<h3>Consider your tools</h3>
<p>Luckily, risk management is easier given the number of tools available for all types of organizations. Use technology to your advantage when it comes to risk management.</p>
<p>There are a number of different tools that you can use to help manage and mitigate risk at your nonprofit. This software will help you with:</p>
<ul class="mb-20">
<li>Operational oversight</li>
<li>Data management</li>
<li>Budget outcome prediction</li>
<li>Compliance</li>
</ul>
<p>You can also invest in consultants who can help you get your initial risk assessment and management policies off the ground. Consider what combination of software solutions, consultants, and DIY risk management practices will be most impactful for your nonprofit.</p>
<h3>Diversify your team</h3>
<p>Nonprofit risk often arises when people are too busy to check in with each other, so make sure your organization is adequately staffed. Ensure that each person has a job to do, but also that they’re asked to work together, which increases visibility across your team.</p>
<p>A great way to do this is to hire experts to help with tasks you may not have time for. Finding <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accountant/">a nonprofit accountant</a>, risk auditor, or another professional can open up everyone’s time and help prevent nonprofit risk. Be sure to evaluate the professional you’ll outsource for these positions to be sure they also have risk protections in place like PCI compliance and data protection policies.</p>
<h3>Set payment controls</h3>
<p>While all nonprofits are different, one of the common areas necessary for visibility and security is payment. Payment controls help ensure your organization’s payments are secure and prevent fraud. Some payment controls may include:</p>
<ul class="mb-20">
<li>Requiring two signatures on payments over a certain amount</li>
<li>Including several departments in <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/">writing and reviewing the budget</a></li>
<li>Requiring approval for purchases over certain thresholds</li>
<li>Reviewing invoices before they’re paid</li>
<li>Standardizing reimbursement policies</li>
<li>Ensuring sound <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-compensation-policy/">compensation policies</a></li>
</ul>
<p>While it may add extra steps to the purchasing process, additional controls on payments for your nonprofit will not only protect your organization, but also those who work there. If only one signature is required to make a large payment, but a human error occurs, that one person becomes suspect of fraud—even if it was truly an accident. By requiring two signatures, you’re less likely to encounter that mistake.</p>
<h3>Check-in with legal</h3>
<p>Your organization likely has a legal review process for certain decisions and compliance concerns. After all, as a nonprofit, you’re beholden to many regulations. Violating these regulations could result in losing your tax-exempt status or other negative consequences.</p>
<p>Check-in with legal to make sure that all contracts are reviewed, and rely on a detailed due diligence checklist for grants, investments, and more. This will ensure you don’t run into compliance issues on the legal side of nonprofit management.</p>
<h3>Beef up internal documentation</h3>
<p>An easy win for risk management is to present new and existing employees with a thorough employee handbook that outlines expectations regarding appropriate behavior and standard procedures. This document may include all sorts of information, but especially focus on the policies surrounding harassment, discrimination, nepotism, work overtime policy, and conflicts of interest.</p>
<p><b>Roll out concrete and detailed policies at your organization, then make them available to all of your staff members in writing.</b> This concrete communication protects leadership, staff, board members, and the organization at large.</p>
<h2>The Bottom Line</h2>
<p>Nonprofit risk management is an ongoing process, requiring time and oversight every year. You’d likely rather focus on your organization’s programs and exciting new initiatives over risk management policies and procedures. However, while it may seem tedious, having an effective nonprofit risk management strategy in place will ultimately save your organization time and money in both the short and long term.</p>
<p>By focusing your efforts on preventing risk at your nonprofit, you can avoid ending up in the news for nefarious reasons. Put the effort in now to build a risk management plan for your nonprofit so your organization can remain safe, solid, and ready to serve!</p>
<p>If you’re interested in learning more about nonprofit financial risk and organizational best practices, explore the following resources:</p>
<ul class="mb-20">
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-management/">Nonprofit Financial Management | Best Practices to Know</a>. Learn more about keeping your finances organized and safe with the top nonprofit financial management best practices.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/in-kind-donations/">In-Kind Donations | Everything Your Nonprofit Should Know</a>. Ensure you comply with the regulations and requirements that accompany in-kind donations to your nonprofit.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/donor-analytics/">4 Types of Donor Analytics and What to Do With Them</a>. Nonprofit risk management is often used to keep both your organization and your donors safe. Learn more about your donors and how to manage their data with this guide to donor analytics.</li>
</ul>Outsourced Accounting for Nonprofits: Top 10+ Firms2022-11-10T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/outsourced-accounting-for-nonprofits-top-firms/<p>Nonprofit accounting is unique. While for-profit businesses focus on how they can make the greatest profit for the shareholders and owners, nonprofits are more focused on how they can reinvest their revenue back into the organization’s mission itself. This also means they have slightly different rules and regulations when it comes to taxes and accounting practices.</p>
<p>Not only that, but nonprofits need to report on their earnings to both donors who may restrict the funds they contribute, and to the IRS to ensure organizations are using the tax-exempt status appropriately.</p>
<p>These unique aspects of nonprofit finances are reflected in their accounting practices, which is why nonprofits use a system of <b>fund accounting</b> to <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-management/">manage their finances</a>.</p>
<p>The issue is that many nonprofit professionals have not extensively studied nonprofit-specific accounting practices. You need access to a professional CPA to make sure the organization is following the generally accepted accounting principles, reporting funds correctly, and making financially sound decisions.</p>
<p><b>This often leads nonprofits to the question: Is it time to outsource accounting services for my nonprofit?</b></p>
<p>In this guide, we’ll walk through the advantages and disadvantages of outsourcing your nonprofit accounting services, features to look for in firms, and the top firms to consider if you choose this path forward.</p>
<div class="blog-callout-full">
<h2>Want to get involved with our top choice for outsourced nonprofit accounting services? </h2>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button white">Contact Jitasa</a>
</div>
<h2>Why outsource your nonprofit’s accounting services?</h2>
<p>When nonprofits’ accounting needs increase, many organizations jump straight to the idea of hiring a full-time accountant to take care of their finances. However, this is often an expensive process as the organization must pay for everything from hiring to maintaining a full-time professional.</p>
<p>Plus, a full-time accountant is often not necessary for small to mid-sized nonprofits. Instead, the ideal service size that these organizations need is offered through outsourced accounting options.</p>
<p><b>Outsourcing provides nonprofits with access to accounting expertise and allows them to accomplish important financial tasks without hiring a full-time team member.</b> Some of the benefits that accompany outsourcing your nonprofit’s accounting needs include:</p>
<ul>
<li><b>Lower costs:</b> Hiring is expensive! Often, you can receive the services you need through an outsourced accounting firm for nonprofits.</li>
<li><b>Access to expertise:</b> While individual accountants bring their own set of expertise, outsourcing firms typically provide your organization with access to a team of accountants. This means you have the experience of a whole team of people.</li>
<li><b>Experience in the industry:</b> Not only will your organization have access to a team of professionals but that team likely works with a number of organizations. That means, if your organization runs into a problem, your outsourced nonprofit accountant has likely seen it before.</li>
</ul>
<p>Outsourcing accounting services for nonprofits allows organizations access to everything from annual taxes to <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-audit/">audit preparation</a> services. The trick is, finding the right firm to help provide these services to your organization.</p>
<h2>What should you look for in an outsourced nonprofit accounting firm?</h2>
<p>Looking for a nonprofit accounting firm to outsource your services can be challenging and overwhelming, especially for nonprofit professionals who have limited time on their hands to review their options.</p>
<p><b>However, defining what your needs are ahead of time can make the process much simpler and less time-consuming.</b> Consider exactly what your nonprofit needs from your accounting firm and start considering (or ruling out) those options based on whether or not they’ll fit your needs.</p>
<p>Every nonprofit’s needs are slightly different, but there are some common features to keep in mind as you start your search. Some qualities that most nonprofits should look for in an outsourced accounting firm include:</p>
<ul>
<li><b>Nonprofit-specific services:</b> as we mentioned, nonprofits are unique. Therefore, it’s necessary to have an accounting firm that truly understands the needs of your organization.</li>
<li><b>Both bookkeeping and accounting services:</b> This helps further reduce the need for your staff members to worry about financial concerns. Instead, your outsourced firm will take care of both the large-scale concerns and everyday data entry.</li>
<li><b>Fits within your budgetary constraints:</b> This shouldn’t be the sole reason you choose a specific accounting firm to outsource your nonprofit’s finances to. However, it is a contributing factor as many organizations have limited budgetary resources.</li>
</ul>
<p>If your nonprofit has a lot of questions or wants some financial insight and guidance, you might also look for a firm that offers <a href="https://www.jitasagroup.com/nonprofit-solutions/cfo-services/">strategic advisory services</a>. These types of services provide insight and financial guidance that can lead your organization on the path to growth.</p>
<p>Let’s dive into our favorite outsourced accounting firms and services that your organization can use to organize and manage your finances. Every nonprofit has slightly different needs, so be sure to keep your own in mind as you review the options available. We’ll get started with our favorite option first: Jitasa.</p>
<h2>1. Jitasa</h2>
<div class="text-center">
<img alt="Jitasa is our top choice for an outsourced nonprofit accounting firm, offering a wide range of services that help nonprofits take their finances to the next level." src="https://jitasa.imgix.net/blog/outsourced_accounting_for_nonprofits_Jitasa.png?auto=format&w=700" width="700" height="160" class="mb-20 mt-5" />
</div>
<p><a href="https://www.jitasagroup.com/">Jitasa</a> offers outsourced accounting, bookkeeping, and advisory services specifically for nonprofit organizations. Their team only serves nonprofits, so they understand exactly what organizations like yours require from an outsourced accounting firm.</p>
<p>The <a href="https://www.jitasagroup.com/nonprofit-solutions/nonprofit-bookkeeping-accounting-services/">services you can expect</a> from Jitasa’s team of experts include:</p>
<ul>
<li><b>A fully staffed nonprofit accounting team.</b> Those who invest in Jitasa get a team of accountants on their side, offering the best and continuous service for the organization.</li>
<li><b>Access to nonprofit accounting experts.</b> Jitasa’s accountants have worked with thousands of clients. They’ve seen and helped resolve so many challenges with other organizations that they’ll have answers to all of your questions.</li>
<li><b>Enhanced internal controls.</b> Security is the number one priority at Jitasa. Rather than worrying about how well your organization has set up internal controls, you can rest assured knowing that Jitasa puts your organization’s safety first.</li>
<li><b>Access to Quickbooks accounting software.</b> If your nonprofit has on-premise, outdated accounting software or is switching from spreadsheets, Jitasa is here to help! These experts will help you to set up your Quickbooks system, migrate your data, and get moving on a cloud-based system that works.</li>
</ul>
<p>Their team of accountants will help you with year-end taxes, financial audit preparation, monthly financial statements preparation, account reconciliations, data entry and allocations, and more. They provide everything you need from their outsourced accounting firm for nonprofits, helping mission-driven organizations reach their full potential.</p>
<p>Even the word Jitasa means, “The spirit of serving others.” This is what drives their team. They want to help organizations succeed so that they can continue serving their communities and their constituents. Jitasa will help your nonprofit get back on track with what matters most: your mission.</p>
<div class="text-center mb-0">
<a href="https://www.jitasagroup.com/services-quote-request/" class="button">Get a Quote from Jitasa</a>
</div>
<h2>2. File 990</h2>
<div class="text-center">
<img alt="File 990 isn’t an outsourced nonprofit accounting firm per se, but they do help nonprofits report their finances through annual Form 990 filing." src="https://jitasa.imgix.net/blog/outsourced_accounting_for_nonprofits_File990.png?auto=format&w=700" width="700" height="160" class="mb-20 mt-5" />
</div>
<p>For small nonprofits simply looking for help with their annual Form 990EZ or 990N, <a href="https://www.file990.org/" target="_blank" rel="noopener noreferrer">File 990</a> is an effective solution to help file taxes. While not a full outsourced nonprofit accounting firm, they will resolve this one accounting concern for organizations.</p>
<p>Essentially, File 990 boils down any complex parts of these tax documents into simple questions that the organization professionals can answer. Then, the software auto-completes the form and allows nonprofits to file their taxes through the e-filer.</p>
<h2>3. Growthforce</h2>
<div class="text-center">
<img alt="Growthforce offers outsourced accounting for nonprofits as well as bookkeeping, advisory services, and more." src="https://jitasa.imgix.net/blog/outsourced_accounting_for_nonprofits_GrowthForce.png?auto=format&w=700" width="700" height="160" class="mb-20 mt-5" />
</div>
<p><a href="https://www.growthforce.com/" target="_blank" rel="noopener noreferrer">Growthforce</a> offers bookkeeping, accounting, and advisory services for businesses and nonprofits alike as a part of their outsourced financial services. Organizations that invest in Growthforce are provided with a three-person team to help manage their unique accounting situations.</p>
<p>Similar to Jitasa, Growthforce will also help organizations get started on Quickbooks. Because they offer extensive solutions (accompanied by a custom price tag), this outsourcing firm is an excellent choice for larger nonprofits.</p>
<h2>4. EBS Chartered Accountants</h2>
<div class="text-center">
<img alt="EBS Chartered Accountants provides a la carte outsourced nonprofit accounting services." src="https://jitasa.imgix.net/blog/outsourced_accounting_for_nonprofits_EBS.png?auto=format&w=700" width="700" height="160" class="mb-20 mt-5" />
</div>
<p><a href="https://www.ebs.ae/" target="_blank" rel="noopener noreferrer">EBS Chartered Accountants</a> also provides outsourced accounting services for nonprofits and small businesses alike. Their services extend far beyond accounting and bookkeeping. They also offer audit assurance services, organizational setup services, and web development.</p>
<p>Their a la carte services make for a good investment for rapidly growing organizations. However, their extensive options can quickly become overwhelming or unnecessary for smaller to mid-sized organizations, so it’s best suited for fast-growing large nonprofits.</p>
<h2>5. NFP Partners</h2>
<div class="text-center">
<img alt="NFP Partners takes a technological approach to outsourced accounting for nonprofits, helping overhaul and organize financial data." src="https://jitasa.imgix.net/blog/outsourced_accounting_for_nonprofits_NFP.png?auto=format&w=700" width="700" height="160" class="mb-20 mt-5" />
</div>
<p>If your nonprofit is focused on implementing accounting software for your organization, <a href="https://nfppartners.com/" target="_blank" rel="noopener noreferrer">NFP Partners</a> might be the right firm for you! They’ll help you implement your new accounting software solution, then manage that software over time.</p>
<p>NFP Partners offers two main services for nonprofits: implementation and support of software solutions and outsourced accounting services. In addition, they do offer private cloud hosting. Therefore, if your accounting challenges are highly related to your technical software solutions and due to your organization outgrowing your current solutions, consider how the right partner could help.</p>
<h2>6. Paro Accountants</h2>
<div class="text-center">
<img alt="Restricted funds make up a part of your organization’s total funding and can only be used for specific purposes." src="https://jitasa.imgix.net/blog/outsourced_accounting_for_nonprofits_Paro.png?auto=format&w=700" width="700" height="160" class="mb-20 mt-5" />
</div>
<p><a href="https://paro.ai/accountants/" target="_blank" rel="noopener noreferrer">Paro Accountants</a> are geared toward businesses and are a part of the larger Paro AI technology company. They do serve nonprofits alongside their target for-profit audience and have over 15 years of experience helping nonprofit organizations with their accounting, financial reporting, taxes, and more.</p>
<p>This firm works slightly differently than others. They allow nonprofits and small businesses to freelance financial experts to cover various financial needs. They’ll provide manpower to help outsource accounting aspects like accounts receivable, controller oversight, and bookkeeping cleanup.</p>
<h2>7. Kiwi Partners</h2>
<div class="text-center">
<img alt="Kiwi Partners offers outsourced accounting for nonprofits in addition to outsourced bookkeeping services." src="https://jitasa.imgix.net/blog/outsourced_accounting_for_nonprofits_Kiwi_Partners.png?auto=format&w=700" width="700" height="160" class="mb-20 mt-5" />
</div>
<p><a href="https://www.kiwipartners.com/" target="_blank" rel="noopener noreferrer">Kiwi Partners</a> offers outsourced accounting for nonprofits, in addition to services like consulting and human resources. Their team serves any size organization, from startups to larger organizations, helping with regular bookkeeping tasks, budget productions, and financial reporting.</p>
<p>Kiwi Partners is a great option for organizations looking for temporary support for their financial needs. 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.</p>
<h2>8. CBIZ</h2>
<div class="text-center">
<img alt="CBIZ offers outsourced nonprofit accounting services as well as security services to ensure safe financial practices." src="https://jitasa.imgix.net/blog/outsourced_accounting_for_nonprofits_CBIZ.png?auto=format&w=700" width="700" height="160" class="mb-20 mt-5" />
</div>
<p><a href="https://www.cbiz.com/" target="_blank" rel="noopener noreferrer">CBIZ</a> focuses their attention on financial security for nonprofits and for-profits alike. Their firm has a team of experts who help nonprofits conduct financial audits whether the organization is required to conduct one or if they’re simply checking that their financial priorities are in order. They’ll conduct audits to review financial statements, employee benefits programs, and more.</p>
<p>In addition to audits, CBIZ experts offer Systems and Organization Control (SOC) report services for organizations. This helps ensure the organization has all of the necessary security protocols in place to ensure safe financial and data operations.</p>
<h2>9. Numbers 4 Nonprofits</h2>
<div class="text-center">
<img alt="Numbers 4 Nonprofits is an outsourced nonprofit accounting firm specifically designed to address fund accounting needs." src="https://jitasa.imgix.net/blog/outsourced_accounting_for_nonprofits_numbers_4_nonprofits.png?auto=format&w=700" width="700" height="160" class="mb-20 mt-5" />
</div>
<p><a href="https://numbers4nonprofits.com/" target="_blank" rel="noopener noreferrer">Numbers4Nonprofits</a> is an outsourced accounting firm that specializes in nonprofit services. Their team is inspired by the missions of nonprofit organizations and dedicate their time and resources to helping those organizations succeed.</p>
<p>Their team provides a number of financial services for these organizations, including annual budgeting, cash flow projections, audit preparation, cash management, and asset protection. They work at a high level to help organizations prepare for the future and with the day-to-day operations of managing nonprofits’ finances.</p>
<h2>10. Quattro</h2>
<div class="text-center">
<img alt="Quattro offers outsourced accounting for nonprofits alongside HR services for a well-rounded approach to financial management." src="https://jitasa.imgix.net/blog/outsourced_accounting_for_nonprofits_Quattro.png?auto=format&w=700" width="700" height="160" class="mb-20 mt-5" />
</div>
<p>Oftentimes, accounting and HR needs go hand-in-hand, requiring nonprofit organizations to take a good look at their entire financial story and overhead expenses in order to make strong financial decisions. <a href="https://www.quatrrobss.com/" target="_blank" rel="noopener noreferrer">Quattro</a> takes this into account, offering outsourced accounting for nonprofits and small businesses alongside HR tasks for a well-rounded view of your organization’s finances.</p>
<p>Some of the services offered by the Quattro team include managing their accounts payable and receivable, reconciling accounts, reporting finances, and making smart financial decisions. Plus, they’ll help ensure HR compliance, overseeing of employee onboarding, and more.</p>
<h2>11. In-Kind Donations of Accounting Services</h2>
<div class="text-center">
<img alt="Brand new nonprofits often use in-kind donations of accounting services until they’re ready to transition to outsourced accounting for nonprofits." src="https://jitasa.imgix.net/blog/outsourced_accounting_for_nonprofits_in_kind_donation.png?auto=format&w=700" width="700" height="160" class="mb-20 mt-5" />
</div>
<p>Startup and small nonprofit organizations may not be financially ready to outsource their accounting services yet (much less hire a full-time accountant!). Therefore, they may search for a local accountant who supports the cause and ask that professional to <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/in-kind-donations/">give their time in-kind</a> to help the organization get its start.</p>
<p>This option is accompanied by many flaws, including a lack of sustained motivation for that accountant to continue providing services and weaker internal controls. However, it is a useful option to keep in mind for nonprofits that are transitioning and growing or just getting started. In-kind services can be used as a short-term solution until your organization is ready to look for an outsourced accounting firm for nonprofits.</p>
<hr />
<p>Nonprofit accounting is unique in that organizations use a system of fund accounting to organize their finances. Therefore, when you go to outsource your nonprofit accounting to a firm, you need to make sure that you’re choosing experts who will understand your particular needs.</p>
<p>Review guides like this one and ask partnering nonprofits for recommendations. However, keep in mind that the right choice of an outsourced nonprofit accounting firm is specific to your organization’s needs. Consider the unique situation that your nonprofit is in and use that to determine the right choice of firm to serve your mission.</p>
<p>If you’re interested in learning more about nonprofit accounting and financial management, check out these additional resources:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/how-do-nonprofits-make-money/">How Do Nonprofits Make Money? Making Nonprofits Profitable</a>. Learn more about how nonprofits diversify their revenue streams for a healthier financial future with this guide.</li>
<li><a href="https://www.jitasagroup.com/nonprofit-resources/nonprofit-financial-ratios/">Nonprofit Financial Ratios: Definitions & Calculators</a>. Financial ratios can provide a lot of insight into your organization’s efficiency and security. Use Jitasa’s ratio calculators to gain insight into your own financial health.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/fund-accounting/">Fund Accounting 101: The Basics and Best Practices</a>. Because nonprofit accounting is so unique, it’s important that your organization has an understanding of the fund accounting basics. Learn more about these basics in this comprehensive guide.</li>
</ul>
<div class="blog-callout-media-object">
<div class="media">
<img src="https://jitasa.imgix.net/blog/flames_white_circle.png?auto=format&w=196&q=70" srcset="https://jitasa.imgix.net/blog/flames_white_circle.png?auto=format&w=196&q=70, https://jitasa.imgix.net/blog/flames_white_circle.png?auto=format&w=196&q=70&dpr=2 2x" alt="Jitasa Logo" width="196" height="196" />
</div>
<div class="text">
<h2>Want to get involved with our top choice for outsourced nonprofit accounting services?</h2>
<p>Jitasa’s team of experts will help you manage your current finances while preparing for the future.</p>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button white">Get a Quote</a>
</div>
</div>
4 Ways to Create a Virtual Silent Auction That Guests Enjoy2022-10-27T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/4-ways-for-nonprofits-to-create-virtual-silent-auctions/<p>While it may feel like yesterday, the COVID-19 pandemic’s initial push for nonprofit fundraising events to go virtual happened <i>nearly two years ago</i>. 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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-revenue-streams-to-diversify-proceeds/">way to diversify revenue streams</a>.</p>
<p>At this point, your auction’s guests have seen it <i>all</i>—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.</p>
<p>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!</p>
<p>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!</p>
<p>This guide will cover four tips to keep in mind when planning your nonprofit’s next <a href="https://blog.handbid.com/blog/silent-auction-guide" target="_blank" rel="noopener noreferrer">virtual silent auction</a>, specifically when it comes to creating a virtual event that your attendees will enjoy. With that in mind, let’s get started.</p>
<h2>Outline “rules” in advance.</h2>
<p><a href="https://blog.handbid.com/blog/silent-auction-rules" target="_blank" rel="noopener noreferrer">Handbid’s guide to auction rules</a> 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!</p>
<p>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.</p>
<p>There are a few essential rules to outline in advance of your auction:</p>
<ul>
<li><b>Bidding Rules:</b> 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 <a href="https://www.handbid.com/mobile-bidding/" target="_blank" rel="noopener noreferrer">mobile bidding platform</a> 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.</li>
<li><b>Seller Rules:</b> 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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/in-kind-donations/">often in-kind donations</a>) 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.</li>
<li><b>General Operations:</b> 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 <i>must</i> extend the auction, give all bidders plenty of notice so they know to continue watching the items they’ve bid on.</li>
</ul>
<p><b>Bonus!</b> 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.</p>
<h2>Make it as easy as possible to find items and bid.</h2>
<p>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!</p>
<p>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.</p>
<p>To <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/10-tips-to-create-an-unforgettable-and-profitable-fundraiser/">create an unforgettable and profitable fundraiser</a>, 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:</p>
<ul>
<li><b>A direct link to your auction event.</b> 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.</li>
<li><b>Multiple ways to browse items.</b> 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.</li>
<li><b>Easy access to details about each item.</b> Guests should be able to access a detailed view of each item, including images, a description, and the bids it has received so far.</li>
<li><b>Convenient bidding options.</b> 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.</li>
<li><b>A dashboard to monitor personal activity.</b> 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.</li>
</ul>
<p>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!</p>
<h2>Encourage friendly competition.</h2>
<p>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.</p>
<p>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!</p>
<p>Your <a href="https://doublethedonation.com/charity-auctions-tools-for-nonprofits/" target="_blank" rel="noopener noreferrer">virtual auction tool</a> 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!</p>
<p>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.</p>
<p><a href="https://recharity.ca/live-streaming-for-nonprofits/" target="_blank" rel="noopener noreferrer">Re:Charity’s guide to livestreaming for nonprofits</a> 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.</p>
<h2>End the event with a convenient checkout.</h2>
<p>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!</p>
<p>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.</p>
<p>Your <a href="https://blog.handbid.com/blog/silent-auction-software" target="_blank" rel="noopener noreferrer">fundraising software can make</a> 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 <i>before</i> they bid on items. Then, it’s just the click of a button to check out at the end of the event.</p>
<p>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.</p>
<p>If you want to host <i><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/how-do-nonprofits-make-money/">profitable</a></i> 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!</p>
<hr />
<h2>Author: Jeff Porter</h2>
<div class="clearfix">
<img alt="Jeff Porter of Handbid" src="https://jitasa.imgix.net/blog/jeff_porter_handbid.jpg?auto=format&w=300" class="img-left mt-0" srcset="https://jitasa.imgix.net/blog/jeff_porter_handbid.jpg?auto=format&w=300&dpr=2&q=20 2x" width="300" height="300" loading="lazy" />
<p>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.</p>
</div>
Your Nonprofit's Guide to Data Hygiene and Data Management2022-09-21T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-guide-to-data-hygiene-and-data-management/<p>Collecting <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/donor-analytics/">donor analytics</a> 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 <a href="https://fionta.com/news/how-to-home-edit-your-data/" target="_blank" rel="noopener noreferrer">edit your data</a> 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:</p>
<ol>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-guide-to-data-hygiene-and-data-management/#audit">Audit your current database</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-guide-to-data-hygiene-and-data-management/#remove">Remove bad data</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-guide-to-data-hygiene-and-data-management/#standardize">Standardize your data entry</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-guide-to-data-hygiene-and-data-management/#tools">Use the right data management tools</a></li>
</ol>
<p>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.</p>
<h2 id="audit">1. Audit your current database</h2>
<p>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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-management/">managing financial data</a> is just as important. Whether you’re creating a new data-informed stewardship strategy or preparing to send your financial statements to your <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accountant/">nonprofit accountant</a>, you want a clean and organized database. The first step is to audit your existing data collection:</p>
<ol>
<li><b>Make sure you’re collecting the kind of data you want.</b> 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.</li>
<li><b>Identify what data you’re collecting that’s not useful.</b> 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.</li>
<li><b>Weed out your “bad” data.</b> 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.</li>
<li><b>Determine if and how your databases or systems can be streamlined.</b> 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.</li>
</ol>
<p>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.</p>
<h2 id="remove">2. Remove bad data</h2>
<p>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 <a href="https://recharity.ca/5-data-hygiene-best-practices-for-growing-your-organization/" target="_blank" rel="noopener noreferrer">basic data hygiene</a> that all nonprofits should be following.</p>
<p>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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/">nonprofit budget</a>. 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.</p>
<h2 id="standardize">3. Standardize your data entry</h2>
<p>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.</p>
<p>Some adjustments you may want to make to standardize future data entry include:</p>
<ul>
<li>Define the format of each type of data point.</li>
<li>Create rules or instructions for handling data errors</li>
<li>Edit and streamline your external forms, like the ones that donors fill out</li>
</ul>
<p>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 <a href="https://fionta.com/nonprofits/nonprofit-solutions/member-management-for-nonprofits/" target="_blank" rel="noopener noreferrer">managing all membership data</a>. 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.</p>
<p>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.</p>
<h2 id="tools">4. Use the right data management tools</h2>
<p>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.</p>
<p>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.</p>
<p>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.</p>
<p>With the right tools and an understanding of <a href="https://npoinfo.com/nonprofit-data-hygiene/" target="_blank" rel="noopener noreferrer">data hygiene best practices</a>, 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!</p>
<hr />
<h2>Author: Karin Tracy</h2>
<div class="clearfix">
<img alt="Laurie Hochman of Auctria" src="https://jitasa.imgix.net/blog/karin_tracy_fionta.jpg?auto=format&w=300" class="img-left mt-0" srcset="https://jitasa.imgix.net/blog/karin_tracy_fionta.jpg?auto=format&w=300&dpr=2&q=20 2x" width="300" height="300" loading="lazy" />
<p>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.</p>
<p>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.</p>
</div>
How Do Nonprofits Make Money? Making Nonprofits Profitable2022-09-07T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/how-do-nonprofits-make-money/<p>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?</p>
<p>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?</p>
<p>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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-management/">manage their finances</a>.</p>
<p>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?</p>
<div class="blog-callout-full">
<h2>Nonprofit Accounting 101 Course</h2>
<p>Take a deep dive into some of the basics of nonprofit accounting.</p>
<a href="https://www.jitasagroup.com/nonprofit-resources/free-courses/nonprofit-accounting-course/" class="button white">Free Course</a>
</div>
<h2>Table of Contents</h2>
<ol>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/how-do-nonprofits-make-money/#nonprofit-term">Defining the Term: Nonprofit</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/how-do-nonprofits-make-money/#nonprofits-money">How do Nonprofits Make Money?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/how-do-nonprofits-make-money/#maintaining-501c3">Maintaining the Nonprofit 501(C)(3) Status</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/how-do-nonprofits-make-money/#nonprofit-budgeting">Budgeting Your Nonprofit’s Money</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/how-do-nonprofits-make-money/#nonprofits-paid">How Are Nonprofit Staff Members Paid?</a></li>
</ol>
<p>Ready to learn more about the nonprofit sector and how these organizations operate? Let’s get started.</p>
<h2 id="nonprofit-term">Defining the Term: Nonprofit</h2>
<p><strong>Nonprofits are often known for their charitable work, bringing together people who want to work toward something noble.</strong></p>
<p>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.</p>
<p>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.</p>
<h3>Why become a nonprofit?</h3>
<p>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:</p>
<ul>
<li>Tax-exempt status</li>
<li>The ability to obtain private or public grants</li>
<li>A desire to work with an organization that exists as a separate entity from its owner</li>
<li>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</li>
</ul>
<p>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.</p>
<h3>Key Differences Between For-Profit and Nonprofit Organizations</h3>
<p>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.</p>
<img alt="This venn diagram shows some of the differences between for-profits and nonprofits, specifically about how nonprofits make money and how they manage those finances." src="https://jitasa.imgix.net/blog/how_do_nonprofits_make_money_for_profit_vs_nonprofit.png?auto=format&w=700" width="700" height="500" class="mb-20" loading="lazy" />
<p>For-profit organizations:</p>
<ul>
<li>Are owned by the official owner as well as shareholders who share the profit of the company</li>
<li>Typically pay all of their staff members, except occasionally those hired for an internship</li>
<li>Organize their finances using traditional accounting methods to cover all expenses while still providing a profit for owners and shareholders</li>
</ul>
<p>Nonprofit organizations:</p>
<ul>
<li>Have no official owner, but are operated by the executive director who answers to a volunteer board of directors</li>
<li>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</li>
<li>Organize finances based on a system of <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/fund-accounting/">fund accounting</a> to ensure all expenses are covered and any restrictions on income are accounted for</li>
</ul>
<p>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.</p>
<h2 id="nonprofits-money">How Do Nonprofits Make Money?</h2>
<p>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.</p>
<p>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.</p>
<p>Let’s dive deeper into some revenue sources for nonprofit organizations.</p>
<div class="text-center"><img alt="Some of the funding sources to help nonprofits make money include earned income, individual donations, grants, and investments." src="https://jitasa.imgix.net/blog/how_do_nonprofits_make_money_funding_sources.png?auto=format&w=600" width="600" height="420" loading="lazy" /></div>
<h3>Earned Income</h3>
<p>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.</p>
<p>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:</p>
<ul>
<li>Sales of merchandise</li>
<li>Fees charged for services</li>
<li>Membership fees</li>
<li>Renting out physical space</li>
</ul>
<p>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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accountant/">an accountant</a>. They’ll help you determine if it falls within the mission and how to report it properly come tax season.</p>
<h3>Individual Contributions</h3>
<p>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.</p>
<p>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:</p>
<ul>
<li><b>Event contributions.</b> 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.</li>
<li><b>Online donations.</b> 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.</li>
<li><b>Stock donations.</b> 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.</li>
<li><b>Planned gifts.</b> 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.</li>
<li><b><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/in-kind-donations/">In-kind contributions.</a></b> 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.</li>
</ul>
<p>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.</p>
<h3>Grants</h3>
<p>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.</p>
<p>Some of the organizations that offer grants for nonprofits include:</p>
<ul>
<li>Government entities</li>
<li>Public charities</li>
<li>Community foundations</li>
<li>Family foundations</li>
<li>Private foundations</li>
</ul>
<p>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.</p>
<p>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.</p>
<p>On top of that, nonprofits need to have an <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/grant-management/">effective management system</a> 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.</p>
<h3>Investments</h3>
<p>One way for nonprofits to make money that is not widely used among organizations is <a href="https://www.infinitegiving.com/blog/nonprofit-investing" target="_blank">investing</a>. 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.</p>
<p>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.</p>
<p>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.</p>
<div class="blog-callout-full">
<h2> Learn more about how nonprofits make and allocate money.</h2>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button white">Talk to a Jitasa accountant </a>
</div>
<h2 id="maintaining-501c3">Maintaining the Nonprofit 501(C)(3) Status</h2>
<p>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.</p>
<p>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:</p>
<ul>
<li>Always filing their <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/form-990-filing/">annual tax return</a> with the IRS to report on their gross receipts and how they used their funding over the course of the year.</li>
<li>Acknowledging all donor gifts over $250 by providing a written receipt.</li>
<li>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.</li>
<li>Familiarizing themselves with and adhering to potential restrictions on lobbying to avoid breaking rules or crossing lines.</li>
<li>Avoiding engaging in political campaign activity that can be construed as favoritism, such as selling mailing lists, renting offices, or paying for political advertising.</li>
<li>Paying taxes on unrelated business income.</li>
<li>Asking the right questions when consulting with a lawyer or nonprofit accountant.</li>
</ul>
<p>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.</p>
<h2 id="nonprofit-budgeting">Budgeting a Nonprofit’s Money</h2>
<p>Just like for-profit companies, nonprofit organizations also allocate their money and <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/">create budgets</a>. 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.</p>
<p>In addition to planning their finances with an annual budget, nonprofits also create income statements (also called <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-activities/">statements of activities</a>), balance sheets (also called <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-financial-position/">statements of financial position</a>), and <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-cash-flows/">cash flow statements</a> to better analyze the organization’s financial health and habits.</p>
<p>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.</p>
<div class="blog-callout-full">
<h2>Nonprofit Budget Template</h2>
<p>The budgeting process is often times confusing to many nonprofit members and leaders. This nonprofit budget template is designed to alleviate that pain.</p>
<a href="https://www.jitasagroup.com/nonprofit-resources/nonprofit-free-downloads/nonprofit-budget-template/" class="button white">Free Download</a>
</div>
<h2 id="nonprofits-paid">How Are Nonprofit Staff Members Paid?</h2>
<p>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.</p>
<p>Remember that <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/understanding-ownership-for-nonprofit-and-for-profit-business/">nonprofit organizations have founders--not owners</a>. 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. <strong>But the profit is never distributed to an individual or private interest.</strong></p>
<p>Nonprofits also often put in place a <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-compensation-policy/">compensation policy</a> 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.</p>
<p>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:</p>
<ul>
<li><b>Increased flexibility.</b> Nonprofits are often more flexible about some day-to-day considerations, including work schedules or work-from-home opportunities.</li>
<li><b>Better benefits.</b> 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.</li>
<li><b>Purposeful work.</b> For many people, the opportunity to do important work in service of others is the main driver for joining the staff of a nonprofit.</li>
<li><b>Good community culture.</b> 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.</li>
</ul>
<p>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.</p>
<h2>The bottom line</h2>
<p>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.</p>
<p>To talk more about how to transition your nonprofit to a more sustainable financial model or simply discuss your financial situation, contact a <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accountant/">nonprofit accountant</a>!</p>
<p>If you’re interested in learning more about how nonprofits make money and how they manage their finances, check out these additional resources:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-management/">Nonprofit Financial Management | Best Practices to Know.</a> 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.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/restricted-funds/">Restricted Funds: What Are They? And Why Do They Matter?</a> 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.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/donor-analytics/">4 Types of Donor Analytics and What to Do With Them.</a> 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.</li>
</ul>
<div class="blog-post-callout">
<div class="inner">
<div class="media">
<picture>
<source srcset="https://www.jitasagroup.com/images/blog/flames_circle_lrg.png, https://www.jitasagroup.com/images/blog/flames_circle_lrg@2x.png 2x" media="(min-width: 850px)" />
<img srcset="https://www.jitasagroup.com/images/blog/flames_circle.png, https://www.jitasagroup.com/images/blog/flames_circle@2x.png 2x" alt="Jitasa Flames" />
</picture>
</div>
<div class="text">
<p>
Learn more about how nonprofits make and allocate money.
</p>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button small"> Talk to a Jitasa accountant </a>
</div>
</div>
</div>
How to Fill Out a W-9 for Nonprofits2022-08-24T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/how-to-fill-out-a-w9-for-nonprofits/<p>One of the largest administrative expenses nonprofits and for-profits both face is hiring staff members who will carry out the day-to-day needs of the organization. Taking on full-time team members is expensive! That’s why when there are temporary projects (think website design, consulting services, etc.), many nonprofits choose to turn to contractors instead.</p>
<p>In fact, many nonprofits even contract out some of their own services for other organizations. Maybe someone reached out to your organization to be a consultant for another struggling nonprofit and offered to pay you for the service. This could be a great way to earn some additional revenue!</p>
<p><strong>Contracting is therefore a key part of <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-management/">financial management</a> in the nonprofit world.</strong></p>
<p>Unfortunately, contracting comes with some new official government forms, including the W-9. For nonprofits, the W-9 doesn’t have to be a complicated form. However, you should understand when it’s used and how to fill it out correctly. That’s what we’ll cover in this guide. Specifically, we’ll dive into the following points:</p>
<ul>
<li>What is a W-9 for Nonprofits?</li>
<li>When do Nonprofits Worry about the W-9 Form?</li>
<li>How to Fill Out a W-9 For Nonprofits: Step by Step</li>
<li>What are the Next Steps Regarding the Nonprofit W-9?</li>
</ul>
<p>Contracting is a great way to earn additional income for your nonprofit or help accomplish something complex at your organization for a short time. By learning more about the W-9, you won’t have to dread tax season even during years when you’re deeply involved with contracting. Let’s dive in to learn more.</p>
<div class="blog-callout-full">
<h2>Talk to a Jitasa expert about filing your W-9.</h2>
<a href="https://www.jitasagroup.com/about/contact/" class="button white">Contact Us</a>
</div>
<h2>What is a W-9 for Nonprofits?</h2>
<p>The <a href="https://www.irs.gov/pub/irs-pdf/fw9.pdf" target="_blank">Form W-9</a> is the IRS form used as a “request for taxpayer identification number and certification.” When someone contracts work from your organization or you contract work from someone else, this form is used to request necessary tax information from the contractor.</p>
<p>The form requests information like the contractor’s name, tax identification number, address, and more. It’s a short, six-page form, but only the first page requires the contractor to fill in information.</p>
<h3>Purpose of Nonprofit W-9 Forms</h3>
<p>Let’s say a nonprofit organization requests contracted work from a consultant to help them plan a capital campaign. That contractor will be paid a pretty penny for their services to the nonprofit and they will need to report that income during tax season. Instead of a W-4, the organization would file a <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/1099-for-nonprofits/">Form 1099 to report the miscellaneous income</a> and provide that form to the contractor.</p>
<p>However, the Form 1099 also requires information about the contractor themselves. And if the nonprofit is filing the form, how will they know what to include in that form? The contracting organization will need to request a W-9 from the contractor prior to filling out the 1099.</p>
<p><strong>The purpose of the W-9 is to provide the tax information that contracting organizations need to complete the Form 1099.</strong></p>
<p>While that’s the most relevant and relatable purpose, the W-9 also has a purpose at the federal level. It provides the information that allows the IRS to match up the submitted 1099 forms reported with the tax returns filed by contractors.</p>
<h2>When do Nonprofits Worry About the W-9 Form?</h2>
<p>As a general rule of thumb, the Form W-9 needs to be filled out when a contractor isn’t an official employee of the contracting organization and that contractor is paid over $600 within a calendar year for their services.</p>
<p>Essentially, there are two reasons you might be reading about the W-9 Form for your nonprofit: Either you need to request one of these forms from a contractor or you need to fill one out because you have contracted your services for another organization.</p>
<h3>Requesting a W-9 from Contractors</h3>
<p>If you’ve contracted someone to work for your nonprofit, all you need to do is request a W-9 from that contractor (until you file the 1099, of course). They’ll send you back a completed form that you should file strategically and safely.</p>
<p>We recommend that you request the W-9 Form at the beginning of your relationship with the contractor. This saves you from having to track down your contractors and request forms during the already-hectic year’s end.</p>
<p>Once you’ve requested a W-9 from a vendor, you can continue to use the information in that form, even in subsequent years. You’ll only need to request a new W-9 Form if their information changes, for example, if they get a new taxpayer identification number (TIN) or an updated status.</p>
<h3>Filling out a W-9 for Contract Work</h3>
<p>If your nonprofit is contracted by another organization for consulting services, design services, or other work, the contracting organization will request a W-9 from your nonprofit (ideally at the beginning of the relationship). You’ll fill it out on behalf of your nonprofit and send the nonprofit W-9 form back to the contracting organization.</p>
<p>In the next section, we’ll discuss the information you need and how to fill out the W-9 for nonprofits.</p>
<h2>How to fill out a W-9 for Nonprofits: Step by Step</h2>
<p>If someone requests a W-9 from your nonprofit, don’t fret! It’s not a very long or difficult form to fill out. You simply need to know some background and technical information about your nonprofit.</p>
<p>When you download it from the IRS, this is what the W-9 Form will look like:</p>
<img alt="When filling out the W-9 for your nonprofit, the form will look something like this." src="https://jitasa.imgix.net/blog/w9_for_nonprofits_form_example.jpg?auto=format&w=600" width="600" height="582" />
<p>We’ll step through each of the steps and boxes on the Form W-9. Follow these step-by-step instructions for filling out this form:</p>
<h3>1. Write your organization’s official name.</h3>
<p>When you incorporated or established your nonprofit, you provided an official name on your Form 1023 and your articles of incorporation. Provide this official name on the W-9 form to match up with your other federal and state forms.</p>
<h3>2. Write your organization’s unofficial name.</h3>
<p>If your organization is generally referred to as a different name than your official name, you’ll want to include this in box two of the nonprofit W-9. However, if you operate under your official name, you can leave this section blank.</p>
<p>For example, let’s say The Association for Puppy Welfare is commonly shortened to as The Puppy Association, that organization may choose to put their unofficial common name in box two.</p>
<h3>3. Name your organization’s federal tax classification.</h3>
<p>Box three of the W-9 Form requires the contractor to disclose their federal tax classification. Essentially, you must provide the tax code your organization falls under. The classification options include the following:</p>
<ul>
<li>Individual/Sole proprietor or single member LLC</li>
<li>C corporation</li>
<li>S corporation</li>
<li>Partnership</li>
<li>Trustee/Estate</li>
<li>Limited liability company</li>
<li>Other</li>
</ul>
<p>If you’re classified as a corporation, you’ll likely check the C Corporation box. S Corporations are slightly different and offer tax benefits for small businesses with fewer than 75 shareholders (only a few small businesses choose this classification). Or, you may instead check “other” and fill in the description box to say “nonprofit corporation.”</p>
<p>If you were filling out this form as an individual (as many of your contractors may do), you would check the “individual/sole proprietor” box.</p>
<p>If you’re unsure of your organization’s specific tax classification, you can always consult a lawyer or tax advisor. Then, make a note of this classification so you’re sure to remember it for future W-9 Forms for your nonprofit.</p>
<h3>4. You’ll most likely leave the “exempt payee code” blank, but always double-check.</h3>
<p>Box four of the W-9 is for people to indicate whether the payment is subject to backup withholding. Some of the payments that may be subject to backup withholding include:</p>
<ul>
<li>Interest and dividend payments</li>
<li>Broker transactions</li>
<li>Barter exchange transactions</li>
<li>Patronage dividends</li>
</ul>
<p>Chances are, as a nonprofit, you’ll end up leaving this section blank. But always double-check the <a href="https://www.irs.gov/businesses/small-businesses-self-employed/backup-withholding" target="_blank">IRS guidelines</a> to make sure everything is in line.</p>
<h3>5. Provide your organization’s mailing address.</h3>
<p>Boxes five and six on the W-9 are fairly easy and straightforward. You simply record your organization’s mailing address in these sections.</p>
<h3>6. [Optional] You can provide the requestor’s name and address.</h3>
<p>Next to the address box, there’s an option to provide the requestor’s name and address so you can make notes of who has access to your sensitive information. This can be helpful for you to keep track of those who have access to your TIN. For individuals, this is also important because you’ll use your social security number on the W-9.</p>
<p>If you fill out W-9s for your nonprofit on a frequent basis, we recommend that you fill out this section of the form and file a copy of the form in a safe location.</p>
<h3>7. List optional account numbers.</h3>
<p>Box seven on the W-9 for nonprofits is more helpful for the contracting organization. Some contractors use numbered systems in which they refer to various contractors. This box, which requests optional account numbers, allows them to include the number to which they reference your nonprofit as a contractor.</p>
<p>When the contracting organization requests your W-9, they may ask to dedicate a specific number in this “account number” space. If they don’t request this number be added to the space, you can leave the section blank.</p>
<h3>8. Fill in your taxpayer identification number.</h3>
<p>Finally, one of the most important sections of this form is the space to fill in your taxpayer identification number (TIN). As a registered 501(C)(3) organization, your nonprofit should have an employer identification number (EIN) that you use to identify yourself. This is where you’ll write out this number.</p>
<p>If you don’t yet have an EIN, apply for one before submitting the W-9 for your nonprofit. Then, in box 8, you can write “applied for” in the TIN section of the form. When you do this, you’ll have 60 additional days to provide your EIN to the requesting organization.</p>
<p>When individuals fill out this section, they’ll identify themselves as an individual/sole proprietor (therefore do not have an EIN) and use their social security number to identify themselves in this section.</p>
<h2>What are the Next Steps Regarding the Nonprofit W-9?</h2>
<p>Before you submit your nonprofit W-9, double and triple check the information you’ve included is correct and complete. If you put the wrong EIN or an incorrect address, you may find tax season to be a nightmare this coming year (or you may never receive your payment!). Once you’ve triple-checked your work, go ahead and send this form back to the requesting organization.</p>
<p>If you were the one to request the W-9 from another contractor, they should send it back to you in a timely manner. Then, you’ll need to use the information on that W-9 to complete the 1099 for the contractor at the end of the year.</p>
<p>Make sure to keep track of your various forms and file them away securely in your <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/fund-accounting/">accounting system</a> for safekeeping. This will help you maintain an organized system, ensuring TINs and social security numbers don’t end up in the open.</p>
<div class="blog-callout-full">
<h2>Nonprofit Accounting 101 Course</h2>
<p>Take a deep dive into some of the basics of nonprofit accounting.</p>
<a href="https://www.jitasagroup.com/nonprofit-resources/free-courses/nonprofit-accounting-course/" class="button white">Free Course</a>
</div>
<hr />
<p>The W-9 isn’t an incredibly challenging form to complete, but it can be tedious if you have to continually re-learn the different elements of the form and look up your EIN and other tax information each time</p>
<p>Keep resources like this guide and file away W-9s that your organization has submitted. This will help make the filing process smoother as you fill out more W-9s in the future.</p>
<p>If you’re looking to learn more about tax forms and accounting for nonprofits, review these additional resources:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/form-990-filing/">Form 1099 for Nonprofits: How and Why to Issue One</a>. The W-9 provides the information necessary for your 1099. Use this guide to take the next step and review the 1099 Form.</li>
<li><a href="https://www.jitasagroup.com/nonprofit-resources/nonprofit-financial-ratios/">Nonprofit Financial Ratios: Definitions & Calculators</a>. Your nonprofit’s financial health matters. Our financial ratios page provides the calculators you need to determine your organization’s health and make educated next financial steps.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/restricted-funds/">Restricted Funds: What Are They? And Why Do They Matter?</a> Some of the gifts you receive from your supporters are accompanied by restrictions for how they can be used. Learn more with this comprehensive guide.</li>
</ul>
<div class="blog-post-callout">
<div class="inner">
<div class="media">
<picture>
<source srcset="https://www.jitasagroup.com/images/blog/flames_circle_lrg.png, https://www.jitasagroup.com/images/blog/flames_circle_lrg@2x.png 2x" media="(min-width: 850px)" />
<img srcset="https://www.jitasagroup.com/images/blog/flames_circle.png, https://www.jitasagroup.com/images/blog/flames_circle@2x.png 2x" alt="Jitasa Flames" />
</picture>
</div>
<div class="text">
<p>
Talk to a Jitasa expert about filing your W-9.
</p>
<a href="https://www.jitasagroup.com/about/contact/" class="button small">Contact Us</a>
</div>
</div>
</div>
Online auction tools for nonprofits.2022-08-18T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/overcoming-financial-restraints-with-online-auctions/<p><a href="https://www.auctria.com/blog/power-of-audience/" target="_blank">Online auctions</a> 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.</p>
<h2>How financial restraints hold nonprofits back from doing more</h2>
<p>Financial restraints are an ever-present reality for all <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/">nonprofits</a>. 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.</p>
<h2>Challenges that nonprofits face with fundraising</h2>
<p>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:</p>
<ul>
<li><b>Reduced individual donations:</b> 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 <a href="https://shopraise.com/blog/passive-fundraising/" target="_blank">diversify your income stream</a>.</li>
<li><b>Relying solely on donations:</b> 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.</li>
<li><b>Maintaining trust:</b> 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.</li>
<li><b>Slow digital growth:</b> 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.</li>
</ul>
<h2>Examples of fundraising events that work for nonprofits</h2>
<p>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:</p>
<ul>
<li><b>Peer-to-peer (P2P) and community events:</b> 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.</li>
<li><b>Facilitating online donations:</b> 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.</li>
<li><b>Crowdfunding:</b> 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.</li>
<li><b>Auctions:</b> <a href="https://www.auctria.com/blog/the-6-best-tips-for-your-online-charity-auction/" target="_blank">Auctions</a> 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.</li>
</ul>
<h2>Why online auctions are a good option for nonprofits</h2>
<p>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:</p>
<ul>
<li><b>More buyers:</b> 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.</li>
<li><b>Convenience:</b> Buyers have the option to bid when and where they want, and even bid on multiple auctions in one day.</li>
<li><b>Instant engagement:</b> Buyers can go immediately from <a href="https://www.auctria.com/blog/giving-tuesday-works-spotlight-on-association-for-individual-development/" target="_blank">seeing your advertising</a> - perhaps on your website or a direct email - to making a bid, in a matter of seconds.</li>
<li><b>Longer bidding window:</b> 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.</li>
<li> <b>Greater choice and control:</b> 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.</li>
</ul>
<h2>Why an increasing number of nonprofits are moving towards online auctions</h2>
<p><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/10-tips-to-create-an-unforgettable-and-profitable-fundraiser/">Nonprofits</a> 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 <em>have</em> 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.</p>
<h2>How nonprofits are making a bigger impact with online auctions</h2>
<p>The benefits of online auctions enable <a href="https://www.auctria.com/blog/summer-double-donation/" target="_blank">nonprofits</a> 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.</p>
<p>With <a href="https://www.auctria.com/blog/how-to-promote-a-virtual-auction/" target="_blank">online auctions</a>, 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.</p>
<p>Using this data, you can plan your marketing and <a href="https://www.auctria.com/blog/procurement-basics/" target="_blank">item procurement</a> more carefully and precisely, which empowers you to create more successful and impactful auctions going forward.</p>
<h2>Plan and execute a winning online strategy with these tips</h2>
<p>Once you get the hang of <a href="https://www.auctria.com/blog/3-steps-run-auctionfundraiser/" target="_blank">running online auctions</a>, they become rather effortless to host. Follow these steps to set up your auction.</p>
<ol>
<li><b>Choose the right platform:</b> 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.</li>
<li><b>Establish your fundraising goals beforehand:</b> Set a <a href="https://www.auctria.com/blog/mobilebidding-strategy/" target="_blank">fundraising</a> 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.</li>
<li><b>Source your sales items:</b> 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.</li>
<li><b>Plan carefully:</b> 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.</li>
<li><b>Determine fair market values:</b> 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.</li>
<li><b>Set starting bid amounts:</b> 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).</li>
<li><b>Promote the auction:</b> Create your auction page, complete with listings and photographs of the goods you are selling. You can then use <a href="https://www.auctria.com/blog/promote-online-auctions-on-social-media/" target="_blank">social media</a> 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.</li>
<li><b>Hold the auction:</b> 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.</li>
</ol>
<hr />
<h2>Author: Laurie Hochman</h2>
<div class="clearfix">
<img alt="Laurie Hochman of Auctria" src="https://jitasa.imgix.net/blog/laurie_hochman_auctria.jpg?auto=format&w=300" class="img-left mt-0" srcset="https://jitasa.imgix.net/blog/laurie_hochman_auctria.jpg?auto=format&w=300&dpr=2&q=20 2x" width="300" height="225" loading="lazy" />
<p>Laurie Hochman has a passion for helping groups exceed their fundraising goals. After using <a href="https://www.auctria.com/" target="_blank">Auctria</a> for many auction fundraisers, she joined the team to help others boost their auction fundraising for many wonderful causes.</p>
</div>
<h2>About Auctria</h2>
<p>Auctria is an easy-to-use web-based platform for organizing and running <a href="https://www.auctria.com/blog/how-to-promote-a-virtual-auction/" target="_blank">online auctions</a>. 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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-management/">nonprofits</a>.</p>Nonprofit Audits: A Complete Guide to Financial Auditing2022-06-30T16:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-audit/<p>When you first started your nonprofit, you filed a Form 1023 to be registered as an official 501(c)(3) organization. This meant the federal government wouldn’t require your organization to pay taxes so that you can instead reinvest all of your revenue back into your mission and the organization itself. But does this exemption from the burden of paying annual taxes also mean that your organization is also exempt from nonprofit audits?</p>
<div class="blog-callout-full">
<h2>Talk to a dedicated nonprofit accountant about your next nonprofit financial audit.</h2>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button white">Contact Jitasa</a>
</div>
<p>The simplest answer is <b>no</b>. But, the more realistic answer is <b>it depends</b>. There are cases when you’re required to audit your nonprofit’s finances, but it’s not the IRS conducting that audit. Generally, your organization will hire an independent auditor to analyze your statements and records. Let’s start with the basics:</p>
<h2>What is an independent nonprofit audit?</h2>
<img src="https://www.jitasagroup.com/images/blog/nonprofit_accounting_definition.png" srcset="https://www.jitasagroup.com/images/blog/nonprofit_accounting_definition.png, https://www.jitasagroup.com/images/blog/nonprofit_accounting_definition@2x.png 2x" alt="Nonprofit independent audit definition" class="img-full img-center" />
<p><b>An independent audit occurs when an auditor or auditing firm outside of your organization examines your nonprofit’s financial statements, records, transactions, accounting practices, and internal controls.</b></p>
<p>The IRS has no reason to audit your organization. After all, you’re not paying taxes! But other entities may require your organization to conduct an audit. For instance, some separate state or federal agencies may require an audit from your nonprofit depending on your size or spending habits. Or, grant organizations may require one to prove your financial responsibility before providing funding.</p>
<p>Here at <a href="https://www.jitasagroup.com/">Jitasa</a>, we help nonprofits determine if they need an audit, provide assistance preparing for it, and help organizations get the most out of the experience. With our ample experience in the field, we decided to put together this guide to help professionals in the sector gain a basic understanding of the nonprofit auditing process. We’ll cover the following topics:</p>
<ol>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-audit/#to-audit">To Audit or Not to Audit</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-audit/#types-audits">Types of Nonprofit Audits</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-audit/#financial-audit-timeline">Nonprofit Financial Audit Timeline</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-audit/#select-audit-firm">Selecting a Nonprofit Auditing Firm</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-audit/#audit-preparation">Nonprofit Audit Prep Work</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-audit/#after-audit">After Your Nonprofit Audit</a></li>
</ol>
<p>Nonprofit audits may seem scary, but they can actually be quite helpful! You’ll be able to identify opportunities to improve your organization’s internal controls, financial practices, and more.</p>
<h2 id="to-audit">1. To Audit or Not to Audit</h2>
<p>It’s not often that small to mid-sized organizations are required to conduct a nonprofit audit. And, luckily, the reasons you may be required to do so are fairly straightforward. When you’re deciding whether or not to conduct an audit at your organization, you should check:</p>
<ul>
<li><b>Your bylaws.</b> At the onset of opening the doors to your organization, one of the founders may have written it into your bylaws that regular nonprofit audits should be conducted in order to ensure financial security and transparency.</li>
<li><b>State requirements.</b> You may be required to conduct a nonprofit audit depending on the state you operate in and dollars received. Nonprofits that spend or earn more than a certain amount (usually around $500,000) may be required to complete a financial audit.</li>
<li><b>Your federal funding.</b> Organizations that receive more than $750,000 in federal funding or federal funding passed through the state are required to have an audit.</li>
<li><b>Grant application requirements.</b> Some grant funders require nonprofits to conduct audits to ensure their financial systems are trustworthy, transparent, and well-managed. Even if granting institutions don’t require an audit, they may require other proof of financial management before they’re willing to provide funding.</li>
</ul>
<p>These options all describe circumstances in which you may be required to conduct an audit. If you find that you’re not <i>required</i> to conduct an audit, that doesn’t mean you’re off the hook!</p>
<p>You’ll still want to practice financial responsibility and accountability by carefully reviewing your financial statements or hiring a nonprofit accountant to do it for you. Internal review procedures and internal audits will help protect your nonprofit from scams, overspending, and other financial missteps you may encounter.</p>
<p>Even if you think you’re doing everything right, it can <i>still</i> be worth conducting a nonprofit audit. There are plenty of benefits that result from conducting one.</p>
<h3>The Purpose of Nonprofit Auditing</h3>
<p>The purpose of a nonprofit audit, according to <a href="https://allianceonlinecommunity.org/" target="_blank" rel="noopener noreferrer">The Alliance for Nonprofit Management</a> is, <i>“for testing the accuracy and completeness of [the] information presented in an organization's financial statements. This testing process enables an independent certified public accountant (CPA) to issue what is referred to as an opinion on how fairly the agency's financial statements represent its financial position and whether they comply with generally accepted accounting principles (GAAP).”</i></p>
<p>Nonprofits who may not be required to conduct an audit may still consider doing so in order to make sure their financial records and internal controls are up-to-par and to find potential opportunities for improvement.</p>
<p>The benefits you’ll encounter when you conduct an audit include:</p>
<ul>
<li><b>Increased transparency.</b> You may decide to communicate that a nonprofit audit took place and even the improvements that you’re making as a result of this deep financial analysis with your supporters. This way they’ll know that you take your funding and your financial management seriously and will effectively protect and use their contributions.</li>
<li><b>Regular accountability.</b> If you conduct a financial audit regularly (whether that’s every year, two years, or even five), you’ll find that you’re held accountable to the same high standards of controls and financial reporting over time. Even as your organization changes and expands, you’ll be confident that your finances are always secure and well-allocated.</li>
<li><b>Find opportunities for improvement.</b> Your nonprofit audit may not be perfect, and <i>that’s ok!</i> One of the great things about auditing is that it can help identify opportunities for your organization to improve upon its policies and procedures.</li>
</ul>
<p>In addition to all of the inherent benefits of conducting a nonprofit financial audit, there are also charity watchdogs who provide information about charities to potential donors. These watchdogs may rank your organization higher if you’ve conducted an audit. This also increases the element of transparency with your supporters who do their research before contributing, assuring them that you’re a trustworthy organization.</p>
<h2 id="types-audits">2. Types of Nonprofit Audits</h2>
<p>The term “audit” can refer to several different things. Generally, it’s discussed in a financial sense, but audits can refer to internal analysis of operations, external parties reviewing your finances, the analysis of your adherence to compliance requirements, and more. Therefore, it’s essential to understand the types of nonprofit audits.</p>
<h3>External Audit</h3>
<p>External audits are our recommendation to ensure your organization has effective internal controls and financial practices. These nonprofit audits are conducted by third-party organizations and individuals, providing an outsider’s perspective of your organization. The experts at <a href="https://www.jitasagroup.com/">Jitasa</a> can help your nonprofit find an auditor to review your various financial statements and documents to determine the best course of action forward.</p>
<h3>Internal Audit</h3>
<p>Internal audits are conducted by your organization’s management team. The purpose is to discover opportunities for improvement and determine if there are better ways to do things than how they’re currently being done. Essentially, internal nonprofit audits allow your organization to take a step back from everyday tasks and determine the best course of action to move the nonprofit forward.</p>
<h3>Financial Audit</h3>
<p>During these audits, your auditor will review your organization’s various financial statements and reporting to determine opportunities that will help improve the financial health of your organization. They’ll also examine your internal controls to ensure the security of your finances.</p>
<h3>Compliance Audit</h3>
<p>It’s important to remember that financial audits are not the only types of audits you may encounter. Compliance audits review your organization’s adherence to regulations and requirements set by the federal, state, and local governing entities as well as your bylaws and other compliance requirements.</p>
<h3>Operational Audit</h3>
<p>Operational audits assess your organization’s operation systems, productivity, staffing, IT, HR, and other functions. This type of nonprofit audit can provide insight into why your organization is hitting or missing your goals and how to create a more efficient and effective organization.</p>
<p>For the purpose of this article, we’ll primarily focus on external financial audits and how your organization can find an auditor, prepare your documentation, and determine your overall financial health.</p>
<h2 id="financial-audit-timeline">3. Nonprofit Financial Audit Timeline</h2>
<p>The timing of your nonprofit audit heavily depends on the requirements of the organization to which you’re submitting the results. This should be the first place you look to see when it should be conducted.</p>
<p><b>Straightforward deadlines for audit completion are easy for nonprofit professionals to understand. However, what is less understood is the amount of time necessary to prepare, conduct, and incorporate recommended adjustments that come out of the audit process.</b> This can put pressure on the date by which you will want to begin the audit process in order to meet your deadlines.</p>
<p>The timeline below is an example of the potential time that your organization can expect to spend on various activities.</p>
<img src="https://www.jitasagroup.com/images/blog/nonprofit_audit_timeline.png" srcset="https://www.jitasagroup.com/images/blog/nonprofit_audit_timeline.png, https://www.jitasagroup.com/images/blog/nonprofit_audit_timeline@2x.png 2x" alt="Nonprofit audit timeline" class="img-full img-center" />
<ul>
<li><b>4-12 weeks:</b> Select an auditor</li>
<li><b>2-4 weeks:</b> Prepare for your audit</li>
<li><b>2-4 weeks:</b> Conduct the audit</li>
<li><b>Immediately after the audit:</b> Incorporate audit recommendations</li>
</ul>
<p>One industry best practice is to make sure your audit is completed before you <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/form-990-filing/">file your Form 990</a>. Nonprofits need to incorporate the adjustments they make as a result of the audit on their Form 990. Here at <a href="https://www.jitasagroup.com/nonprofit-solutions/nonprofit-tax-services/">Jitasa</a>, we file our clients’ Form 990s after they’ve completed their financial audit.</p>
<p>If it doesn’t look like the audit will be completed before the Form 990 is due, we’ll file a <a href="https://www.irs.gov/pub/irs-pdf/f8868.pdf" target="_blank" rel="noopener noreferrer">Form 8868</a> with the IRS to request an extension for the Form 990 on behalf of the client to make sure this vital audit information can be included.</p>
<h2 id="select-audit-firm">4. Selecting a Nonprofit Auditing Firm</h2>
<p>If your organization has decided to (or is required to) conduct a financial audit, you’ll need to choose an auditing firm that will best suit your needs. You shouldn’t just pick the first auditing firm that you come across. This selection process is very important for your nonprofit to get the most out of the financial audit.</p>
<p><b>The stages that you’ll go through during the auditing firm selection process include: conducting initial research, narrowing your selection, sending an RFP, making a final decision.</b></p>
<h3>Initial Research</h3>
<p>To start your research, you may choose to conduct an initial Google search, ask your <a href="https://www.jitasagroup.com/">accounting firm</a> for recommendations, or collect referrals from other nonprofits. This initial list can be as long as you feel is necessary. The next step will describe the process by which you can narrow your selections according to your organization’s needs and budget.</p>
<h3>Narrow Your Selection</h3>
<p>Once you’ve got your initial list of potential auditing firms, search the firm’s website or set up a call to ask them a few questions, digging deeper into their services. Some of the questions you’ll want answers to include:</p>
<ul>
<li><b>What percentage of the clients are nonprofits?</b> Nonprofit finances differ dramatically from those of for-profits. Therefore, their auditing process also looks different. Make sure that the auditing firm you choose has an extensive background working with nonprofit organizations so that they can fulfill the specific requirements for 501(c)(3) organizations.</li>
<li><b>How long will the nonprofit auditing process take?</b> Can they give you deadlines for each of the activities? This is important to make sure that your organization can meet the deadlines for the audit itself. The last thing you want is for your auditing firm to miss a deadline and make your audit late.</li>
<li><b>What is the fee structure?</b> The fee structure of the auditing firm should be consistent with the scope of the audit activities required. Ask about the fee structure and see if firms will provide you with a quote.</li>
</ul>
<p>The best way to compare the scope and price of different firms is to go through a formal RFP process with your shortlist of firms. We’ll cover that more in-depth next.</p>
<h3>Provide an RFP</h3>
<p>A formal request for proposal (RFP) helps your organization compare your shortlist of auditing firms. This document allows you to request information about the firm and provide information about your organization to see if a partnership with a specific firm will be a good fit for you both. When you put together your RFP for a nonprofit auditing firm, ask for items such as:</p>
<ul>
<li>A description of the firm</li>
<li>Information on who will be working with your nonprofit to complete the audit</li>
<li>An explanation of what sets that firm apart from other nonprofit auditing firms</li>
<li>A statement of the work that will be performed by the firm</li>
<li>The structure of the fees</li>
<li>A list of references (other organizations that have worked with the firm)</li>
</ul>
<p>With an effective RFP, your organization will be able to decide if a firm is truly a good fit for your needs and budget. Call their references and double-check that they have a positive track record with past clients before you make your final choice.</p>
<h3>Make a Final Decision</h3>
<p>Congrats! You’ve decided who you’ll be working with for your nonprofit financial audit. You’ve put in the work and the research necessary to be sure you’re working with a reliable firm that understands your organization’s needs. You know what you’ll be receiving from them and can rest assured that everything is taken care of.</p>
<p>Now, you can start preparing for the audit.</p>
<h2 id="audit-preparation">5. Nonprofit Audit Prep Work</h2>
<p>You’ll need to do some preparation before your nonprofit audit can take place. Usually, auditors will send a PCB (Pull by Client) list that tells your organization what information the auditor will be requesting.</p>
<div class="blog-callout-full">
<h2>Provided by Client (PBC) List Template</h2>
<p>The provided by client list for a nonprofit audit can serve as the foundation that organizations can use to ensure that their financial practices are transparent, accurate, and compliant.</p>
<a href="https://www.jitasagroup.com/nonprofit-resources/nonprofit-free-downloads/nonprofit-pbc-list-template/" class="button white">Free Download</a>
</div>
<p><b>This means you’ll need to pull together some documentation and reports that your auditor will be using during the auditing process. Having these ready to go will help them analyze these documents quickly and find actionable information for improvements.</b></p>
<p>As you finish up the fiscal year, your organization should be sure that all of your bookkeeping and accounting activities are accomplished before you close up the books. Make sure that your organization does the following:</p>
<img src="https://www.jitasagroup.com/images/blog/nonprofit_audit_prep_checklist_2022.png" srcset="https://www.jitasagroup.com/images/blog/nonprofit_audit_prep_checklist_2022.png, https://www.jitasagroup.com/images/blog/nonprofit_audit_prep_checklist_2022@2x.png 2x" alt="Nonprofit audit preparation checklist" class="img-full img-center" />
<ul>
<li><b>Reconcile all bank accounts.</b> It’s recommended that you reconcile your bank accounts on a monthly basis. Reconciling accounts on a regular basis ensures errors are identified and can be attributed to a specific timeframe. Otherwise, errors may accumulate and make future reconciliations more challenging.</li>
<li><b>Review uncleared transactions.</b> If transactions have not cleared, your organization should be aware of it before bank reconciliations. Addressing uncleared transactions will ensure you have an accurate understanding of your cash balance in your financial statements. Plus, it will allow you to follow up about these transactions.</li>
<li><b>Review your nonprofit’s vendors.</b> You should never have several vendors with negative or zero balances. Ensure your organization is effectively applying for vendor credits and review your accounts payable for vendors and your vendor lists to remove any inactive ones.</li>
<li><b>Review your customers’ or members’ payments.</b> If your organization relies on service fees or membership dues to operate, you should make sure there aren’t too many outstanding payments or individuals with negative or zero balances. If there are a lot of negative or zero balances, you should check to ensure receivables are properly applied and correctly recorded.</li>
<li><b>Review undeposited funds.</b> Large amounts of undeposited funds make it challenging to maximize your cash availability. Depositing cash in a timely manner is essential to improve cash flow and it reduces the risk of theft or misappropriation of funds.</li>
<li><b>Look for coding errors.</b> Duplicate entries, entries missing information, and entries with incorrect information can all make a mess of your organization’s accounting statements and reports. Address any discrepancies or errors right away to provide a clear picture of your organization’s finances.</li>
<li><b>Review your capitalization.</b> Nonprofits need to categorize material and immaterial assets properly. It’s important to comb through these assets periodically to ensure updated records. Plus, keeping past immaterial assets that no longer exist creates additional recordkeeping work for your team.</li>
<li><b>Review your account balances.</b> Account balances should accurately reflect the amounts designated in your nonprofit’s various records and financial statements. This accuracy allows users of nonprofit financial statements an additional level of clarity in decision-making processes.</li>
<li><b>Review your accounts receivable and payable.</b> If many payables and receivables have not cleared in the past 90 days, you should immediately review these issues. This will help you determine any cash obligations, potential vendor disputes, and overall cash management strategies.</li>
</ul>
<p>As you’re going through this year-end financial data, keep in mind that if you find discrepancies, your auditor will also likely find the same ones. Do some work ahead of time to figure out what might be off. Assemble supporting documents for balance sheets, as well as clear and accurate records for payments, etc., which help prove that you’re adhering to organizational policy.</p>
<p>If you’ve had an audit before, you might already have access to a past Pulled by Client (PBC) list of items that your auditor will need from you. If you’re new to the audit process, you can request one of these documents from your auditing firm so that you can prepare the information your auditor needs.</p>
<p>PBCs can be anywhere between 40 and 120 items depending on the scope of the nonprofit audit and the complexity of your organization. Some of the items that are <a href="https://www.nonprofitaccountingbasics.org/topic/audit-process" target="_blank" rel="noopener noreferrer">likely to be listed on your PBC</a> include:</p>
<ul>
<li>Copies of bank reconciliations</li>
<li>Bank statements</li>
<li>Investment statements</li>
<li>Schedule of prepaid items</li>
<li>Invoices that have not yet been paid</li>
<li>Schedule of accrued wages and vacation</li>
<li>Details of grants received</li>
<li>Details of fundraising contributions received</li>
<li>Payroll information</li>
</ul>
<p>The best thing your organization can do (if you know you’ll need a nonprofit financial audit) is to keep these items in mind throughout the year. You can keep your data organized and ready to pull into these reports. This way you’ll be able to pull them quickly and easily when it’s time to prepare for your upcoming audit.</p>
<h2 id="after-audit">6. After Your Nonprofit Audit</h2>
<p>After your nonprofit audit is complete, the auditor will create a “letter to management,” also known as the “management letter” which outlines the recommendations the auditor has for the organization to incorporate into their activities and processes.</p>
<p>The management letter contains two parts: material internal control issues and operating inefficiencies. The material internal control issues outline the processes and procedures that need to be adjusted to ensure proper recording of financial information in the future. Meanwhile, operating inefficiencies are more like red flags that indicate potential issues that could arise.</p>
<p>After your audit committee has reviewed the management letter, they should have a discussion with the auditor to gain more information about the audit process and results. In this discussion, the committee may <a href="https://www.councilofnonprofits.org/nonprofit-audit-guide/after-the-audit" target="_blank" rel="noopener noreferrer">ask questions</a> like:</p>
<ul>
<li>Were internal controls for financial reporting adequate?</li>
<li>Could you expand on the most material recommendations from the audit?</li>
<li>Are there any legal or regulatory issues that may impact our finances?</li>
<li>Did you find the management team cooperative?</li>
<li>Are there any items that could be disputed by the IRS?</li>
<li>Did management follow suggestions from past audits?</li>
<li>How does our nonprofit compare with other organizations?</li>
<li>Did you find anything that needs to be brought to the attention of the board?</li>
<li>Do you have further suggestions about ways to improve accounting, reporting, and operating procedures?</li>
</ul>
<p>The auditor isn’t the only one owed a conversation by your team after the audit is complete. You’ll also need to start a conversation with your executive director. In this conversation, you might ask questions like:</p>
<ul>
<li>Are you satisfied with the auditor chosen to conduct the nonprofit financial audit?</li>
<li>Did you notice or hear about any challenges or disputes among staff during the audit?</li>
<li>Was the presence of the auditor disruptive to regular organizational activities?</li>
</ul>
<p>These discussions can help your committee and organization leaders learn more about the audit itself and prepare for any questions that may arise from the board when you present the management letter to them. You should make sure you have as much information upfront as possible to assure board members that you’re taking the audit seriously and determine the next steps coming out of it. </p>
<hr />
<p>Keep in mind that your nonprofit audit isn’t an opportunity for the auditor to sit back and accuse your organization of doing things incorrectly. Rather, it’s an opportunity to learn about how your organization can continue to improve its processes. These improvements may be simple actions that amplify to create a major impact, or they may be more complex changes that will take hard work and focus.</p>
<p>Either way, the purpose of conducting the nonprofit audit is to <i>help</i> your organization. Your auditor is in your corner to help you improve.</p>
<p>However, nonprofit audits aren’t the <i>only</i> way to improve your finances. The more you learn about them, the better you can strategize and enhance your operations. So, continue your research! We recommend continuing your reading with the following resources:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/">Nonprofit Budgeting: Understanding the Basics [+Template]</a>. Nonprofit budgeting is a difficult aspect of your organization’s financial plan. However, with the proper background knowledge and tips for success, you’ll create a concrete annual budget each time.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/form-990-filing/">Form 990 Filing: Your Essential Guide to Nonprofit Taxes</a>. Tax season can be confusing even if you’re not conducting an audit. Learn about nonprofit Form 990s, why they’re necessary, and how to file one in this guide to nonprofit taxes.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/outsourced-accounting-for-nonprofits-top-firms/">Top 10+ Outsourced Nonprofit Accounting Firms</a>. If you think your organization could benefit from having an accountant on your side, consider outsourcing the services to professionals. These top 10+ firms will get your research started.</li>
<li><a href="https://www.jitasagroup.com/nonprofit-resources/nonprofit-financial-ratios/">Nonprofit Financial Ratios: Definitions & Calculators</a>. Trying to get a bird’s eye view of your nonprofit’s finances? Check out our financial ratios guide to review the most common ratios to measure financial performance (and calculate your own!)</li>
</ul>
<div class="blog-callout-media-object img-bottom-right">
<div class="media">
<img src="https://jitasa.imgix.net/blog/callouts/ill_hands_holding_magnifying_glass.png?auto=format&w=260" srcset="https://jitasa.imgix.net/blog/callouts/ill_hands_holding_magnifying_glass.png?auto=format&w=260, https://jitasa.imgix.net/blog/callouts/ill_hands_holding_magnifying_glass.png?auto=format&w=260&dpr=2 2x" alt="Illustration of hands holding a magnifying glass over documents" width="260" height="256" />
</div>
<div class="text">
<h2>Are you conducting a nonprofit financial audit this year?</h2>
<p>A dedicated <b>Jitasa</b> accountant will help you prepare and even refer you to an auditor.</p>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button white">Learn more</a>
</div>
</div>Nonprofit Compensation Policy: What You Need to Know2022-05-18T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-compensation-policy/<p>Nonprofits have a reputation for failing to pay their employees as much as for-profit organizations. Paying less is often considered an attempt to keep the overhead expenses to a minimum. However, the outlook on nonprofit overhead is changing!</p>
<p><b>By providing fair and competitive compensation, nonprofits are able to better retain their employees, which saves money in the long run by decreasing recruitment and onboarding costs.</b></p>
<p>And at the heart of fair compensation lies the need for a nonprofit to implement a <b>nonprofit compensation policy</b>. 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:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-compensation-policy/#what">What is a nonprofit compensation policy?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-compensation-policy/#requirements">Requirements regarding compensation for nonprofit employees</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-compensation-policy/#included">What’s included in your nonprofit compensation policy?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-compensation-policy/#sample">Nonprofit compensation policy sample</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-compensation-policy/#setting">Setting strategic compensation plans for nonprofits</a></li>
</ul>
<p id="what">Before we dive in too deep, let’s make sure we’re all on the same page about the general definition of a nonprofit compensation policy.</p>
<h2>What is a nonprofit compensation policy?</h2>
<p>Nonprofit compensation policies outline the process of deciding how salaries and other compensation benefits are determined for staff members at the organization. Specifically, this policy outlines the procedure to decide the salary of executive members.</p>
<p>Sole proprietors are generally paid through draws on the company income. The income generated through that business is considered to be an extension of the business owner themselves and salaries paid to employees are considered an expense. <b>However, nonprofits operate a bit differently.</b></p>
<p>According to <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accounting/">nonprofit accounting guidelines</a>, 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. Thus, the leaders and other staff members must take a salary that is agreed upon as a part of the organization’s overhead expenses.</p>
<p id="requirements">As it can cause conflict to ask the executive director to choose their own salary at a nonprofit, the nonprofit compensation policy outlines a clear process for doing so without causing any conflicts of interest.</p>
<h2>Requirements regarding compensation for nonprofit employees</h2>
<p>As mentioned earlier, 501(C)(3) requirements for nonprofits mean that the organization cannot use generated revenue for the benefit of the owners or shareholders. Instead, those funds need to be reinvested back into the organization.</p>
<p>Therefore, there are specific requirements for nonprofit compensation set by the IRS that this policy helps to ensure when salaries are determined. It requires that salaries:</p>
<ul>
<li><b>Are considered reasonable, but not excessive.</b> Generally, this is the greatest concern for the executive director’s salary. Unfortunately, there are people who will try to take advantage of the tax exemption status of nonprofits and set up false organizations to earn additional money. This requirement prevents this fraudulent behavior and preserves the integrity of nonprofits like yours.</li>
<li><b>Include benefits and bonuses as a part of overall compensation.</b> When compensation is recorded and reported, it must be done so in its entirety, including any benefits and bonuses provided for staff members. This holistic approach considers all organization expenses relevant to compensation to ensure everything is properly accounted for.</li>
<li><b>Are reported transparently on an annual basis.</b> On your <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/form-990-filing/">nonprofit’s Form 990</a>, you’re required to disclose the salaries of the five highest-paid employees to communicate this compensation with the IRS and ensure they’re in line with the other requirements. Keep in mind that this is also a public document, so the highest-paid employees’ salaries are also publicly available.</li>
</ul>
<p>It’s highly recommended that the board of directors at your nonprofit plays a part in setting compensation for executives. That conversation should be revisited on an annual basis. Then, the executive director can follow the guidelines in the compensation policy to set the salaries of the other staff members.</p>
<h3>Executive director compensation</h3>
<p><b>Your nonprofit compensation policy should have provisions and processes outlined to ensure the compensation of your executive director is reasonable but not excessive.</b></p>
<p>The recommended process to determine the right compensation is to conduct research on the compensation for other executives for other organizations. This comparative research should be done for other executives who work with:</p>
<ul>
<li>Similar types of organizations</li>
<li>Similar-sized organizations</li>
<li>Organizations in the same general region</li>
</ul>
<p>If you were to compare the salary of an executive director at a nationally renowned organization like the Red Cross versus your local dog shelter, you’ll likely find they’re quite different!</p>
<p>Comparative research should be done between similar organizations so that your organization’s executive director can show they’re paid at a reasonable level.</p>
<h3>Penalties for excessive compensation</h3>
<p>When we hear about nonprofits paying their executives a high amount of money, our minds often immediately jump to corruption. However, this corruption is precisely what the IRS and state governments are trying to prevent by creating stipulations around the idea of compensation.</p>
<p>Your nonprofit compensation policy should help prevent your nonprofit avoid any assumptions of corruption because it helps your organization remain compliant.</p>
<p><b>If the IRS <i>does</i> find that an organization has issues with excessive compensation among the highest-paid employees, that nonprofit may face heavy penalties.</b></p>
<p>If the IRS flags potential violations and excessive compensation, the organization may be required to undergo:</p>
<ul>
<li>An official IRS inquiry or a <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-audit/">nonprofit audit</a> to further examine the situation</li>
<li>Further investigation from the state level</li>
<li>Payment of heavy fines</li>
</ul>
<p>To avoid these penalties, your nonprofit should always ensure the processes laid out in your nonprofit compensation policy are clear, follow the rules, and encourage you to leave a paper trail that you can use to back up your decisions to the IRS if necessary.</p>
<p id="included">Penalties don’t only come from the IRS. If you overpay your staff members, you likely don’t have the funds to effectively run your nonprofit’s programming. Calculate your nonprofit’s program efficiency ratio. 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 the balance between paying your employees what they deserve and ensuring you have the funds to continue pursuing your mission.</p>
<h2>What’s included in your nonprofit compensation policy?</h2>
<p>Different organizations often have slightly different items in their compensation policies, but they generally have a common outline to them. A nonprofit compensation policy often includes the following information:</p>
<ul>
<li><b>Overview or philosophy:</b> Most nonprofits include an overview section on the first page of their policy, discussing the purpose of the document, how to read it, and sometimes the values the organization holds regarding compensation in general.</li>
<li><b>Information about who is affected by the policy:</b> Some organizations include information about compensation for all of their staff members in their compensation policy while others simply provide information about their executives. This section of your policy will cover the description of the roles that are covered by the policy process.</li>
<li><b>Compensation structure and elements:</b> Because your Form 990 requires you to report all aspects of your compensation, your organization can 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, salary.</li>
<li><b>Procedure for approving compensation:</b> As we mentioned, you should outline the process of how you’ll compare compensation information from other organization executives and how board members are involved in the process. For instance, if you require a vote on final compensation decisions, you might require two-thirds of board members to agree or a simple majority.</li>
<li><b>Comparability data information:</b> This section will 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.</li>
<li><b>Schedule of compensation deliberations:</b> Compensation isn’t a stagnant item for your organization. Instead, it undergoes changes and adjustments with inflation, organizational growth, and other factors. Therefore, your organization should list a general schedule for how often you’ll review compensation for relevant members.</li>
</ul>
<p>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.</p>
<h3>Nonprofit compensation and conflict of interest policies</h3>
<p>In addition to your organization’s nonprofit compensation policy, you should also make sure to have your conflict of interest policy. While this is a different policy, it does overlap with our compensation policy as both ensure organizations remain compliant and prevent fraud.</p>
<p><b>Conflict of interest policies are set to prevent leaders from gaining individual benefits from the organization’s public funds.</b></p>
<p>For example, if an executive also works as a consultant for another company and signs the nonprofit up with services from that other company. If the executive gains financially from the agreement, it would likely be considered a conflict of interest.</p>
<p>If anything goes wrong or the IRS identifies a risk of overcompensation, the first thing they look for is any conflict of interest at the nonprofit.</p>
<h2 id="sample">Nonprofit Compensation Policy Sample</h2>
<p>Now that you understand what is included in your nonprofit compensation policy, you might be asking, “but what does this document <i>actually</i> look like?”</p>
<p>Below is a template that shows the general outline of the policy. Keep in mind that this template shows your policy all on a single page while they’re actually usually much longer than one page. Don’t fret if you draw up a multi-page document for this compensation policy.</p>
<div class="text-center">
<img alt="This nonprofit compensation policy template outlines the elements listed in the last section describing what should be included in your policy." src="https://jitasa.imgix.net/blog/nonprofit_compensation_policy_image.png?auto=format&w=700" width="700" height="800" />
</div>
<p>If you’d like to see other versions of nonprofit compensation policies, check out the following examples:</p>
<ul>
<li><a href="https://fullercenter.org/manual-compensation-policy-template/" target="_blank" rel="noopener noreferrer">The Fuller Center Manual Compensation Policy Template</a></li>
<li><a href="https://studylib.net/doc/8542014/sample-policy---national-council-of-nonprofits" target="_blank" rel="noopener noreferrer">Sample Nonprofit Compensation Policy from National Council of Nonprofits</a></li>
</ul>
<p id="setting">Keep in mind 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.</p>
<h2>Setting strategic compensation plans for nonprofits</h2>
<p>In a study cited in a <a href="https://www.forbes.com/sites/chrisstrub/2020/02/10/nonprofithr/" target="_blank" rel="noopener noreferrer">Forbes article</a>, 45% of nonprofit staff members who responded indicated that they would be looking for new employment over the next 5 years. In addition, 49% of those who responded shared that the organization didn’t pay enough and 19% shared that nonprofits don’t offer long-term career opportunities.</p>
<p>This creates a huge problem for the nonprofit sector as employee retention is vital for organizational growth and success. Therefore, as you’re considering your nonprofit compensation policy, don’t forget to consider your organization's overall staff retention strategy as well.</p>
<p>Remind staff members of the holistic approach to compensation such as the benefits you offer, paid time off, culture, and salary. Be sure each element of this compensation package is competitive with other positions they could be looking at.</p>
<p>In addition, when staff members do leave, be sure to conduct an exit interview so you can ask staff members why they decided to leave. Include compensation questions in this interview so you can see where your organization falls in the total compensation offered in comparison to your competitors.</p>
<h2>Wrapping Up</h2>
<p>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 enough while preventing excessive compensation among your staff, especially your executives.</p>
<p>If you need help setting compensation policies to remain compliant, consider discussing the matter with nonprofit finance professionals. Our <a href="https://www.jitasagroup.com/nonprofit-solutions/cfo-services/">Jitasa J-SAT team</a> 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.</p>
<p>To learn more about compensation and general nonprofit financial management, check out the following resources:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-management/">Nonprofit Financial Management | Best Practices to Know</a>. Managing your finances can seem challenging, but this guide will walk you through the best practices that all nonprofit teams need to know.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-activities/">Nonprofit Statement of Activities | A Comprehensive Guide</a>. A key financial document where you’ll record your compensation for employees is your statement of activities. See why it’s so important in this comprehensive article.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-audit/">Nonprofit Audits: A Complete Guide to Financial Auditing</a>. Over-compensating executives can result in an audit, but audits aren’t an inherently bad thing! Learn more about financial auditing for nonprofits.</li>
</ul>
4 Types of Nonprofit Donor Analytics and What to Do With Them2022-05-16T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/donor-analytics/<p>Simple data sitting in your nonprofit’s database and financial systems don’t constitute <i>analytics</i>. Rather, donor analytics encompasses the conclusions you can draw from data and how you can apply those insights to better manage your organization. When you pull donor analytics for your organization, it can help you identify trends and make decisions that result in better <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-management/">financial management</a> at your nonprofit.</p>
<p>There are several different types of analytics that your nonprofit can benefit from. That’s what we’ll discuss in this article: the types of analytics you can pull for your nonprofit and how additional insights from these analytics can result in financial stability for your organization.</p>
<p>We’ll cover the following types of donor analytics for nonprofits:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/donor-analytics/#giving">Donor Giving Analytics</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/donor-analytics/#engagement">Donor Engagement Analytics</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/donor-analytics/#demographic">Donor Demographic Analytics</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/donor-analytics/#predictive">Predictive Donor Analytics</a></li>
</ul>
<p id="giving">Discerning insights from your donor analytics is the key to unlocking your fundraising strategy and raising more. With the resulting additional financial flexibility, your nonprofit can better pursue its mission, serve your constituents, and expand its services. Let’s dive in!</p>
<div class="blog-callout-full full-width-text">
<h2>See how Jitasa’s JSAT team can help you better use donor analytics.</h2>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button white">Contact Us</a>
</div>
<h2>Donor Giving Analytics</h2>
<p>Understanding donor analytics about giving patterns allows your nonprofit to better understand your supporters’ donation habits. This can help guide your communications and make it easier to build relationships with your supporters.</p>
<p>You should collect data points for your donor giving analytics for each of your supporters in their individual donor profiles in your nonprofit CRM. The data that you’ll rely on for these insights include the following:</p>
<div class="text-center">
<img alt="To learn more about donor giving analytics, your nonprofit should collect these data points." src="https://jitasa.imgix.net/blog/donor_analytics_giving_data.png?auto=format&w=500" width="500" height="400" />
</div>
<ul>
<li><b>Past donation amounts.</b> By understanding the past donation amounts of individual donors, you can see what their average donation amount is and if it has increased or decreased. When it comes to asking for donations in the future, you’ll have an idea of the general gift amount the supporter is willing to contribute.</li>
<li><b>Frequency of giving.</b> Giving frequency of individual supporters can help you identify opportunities to make future asks. If a supporter donates sporadically throughout the year, you might be able to ask them to get involved with your recurring giving program, ensuring a sustainable source of income. Or, if you know a supporter tends to give once at the year’s end, you’ll know to reach them with your end-of-year campaign message.</li>
<li><b>Recency of giving.</b> If a donor usually gives multiple times per year but hasn’t donated at all this year, they may be in danger of lapsing. If they haven’t donated in a long time, you can reach out with a message that says “we miss you!” to recapture their support. On the flip side, if a donor just gave to your organization, it can seem greedy and out of touch if you send them another solicitation the following week.</li>
<li><b>Lifetime value.</b> By collecting donation information about each of your donors, you can better understand the efficiency of your fundraising efforts per donor. While you’ll calculate the fundraising efficiency ratio for your campaigns at large, boiling down your ROI per supporter can help you better understand who your most valuable donors are.</li>
</ul>
<p><b>By understanding the data about your specific donors and their giving history, you can draw insights that will help you guide your fundraising asks and offer opportunities to get them more involved.</b></p>
<p>Consider for example a mid-tier supporter who gives multiple times per year to your nonprofit. Let’s say this supporter donates about $2,000 three times per year. During your upcoming capital campaign, you might try to increase their annual gift by providing a message such as the following:</p>
<p><i>“Thank you for all of your generous support over the past year! We are launching a new program now that will help x, y, and z. You can be a part of this exciting initiative if consider committing $7,000 to this single campaign this year.”</i></p>
<p>In addition to helping with individual donor relationships, tracking donor analytics related to giving allow your nonprofit to come up with new data points like your average donation amount and total revenue from individual donors. You can use this information to create a <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/">more accurate budget</a> in the future.</p>
<p id="engagement">Plus, you can see the fluctuations in your fundraising data over the years, allowing your nonprofit to better predict revenue trends. For example, you might find that major donations decrease leading up to elections because many supporters choose to increase their donations to political campaigns rather than charitable contributions.</p>
<h2>Donor Engagement Analytics</h2>
<p>Donating to your organization isn’t the only opportunity supporters have to engage with your mission. Just because a supporter hasn’t donated in a while doesn’t mean they’re not paying attention or haven’t contributed to your cause in another way.</p>
<p>Collect broader data about your supporters’ more general engagement with marketing efforts and alternative giving channels. Some of the data to collect per donor includes:</p>
<div class="text-center">
<img alt="To learn more about donor engagement analytics, you should collect information about the following data points." src="https://jitasa.imgix.net/blog/donor_analytics_engagement.png?auto=format&w=500" width="500" height="400" />
</div>
[Alt text: To learn more about donor engagement analytics, you should collect information about the following data points.]
<ul>
<li><b>Email open rates.</b> The average email open rate for nonprofits rests <a href="https://www.campaignmonitor.com/resources/guides/email-marketing-benchmarks/" target="_blank" rel="noopener noreferrer">right around 26.6%</a>. Even if supporters haven’t donated to your cause, they may be keeping up with your emails! Check open rates and click-through rates per supporter to see how they engage with your email.</li>
<li><b>Event attendance.</b> Donors that attend events are dedicated to your campaign. Therefore, your nonprofit should be sure to track which individual donors attend your event as well as your event attendance as a whole. For your hybrid events, track who attends in-person versus virtually. That way, you can solicit feedback and better understand how each supporter engages.</li>
<li><b>Volunteer hours.</b> When supporters fall on hard times or simply want to supplement their contributions, they may decide to volunteer for your cause. Keep track of volunteer hours and view them as contributions of time rather than just another engagement metric. In addition, you might be able to reach out to your volunteers and ask them to check their eligibility for <a href="https://www.crowd101.com/volunteer-grants/" target="_blank" rel="noopener noreferrer">volunteer grants</a> from their employers.</li>
<li><b>In-kind donations.</b> Similar to volunteer hours, <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/in-kind-donations/">in-kind donations</a> contributed by supporters can be just as valuable as your monetary contributions and are assigned values as a part of your accounting processes. Supporters who haven’t contributed monetarily may still have provided in-kind contributions to support your cause.</li>
<li><b>Feedback provided.</b> Even negative feedback can be a sign that a supporter is engaged with your cause. Supporters only provide feedback for causes they care about, so sharing their opinions is a sign they want your organization to improve upon something.</li>
</ul>
<p><b>From this information, your nonprofit can draw conclusions about your organization’s strategies and effectiveness in engaging your supporters.</b></p>
<p>Some of the insights you might determine from your donor analytics regarding engagement include:</p>
<ul>
<li><b>Optimization opportunities</b> for your engagement strategies. You might employ A/B testing to determine the effectiveness of your emails, registration pages, and other opportunities. Or, you may solicit feedback from supporters involved with various engagement opportunities to see how you can improve.</li>
<li><b>Prevent donors from lapsing</b> if they become unengaged in your various activities (stop attending events, reading emails, or contributing to campaigns, for example). You can reach out to them and try to reengage them before they lapse entirely. After all, lapsed donors are only recaptured about <a href="https://bloomerang.co/blog/donor-retention/" target="_blank" rel="noopener noreferrer">4% of the time</a>, so you should try to save these supporters before they drop off.</li>
<li><b>Show appreciation for non-monetary contributions</b> provided for your nonprofit. In-kind donations and volunteers are often not shown as much appreciation as your donors are. However, in-kind gifts have a monetary value that you should find for your accounting standards, and volunteer hours are valued at an average of <a href="https://independentsector.org/value-of-volunteer-time-2022/" target="_blank" rel="noopener noreferrer">$28.54 per hour</a>.</li>
</ul>
<p id="demographic">When supporters are engaged in more than one way with your nonprofit, they are not only more likely to be retained for the long haul, but they also provide value past monetary donations. Track individual engagement metrics per supporter, then look at the big picture of your donor analytics regarding engagement to see large-scale opportunities moving forward.</p>
<h2>Donor Demographic Analytics</h2>
<p>When your audience reaches out to acquire new supporters, it’s helpful to understand the demographics of your current base of support. It’s more likely that you’ll be able to reach those who share similar qualities with your current supporters than someone entirely different. For instance, a nonprofit that supports young children will likely have many supporters comprised of young parents and families.</p>
<p><b>Targeting your outreach using these types of donor analytics can help lower acquisition costs and improve your return on investment when it comes to finding new supporters.</b></p>
<p>Here are some of the demographic data you should track about your supporters:</p>
<div class="text-center">
<img alt="To gain insights about your donor analytics regarding demographics, you’ll need to collect these data points." src="https://jitasa.imgix.net/blog/donor_analytics_demographic.png?auto=format&w=500" width="500" height="400" />
</div>
<ul>
<li><b>Age.</b> Your average age of supporters can help provide insights regarding how your organization can best reach out to your target audience (it’s unlikely that your elderly audience will be reachable on TikTok). Plus, it can help you determine how to frame your marketing campaigns to best engage your target readership.</li>
<li><b>Location.</b> Location is essential to track for a couple of reasons. One, you can estimate how many locals you have as supporters to attend in-person event opportunities and how much you should invest in virtual options. Two, fundraising in different states requires your nonprofit to <a href="https://labyrinthinc.com/charitable-solicitation-registration/" target="_blank" rel="noopener noreferrer">register with the state</a> in which you raise money.</li>
<li><b>Family members.</b> When you understand the households of your supporters, your nonprofit can reach out to the entire household instead of individual members. This is especially helpful when it comes to sending direct mail as you can cut down on the cost of mailing invitations, annual reports, etc.</li>
<li><b>Employer.</b> When supporters work for the same employer, you might be able to discuss corporate philanthropy options with the employing company. This employer may provide <a href="https://doublethedonation.com/tips/corporate-matching-gift-programs/" target="_blank" rel="noopener noreferrer">matching gift opportunities</a>, volunteer days, or other opportunities to get more of their staff members involved.</li>
<li><b>Relevant interests.</b> Specific interests can become the basis of effective nonprofit donor segments. This allows you to target your supporters based on what motivates and interests them relevant to your cause.</li>
</ul>
<p>As mentioned, donor analytics covering your audience demographics is particularly helpful when it comes to marketing outreach to acquire new supporters as well as marketing to existing ones. Consider for example, how marketing on social media platforms works. You can narrow your target audience by recorded interests, age, gender, and more when you run an advertisement campaign for your organization.</p>
<p id="predictive">In addition, these donor analytics are also helpful when it comes to creating donor segments in your existing database to run marketing and fundraising campaigns for your current audience. For example, an animal shelter may collect information about which of their supporters prefer cats and which supporters prefer dogs. Then, they can reach out with very different messages for each segment.</p>
<h2>Predictive Donor Analytics</h2>
<p>Also in your donor database, you can save essential information about your supporters that can help you predict their potential future involvement with your cause. These donor analytics primarily comes from prospect research data that your organization can pull about supporters.</p>
<p>Predictive donor analytics come from the following types of data:</p>
<div class="text-center">
<img alt="To predict the potential donations from supporters, you’ll need to analyze donor analytics insights pulled from prospect research." src="https://jitasa.imgix.net/blog/donor_analytics_predictive.png?auto=format&w=500" width="400" height="400" />
</div>
<ul>
<li><b>Wealth data.</b> These metrics provide insight into the wealth of your supporters, providing insight as to the money they could potentially give to your nonprofit. Here are some of the data points you can examine:</li>
<ul>
<li>Real estate ownership</li>
<li>Stock ownership</li>
<li>Political giving</li>
</ul>
</ul>
<ul>
<li><b>Philanthropic data.</b> These metrics provide information about your supporters’ philanthropic behavior, allowing you to predict their propensity to give to your nonprofit. Here are some of the data points you can examine:</li>
<ul>
<li>Past gifts to your nonprofit or to other similar organizations</li>
<li>Volunteer hours worked at your nonprofit or similar organizations</li>
<li>Memberships on your or other nonprofit boards</li>
<li>Recency, frequency, and monetary value of gifts</li>
</ul>
</ul>
<p>Generally, this data is collected to help you find major gift prospects for your cause. About <a href="https://www.donorsearch.net/resources/major-gifts-guide/" target="_blank" rel="noopener noreferrer">88% of nonprofit funds</a> come from the top 12% of donors, showing how important these contributions are. If you have data that indicates someone has both the potential wealth and propensity to donate, they could be a good candidate for a major donation.</p>
<p>Insights from these donor analytics can also help you determine the best fundraising ask to solicit from your supporters or help determine the gift levels at which to enter into conversations with your supporters. For example, if you know a supporter gave $5,000 to another organization, you might come into a conversation with them asking for the same amount. Then, ask for $3,500 if they refuse the larger gift.</p>
<p>When you’re able to plan out your fundraising asks with more accuracy <i>and</i> with the intention of maximizing your ask, you can better predict your funding and earn more funding. This makes for better budgeting in your organization and additional flexibility in your revenue. This flexibility leads to more liquidity and propensity for risk at your organization, which you’ll see reflected in your <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-financial-position/">statement of financial position</a>, and creating additional opportunities to grow.</p>
<h2>Wrapping Up</h2>
<p>The data used to drive insights from your nonprofit’s donor analytics is essential information for your organization to determine the key performance indicators for your fundraising strategy. Not only can you use them to determine these KPIs, but you can also find metrics to support your pursuit of these goals.</p>
<p>If you’re looking for an opportunity to use your own donor analytics to determine the right KPIs to increase your nonprofit’s revenue, the experts here at <a href="https://www.jitasagroup.com/">Jitasa</a> can help! <a href="https://www.jitasagroup.com/nonprofit-solutions/cfo-services/">Our JSAT team</a> will work with your nonprofit to create a budget, determine a strategy, and uncover opportunities to increase your funding. When you do, our team will also help you allocate those resources and <a href="https://www.jitasagroup.com/nonprofit-solutions/nonprofit-bookkeeping-accounting-services/">track your finances</a> to continue supporting organizational growth.</p>
<p>If you’re interested in learning more about donor analytics and nonprofit finances, check out these additional resources:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/form-990-filing/">Form 990 Filing: Your Essential Guide to Nonprofit Taxes.</a> Each year, you’ll need to report your earnings to the IRS, learn more about this process and how new nonprofit growth affects it with our File 990 guide.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/">Nonprofit Budgeting: Understand the Basics + Template</a>. One of the benefits of collecting data and interpreting donor analytics is that you can have a more sustainable income. See how to use this information to create the best budget for your nonprofit.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-audit/">Nonprofit Audits: A Complete Guide to Financial Auditing</a>. Also with new growth and enhanced strategies comes the potential for a financial audit. Far from a scary process, this guide walks you through how an audit can actually help your organization continue to grow.</li>
</ul>
<div class="blog-callout-media-object">
<div class="media">
<img src="https://jitasa.imgix.net/blog/flames_white_circle.png?auto=format&w=196&q=70" srcset="https://jitasa.imgix.net/blog/flames_white_circle.png?auto=format&w=196&q=70, https://jitasa.imgix.net/blog/flames_white_circle.png?auto=format&w=196&q=70&dpr=2 2x" alt="Jitasa Logo" width="196" height="196" />
</div>
<div class="text">
<h2>Start better leveraging your donor analytics today!</h2>
<p>See how our JSAT team can help you measure and use your data.</p>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button white">Contact Us</a>
</div>
</div>Fund Accounting 101: The Basics and Best Practices2022-04-27T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/fund-accounting/<p>Those who repeat the mantra “accounting is black-and-white” are wrong because not all accounting is the same. It changes based on the industry in which the accountant operates. This is because the financial goals change per industry and therefore the <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-management/">management of those finances</a> will also change.</p>
<p>While for-profit companies are focused on generating a profit (as indicated in the name), other not-for-profit organizations like nonprofits, government agencies, associations, and churches leverage a type of accounting called <b>fund accounting</b>. This financial management system focuses on leveraging finances to be as accountable to the revenue generation sources as possible and to advance the organization rather than generate a profit.</p>
<p>In this guide, we’ll discuss the essentials of fund accounting, covering the common questions associated with it. We’ll cover the following:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/fund-accounting/#what%20is">What is fund accounting?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/fund-accounting/#how%20does">How does fund accounting differ from regular accounting?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/fund-accounting/#use">What organizations use fund accounting?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/fund-accounting/#why%20is">Why is fund accounting important?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/fund-accounting/#what%20are">What are the “funds” in fund accounting?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/fund-accounting/#how%20do">How do organizations get started with fund accounting?</a></li>
</ul>
<p id="what is">Ready to get started with this discussion on fund accounting? Let’s dive in!</p>
<div class="blog-callout-full full-width-text">
<h2>Need help getting your organization set up with fund accounting? Jitasa can help!</h2>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button white">Learn More</a>
</div>
<h2>What is fund accounting?</h2>
<p><b>Fund accounting is a system of accounting used to track the amount of money allocated to various operations at an organization.</b> It’s a system designed to ensure funds are used productively and for the benefit of the organization as a whole.</p>
<p>This is a useful method of accounting when all of the funds an organization earns are recycled and reinvested back into the organization itself rather than collected as a profit.</p>
<p id="how does">For example, when a nonprofit organization earns a $100 donation from a donor, that money can be used to fund the operational costs of the organization, be dedicated toward a specific program, or be used to help host the next fundraising event. The money is not collected as profit.</p>
<h2>How does fund accounting differ from regular accounting?</h2>
<p>Fund accounting is unique to organizations that do not aim to earn a profit. The element that makes it truly unique is that it focuses on ensuring the “accountability” of the organization because these organizations generally rely on the generous contributions of supporters (donors at a nonprofit, congregation at a church, etc).</p>
<p>Some of these supporters may give a large gift to organizations, but require the money to be maintained, invested, and only the interest spent on specific projects. These are referred to as <b>restricted gifts</b> and they must be honored by the organization that agrees to the terms.</p>
<p>For example, a major donor at a church may ask their contribution to be dedicated to the mission trip scholarship program, allowing members of the youth group to attend mission trips.</p>
<p id="use">When these organizations encounter <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-audit/">financial audits</a>, their accounting documents are checked to ensure that the funds they accepted are dedicated to the proper projects and causes. Essentially, this is designed to ensure organizations have remained accountable to those who ask to restrict funding.</p>
<h2>What organizations use fund accounting?</h2>
<p>Fund accounting is generally used by any organization that focuses on accountability rather than profitability. This includes nonprofit organizations, government entities, churches, and associations.</p>
<img alt="Nonprofits, governments, and churches are the primary organizations that use fund accounting to manage their finances." src="https://jitasa.imgix.net/blog/fund_accounting_organizations.png?auto=format&w=700" width="700" height="300" />
<h3>Nonprofit organizations</h3>
<p>These <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accounting/">501(C)(3) organizations</a> are the primary type of organization discussed in matters of fund accounting.</p>
<p>Charitable organizations rely on contributions from supporters, grants from numerous organizations, federal and state funding, and sponsorships. These generous contributions all play an important part in keeping the organization afloat and working toward the mission.</p>
<p>Nonprofits must restrict their funding to keep track of how their monies are used based on who contributed those funds and how they were restricted. For example, organizations that rely heavily on grants likely have specific deadlines and requirements they need to meet for each grant. Therefore, they use fund accounting to keep track of those deadlines in addition to tracking donor-restricted funds.</p>
<h3>Governments</h3>
<p>Governing entities are not focused on generating a profit. They need to keep a tight grip on their finances to determine how funds are leveraged for a variety of purposes and different projects. This is true for all levels of government—federal, state, and local.</p>
<p>These governments must stay true to the standards set by the Governmental Accounting Standards Board (GASB). This board has the responsibility of setting financial standards for state and local governments. Its purpose is essentially the same as the Financial Accounting Standards Board (FASB), which holds the same responsibilities, but for non-governmental organizations.</p>
<p>Fund accounting helps government entities keep accurate and tight control over their financial information, with a particular focus on the remaining resources. This helps prevent general overspending or overspending in areas outside of the set budget for the government.</p>
<h3>Churches</h3>
<p>Consider what all the church needs to pay for out of their bank account. They have a general fund, a missions fund, and a building fund:</p>
<ul>
<li>The general fund covers most of the expenses incurred by the church, allowing it to continue operating.</li>
<li>The missions fund helps cover the philanthropic good the church does in the community and world.</li>
<li>The building fund covers building expenses like plumbing repairs or landscaping.</li>
</ul>
<p>Because these expenses fall somewhat neatly into different categories and because the church is (like nonprofits and governments) working to keep a close eye on how their finances are used, fund accounting is the perfect system of financial management and reporting for churches.</p>
<p id="why is">Churches also run into fund restrictions and grant management needs, requiring them to remain accountable to their generous funders. Therefore, <a href="https://www.jitasagroup.com/about/partnerships/churches/">church accounting</a> is similar to nonprofit accounting in the need to organize finances into funds.</p>
<h2>Why is fund accounting important?</h2>
<p>Imagine you purchase a new pair of shoes for $50. At the time of the purchase, you’re primarily excited about the fact that they look good, are comfortable, and match an outfit you look forward to wearing to a big event.</p>
<p>You’re probably not thinking as much about where you’re money went when you purchased the shoes. You may have checked up on the company to be sure they treat their employees well and have a positive community impact, but this just means you wanted to support a good company. If you hear that the $50 is going to help pay the salary of an employee, you’ll probably be happy that it’s not going into the pocket of the CEO.</p>
<p>Now, imagine you give a $50 donation to a nonprofit organization. You might be more interested in how that money is used because you gave it out of the goodness of your heart. You want to make sure that money will help people in need. You may even be less excited to hear that the money was used to help pay someone’s salary.</p>
<p><b>Fund accounting is important because it helps organizations appeal to these supporters who want to better understand where their money is going and how it’s helping.</b></p>
<p>Fund accounting helps organizations stay accountable in several ways:</p>
<ul>
<li><b>It helps them keep a tight grip on where money is going.</b> If a nonprofit needs to dedicate $25,000 toward project A, $15,000 toward project B, and $10,000 to project C, they need to make sure that all funding is properly allocated as such. If they have a grant covering $20,000 for project A, they only need to allocate $5,000 more to that project and other fundraising revenue can be allocated toward B and C. This can be hard to keep track of if the system of accounting is not primarily focused on the allocation of funds.</li>
<li><b>It helps them report their finances to the IRS.</b> 501(C)(3) organizations are required to report their finances and how their funds are used to the IRS. For nonprofits, this is completed through the <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/form-990-filing/">Form 990</a>. It’s important to keep a close eye on how resources are used for this type of reporting because it’s what allows some organizations to remain tax-exempt from year to year.</li>
<li><b>It helps them honor any restrictions placed on assets.</b> When people give to organizations and place restrictions on those gifts, they expect those restrictions to be honored. More than that, organizations want to honor them. But if the system is unorganized and emphasis is not placed on how monies are used, it’s challenging to ensure all money is used in the way promised.</li>
<li><b>It helps them ensure they have the funds necessary to continue operating.</b> Fund accounting allows nonprofits to clearly understand how much of their funding is spent on various fundraising, program, and operational expenses. This allows the organization to make more accurate budgets and ensure they have the funds necessary to continue operating in the future.</li>
</ul>
<p id="what are">Fund accounting allows organizations to allocate their funds based on the liquid assets in their system. Restricted monies, grants, and other funds are less liquid than other monies at the organization. Therefore, they can’t be used as easily as other funds to help the organization operate.</p>
<h2>What are the “funds” in fund accounting?</h2>
<p>Fund accounting allows your organization to separate your revenue into buckets, including the restricted, unrestricted, and temporarily restricted funds:</p>
<ul>
<li><b>Restricted funds</b> are those that must be maintained for a specific purpose at the organization. For instance, an endowment fund must be maintained, but the interest can be spent on specific projects.</li>
<li><b>Unrestricted funds</b> are those that can be used for whatever purpose has the greatest need at the organization. Monies spent on operating expenses (salaries, rent, utilities, etc.) typically come from the unrestricted funds at an organization.</li>
<li><b>Temporarily restricted funds</b> were received with a donor-imposed restriction that will be satisfied at a specific point in time in the future.</li>
</ul>
<p>When contributions are made to nonprofits, they are recorded in the <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-chart-of-accounts/">chart of accounts</a> based on where they came from and how they’re used. The organization assigns numbered classifications for funds. For example, contributions may be listed under the 4000s, with individual contributions listed as 4100s and in-kind contributions listed as 4200s.</p>
<p>This breakdown helps keep the funds all organized. This organization and allocation also acts as the basis for various statements that help nonprofits make financial decisions. For example, the following <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-financial-position/">statement of financial position</a> breaks down monies by liabilities and assets as well as restricted and unrestricted funds.</p>
<img alt="Your statement of financial position is a key statement to break down the use of funds in the fund accounting system." src="https://jitasa.imgix.net/blog/nonprofit_financial_management_statement_of_financial_position_example.png?auto=format&w=600" width="600" height="700" />
<p id="how do">This particular statement allows organizations to see their liquidity because it takes restrictions into account when measuring net assets. Other statements also take these restrictions and fund accounting specifics into account, allowing the organization to further analyze its finances and make smarter financial decisions.</p>
<div class="blog-callout-full">
<h2>Nonprofit Statement of Financial Activities Template</h2>
<p>This template provides a clear and organized way to present financial information, including revenues, expenses, and net change in financial position, by class, location, and project.</p>
<a href="https://www.jitasagroup.com/nonprofit-resources/nonprofit-free-downloads/nonprofit-statement-of-financial-activities-template/" class="button white">Free Download</a>
</div>
<h2>How do organizations get started with fund accounting?</h2>
<p>Smaller organizations often don’t have the resources to find a dedicated fund accounting professional. Therefore, they end up relying on their executive director to complete all of their financial management tasks. However, these individuals likely didn’t enter the field the crunch numbers and have other things to worry about than learning how to do fund accounting.</p>
<p>For most organizations, the best way to get started and ensure fund accounting is completed correctly is by <a href="https://www.jitasagroup.com/nonprofit-solutions/nonprofit-bookkeeping-accounting-services/">outsourcing their needs</a> to a dedicated accounting firm that understands (and specializes in) the intricacies of fund accounting.</p>
<p>By putting your accounting needs in the hands of fund accounting experts, your organization will ensure you meet all of the Generally Accepted Accounting Principles (GAAP) and FASB requirements.</p>
<p><b>Here at Jitasa, we’d be honored to be those experts for your organization!</b></p>
<p>Our team works with nonprofits, churches, and other organizations that leverage fund accounting, helping them maintain an organized accounting system and answering any of their questions. We focus on helping these organizations get back to their missions while we take care of ensuring they’re in a financially sound position.</p>
<p><a href="https://www.jitasagroup.com/services-quote-request/">Get a quote</a> to see how affordable it is to work with dedicated experts!</p>
<h2>Wrapping Up</h2>
<p>Fund accounting allows organizations to ensure they remain accountable to their funders and to their missions. It’s a system of organization that makes it easy for organizations to track their funding, how it’s allocated, and how they can best keep the organization operating at the highest caliber.</p>
<p>If you’re curious to learn more about fund accounting and financial management for organizations that leverage this type of accounting, check out these additional resources:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accounting/">Nonprofit Accounting: A Guide to Basics and Best Practices</a>. Nonprofits leverage fund accounting to help keep all of their finances straight. Learn more about how they use it and what it looks like in this guide.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-management/">Nonprofit Financial Management | Best Practices to Know</a>. Want to learn more about general financial management in the nonprofit sector? Check out this comprehensive guide on the subject.</li>
<li><a href="https://www.jitasagroup.com/nonprofit-solutions/nonprofit-bookkeeping-accounting-services/">Bookkeeping and Accounting Services Exclusively for Nonprofits</a>. See what services Jitasa offers and how our team can help you implement fund accounting</li>
</ul>
<div class="blog-callout-media-object">
<div class="media">
<img src="https://jitasa.imgix.net/blog/flames_white_circle.png?auto=format&w=196&q=70" srcset="https://jitasa.imgix.net/blog/flames_white_circle.png?auto=format&w=196&q=70, https://jitasa.imgix.net/blog/flames_white_circle.png?auto=format&w=196&q=70&dpr=2 2x" alt="Jitasa Logo" width="196" height="196" />
</div>
<div class="text">
<h2>Fund accounting can seem complicated for organizations just getting started.</h2>
<p>But our Jitasa experts can make it easy!</p>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button white">Learn more</a>
</div>
</div>10 Tips To Create a Profitable Nonprofit Fundraiser2022-03-01T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/10-tips-to-create-an-unforgettable-and-profitable-fundraiser/<p>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?</p>
<p>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:</p>
<ol>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/10-tips-to-create-an-unforgettable-and-profitable-fundraiser/#start">Start with a plan and gather your team.</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/10-tips-to-create-an-unforgettable-and-profitable-fundraiser/#get">Get to know your audience.</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/10-tips-to-create-an-unforgettable-and-profitable-fundraiser/#recruit">Recruit great even sponsors.</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/10-tips-to-create-an-unforgettable-and-profitable-fundraiser/#make">Make it simple to participate and donate.</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/10-tips-to-create-an-unforgettable-and-profitable-fundraiser/#offer">Offer hybrid and virtual options to include everyone.</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/10-tips-to-create-an-unforgettable-and-profitable-fundraiser/#generate">Generate hype on social media.</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/10-tips-to-create-an-unforgettable-and-profitable-fundraiser/#engage">Engage your supporters and have fun with gamification elements.</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/10-tips-to-create-an-unforgettable-and-profitable-fundraiser/#host">Host an unforgettable event.</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/10-tips-to-create-an-unforgettable-and-profitable-fundraiser/#stay">Stay in touch with your donors.</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/10-tips-to-create-an-unforgettable-and-profitable-fundraiser/#show">Show your donors how they are making an impact.</a></li>
</ol>
<p>Get started to learn more about how your organization can smash your fundraising goals!</p>
<h2 id="start">1. Start with a plan and gather your team.</h2>
<p>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:</p>
<ul>
<li>Handle various planning tasks and all of the event logistics.</li>
<li>Determine your fundraising goals and budget together: Fundraising events with targets raise more than those without.</li>
<li>Brainstorm and create a roadmap to reach your goals (financial and non-financial).</li>
<li>Work out where you can implement diverse <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-revenue-streams-to-diversify-proceeds/">multiple streams of income</a> to boost your proceeds.</li>
<li>Decide how and where you will recruit sponsors, obtain in-kind donations and what reward packages you may want to offer.</li>
</ul>
<p>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.</p>
<h2 id="get">2. Get to know your audience.</h2>
<p>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.</p>
<h3>Demographics</h3>
<p>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:</p>
<ul>
<li>Age</li>
<li>Gender</li>
<li>Life stage</li>
<li>Geographical location</li>
<li>Employment</li>
<li>Income</li>
</ul>
<p>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.</p>
<p>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.</p>
<h3>Engagement History</h3>
<p>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:</p>
<ul>
<li>What are their motivations and ways of thinking? Likes and dislikes?</li>
<li>Do supporters have a history of giving to your cause/organization (one-time, recurrent or major donors)?</li>
<li>What is their prior involvement? Have they volunteered or benefited from your organization’s services?</li>
<li>How did they first find out about the cause?</li>
<li>How have you communicated with them in the past (emails, direct mail, social media)?</li>
</ul>
<p>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.</p>
<p>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.</p>
<h2 id="recruit">3. Recruit Great Event Sponsors</h2>
<p>When planning a fundraiser, one of the best ways to help finance it, make a profit and expand your outreach is by <a href="https://www.dojiggy.com/how-to-attract-charity-event-sponsors/" target="_blank" rel="noopener noreferrer">finding charity event sponsors</a>. 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.</p>
<p>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.</p>
<p>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.</p>
<h2 id="make">4. Make It Simple To Participate And Donate</h2>
<p>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.</p>
<p>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.</p>
<h3>Mobile Giving</h3>
<p><a href="https://www.dojiggy.com/blog/free-text-fundraising-with-text-to-donate" target="_blank" rel="noopener noreferrer">Text-To-Donate</a> 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.</p>
<h3>A Clear Event Timeline</h3>
<p>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.</p>
<h3>Contingency Plans</h3>
<p>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 <a href="https://www.dojiggy.com/guide-to-organizing-successful-hybrid-events/" target="_blank" rel="noopener noreferrer">hybrid fundraising options</a> 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.</p>
<h2 id="offer">5. Offer Hybrid And Virtual Options To Include Everyone</h2>
<p>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.</p>
<p>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.</p>
<p>Get a clearer idea of how to plan your virtual fundraising budget and revenue with here.</p>
<h2 id="generate">6. Generate Hype On Social Media</h2>
<p>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.</p>
<p>Here are a few ideas:</p>
<ul>
<li>Create engaging and compelling content, which sparks an emotional reaction from your donors and inspires action.</li>
<li>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.</li>
<li>Start hashtag challenges to expand your audience, educate your supporters on the story behind your challenge and generate donations for your charity.</li>
<li>Use stories on Facebook and Instagram to engage your supporters and provide an insight of the daily operations of your fundraising event.</li>
<li>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.</li>
</ul>
<h2 id="reward">7. Reward Your Donors And Have Fun With Gamification</h2>
<p><a href="https://www.dojiggy.com/blog/boost-fundraising-revenue-by-utilizing-crowdfunding-with-rewards/" target="_blank" rel="noopener noreferrer">Crowdfunding with rewards</a> 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.</p>
<p>Another way to engage your supporters is to incorporate <a href="https://www.dojiggy.com/blog/gamification-tools-to-boost-your-fundraising-success/" target="_blank" rel="noopener noreferrer">gamification tools and elements</a> into your campaign. Show them the difference they make, use leaderboards to create friendly competition, or provide prizes to donors who complete certain tasks.</p>
<p>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:</p>
<ul>
<li>Free fundraising thermometers are used to monitor the progress of funds raised for an online fundraising campaign</li>
<li>Leaderboards build excitement and competitiveness among your P2P campaign participants.</li>
<li>Online polls are a great tool for audience engagement. Find out what your donors are thinking by simply asking them.</li>
<li>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.</li>
<li>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.</li>
</ul>
<h2 id="host">8. Host An Unforgettable Event</h2>
<p>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.</p>
<ul>
<li>Host the event at an interesting or exclusive venue to grab your supporter’s interest.</li>
<li>Create an event theme. Themes help get everyone in the mood with relevant costumes and attire, decorations, and food and drink.</li>
<li>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.</li>
</ul>
<h2 id="stay">9. Stay in touch with your donors.</h2>
<p>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.</p>
<p>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.</p>
<h2 id="show">10. Show your donors how they are making an impact.</h2>
<p>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.</p>
<hr />
<h2>Conclusion</h2>
<p>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.</p>Nonprofit financial management best practices.2022-01-12T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-management/<p>Your nonprofit’s number one priority is your mission. It’s what your organization was started to accomplish and probably what motivates you to work hard every day. However, all of that hard work would be fruitless if your nonprofit had no money to work with. That’s why you need to track your finances carefully and manage them well.</p>
<p><b>Effective financial management’s true value comes from its ability to provide your staff with the resources and finances necessary to pursue your mission.</b></p>
<p>In this guide, we’ll discuss the key elements of effective financial management for nonprofits. By learning about best practices and determining the resources you need to manage your finances well, you can ensure your team has the financial capacity to effectively run your programs and expand in the future. We’ll cover the following:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-management/#policy">Policies for Good Nonprofit Financial Management</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-management/#creating">Creating a Budget for Effective Nonprofit Financial Management</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-management/#reports">Nonprofit Financial Management Statements and Reports</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-management/#stakeholder">Nonprofit Financial Management Stakeholders</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-management/#tips">More Tips for Effective Nonprofit Financial Management</a></li>
</ul>
<p>Ready to learn more about how you can better manage your finances to drive your mission further? Let’s dive in to learn more about effective nonprofit financial management best practices.</p>
<div class="blog-callout-full">
<h2>Talk to an expert to <b>learn more about effective nonprofit financial management</b> practices.</h2>
<a href="https://www.jitasagroup.com/nonprofit-solutions/cfo-services/" class="button white">Contact Jitasa</a>
</div>
<h2 id="policy">Policies for Good Nonprofit Financial Management</h2>
<p>To have effective management practices, your organization must lay the groundwork by enacting specific policies and procedures. Nonprofit financial management is no different. You need to lay out a foundation with financial policies that define certain rules for finances.</p>
<p>We’ll walk through several common policies that nonprofits should implement as a part of their financial management practices:</p>
<h3>Gift Acceptance Policy</h3>
<p>Imagine your organization receives an <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/in-kind-donations/">in-kind donation</a> from a generous supporter, but that gift is of no use for your mission. Unfortunately, that means the gift will likely go to waste, either being donated elsewhere or thrown away.</p>
<p>Gift acceptance policies help prevent this very situation from occurring. A gift acceptance policy covers more than simply in-kind donations. According to <a href="https://learning.candid.org/resources/knowledge-base/examples-of-gift-acceptance-policies/" target="_blank" rel="noopener noreferrer">Candid’s guide to nonprofit gift acceptance</a>, these policies also cover questions such as:</p>
<ul>
<li>The types of gifts your organization will and won’t accept</li>
<li>The circumstances under which you’ll accept various gifts</li>
<li>How you will record and track contributed gifts</li>
<li>Major donations and how they will be tracked and recorded</li>
</ul>
<p>This policy has explicit directions and instructions regarding how nonprofits should accept the contributions they receive from their generous supporters. Therefore, it’s a key document for your finance team to play a part in creating. They should understand how to best record the financial gifts and track non-financial contributions as well.</p>
<h3>Conflict of Interest Policy</h3>
<p>A nonprofit’s conflict of interest policy prevents directors, board members, and other key players from making decisions that could be influenced by outside financial interests. For example, if a board member owns a software company and the nonprofit is considering purchasing that software, the conflict of interest policy may require the board to choose a different solution or that the company owner must abstain from voting.</p>
<p>This financial management documentation should define the situations which are considered a conflict of interest and provide the next actions if a conflict arises. It should <a href="https://www.nolo.com/legal-encyclopedia/conflict-of-interest-policies-for-nonprofit.html" target="_blank" rel="noopener noreferrer">include the following elements</a>:</p>
<ul>
<li>The definition of what a conflict of interest is for the organization and what circumstances constitute a conflict</li>
<li>The timeline and method through which the director or board members must disclose conflicts that have arisen</li>
<li>How the board will record the conflict of interest once it’s discovered or disclosed</li>
<li>The next steps taken after the discovery or disclosure of a conflict of interest</li>
<li>Processes for how the policy is updated and reviewed</li>
</ul>
<p>Even if a potential conflict falls into a “gray area” and it’s unclear if one took place, it’s always best to act on the side of caution. Treat potential conflicts as confirmed conflicts to be sure you’re always covered.</p>
<h3>Expense Reimbursement Policy</h3>
<p>While your nonprofit has a bank account with funding set aside for each of your organization’s expenses, there will be times when your staff members or volunteers spend money from their personal accounts on behalf of your cause. When this occurs, they may be able to be reimbursed for their expenses.</p>
<p>For this reason, your nonprofit needs to put together a plan and documentation regarding how you’ll reimburse expenses. Your expense reimbursement policy is a vital element of nonprofit financial management because it confirms that all funds reimbursed have actually been used on behalf of the organization and prevents fraud.</p>
<p>In your expense reimbursement policy, include information about:</p>
<ul>
<li>What expenses can be reimbursed. These expenses should be related to your nonprofit and accounted for within 60 days of the expense taking place.</li>
<li>What information should be submitted in order to receive reimbursement. This includes items like who incurred the expense, what they purchased, and when and why they purchased the item.</li>
<li>Who is responsible for providing the reimbursement to the staff member.</li>
<li>How the reimbursement information should be recorded by your nonprofit.</li>
</ul>
<p>If excess reimbursements are provided, they must be returned to your organization within 120 days after they’re provided.</p>
<p>Your reimbursement policy may be folded into your nonprofit fiscal policies and procedures document, which we’ll cover in more detail next.</p>
<h3>Nonprofit Fiscal Policies and Procedures</h3>
<p>Your nonprofit’s fiscal policies and procedures documentation is one of the most important manuals you’ll create and update on an annual basis. It outlines the internal controls for the organization’s well-being and ensures compliance with the Generally Accepted Accounting Principles.</p>
<p>Essentially, this is a rulebook as to how your nonprofit will conduct its financial operations for the year. It should be reviewed on an annual basis and updated as necessary.</p>
<p>In this <a href="https://www.ftmllc.com/files/Sample-Nonprofit-Financial-Policies-and-Procedures-Manual-Resource.pdf" target="_blank" rel="noopener noreferrer">sample document</a>, the table of contents for the nonprofit fiscal policies and procedures document included the following:</p>
<ul>
<li>Introduction, manual protocol, accounting guidelines, and internal controls</li>
<li>Annual audit</li>
<li>Annual budget, financial statements</li>
<li>Insurance coverage, security</li>
<li>Record retention</li>
<li>Cash receipts and revenue processing</li>
<li>Cash disbursements and accounts payable processing</li>
<li>Travel expense reimbursement</li>
<li>Payroll and human resources</li>
<li>Net asset classifications</li>
<li>Notes payable</li>
<li>Board conflict of interest policy</li>
<li>Whistleblower policy</li>
<li>Code of conduct</li>
</ul>
<p>Small organizations may be tempted to forgo these policies, saying that they trust their employees and have no need for them. However, they’re about much more than just trust. They provide a resource that staff members can use when they’re confused about a policy or procedure. Plus, it helps ensure financial compliance at your nonprofit.</p>
<h2 id="creating">Creating a Budget for Effective Nonprofit Financial Management</h2>
<p>One of the most recognizably vital elements of nonprofit financial management is your organization’s budget. The purpose of your budget is to plan your organization’s various expenses for the upcoming year.</p>
<p>You’ll create your budget from scratch once each year, but you’ll need to make adjustments sparingly throughout the year as financial situations change. Generally, we recommend adjusting your annual budget on a quarterly or semi-annual basis.</p>
<p>An effective <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/">nonprofit budget</a> has the following elements:</p>
<ul>
<li><b>Defined activities</b>. Your budget should go hand-in-hand with your organization’s strategic plan, specifically spelling out the funding that is necessary for each activity you hope to accomplish. For example, an animal shelter might set aside $10,000 to pay the veterinary expenses for 100 dogs.</li>
<li><b>Specific time frames</b>. Spell out when you expect to generate revenue. Many nonprofits find summer to be a dry period for fundraising and generate more funding during year-end activities or on #GivingTuesday.</li>
<li><b>Realistic and measurable goals</b>. Use previous expenses and planned versus actual budgets to establish goals and concrete metrics for your various initiatives. Even if you’re taking on a new project, set an estimate for the funding it will require. Then acknowledge that you might need to make adjustments in the future.</li>
</ul>
<p>Even the best budgets sometimes go astray. And your organization will need to review your finances regularly throughout the year to ensure you stay on track. We recommend your finance and executive teams meet every:</p>
<ul>
<li><b>Year</b>. Your annual meeting is when you’ll set your budget for the following fiscal year. It’s likely the longest meeting you’ll have, where you and <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accountant/">your accountant</a> will meet to review past finances and determine where you stayed on course and where you strayed in your financial planning.</li>
<li><b>Quarter</b>. During the quarterly meeting, your team should compare your budgeted revenue and expenses for the quarter and compare it with the actual amounts. This is also where you can review grants that were won, lost, unused, etc. You should also note any discrepancies in the budget to catch mistakes before they become a problem for your organization.</li>
<li><b>Month</b>. Use monthly reviews to compare your planned versus actual expenses and revenue to make small adjustments where necessary. Also look for discrepancies in the budget to ensure future information is correct.</li>
</ul>
<p id="reports">Don’t toss your old budgets when the year is done. Instead, use the metrics and actual expenses from the past year to refine your budget for the next year, making it more accurate over time.</p>
<div class="blog-callout-full">
<h2>Nonprofit Budget Template</h2>
<p>The budgeting process is often times confusing to many nonprofit members and leaders. This nonprofit budget template is designed to alleviate that pain.</p>
<a href="https://www.jitasagroup.com/nonprofit-resources/nonprofit-free-downloads/nonprofit-budget-template/" class="button white">Free Download</a>
</div>
<h2>Nonprofit Financial Management Statements and Reports</h2>
<p>Another key element of your nonprofit’s financial management processes is pulling reports and statements from <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-chart-of-accounts/">your chart of accounts</a> to summarize your organization’s use of funds. These reports provide information and can generate insights into your nonprofit’s financial health.</p>
<p>Your accountant should compile and review these statements and determine what next actions should be taken. These are also the statements that your <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-audit/">nonprofit auditor</a> will review as a part of their financial review.</p>
<h3>Statement of Activities</h3>
<p>Your nonprofit statement of activities is also known as your income statement. It allows your organization to review your revenue versus your expenses over time, categorizing your various expenditures and funding into categories.</p>
<p>This statement is split into three main categories:</p>
<ul>
<li><b>Revenue</b>. In the revenue section of your statement of activities, you’ll record revenue such as those generated through contributions, fees, dues, investment income, and the funding released from restriction.</li>
<li><b>Expenses</b>. The expenses section will include categories such as your organization’s main programs, fundraising activities, and operating expenses.</li>
<li><b>Net Assets</b>. Finally, the net assets section of your statement of activities will show the difference between your revenues and expenses.</li>
</ul>
<img alt="Your organization’s statement of activities is a key nonprofit financial management document." src="https://jitasa.imgix.net/blog/nonprofit_statement_of_activities.png?auto=format&w=600" width="600" height="700" />
<p>As you can see above, the columns also report the amount of funding that is unrestricted, temporarily restricted, and the total. This provides your organization insight into the funding that is usable currently versus usable in the future.</p>
<h3>Statement of Financial Position</h3>
<p>Your <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-financial-position/">statement of financial position</a> offers another view of your nonprofit financial management. This statement is used to determine the amount of risk that your organization can take on. This report is also known as your organization’s balance sheet, and it provides a snapshot view of your organization’s financial health.</p>
<p>This report is also split into three main sections:</p>
<ul>
<li><b>Assets</b>. This section defines what your organization owns, including cash, accounts receivable property and equipment investments, long-term receivables, prepaid expenses, and more.</li>
<li><b>Liabilities</b>. Your liabilities section shows what your organization owes, including accounts payable, debt, and other expenses.</li>
<li><b>Net Assets</b>. Your net assets are your organization’s total assets minus your total liabilities. This section of your report will note how many of your assets have restrictions and how many are free to be incorporated into your budget.</li>
</ul>
<img alt="Your organization’s statement of financial position is a key nonprofit financial management document." src="https://jitasa.imgix.net/blog/nonprofit_statement_of_financial_position.png?auto=format&w=600" width="600" height="700" />
<p>From this document, your organization can calculate your months of liquid unrestricted net assets (LUNA), showing how many months you can cover your regular expenses given the liquid assets you have on hand. Your months of LUNA can be recorded with the following calculation:</p>
<p><b>Months of LUNA = (Total Unrestricted Net Assets - Property and Equipment Assets) / Average Monthly Expenses</b></p>
<p>When your months of LUNA are less than zero, it means your nonprofit doesn’t have the cash on hand to cover your current expenses. If it’s between 0 and 3 for several years, you should readdress your financial position to get back to a healthier place. If your months of LUNA are 3 or greater, you are in a healthy financial position. The higher the number, the more cash you have on hand to take on risks and attempt growth.</p>
<h3>Statement of Cash Flows</h3>
<p>Your <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-cash-flows/">nonprofit’s statement of cash flows</a> shows how cash moves in and out of your organization on a regular basis, providing insight into your organization’s spending and fundraising habits. If you’ve ever over-drafted from your personal bank account because you didn’t realize how much you had already spent, you know the importance of determining cash flow for your organization.</p>
<p>This important nonprofit financial management statement is composed of three sections:</p>
<ol>
<li>Operating activities</li>
<li>Investing activities</li>
<li>Financing activities</li>
</ol>
<img alt="Your organization’s statement of cash flow is a key nonprofit financial management document." src="https://jitasa.imgix.net/blog/nonprofit_statement_of_cash_flow.png?auto=format&w=600" width="600" height="700" />
<p>There are two ways your nonprofit can choose to record your cash flows on a regular basis: direct and indirect.</p>
<ul>
<li><b>Direct method</b>. The direct method of cash flow calculates your cash flow based on your organization’s actual transactions. It’s more time-consuming, but also tends to be more accurate. When you use this method, your accountant will need to reconcile accounts to separate the cash flows. Depreciation is also ignored in this method.</li>
<li><b>Indirect method</b>. The indirect method of cash flow uses net income as the basis, then calculates the net adjustments for assets and liabilities to create your cash flow statement. It tends to be faster, yet less accurate. However, depreciation is accounted for with this method.</li>
</ul>
<p>Very few organizations use the direct method as it tends to be more time-consuming even though it’s more accurate. Choose whether you’ll use the direct or indirect method of cash flow to record everything correctly and consistently.</p>
<h3>Statement of Functional Expenses</h3>
<p>The nonprofit statement of functional expenses is the final financial statement fundamental to effective nonprofit financial management. This report breaks down your organization’s expenditures into categories according to their functions: program expenses, administrative, and fundraising.</p>
<img alt="Your organization’s statement of functional expense is a key nonprofit financial management document." src="https://jitasa.imgix.net/blog/nonprofit_statement_of_functional_expenses.png?auto=format&w=600" width="600" height="700" />
<p>The categories listed on the statement of functional expense are parallel to those listed on your <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/form-990-filing/">nonprofit's annual form 990</a>. Organizations began disclosing this nature of their expense activities when these categories were added to the Form 990 in 2017.</p>
<p><b>Not only does this form allow your organization to review detailed information about your expenses, but it also makes it easier for you to file your annual tax forms each year.</b></p>
<h2 id="stakeholder">Nonprofit Financial Management Stakeholders</h2>
<p>Who is responsible for ensuring your nonprofit financial management processes are effective? More than one person maintains effective financial processes and measures your organization’s financial health. It requires input from your entire nonprofit team. Some of the key stakeholders in your financial management processes include your board of directors, executive director, and finance team.</p>
<img alt="The financial stakeholders for financial management are your board of directors, executive director, and finance team." src="https://jitasa.imgix.net/blog/nonprofit_stakeholders.png?auto=format&w=700" width="700" height="375" />
<h3>Board of Directors</h3>
<p><a href="https://boardable.com/blog/board-member-responsibilities/" target="_blank" rel="noopener noreferrer">Your board of directors’ role</a> is primarily to provide organizational oversight. When it comes to your financial management, your nonprofit board will review and approve several key financial documents for your organization, such as your:</p>
<ul>
<li>Annual audit</li>
<li>IRS Form 990</li>
<li>Annual budget</li>
</ul>
<p>Most of your board of directors will be coming from for-profit jobs and will have little experience with nonprofit financial statements. Therefore, when new board members join your team, they should go through reporting and nonprofit financial management training.</p>
<p>The review process shouldn’t just be a rubber stamp “approval” from your board. They should understand the importance and implications of each of these documents and ask appropriate and insightful questions about each one.</p>
<h3>Executive Director</h3>
<p>Your executive director is in charge of your organization’s day-to-day operations. They not only oversee your finance team but also act as the liaison between your organization and the board of directors. This means they also need to both understand and be able to articulate the various financial reports coming from the finance and fundraising departments.</p>
<p><b>This key team member also needs to monitor organization spending and ensure the nonprofit is on track with the budget and following financial best practices.</b></p>
<p>Essentially, the executive director needs to have a thorough understanding of your nonprofit financial management processes in order to both oversee and manage your organization’s other departments and teams.</p>
<h3>Finance Team</h3>
<p>Your nonprofit finance team is the on-the-ground team working to ensure your organization has effective financial management processes. They compile financial reports and interpret the results, reporting back to the executive director. This team includes your organization’s accounting and bookkeeping personnel.</p>
<p>While some organizations choose to employ these individuals internally, many others recognize the potential to <a href="https://www.jitasagroup.com/nonprofit-solutions/nonprofit-bookkeeping-accounting-services/">outsource these responsibilities</a> to an outside organization. For small to mid-sized organizations, this not only puts your financial information in the hands of professionals, but it’s also far less expensive than hiring internally.</p>
<h2 id="tips">More Tips for Effective Nonprofit Financial Management</h2>
<p>Effective nonprofit financial management is more than just implementing the right policies and creating the best reports. It also comes from the decisions you make according to your current and ideal financial policies.</p>
<p>These eight nonprofit financial management tips will make sure your organization is implementing healthy financial spending, fundraising, and reporting processes.</p>
<h3>1. Diversify your funding.</h3>
<p>The importance of diversification hit many organizations in 2020 when the COVID-19 pandemic began. Many who relied on one or two major funding sources saw those funding sources pull out or postpone their funding. For instance, major donors who were hit hard with the financial crisis may have found themselves unable to make their usual annual contribution.</p>
<p>This left these nonprofits in disarray, scrambling to replace that single important funding source. Diversifying your funding adds greater stability to your nonprofit finances. Here are some steps you can take to diversify your organization’s income:</p>
<ul>
<li>Determine the percentage of your income that comes from each of your current funding sources. Determine if any of them could be increased. For example, mid-tier donors are often under-stewarded by fundraising teams who prefer to focus on major gifts. However, mid-tier donations add up quickly if you’re able to reach these donors.</li>
<li>Consider the services you currently offer. Are there opportunities you can charge for those services?</li>
<li>Look into business activities that you can operate tax-free alongside your other services. For instance, you may open a thrift store or rent out space for third-party organization events.</li>
</ul>
<p>As you look into diversification opportunities, keep in mind that taxable income cannot make up a significant portion of your total income as a nonprofit organization.</p>
<h3>2. Transparently communicate program expenses.</h3>
<p>When you reach out to major supporters, grantmakers, and other funders, transparently communicate the expenses that running your programs incurs. While it can be tempting to make it seem like you’re more fiscally frugal than you actually are, transparency is key to obtaining the funding you need. Plus, honesty is always the best policy.</p>
<h3>3. Focus on sustainable funding.</h3>
<p>Donors tend to give more money over time as they develop stronger connections with your organization. And, it’s more expensive to acquire new supporters than it is to retain them. You can save on your fundraising expenses by retaining the supporters you’ve already reeled in.</p>
<p>You can build a more sustainable fundraising base by focusing on donor retention. According to <a href="https://bloomerang.co/blog/donor-retention/" target="_blank" rel="noopener noreferrer">Bloomerang’s donor retention guide</a>, the average donor retention rate has rested around 45% for years, providing an opportunity for your organization to go above and beyond. They provide an example that shows how a nonprofit that improves its retention rate by 10% is able to save $456,349 over time.</p>
<h3>4. Cut down on fixed expenses.</h3>
<p>The small things you do at home can also help your nonprofit cut back on the expenses you incur on a regular basis. For example, set your office temperature lower in the winter and warmer in the summer to save on power bills. You can also look for opportunities to create more efficient fundraising or programming processes.</p>
<p>The <a href="https://www.bbb.org/globalassets/local-bbbs/dayton-oh-51/charities-and-donors/standards-for-charity-accountability.pdf" target="_blank" rel="noopener noreferrer">Better Business Bureau</a>recommends that organizations spend no more than 35% of their funding on overhead expenses and 65% on programs. This is simply a recommendation and can be adjusted to your organization’s needs.</p>
<img alt="It’s best practice for good financial management to keep a healthy balance between overhead and program expenses." src="https://jitasa.imgix.net/blog/nonprofit_overhead_example.png?auto=format&w=300" width="300" height="300" />
<p>Keep in mind that lower overhead should not come at the expense of quality. Find the balance between the overhead necessary to run your organization effectively and eliminating excessive overhead expenses.</p>
<h3>5. Invest in nonprofit-specific finance software.</h3>
<p>Nonprofit finances operate differently from for-profit organizations. While for-profits sell goods and services to obtain revenue, nonprofits rely on the generosity of their supporters and grantors to operate. Nonprofits also need to manage restrictions placed on various funding sources. This is why you leverage fund accounting practices to manage your finances.</p>
<p>Because this system of accounting is so unique, your organization needs specific software that can account for these unique elements. Leverage fund accounting software to manage your nonprofit’s finances and ensure your accounting system stays organized. For instance, Quickbooks offers a solution specifically designed for nonprofit organizations.</p>
<h3>6. Prepare for necessary audits.</h3>
<p>Many nonprofits conduct annual <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-audit/">financial audits</a> to ensure they are maintaining effective financial management practices every year. Generally, if this is the case, the audit is required according to the organization’s bylaws. However, it may also be required if your nonprofit meets certain requirements set by the state, if you receive more than $750,000 in federal funding, or if grantmakers require one.</p>
<p>By leveraging effective nonprofit financial management processes year-round, your organization will be prepared for financial audits every time. Review your checklist of the last things to do before the audit, including:</p>
<img alt="Make sure you’ve prepared for your audit with this checklist to ensure you have effective financial management practices before the auditor arrives." src="https://jitasa.imgix.net/blog/nonprofit_audit_checklist.png?auto=format&w=400" width="400" height="400" />
<ul>
<li>Ensuring every transaction has been captured</li>
<li>Reconciling bank accounts</li>
<li>Analyzing adjustments for prepaid expenses</li>
<li>Reviewing expenses for items that should be capitalized</li>
<li>Crafting financial statements and reports</li>
</ul>
<p>Keep in mind that nonprofit financial audits are not designed to point out your organization’s flaws. They’re designed to help you better manage your finances and implement best practices that will help your organization succeed.</p>
<h3>7. File tax forms on time.</h3>
<p>Avoid unnecessary expenses to maintain effective nonprofit financial management. For example, one major expense you could incur is late fees for filing your tax forms past their deadline. Your <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/form-990-filing/">annual Form 990</a> is due every year on the 15th day of the 5th month after your fiscal year ends. For nonprofits using the calendar year, this means it’s due on May 15th.</p>
<p>However, if you don’t file on time, you risk incurring fees at $20 per day the form is late. Or, for very large organizations, $100 per day the form is late. Plus, you could lose your ability to accept tax-deductible contributions and your tax-exempt status, which could cause you to lose revenue and pay taxes. Not filing your annual forms on time is expensive! Be sure to set a calendar reminder about these forms or keep up with your accountant to file on time.</p>
<p>While these fees add up over time, they’re not necessary. If you’re worried your organization won’t make the tax deadline, you can file for an extension with the IRS with a Form 8868. This extends the deadline for filing by six months, making it due on the 15th day of the 11th month after the end of your organization’s fiscal year.</p>
<h3>8. Work with nonprofit financial management experts.</h3>
<p>We mentioned earlier that many small to mid-sized organizations choose to <a href="https://www.jitasagroup.com/nonprofit-solutions/nonprofit-bookkeeping-accounting-services/">outsource their accounting and bookkeeping services</a>. This helps them save money and time in their financial practices. But outsourcing to the experts also provides a number of other nonprofit financial management benefits, including:</p>
<ul>
<li>Improved internal controls, providing additional safety for financial information</li>
<li>Access to experts who have encountered the most common financial management questions in the past</li>
<li>Fundraising assistance from nonprofit experts who understand the ins and outs of the financial component</li>
</ul>
<p>Hiring new individuals to manage your bookkeeping, accounting, and financial strategy can be expensive and challenging. Instead, look into outsourcing options with <a href="https://www.jitasagroup.com/">Jitasa</a>.</p>
<hr />
<p>Effective nonprofit financial management is necessary to ensure your organization is financially healthy enough to pursue your mission and take on additional growth opportunities. Use the advice in this guide to make sure you’re on the right track.</p>
<p>To learn more about financial management best practices and the reports that accompany them, check out these additional resources:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/">Nonprofit Budgeting: Understand the Basics + Template</a>. Use this guide to craft a more accurate budget and leverage that budget to better track your finances throughout the year.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/form-990-filing/">Form 990 Filing</a>: Your Essential Guide to Nonprofit Taxes. Each tax season, you’ll need to report on your financial standing. Learn more about your annual Form 990 in this guide.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-financial-position/">Nonprofit Statement of Financial Position (or Balance Sheet)</a>. Your Statement of Financial Position is a key report for effective nonprofit financial management. Learn more about this important document in this guide.</li>
</ul>Nonprofit Statement of Cash Flows: Complete Guide & Example2021-10-14T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-cash-flows/<p>Around <a href="https://mint.intuit.com/blog/budgeting/spending-knowledge-survey/" target="_blank" rel="noopener noreferrer">3 in every 5 Americans</a> don't know how much they spent last month. Personal financial management is a challenge for the majority of people. But your nonprofit should have better management strategies to track and understand its own finances.</p>
<p>Without effective financial management, nonprofits run the risk of misallocating their funds, potentially leading to poor program management, wasted resources, and non-compliance with funding guidelines. <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accounting/">Good nonprofit accounting practices</a> are therefore essential to managing a well-run nonprofit.</p>
<p>Your nonprofit leverages (or should leverage) a number of financial statements to maintain consistent visibility into the financial health of the organization and to make decisions that will help prevent misallocation. These statements are pulled from the <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-chart-of-accounts/">chart of accounts</a>, which maintains a running record of the various ledgers kept at your organization.</p>
<p>With accurate tracking of financial information, you can see how money is used at your organization over time. It can help you determine the amount of cash you have at any given point and help you make current and future financial decisions.</p>
<p><b>The financial statement that will help you understand the movement of cash at your nonprofit is the nonprofit statement of cash flows.</b></p>
<p>In this guide, we’ll walk through what the statement of cash flows looks like and the part it plays in the financial strategy for nonprofits like yours. Specifically, we’ll cover the following topics:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-cash-flows/#cash%20flows">Understanding the Nonprofit Statement of Cash Flows</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-cash-flows/#statements">Importance of Nonprofit Cash Flow Statements</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-cash-flows/#draw">Conclusions to Draw From a Nonprofit Statement of Cash Flows</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-statement-of-cash-flows/#example">Example Cash Flow Statement for Nonprofit Organizations</a></li>
</ul>
<p id="cash flows">Keep your financial documentation organized so that you can easily look back at your nonprofit statements of cash flows over time to draw long-term conclusions. You can leverage the example at the end of this article as a template on which to base your own cash flow statement.</p>
<div class="blog-callout-full">
<h2>Contact <b>Jitasa</b> to help create and analyze your statement of cash flows.</h2>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button white">Contact Jitasa</a>
</div>
<h2>Understanding the Nonprofit Statement of Cash Flows</h2>
<p><b>A nonprofit statement of cash flows is a financial report that shows how cash moves in and out of an organization on a regular basis.</b></p>
<p>This report is pulled on a monthly basis and is typically composed of three primary sections. These sections include the cash flows from:</p>
<ul>
<li>Operating activities</li>
<li>Investing activities</li>
<li>Financing activities</li>
</ul>
<p>Each of these sections breaks down further to provide more insight into the specific activities that are bringing funds into the organization and how those funds are being spent. For instance, consider the following example of a nonprofit cash flows statement from a single month:</p>
<img alt="This is an example of a nonprofit statement of cash flows for a single month" src="https://jitasa.imgix.net/blog/nonprofit_accounting_sample_cash_flow_2.png?auto=format&w=600" width="600" height="700" />
<p>Consider the section titled “Cash Flows From Operating Expenses.” In this example, you can see that the cash received from contracts and contributions add up to $300,000. However, the cash paid out to employees is $275,000, meaning that money is cash flowing out of the organization. In total, the net cash from operating activities is therefore $25,000.</p>
<p>When you analyze your nonprofit’s statement of cash flows, you not only know how much money is flowing into your nonprofit, but (unlike the majority of Americans) you also know exactly how much cash is spent in any given month. If you gain $10,000 in <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/grant-management/">grant funding</a>, but spend $12,000 on programming, you’ll end up in the red and slowly deplete your reservoir of resources over time. This means you’ll need to make some adjustments.</p>
<p>Nonprofit cash flow statements can be recorded using one of two different methods: direct or indirect. Make the decision of which one your organization will use prior to pulling this report so you can be sure it’s accurate and consistent from month to month.</p>
<h3>Direct vs. Indirect Cash Flow</h3>
<p>The <b>direct method</b> of cash flow calculates your statement of cash flows based on the cash transactions made by your organization. Here are some factors to keep in mind about the direct cash flow method:</p>
<ul>
<li>It tends to be more time consuming to compile the statement of cash flows</li>
<li>Reconciliation must be done to separate the cash flows</li>
<li>Depreciation is ignored using the direct method</li>
<li>This method tends to be more accurate than the indirect method</li>
</ul>
<p>Very few organizations choose to leverage the direct method of cash flows. Instead, most choose to use the <b>indirect method</b>. The indirect method of cash flows uses net income as the basis, then calculates the net adjustments for assets and liabilities to create the statement of cash flows. Here are some factors to consider about this method:</p>
<ul>
<li>It’s a faster way to compile your statement of cash flows</li>
<li>Net income is already transformed into cash flow</li>
<li>Depreciation is taken into account with the indirect method</li>
<li>Adjustments are made, so this method cannot be considered completely accurate</li>
</ul>
<p id="statements">After analyzing a statement of cash flows, your nonprofit team should have a good idea of the liquidity of your nonprofit and how much funding you have on hand at any time.</p>
<h2>Importance of Nonprofit Cash Flow Statements</h2>
<p>Have you ever overdrafted from your bank account because you didn’t realize how much you had already spent? Or perhaps had a credit card declined when you reached the limit earlier than anticipated? These things happen when individuals don’t understand how much money is flowing in and out of their various accounts. The statement of cash flows can prevent this for your nonprofit.</p>
<p>Essentially, your nonprofit statement of cash flows provides a close-up analysis of your organization’s spending and fundraising habits. There are several reasons why it’s so important to keep track of your cash flows:</p>
<ul>
<li>Over time, cash flow statements provide insight into spending and fundraising habits of your nonprofit.</li>
<li>Understanding the habits and general flow of cash over time helps organizations create <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/">more accurate budgets</a>.</li>
<li>You can uncover potential risks and opportunities regarding your nonprofit’s financial situation from your statement of cash flows.</li>
</ul>
<p id="draw">Recording accurate information is the first step to ensuring this important statement is as helpful as possible for your organization. The second step is to ensure you’re drawing the correct conclusions from the document, which we’ll cover in more detail in the next section.</p>
<h2>Conclusions to Draw From a Nonprofit Statement of Cash Flows</h2>
<p>Once you have a completed statement of cash flows for your nonprofit, it’s time to analyze it and draw conclusions that your organization can leverage for better financial management in the future.</p>
<p><b>We recommend discussing the takeaways from your nonprofit statement of cash flows with a <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accountant/">professional nonprofit accountant</a>.</b></p>
<p>Accountants have the expertise and experience to not only identify the important aspects of your statement of cash flows, but also to draw the necessary conclusions and make recommendations based on the information it provides.</p>
<p>Two of the metrics that your nonprofit accountant might highlight within your statement of cash flow include:</p>
<ul>
<li><b>Free cash flow</b>. Your nonprofit’s free cash flow describes the amount of liquidity your organization has to fund growth strategies. Essentially, this metric describes how much financial flexibility your nonprofit has.</li>
<li><b>Cash flow to debt</b>. If your nonprofit carries debt, your cash flows statement can show how much cash your organization has on hand to service debt issues.</li>
</ul>
<p>You can also make predictions about the future cash flow of your organization based on the nonprofit statement of cash flows. For instance, you can:</p>
<ul>
<li>Use the expenditures shown in your cash flow statement to better understand and <b>budget for expenses</b> throughout the year. Understanding how money moves out and comes in on a monthly basis allows you to account for the variability of fundraising and expenses throughout a given year.</li>
<li>Use the investments to predict your future cash flow related to <b>investing activities</b>. If you hold investments, you can better predict future dividend payments and account for that in future budgets.</li>
</ul>
<p id="example">The statement of cash flows is often confused with the nonprofit statement of activities (the equivalent of the for-profit income statement). While your statement of activities measures the value of your revenue against your organization’s expenses, your statement of cash flow is intended to show how cash moves in and out of your organization.</p>
<div class="blog-callout-full">
<h2>The Beginner’s Guide to Nonprofit Accounting</h2>
<p>This nonprofit accounting guide is great for anyone wanting to learn the foundation of nonprofit accounting.</p>
<a href="https://www.jitasagroup.com/nonprofit-resources/nonprofit-free-downloads/beginners-guide-to-nonprofit-accounting/" class="button white">Free Download</a>
</div>
<h2>Example Cash Flow Statement for Nonprofit Organizations</h2>
<p>You can either analyze your nonprofit’s cash flow statement by individual months or by viewing various cash flow statements over time. Generally, for the second option, you’ll view the last 13 months of cash flow statements to be able to view trends in cash flow over time.</p>
<p>Below, we’ve included an example that your organization can use to see what this report will look like over time. If you isolate a single column, that’s the example of the statement of cash flow for a single month.</p>
<img alt="This example of a nonprofit statement of cash flows shows what the report will look like over time" src="https://jitasa.imgix.net/blog/nonprofit_statement_of_cash_flows_example.png?auto=format&w=700" width="700" height="734" />
<p>While you <i>can</i> pull this report together on your own, we highly recommend reaching out to a professional instead. A trained accountant can help your team pull an accurate report, interpret the information included, and draw conclusions for next actions to take.</p>
<h2>How Jitasa Can Help</h2>
<p>If you’re looking for help with your nonprofit statement of cash flows, we recommend <a href="https://www.jitasagroup.com/services-quote-request/">reaching out to Jitasa accountants</a>. Our trained accounting professionals will not only help your organization compile an accurate report, but we’ll also help you interpret the findings from it.</p>
<p>Reach out to get in touch with a member of the <a href="https://www.jitasagroup.com/nonprofit-solutions/cfo-services/">Jitasa Strategic Advisory Team (J-SAT)</a>. Each member has at least five years of experience as a CFO and over ten years of experience as a leader in nonprofit finance.</p>
<p>These experienced members will help your team leverage technology to pull your nonprofit cash flows statement and forecast for future statements. Then, our team will analyze this document as well as other resources to identify potential risks, opportunities, and scenarios that could occur. From there, we’ll provide recommendations regarding how to maintain healthy financial management practices at your organization.</p>
<p>If you’re interested in learning more about nonprofit accounting, statements, and Jitasa’s services, check out the following resources:</p>
<ul>
<li><a href="https://www.jitasagroup.com/nonprofit-solutions/cfo-services/">Jitasa’s Advisory Services (J-SAT Team)</a>. Learn more about the advisory services offered by Jitasa’s team of CFOs and nonprofit finance professionals.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/">Nonprofit Budgeting: Understand the Basics + Template</a>. You can use your nonprofit statement of cash flows for better budgeting. Learn more about nonprofit budgeting with this guide.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accountant/">Working with a Nonprofit Accountant: What to Expect</a>. See what it’s like to work with an accountant to help manage your organization’s finances.</li>
</ul>
<div class="blog-callout-media-object">
<div class="media">
<img src="https://jitasa.imgix.net/blog/callouts/ill_credit_card_clipboard_men.png?auto=format&w=250" srcset="https://jitasa.imgix.net/blog/callouts/ill_credit_card_clipboard_men.png?auto=format&w=250, https://jitasa.imgix.net/blog/callouts/ill_credit_card_clipboard_men.png?auto=format&w=250&dpr=2 2x" alt="Illustration of men with clipboard holding credit card" width="250" height="203" />
</div>
<div class="text">
<h2>Looking for help creating and interpreting your nonprofit statement of cash flows?</h2>
<p>
Contact <b>Jitasa's</b> J-SAT team today!
</p>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button white">Learn more</a>
</div>
</div>
Church Accounting: The Definitive Guide For Growth2021-07-19T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/church-accounting-guide/<p>When you became a leader at your church, you did so because you felt called by God to help spread the Word and to make a difference in your community. If you already have a background as a CPA, you’re a minority in the leaders in the industry.</p>
<p>If you don’t have your CPA, no worries! That’s why we’ve put together this guide, to help church professionals become acquainted with the accounting systems for their institutions.</p>
<p><strong>Churches more often than not fall under the 501(C)(3) tax code.</strong></p>
<p><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accounting/">Like nonprofit charities</a>, your church is exempt from paying federal income tax under this classification. It also means that you likely use a system of fund accounting for your church, separating your revenue sources into a number of buckets according to their uses and allocation at the organization. This helps churches focus on accountability to their supporters and congregation.</p>
<p>Because this focus on accountability differs greatly from the for-profit mindset of profitability, even professionals with a basic understanding of for-profit accounting can benefit from a review of <a href="https://www.jitasagroup.com/about/partnerships/churches/">church-specific accounting practices</a>. In this guide, we’ll cover the following:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/church-accounting-guide/#what">What is Church Accounting?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/church-accounting-guide/#how">How is Church Accounting Different?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/church-accounting-guide/#software">What Should You Look for in Church Accounting Software?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/church-accounting-guide/#outsource">Is it Better to Hire or Outsource a Church Accountant?</a></li>
</ul>
<p id="what">Let’s start from the very beginning with a definition of church accounting. This will help make sure we’re all starting with the same foundations on the topic before diving deeper.</p>
<div class="blog-callout-full">
<h2>
<b>Looking for church accounting services?</b> We can help!
</h2>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button white">Contact Jitasa</a>
</div>
<h2>What is Church Accounting?</h2>
<p><strong>Church accounting is the organization, recording, and planning of finances for churches. It differs from other organizations because it relies on a system of fund accounting, prioritizing the accountability aspect of finance over profitability.</strong></p>
<p>Churches rely on a number of different sources of revenue to advance the mission. The majority of these revenue sources rely on the generosity of your church’s congregation and community support. For instance, churches may receive funding from:</p>
<ul>
<li>Gifts and tithing</li>
<li>Pledge drives</li>
<li>One-off donations</li>
<li><a href="https://doublethedonation.com/tips/church-fundraising-ideas/" target="_blank" rel="noopener noreferrer">Fundraising campaigns</a> and events</li>
<li>Capital campaigns</li>
<li>Grants</li>
<li>Investments</li>
</ul>
<p>As you can see, each of these revenue streams relies on the good nature of your church’s supporters and congregation for success. Sometimes, restrictions accompany these revenue sources so that certain monies must be spent on specific activities. For example, grant monies might be restricted to a scholarship program.</p>
<p>These restrictions dictate the buckets or “funds” that church money is separated into in their finance systems. This is why fund accounting is so important for churches, allowing them to remain cognizant and respectful of these restrictions.</p>
<img alt="Church accounting leverages fund accounting to organize finances." src="https://jitasa.imgix.net/blog/church_accounting_fund_accounting_process.jpg?auto=format&w=520" width="520" height="420" />
<p>In the above image, you can see how in general accounting, the income is recorded in the general ledger, which also indicates the amount you have for your expenses. Meanwhile, in fund accounting, the income is recorded in various “funds” including the general ledger, grant fund, and scholarship fund in this example. The funds donated for these purposes are then used to promote those related programs.</p>
<p id="how">The focus of church accounting is always on advancing the mission and goals of the church itself, reinvesting all revenue back into the organization itself to advance objectives.</p>
<p>As a 501(C)(3), churches are also required to follow the generally accepted accounting principles (GAAP) for various documents and reports and comply with the requirements set in place by the IRS.</p>
<h2>How is Church Accounting Different?</h2>
<p>As we mentioned, church accounting differs greatly from for-profit accounting practices. This makes sense! After all, your church operates differently from a for-profit, so having financial practices that are more applicable to your actual situation will make your budgeting and financial management more accurate and efficient.</p>
<p>Let’s explore the most prominent ways that church accounting differs from for-profit accounting standards.</p>
<h3>Accountability vs. Profitability</h3>
<p>Churches, like nonprofits, rely on the generosity of their supporters to fund their organizations. Therefore, the polite (and necessary) thing to do is to respect these supporters’ wishes for how they want their contributions to be allocated at your organization.</p>
<p>Even when restrictions aren’t placed on the contributions, they should all be reinvested back into making your organization better and more impactful. This ensures your organization is remaining respectful and responsible with the funds generously given to your church.</p>
<p><strong>This primary focus on accountability differs from for-profit organizations that focus their efforts on being profitable.</strong></p>
<p>Before you allocate funds, be sure to ask yourself how that allocation will help advance your church and your church’s mission. That way, when you run reports at your organization, the story those reports tell will show how your church uses funding responsibly.</p>
<h3>Multiple Ledgers</h3>
<p>When for-profit organizations make a sale of their goods or services, the revenue earned and expenses made are all added to a single general ledger. This ledger is self-balancing and keeps track of all financial transactions for the company.</p>
<p>However, churches are different. Because your church doesn’t sell goods or services, you need more than a single general ledger. You need a series of ledgers to describe the different uses for the money at the church.</p>
<p>Churches can designate these smaller ledgers according to restrictions, bite-sized budgets, and other allocations at the organization. Ultimately, these ledgers are then organized in a greater chart of accounts to keep everything organized.</p>
<div class="blog-callout-full">
<h2>Chart of Accounts Template for Your Church</h2>
<p>This comprehensive tool allows you to categorize financial activity by class, location, and project, giving you a clear and detailed view of your congregation’s financial performance.</p>
<a href="https://www.jitasagroup.com/nonprofit-resources/nonprofit-free-downloads/church-chart-of-accounts-template/" class="button white">Free Download</a>
</div>
<h3>Financial Documents</h3>
<p>Financial documents and reports are used to tell the story of your church’s accounting activities and check in on the financial situation of the organization. This is another place where the regular practices at churches differ from those at for-profit companies.</p>
<p>In lieu of certain for-profit accounting documents, churches use slight variations to describe the financial health and positioning of the organization.</p>
<h4>Statement of Activities</h4>
<p>While for-profits use <strong>income statements</strong> to describe the revenue earned at the company over a specific period of time, church accounting dictates that church organizations use a <strong>statement of activities</strong> instead.</p>
<p><strong>A church’s statement of activities describes the revenue, expenses, and net changes in assets for the organization over a specific period of time.</strong></p>
<img alt="Your statement of activities is a vital church accounting report to determine net assets." src="https://jitasa.imgix.net/blog/church_accounting_statement_of_activities.jpg?auto=format&w=600" width="600" height="700" />
<p>This statement allows your church to see your revenue sources and how you leverage the resources at your disposal toward activities that advance the church’s mission.</p>
<h4>Statement of Financial Position</h4>
<p>Companies use a <strong>balance sheet</strong> to show the assets, liabilities, and net worth (or equity capital) of the for-profit organization. Meanwhile, churches leverage a <strong>statement of financial position</strong> to show the organization’s liabilities and assets to get an idea of the net assets of the organization.</p>
<p><strong>The main difference between a standard balance sheet and a statement of financial position is that the balance sheet puts finances in terms of equity.</strong></p>
<img alt="The statement of financial position is the equivalent of a balance sheet for church accounting." src="https://jitasa.imgix.net/blog/church_accounting_statement_of_financial_position.jpg?auto=format&w=600" width="600" height="700" />
<p>Because churches are not technically owned by anyone, there is no equity to be shared among stakeholders. Instead, churches simply use this sheet to understand their assets and liabilities at the organization.</p>
<h4>Statement of Functional Expenses</h4>
<p>Because churches function as nonprofit organizations, they’ll need to compile a <strong>statement of functional expenses</strong>, a financial statement unnecessary for for-profits. Churches must provide detailed characterization of the expenses they incur.</p>
<p><strong>The statement of functional expenses helps churches gain detailed inside views of how their funding is used to help the organization succeed.</strong></p>
<img alt="In church accounting, the statement of functional expenses helps organize the costs you incur." src="https://jitasa.imgix.net/blog/church_accounting_statement_of_functional_expenses.jpg?auto=format&w=600" width="600" height="700" />
<p>Understanding your church’s expenses will help you better allocate resources realistically in the future. For example, if you estimate that you’ll spend $15,000 on mission work, but realize that you usually spend closer to $20,000 after looking at your statement of functional expenses, you can make necessary adjustments in your budget moving forward.</p>
<p>While these are the financial documents and reports that make church accounting different from for-profits, they also share a couple of similar documents and reports that help provide additional insight into the organization’s financial situation. For instance, both for-profits and churches alike will compile the following documents:</p>
<ul>
<li><strong>Annual budget</strong> to plan out the revenue and expenses for a set timeframe.</li>
<li><strong>Cash flow statements</strong> to measure the cash flowing into and out of the organization.</li>
</ul>
<p id="software">Church accounting and accounting at a for-profit company differ greatly from one another. This means that when you rely on various resources, whether that’s an outsourced CPA, template reports, or a software solution, you’ll need to look for fund accounting specific solutions.</p>
<h2>What Should You Look for in Church Accounting Software?</h2>
<p>If you’re keeping your financial information in a spreadsheet currently, it’s probably time to upgrade your system. Accounting software helps make the bookkeeping process easier and allows organizations to automate the reporting process. This helps maintain consistency in your reporting and makes financial information comparable between set periods of time.</p>
<p><strong>When you invest in a church accounting software solution, be sure you choose one that will account for the financial intricacies of the fund accounting system.</strong></p>
<p>A fund accounting software solution will include features that are specific to either nonprofit or church accounting needs. For instance, it might include features such as:</p>
<ul>
<li><strong><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/grant-management/">Grant management</a> tools</strong>. Grant monies are often accompanied by a number of restrictions that churches must adhere to in order to remain compliant and accountable to the grant funder. Be sure you can allocate various grant funds appropriately.</li>
<li><strong>Budgeting tools</strong>. Compile your <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/">annual budget</a>, then be sure you can save each budget to compare these numbers from year to year in order to make future projections more accurate. Be sure you’re also able to revisit this budget to make necessary adjustments as actual expenditures and revenues vary throughout the year.</li>
<li><strong>Fund accounting reporting tools</strong>. Earlier, we walked through a number of the unique financial documents that churches need to compile in order to gain the financial insights they need. Therefore, be sure whatever software you invest in will provide you with the templates and standard reports necessary for church accounting.</li>
</ul>
<p id="outsource">While there are a number of accounting solutions out there that can handle fund accounting, <a href="https://quickbooks.intuit.com/industry/churches/" target="_blank" rel="noopener noreferrer">Quickbooks</a> is the name that’s most well-known in the space. They offer several versions of their solution depending on the industry your organization functions in. Therefore, this solution will offer church-specific accounting needs.</p>
<p>Here at <a href="https://www.jitasagroup.com/">Jitasa</a>, our accounting team helps churches open up an account at Quickbooks to help keep all relevant financial information organized and to set up reporting features.</p>
<h2>Is it Better to Hire or Outsource a Church Accountant?</h2>
<p>As we mentioned, very few church professionals entered the industry to start their accounting careers. Rather, your industry is full of individuals who feel called by God to serve their communities and spread the Word. Therefore, you’ll likely look for outside sources to handle the accounting tasks at your church.</p>
<p>This leaves most churches with two options to handle their accounting needs: hiring or outsourcing.</p>
<img alt="You might decide to hire or outsource an accountant to handle your church accounting needs." src="https://jitasa.imgix.net/blog/church_accounting_hiring_v_outsouring.jpg?auto=format&w=500" width="500" height="300" />
<h3>Hiring an In-House Accountant</h3>
<p>In-house accountants tend to be the right choice for large churches who have the resources available to hire someone for the full-time position. While this option is a little more expensive, you’ll be able to find someone who dedicates all of their time to your organization, helping them become very familiar with your church and its specific needs.</p>
<h3>Outsourcing Your Church Accounting Needs</h3>
<p>For the majority of churches, <a href="https://www.jitasagroup.com/about/partnerships/churches/">outsourcing your accounting needs</a> makes much more sense than hiring someone to fill the full-time position of a church accountant. While you won’t receive the specialized attention of someone spending all of their time with your church, you’ll gain something just as valuable: experience.</p>
<p>Outsourcing your church accounting needs means you’ll be working with an experienced church accountant who has encountered any number of questions and issues at other churches, helping them understand the best methods to overcome the most common hassles.</p>
<p>Plus, most small churches don’t need someone full time to look after their finances. Outsourcing provides an affordable option that provides churches with the expertise they need in an accountant.</p>
<hr />
<p>Church accounting is a unique form of financial management that helps church professionals like yours to gain insider knowledge about the financial health and position of the organization. Plus, you’ll be able to make plans within the scope of financial possibility at your organization while maintaining as high of an impact as possible.</p>
<p>We recommend churches like yours think long and hard about who will be best suited to handle the accounting needs of your organization. For the majority of small to mid-sized organizations, outsourcing your accounting needs is the best option. It provides you with the expertise and experience you need to ensure healthy financial situations.</p>
<p>Jitasa can help! Check out our <a href="https://www.jitasagroup.com/about/partnerships/churches/">accounting and bookkeeping services</a> specifically for church organizations to learn about how we can manage your church’s accounts and provide financial insights to help you succeed.</p>
<p>If you’re looking for more information about accounting and bookkeeping for churches, check out these additional resources:</p>
<ul>
<li><a href="https://www.jitasagroup.com/about/partnerships/churches/">Outsourced Bookkeeping and Accounting for Churches</a>. See how Jitasa’s bookkeeping and accounting services can help your church maintain organized finances.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accounting/">Nonprofit Accounting: A Guide to Basics and Best Practices</a>. Churches operate as 501(C)(3) organizations, meaning their accounting principles are very similar to that of nonprofits. Check out this guide to learn more about it.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/grant-management/">Grant Management: A Nonprofit’s Complete Guide</a>. Grants are a major funding source for your church. Learn more about how they fit into your accounting systems with this guide.</li>
</ul>
<div class="blog-post-callout">
<div class="inner">
<div class="media">
<picture>
<source srcset="https://www.jitasagroup.com/images/blog/flames_circle_lrg.png, https://www.jitasagroup.com/images/blog/flames_circle_lrg@2x.png 2x" media="(min-width: 850px)" />
<img srcset="https://www.jitasagroup.com/images/blog/flames_circle.png, https://www.jitasagroup.com/images/blog/flames_circle@2x.png 2x" alt="Jitasa Flames" />
</picture>
</div>
<div class="text">
<p>Get back to your mission and let us handle your church’s complex financial needs. <b>See how Jitasa’s team of church accounting experts can help!</b></p>
<a href="https://www.jitasagroup.com/services-quote-request/" class="button small">Contact Jitasa</a>
</div>
</div>
</div>The Employee Retention Tax Credit and Nonprofit Eligibility2021-07-07T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/employee-retention-tax-credit-nonprofit-eligibility/<p>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.</p>
<p>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.</p>
<p>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.</p>
<p><strong>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.</strong></p>
<p>In this guide, we’ll be covering the background of the ERTC in a general sense and how it impacts your organization.</p>
<p><strong>Navigation</strong></p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/employee-retention-tax-credit-nonprofit-eligibility/#what">What is the Employee Retention Tax Credit?</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/employee-retention-tax-credit-nonprofit-eligibility/#history">History of the ERTC</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/employee-retention-tax-credit-nonprofit-eligibility/#retention">Employee Retention Tax Credit Qualifications for Nonprofits</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/employee-retention-tax-credit-nonprofit-eligibility/#claim">How to Claim the Employee Retention Tax Credit</a></li>
</ul>
<p>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 <a href="https://www.jitasagroup.com/nonprofit-solutions/nonprofit-bookkeeping-accounting-services/">services for nonprofits</a>, we want to serve you so that you can serve the world.</p>
<p id="what">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.</p>
<h2>What is the Employee Retention Tax Credit?</h2>
<p>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.</p>
<p id="history">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.</p>
<h2>History of the ERTC</h2>
<p>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:</p>
<img alt="The employee retention tax credit was initially introduced in the CARES Act" src="https://jitasa.imgix.net/blog/cares_act.png?auto=format&w=460" width="460" height="115" />
<h3>CARES Act</h3>
<p><strong>Passed March 27, 2020</strong></p>
<p>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. <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/american-rescue-plan-complete-guide-for-nonprofits/">The CARES Act</a> implemented certain policies such as the Paycheck Protection Program (PPP), Economic Injury Disaster Loans, additional aid for unemployment benefits, and more.</p>
<p>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.</p>
<img alt="The employee retention tax credit was initially introduced in the CARES Act" src="https://jitasa.imgix.net/blog/consolidated_appropriations_act.png?auto=format&w=460" width="460" height="115" />
<h3>Consolidated Appropriation Act</h3>
<p><strong>Passed December 27, 2020</strong></p>
<p>The <a href="https://www.cooley.com/news/insight/2020/2020-12-31-consolidated-appropriations-act-2021-provides-further-pandemic-tax-relief" target="_blank" rel="noopener noreferrer">Consolidated Appropriation Act</a> 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.</p>
<p>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.</p>
<p>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.</p>
<img alt="The American Rescue Plan Act also further extended the Employee Retention Tax Credit program for nonprofits.]" src="https://jitasa.imgix.net/blog/american_rescue_plan_act.png?auto=format&w=460" width="460" height="115" />
<h3>American Rescue Plan Act</h3>
<p><strong>Passed March 11, 2021</strong></p>
<p><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/american-rescue-plan-complete-guide-for-nonprofits/">The American Rescue Plan Act</a> 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.</p>
<p>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.</p>
<p>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. <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/employee-retention-tax-credit-nonprofit-eligibility/#etrc">We’ll cover those changes later</a>.</p>
<h2 id="retention">Employee Retention Tax Credit Qualifications for Nonprofits</h2>
<p>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:</p>
<ol>
<li>You’ve experienced a 50% decline in gross receipts in any quarter of 2020.</li>
<li>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.”</li>
</ol>
<p>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.</p>
<p>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 <a href="https://www.irs.gov/newsroom/covid-19-related-employee-retention-credits-determining-when-an-employers-trade-or-business-operations-are-considered-to-be-fully-or-partially-suspended-due-to-a-governmental-order-faqs" target="_blank" rel="noopener noreferrer">ongoing list of FAQs</a> that help determine this qualification.</p>
<p><strong>If you’re not sure if you qualify for ERTC funds, you can always reach out to a nonprofit accountant to get more information.</strong> They’ll be able to help you conduct the calculations to see if you qualify under the first provision.</p>
<p id="etrc">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.</p>
<h2>ERTC Changes for Q4 2021</h2>
<p>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:</p>
<ul>
<li>You must have 1 or more employees (other than >50% owners and certain family members of theirs)</li>
<li>You must be a startup company and started operations on or after 2/15/2020</li>
<li>You must have gross receipts under $1 million dollars for 2020 and 2021, each year.</li>
</ul>
<p>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.</p>
<div class="text-center mb-0">
<a href="https://www.jitasagroup.com/nonprofit-solutions/nonprofit-bookkeeping-accounting-services/" class="button">Contact Jitasa to Discuss Qualification for the ERTC</a>
</div>
<h2 id="claim">How to Claim the Employee Retention Tax Credit</h2>
<p>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.</p>
<p><strong>Work with a nonprofit accountant who can help you retroactively claim the tax credit for 2020.</strong> 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.</p>
<p>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:</p>
<ul>
<li><strong>Dispersing your PPP loans throughout the year if possible.</strong> 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.</li>
<li><strong>Retroactively claiming the tax credit.</strong> 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.</li>
</ul>
<p>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.</p>
<p>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.</p>
<hr />
<p>The federal government passed legislation to <em>help</em> 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.</p>
<p>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.</p>
<p>If you’re interested in learning more about the legislation designed to help organizations during the COVID-19 pandemic, check out these additional resources:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/american-rescue-plan-complete-guide-for-nonprofits/">The American Rescue Plan: The Nonprofit Complete Guide</a>. Learn more about the latest of the legislative changes made in response to the pandemic and how it impacts nonprofits.</li>
<li><a href="https://www.jitasagroup.com/nonprofit-solutions/nonprofit-bookkeeping-accounting-services/">Jitasa Bookkeeping and Accounting Services</a>. Discuss your options regarding government funding with a professional by reaching out to a trained Jitasa accountant.</li>
</ul>T-Shirt Fundraising: What Your Nonprofit Needs to Know2021-06-15T11:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/t-shirt-fundraising-what-nonprofit-need-to-know/<p>Fundraising is at the heart of any nonprofit’s strategy—not because it’s the most important thing that nonprofits do, but because it <i>enables</i> nonprofits to do the crucial work for their mission through impactful programming.</p>
<p>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.</p>
<p><strong>One such fundraising idea that’s proven to be wildly successful for all types of causes is selling t-shirts.</strong></p>
<p>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.</p>
<p>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:</p>
<ol>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/t-shirt-fundraising-what-nonprofit-need-to-know/#t-shirts">Choose How You’ll Sell & Distribute T-Shirts</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/t-shirt-fundraising-what-nonprofit-need-to-know/#platform">Consider What to Look for in a T-Shirt Fundraising Platform</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/t-shirt-fundraising-what-nonprofit-need-to-know/#design">Design Your T-Shirt with More Than Your Logo</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/t-shirt-fundraising-what-nonprofit-need-to-know/#strategy">Consider How the Fundraiser Fits into Your Strategy</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/t-shirt-fundraising-what-nonprofit-need-to-know/#thanks">Say Thank You After The Fundraiser Ends</a></li>
</ol>
<p id="t-shirts">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.</p>
<h2>Choose How You’ll Sell & Distribute Your T-Shirts</h2>
<p>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:</p>
<ul>
<li><strong>Online.</strong> 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.</li>
<li><strong>In-person.</strong> 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.</li>
</ul>
<p>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.</p>
<p id="platform"><strong>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.</strong> They’ll also provide a bulk ordering option so that you can purchase some shirts ahead of time for events and in-person opportunities.</p>
<h2>Consider What to Look for in a T-Shirt Fundraising Platform</h2>
<p>If you’re selling your shirts online, then you’ll likely <a href="https://doublethedonation.com/tips/t-shirt-fundraising-platforms/" target="_blank" rel="noopener noreferrer">use a platform</a> 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.</p>
<p>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.</p>
<p>All fundraising campaigns have <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-overhead/">overhead expenses</a> 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.</p>
<p>To get the most out of your t-shirt fundraiser, look for the following qualities in your merchandise provider:</p>
<ul>
<li>No inventory costs</li>
<li>No platform fees</li>
<li>No print minimums</li>
<li>Low payment processing fees</li>
<li>Discounted processing fees for registered 501(c)(3) organizations</li>
</ul>
<p>All of these features will help you obtain the most revenue possible from your next t-shirt fundraising campaign.</p>
<p id="design">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.</p>
<h2>Design Your T-Shirt with More Than Your Logo</h2>
<p>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 <a href="https://blog.bonfire.com/t-shirt-fundraising-mistakes-to-avoid/" target="_blank" rel="noopener noreferrer">add <i>more</i> than just your logo</a> to your shirt.</p>
<p><strong>T-shirts provide a canvas to inspire change and intrigue donors, encouraging them to get involved with your organization’s activities.</strong> 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.</p>
<p>Leverage the latest <a href="https://blog.bonfire.com/t-shirt-design-trends/" target="_blank" rel="noopener noreferrer">t-shirt design trends</a> to provide additional intrigue for your merchandise and inspire donors. For instance, some of these trends include:</p>
<ul>
<li><strong>Multicolored words.</strong> 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.</li>
<li><strong>Handwritten typography.</strong> 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.</li>
<li><strong>Illustrative figures.</strong> 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.</li>
<li><strong>Animal portraits.</strong> 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.</li>
</ul>
<p id="strategy">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.</p>
<h2>Consider How the Fundraiser Fits into Your Strategy</h2>
<p>As you plan your t-shirt fundraiser, you should be sure you understand exactly how this particular fundraiser fits into your larger strategy.</p>
<p>At the start of the year, you put together a budget and <a href="https://www.nonprofit.courses/blog/building-a-fundraising-strategy/" target="_blank" rel="noopener noreferrer">designed a fundraising strategy</a> 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:</p>
<ul>
<li>Support a campaign for a new program</li>
<li>Diversify your event <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-revenue-streams-to-diversify-proceeds/">revenue streams</a></li>
<li>Contribute to your nonprofit’s annual fund</li>
<li>Provide funds for a specific aspect of your current programming</li>
</ul>
<p>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 <a href="https://nonprofithub.org/fundraising/understanding-why-and-how-people-give/" target="_blank" rel="noopener noreferrer">driven by the impact they can have</a> 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.</p>
<p id="thanks">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.</p>
<h2>Say Thank You After The Fundraiser Ends</h2>
<p>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.</p>
<p>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:</p>
<ul>
<li>Writing <a href="https://www.fundraisingletters.org/donor-thank-you-letters/" target="_blank" rel="noopener noreferrer">heartfelt thank you notes</a> to your supporters who participated in the campaign</li>
<li>Calling supporters to say thank you and inform them of other upcoming engagement opportunities</li>
<li>Provide a thank-you note or a small gift in the package with the t-shirt you sell (like a matching face mask)</li>
<li>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</li>
</ul>
<p>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.</p>
<h2>In Conlcusion</h2>
<p>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!</p>
<h2>Author: Kevin Penney</h2>
<div class="clearfix">
<img alt="Kevin Penney of Bonfire" src="https://jitasa.imgix.net/blog/kevin_penney_bonfire.jpg?auto=format&w=300" class="img-left mt-0" srcset="https://jitasa.imgix.net/blog/kevin_penney_bonfire.jpg?auto=format&w=300, https://jitasa.imgix.net/blog/kevin_penney_bonfire.jpg?auto=format&w=300&dpr=2 2x" width="300" height="303" />
<p>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.</p>
</div>The American Rescue Plan: The Nonprofit Complete Guide2021-05-18T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/american-rescue-plan-complete-guide-for-nonprofits/<p>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.</p>
<p>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 <a href="https://www.nytimes.com/2020/12/22/us/politics/second-stimulus-whats-included.html" target="_blank" rel="noopener noreferrer">second stimulus bill</a> was passed on December 27, 2020.</p>
<p><b>Now that we’re knee-deep in 2021, the federal government passed a third stimulus bill, <a href="https://www.congress.gov/bill/117th-congress/house-bill/1319/text" target="_blank" rel="noopener noreferrer">The American Rescue Plan</a>, effective as of March 11, 2021.</b> 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.</p>
<p>That’s what we’ll cover in this piece — how nonprofits just like yours have been affected by The American Rescue Plan. Here at <a href="https://www.jitasagroup.com/">Jitasa</a>, we’ve helped organizations just like yours take advantage of each stimulus package, and we’ll continue to do so as the situation evolves.</p>
<h2>Navigation</h2>
<ol>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/american-rescue-plan-complete-guide-for-nonprofits/#plan">The American Rescue Plan Overview</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/american-rescue-plan-complete-guide-for-nonprofits/#program">The Latest on the Paycheck Protection Program</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/american-rescue-plan-complete-guide-for-nonprofits/#unemployment">Federal Coverage for Unemployment</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/american-rescue-plan-complete-guide-for-nonprofits/#grants">Shuttered Venue Operators Grants</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/american-rescue-plan-complete-guide-for-nonprofits/#government">Grants for State and Local Governments</a></li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/american-rescue-plan-complete-guide-for-nonprofits/#incentives">Potential Incentives Past The American Rescue Plan</a></li>
</ol>
<p id="plan">Ready to learn more about The American Rescue Plan for nonprofits? Let’s dive deeper.</p>
<h2>1. The American Rescue Plan Overview</h2>
<p>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:</p>
<img src="https://www.jitasagroup.com/images/blog/american_rescue_act_summary.png" srcset="https://www.jitasagroup.com/images/blog/american_rescue_act_summary.png, https://www.jitasagroup.com/images/blog/american_rescue_act_summary@2x.png 2x" alt="This image provides a brief overview of the American Rescue Plan for nonprofits, each item will be covered in more detail throughout the article." width="600" height="450" class="img-center img-full" />
<p id="program">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.</p>
<h2>2. The Latest on the Paycheck Protection Program</h2>
<p>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.</p>
<p>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.</p>
<p>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 <a href="https://www.jitasagroup.com/nonprofit-solutions/nonprofit-bookkeeping-accounting-services/">skilled nonprofit accountant</a>. 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.</p>
<p id="unemployment">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.</p>
<div class="text-center mb-0">
<a href="https://www.jitasagroup.com/nonprofit-solutions/nonprofit-bookkeeping-accounting-services/" class="button">Talk to a Jitasa professional today!]</a>
</div>
<h2>3. Federal Coverage for Unemployment</h2>
<p>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:</p>
<ol>
<li>The federal payment for a portion of unemployment insurance expenses has been extended through September 6th, 2021.</li>
<li>The federal coverage for reimbursement of these expenses increased from 50% to 75%.</li>
</ol>
<p>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.</p>
<p id="grants">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.</p>
<h2>4. Shuttered Venue Operators Grants</h2>
<p>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.</p>
<p>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.</p>
<p>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.</p>
<p>Here are some tips to keep in mind if you decide to apply for SVOG funds:</p>
<ul>
<li><b>You might be required to conduct a <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-audit/">nonprofit financial audit</a>.</b> 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.</li>
<li><b>There may be limitations on how you can use SVOG funds.</b> These grant monies must be used for payroll costs, rent or utilities, payments to independent contractors <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/1099-for-nonprofits/">reported on a 1099-MISC</a>, and other ordinary and necessary expenses. Be sure you accurately track where all of these funds are allocated using <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/grant-management/">grant management best practices</a>. This will help keep all of the expenses straight and prove you used the funds correctly.</li>
</ul>
<p>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!</p>
<p id="government">If you have additional questions regarding SVOG funds, you may find the answers provided on the <a href="https://www.sba.gov/document/support-faq-regarding-shuttered-venue-operators-grant-svog" target="_blank" rel="noopener noreferrer">FAQ sheet</a> provided by the U.S. Small Business Administration.</p>
<h2>5. Grants for State and Local Government</h2>
<p>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.</p>
<p>According to the <a href="https://home.treasury.gov/news/featured-stories/fact-sheet-the-american-rescue-plan-will-deliver-immediate-economic-relief-to-families" target="_blank" rel="noopener noreferrer">Department of Treasury</a>, these $350 billion in funds will be divided as such:</p>
<ul>
<li>$195 billion for states with a minimum of $500 million for each.</li>
<li>$130 billion for local governments with a minimum of $1.25 billion per state and allocated to local governments within that state.</li>
<li>$20 billion for tribal governments.</li>
<li>$4.5 billion for U.S. territories.</li>
</ul>
<p>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.</p>
<p><b>So how do the grants for state and local governments impact your nonprofit?</b></p>
<p>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.</p>
<p id="incentives">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.</p>
<h2>6. Potential Incentives Past The American Rescue Plan</h2>
<p>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.</p>
<p>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.</p>
<p><b>This legislation has not yet been passed into law.</b></p>
<p>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.</p>
<p>If you’d like to track the progress of this Act, you can do so <a href="https://www.govtrack.us/congress/bills/117/s618" target="_blank" rel="noopener noreferrer">here</a>.</p>
<p>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.</p>
<h2>Wrapping Up</h2>
<p>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!</p>
<p>If you’re not sure how your organization can make the most use of the relief programs or how the different finance opportunities <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-budgeting-understand-the-basics/">fit into your budget</a>, you can always talk to a professional.</p>
<p><b>Here at <a href="https://www.jitasagroup.com/">Jitasa</a>, 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.</b></p>
<p>If you’re looking for more information about nonprofit finances to help get you through these challenging times, check out the additional resources below:</p>
<ul>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-accounting/">Nonprofit Accounting: A Guide to Basics and Best Practices.</a> This guide to nonprofit accounting can help determine the impact The American Rescue Plan can have for your organization.</li>
<li><a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/form-990-filing/">Form 990 Filing: Your Essential Guide to Nonprofit Taxes.</a> 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!</li>
</ul>
<p>If you are seeking assistance with ERTC filings by becoming a Jitasa Client please contact <a href="mailto:jon.osterburg@jitasagroup.com">jon.osterburg@jitasagroup.com</a></p>Nonprofit Revenue Streams to Diversify Proceeds2021-04-21T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-revenue-streams-to-diversify-proceeds/<p>Although a nonprofit organization is primarily committed to serving a specific mission, the term nonprofit is often misleading. A nonprofit organization must, for example, still generate a profit if they hope to fulfil their goals. Like any business, having multiple streams of income can help save an organization if one source falls through. It is a measure undertaken by many to ensure long term success, and can help continue service, uninterrupted--no matter the influence of external factors on one source of funding.</p>
<img src="https://www.jitasagroup.com/images/blog/throwing_paper_airplanes.jpg" srcset="https://www.jitasagroup.com/images/blog/throwing_paper_airplanes.jpg, https://www.jitasagroup.com/images/blog/ 2x" alt="" width="702" height="400" />
<h2>The problem with limited revenue streams</h2>
<p>The obvious problem with a lack of diversity in your income is that something may happen to your sole source of money–and then what? If a granting institution suddenly loses their own funding or decides to redirect the single grant you relied upon, your organization is left high and dry. When you count on one thing, the end of it can be catastrophic.</p>
<p>When your funding comes from many places, one can end with little disruption to your operations. Sure, you may need to replace it, but you’ve got money to cover operations for at least a little while. Diversified revenue streams can also help you in times of national tragedy or recession when people may be a little more reserved with their spending.</p>
<h2>Types of nonprofit revenue</h2>
<p>Nonprofits are not’ bringing in the bulk of their dollars by exchanging a product for your dollars, so they’ve got to be more creative with where the money comes from. Luckily, there are a lot of ways businesses of all types--even nonprofits--can make money.</p>
<h3>Grant funding</h3>
<p>Nonprofits receive a large portion of their revenue by acquiring grant money, which does not require repayment. Organizations apply for grants (which vary greatly in size, scope, and application process), and the money is given to them to use as either they or the grant instructs. Some grants come with requirements for how the money is spent, reporting on activities enabled by the grant, etc. Some do not, and are given freely with the expectation that the money will be used as described in the application.</p>
<p>The application process can vary, ranging from a simple form to a lengthy documentation process. Most require good storytelling and competent writing, as well as organizational characteristics that match what the granting institution is looking for.</p>
<p>Foundations also offer a variety of grants, and can be both public and private, corporate, and family. Organizations like the Gates Foundation are large and have the capacity to provide extensive grants. Others may be small and offer more limited (but still crucial) funding.</p>
<h3>Fundraising and charitable contributions</h3>
<p>A nonprofit organization gets a good bit of their money through fundraising that they conduct within the community. This can be through events, donor drives, recurring donations, etc. For every organization, it looks a little bit different, and can even vary from year to year as the organizational needs change.</p>
<p>Charitable contributions, which often happen as a result of fundraising efforts, are simply donations made to a nonprofit organization. These make up a large portion of a nonprofit’s revenue stream.</p>
<h3>Earned income</h3>
<p>Nonprofits can and often do make money through the sale of service fees and through the sale of products. Although this type of income is subject to IRS regulations, it is helpful in the diversification of income streams in the nonprofit world. A great example of this is a nonprofit hospital that funds activity by charging for medical care. Girl Scouts sell cookies, which is the perfect example of this type of income stream. Other nonprofits might charge a fee for membership or sell merchandise to earn income.</p>
<h3>Philanthropy</h3>
<p>Some nonprofits are able to form partnerships with corporate entities that result in funding. These are great because they’re typically reliable and can offer other networking benefits. In instances of partnerships, a company might agree to match all donations to an organization over a certain period of time. They may also result in corporate volunteers for a nonprofit.</p>
<h3>Government and community funding</h3>
<p>Many nonprofits receive government funding, usually in the form of a grant. Because government issued grants make up a large amount of the money available, they’re worth mentioning independently of other types of grants.</p>
<p>Frequently, other organizations operating within the community offer funding to nonprofits who qualify. This includes organizations like United Way.</p>
<h2>Understanding the difference: recurring and episodic funding</h2>
<p>While all funding is appreciated, not all funding is created equal. Some funding happens just once, while others are offered many times. Some can be renewed on a temporary basis and others require that certain metrics be met. While renewable funding is great because of its reliability, having a mix of the two is ideal.</p>
<h3>Examples of renewable funding</h3>
<p>Renewable funding is often the result of annual funds, and most of the time, this funding doesn’t come with restrictions. Likely, this type of funding accounts for a large portion of nonprofit income.</p>
<p>Renewable income can also be the result of monthly giving campaigns in which donors give a certain amount each month, or grants that are good for a few years. Endowment funds also fall into this category.</p>
<h3>Examples of nonrenewable funding</h3>
<p>Nonrenewable funding is much more unpredictable because it varies year to year. If you sell tshirts for a one time event, this income is obviously not in contention for the following year. Most fundraising efforts are considered nonrenewable.</p>
<p>While both types of funding should be planned for and accounted for in your nonprofit budget, renewable funding offers something of a source of stability.</p>
<h2>How nonprofits can diversify</h2>
<p>Knowing what types of funding exist is only half the battle. Being able to actually diversify your income in some way is another task entirely. Luckily, with a little preparation, you can do it!</p>
<ul>
<li>Look for donors. This may sound straightforward, but one of the best things you can do is look for new donors to increase your overall donor base and make your organization more stable. Decide who your audience is, how you might reach them, and what you’ll need to do to build a lasting relationship with them.</li>
<li>Build relationships. Not only will this help you diversify your donor base, but it may land you a corporate partnership as well. Form alliances with businesses within your community without the expectation of financial support. Cultivate relationships with people who know people. Often, this results in good things for your nonprofit. If you want, you may even seek sponsorships or partnerships directly.</li>
<li>Focus on grants. There are so many grants available, and you’re probably only applying for a very small part of them. Find an experienced grant writer who also knows how to research them, and you’ll open new doors for yourself. Apply often and thoroughly--and reapply if you can.</li>
<li>Practice gratitude. If you’re only focused on making money, you’re probably in the wrong business. When you build intentional relationships with the individuals and businesses giving you money, they’re probably inclined to give more or tell their friends. Approach things from an authentic place and find ways to recognize the people who support your organization.</li>
<li>Identify a sellable product. No matter your particular niche, there’s probably a product or service you can offer that both compliments your mission and brings in additional sources of income. Branded merchandise, tutoring services, or even renting part of your space when you aren’t using it are great (and relatively easy) examples of places you might make some money and diversify your income.</li>
<li>Think outside the box. Nonprofits rarely suffer from a lack of creativity, and funding diversification is no exception. There may be an untapped donor base, wildly successful fundraiser, or grant writer you just haven’t thought of yet. Meet with staff and volunteers to identify easy (or even difficult) ways to make your organization soar with the resources and connections you already have.</li>
</ul>
<h2>An ideal funding situation and a final word</h2>
<p>One or two income streams are great, but ten are even better. In a perfect world, you’ll have income coming in from lots of places. You may be getting dollars from monthly giving, grants, events, major gifts, sponsorships, etc.–all at the same time.</p>
<p>Plan for as many different sources of funding as you feel you can responsibly secure. Increase your goals for the next year, and future-proof your nonprofit for years of continued success.</p>
<p>Diversified funding can look a lot of different ways, depending on the exact setup of your organization. Don’t limit yourself by identifying three ways of generating income, but also be cautioned that each stream should be carefully thought out before you invest valuable time in it.</p>
<p>This sort of thing can feel tricky for nonprofits, because they're typically driven to spend money and hours in service of the mission. Diversifying income requires that some time is spent on more operational aspects of the nonprofit business. While this can feel strange, it is important to remember that a little bit of time on this type of operational work now results in more money down the road. More money down the road results in more and better services that will be around for a lot longer.</p>
What Nonprofits Should Know About Overhead2021-03-23T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-overhead/<p>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.</p>
<img src="https://www.jitasagroup.com/images/blog/plant_growing_in_coins.jpg" srcset="https://www.jitasagroup.com/images/blog/plant_growing_in_coins.jpg, https://www.jitasagroup.com/images/blog/ 2x" alt="" />
<p>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!</p>
<h2>The cost of service</h2>
<p>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.</p>
<p>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.</p>
<h2>How overhead is calculated</h2>
<p>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.</p>
<h2>Where mistakes happen</h2>
<p>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.</p>
<p>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.</p>
<h2>Why does it matter?</h2>
<p>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.</p>
<h2>Common types of overhead for nonprofits</h2>
<p>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.</p>
<h2>Too much and too little</h2>
<p>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.</p>
<h2>When overhead is a good thing</h2>
<p>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.</p>
<p>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.</p>
<h2>The cost of too little</h2>
<p>In an article published in <i>Stanford Social Innovation Review</i>, 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.</p>
<p>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.</p>
<p>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.</p>
<h2>The lasting results of low overhead</h2>
<p>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.</p>
<p>What does it all mean?</p>
<p>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.</p>
<p>But how exactly can a nonprofit do this? It doesn’t have to be complicated.</p>
<h2>The path to managing overhead</h2>
<p>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.</p>
<h3>Check your calculations</h3>
<p>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.</p>
<h3>Open up the conversation</h3>
<p>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.</p>
<h3>Learn how to communicate</h3>
<p>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.</p>
<h2>A better way to evaluate nonprofit performance</h2>
<p>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.</p>
<p>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:</p>
<ul>
<li>BBB Wise Giving Alliance</li>
<li>GuideStar</li>
<li>Charity Navigator</li>
</ul>
<p>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.</p>Nonprofit Cash Flow: Nine Tips for Better Financial Management2021-02-16T12:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/nine-tips-for-nonprofit-cash-flow/<p>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.</p>
<p>If you’re looking for some easy ways to better manage your nonprofit finances, read on!</p>
<h2>Know your costs</h2>
<p>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.</p>
<h2>Make a budget</h2>
<p>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.</p>
<p>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.</p>
<h2>Focus on accountability</h2>
<p>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.</p>
<p>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.</p>
<h2>Share the responsibility</h2>
<p>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.</p>
<p>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.</p>
<h2>Maintain a reserve</h2>
<p>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.</p>
<p>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.</p>
<h2>Keep your eyes on funding opportunities</h2>
<p>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.</p>
<p>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.</p>
<h2>Make some investments</h2>
<p>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.</p>
<h2>Stay current</h2>
<p>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.</p>
<p>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.</p>
<h2>Respond well</h2>
<p>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.</p>
<p>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.</p>
<p>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.</p>
<p>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.</p>Nonprofit Financial Reconciliation: Your Accounting Team's Part2021-02-01T09:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-financial-reconciliation/<p>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.</p>
<p>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.</p>
<h2>Why reconcile?</h2>
<p>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.</p>
<h2>What causes account discrepancies?</h2>
<p>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:</p>
<ul>
<li>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.</li>
<li>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.</li>
<li>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.</li>
<li>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.</li>
</ul>
<h2>More on other places to reconcile</h2>
<p>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:</p>
<ul>
<li><b>Bills</b>. 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.</li>
<li><b>Invoices</b>. 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.</li>
<li><b>Fixed assets</b>. 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.</li>
<li><b>Balance Sheet Accounts</b>. 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.</li>
</ul>
<p>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.</p>
<h2>Manual or Automated?</h2>
<p>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:</p>
<ul>
<li><b>Bank</b>. 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.</li>
<li><b>Subledger balances</b>. 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.</li>
<li><b>Roll-forward schedules</b>. 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.</li>
</ul>
<h2>How to begin the reconciliation process</h2>
<p>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.</p>
<p>You may also choose to do the reconciliation using your accounting department. In this case, you will need to:</p>
<ul>
<li>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).</li>
<li>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.</li>
<li>Ensure there are no bank errors, which are infrequent, but can happen.</li>
<li>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.</li>
<li>Finally, look at your balances and make sure they’re a match. Do this often.</li>
</ul>
<h2>What happens next?</h2>
<p>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.</p>
<p>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.</p>
<p>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.</p>
<h2>What to do if you suspect fraud</h2>
<p>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:</p>
<ul>
<li><b>Protect the evidence</b>. 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.</li>
<li><b>Enlist help</b>. 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.</li>
<li><b>Ask questions</b>. 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.</li>
<li><b>Contact insurance</b>. 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.</li>
<li><b>Establish loss</b>. 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.</li>
</ul>
<p>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.</p>What is nonprofit journalism?2020-10-08T15:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/nonprofit-journalism/<p>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.</p>
<p>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.</p>
<p>And, in reality, nonprofit journalism is actually not all that complicated, though the distinctions are many.</p>
<h2>The short answer: what is nonprofit journalism?</h2>
<p>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.</p>
<p>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.</p>
<h2>A brief history of nonprofit journalism</h2>
<p>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.</p>
<p>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.</p>
<h2>Why focus on nonprofit journalism?</h2>
<p>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.</p>
<p>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.</p>
<p>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.</p>
<h2>Why nonprofit journalism succeeds</h2>
<p>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.</p>
<p>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.</p>
<h2>The best of nonprofit news</h2>
<p>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.</p>
<ul>
<li>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.</li>
<li>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.</li>
<li>Kaiser Health News was a finalist for investigative reporting on a predatory bill collection practice by the University of Virginia Health System.</li>
</ul>
<p>Overall, many more nonprofits won this year, reflecting a greater recognition of (and perhaps the improving quality of) nonprofit journalism.</p>
<h2>More on funding nonprofit journalism</h2>
<p>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 <a href="https://www.jitasagroup.com/jitasa_nonprofit_blog/grant-management/">grant and foundation support</a>. Many also choose to advertise, but it accounts for very little of the overall dollars that support an organization.</p>
<p>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).</p>
<p>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.</p>
<h2>Not in it for the money</h2>
<p>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.</p>
<p>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.</p>
<h2>3 ways you can support nonprofit journalism</h2>
<p>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:</p>
<ul>
<li>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.</li>
<li>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.</li>
<li>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.</li>
</ul>
<h2>Good news travels fast</h2>
<p>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.</p>Common Nonprofit Scams and How to Avoid Them2020-08-13T15:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/common-nonprofit-scams/<p>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.</p>
<img src="https://www.jitasagroup.com/images/blog/smart_phone_with_spam_messages.jpg" srcset="https://www.jitasagroup.com/images/blog/smart_phone_with_spam_messages.jpg, https://www.jitasagroup.com/images/blog/ 2x" alt="" />
<h2>Fraud risk in nonprofits</h2>
<p>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.</p>
<h2>Common types of fraud or scams in nonprofits</h2>
<p>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:</p>
<p><b>Ghost employees:</b> 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.</p>
<p><b>Misappropriation of funds:</b> 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.</p>
<p><b>Vendor kickbacks:</b> 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.</p>
<p><b>Check fraud:</b> 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.</p>
<p><b>Expense fraud</b> Expense fraud can vary, but it is usually when an employee submits fake expenses, fraudulent personal expenses, multiple reimbursements, or overstated expenses.</p>
<p><b>Theft of cash or assets:</b> Perhaps the easiest to understand, theft happens when an employee within your nonprofit simply removes cash or assets from the premises with nefarious intent.</p>
<h2>Red flags for fraud or scams in your nonprofit</h2>
<p>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.</p>
<p>Look for:</p>
<ul>
<li>Unclear invoices</li>
<li>Vendors you haven’t heard of or those with unclear information (like no physical address)</li>
<li>Sudden increases in invoices from a specific vendor</li>
<li>Multiple monthly invoices from one vendor</li>
<li>Vendor invoices that list employee addresses as their own</li>
<li>Large vendor amounts divided amongst multiple invoices</li>
<li>Low visibility of employees dealing with payments and vendors</li>
</ul>
<h2>How to protect your nonprofit</h2>
<p>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.</p>
<p>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.</p>
<p>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.</p>
<p>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.</p>
Know the Difference: B Corp vs. Nonprofit2020-04-29T15:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/bcorp-vs-nonprofit/<p>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!</p>
<h2>All about ownership</h2>
<p>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.</p>
<p>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.</p>
<h2>Some overlap</h2>
<p>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.</p>
<p>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.</p>
<p>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!</p>The Importance of Goal Setting for Nonprofits2020-02-20T21:09:15Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/goal-setting-for-nonprofits/<p>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.</p>
<p>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.</p>
<h2>Goals and overall success</h2>
<p>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!</p>
<h2>Keep it on track</h2>
<p>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.</p>
<h2>Next steps</h2>
<p>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.</p>
<h2>More money</h2>
<p>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.</p>
<p>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.</p>
Why Nonprofits Should Ditch the Extra Bank Accounts2019-12-10T15:01:15Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/ditch-the-extra-bank-accounts/<p>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.</p>
<p>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.</p>
<h2>How it costs you</h2>
<p>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.</p>
<p>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.</p>
<h2>A simple solution</h2>
<p>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.</p>
<p>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.</p>
<p>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.</p>
<h2>Keep it simple</h2>
<p>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.</p>
<p>Make things simple for yourself, your staff, and your board and stick with one easy account.</p>
Can Nonprofit Organizations Unionize?2019-11-25T15:01:15Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/can-nonprofits-unionize/<p>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?</p>
<p>Since they are workers--passionate, awesome ones--they can indeed unionize if they desire.</p>
<h2>A brief history</h2>
<p>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.</p>
<h2>Modern examples</h2>
<p>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.</p>
<p>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.</p>
<h2>Nonprofit working conditions</h2>
<p>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.</p>
<p>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.</p>
<p>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.</p>Understanding Ownership for Nonprofit and For-Profit Business2019-07-15T09:17:15Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/understanding-ownership-for-nonprofit-and-for-profit-business/<p>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.</p>
<p>Essentially, nobody does. If this is confusing, don’t despair--different businesses are owned in different ways, explained below.</p>
<h3>The for-profit model</h3>
<p>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.</p>
<p>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.</p>
<p>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.</p>
<p>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.</p>
<h3>The nonprofit model</h3>
<p>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.</p>
<p>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.</p>
<p>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.</p>
<p>Nonprofits aren’t owned by anyone, which allows them to operate in different and meaningful ways.</p>
Social accounting: what is it and why does it matter?2019-03-11T10:28:59Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/social-accounting-what-is-it-and-why-does-it-matter/<p>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.</p>
<p>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.</p>
<h3>So what exactly is it?</h3>
<p>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.</p>
<p>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.</p>
<h3>Measuring the unmeasurable</h3>
<p>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.</p>
<p>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.</p>
<h3>What it looks like</h3>
<p>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.</p>
<p>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.</p>
<h3>Benefits of social accounting</h3>
<p>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.</p>
<p>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.</p>
How to Prepare to Present Your Nonprofit Financials to Your Board2017-09-07T09:16:43Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/how-to-prepare-to-present-your-nonprofit-financials-to-your-board/<p>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.</p>
<p>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.</p>
<p>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:</p>
<p><strong><em>Executive Summary:</em></strong> <em>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.</em></p>
<p><em><strong>Statement of Financial Position:</strong> This report is also known as a balance sheet, and will reflect your assets and liabilities.</em></p>
<p><em><strong>Statement of Activities:</strong> This report will detail your income versus your expenses. It can also be called an income statement.</em></p>
<p><em><strong>Budget vs. Actuals Statement:</strong> 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.</em></p>
<p><em><strong>Statement of Functional Expenses:</strong> 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.</em></p>
<p>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:</p>
<p><strong>Plan your approach:</strong> 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.</p>
<p><strong>Stick with simplicity:</strong> 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.</p>
<p><strong>Discuss executive summary in detail:</strong> Do spend time discussing your executive summary as it provides the clearest picture of your nonprofit’s financial health.</p>
<p><strong>Be aware of aesthetics:</strong> 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.</p>
<p><strong>Simplify and educate:</strong> 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.</p>
27 Questions to Ask an Outsourcing Agency2017-07-03T00:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/27-questions-to-ask-an-outsourcing-agency/<p>Outsourcing can be a cost-effective way for you to manage a function of your organization that you lack the expertise to do properly. It can also free up a chunk of your time that you can then refocus toward your mission. However, outsourcing is a business relationship that requires communication and preparation. Taking the time to interview an outsourcer before you sign a contract will ensure that you’re making the best choice for your organization. In that spirit, here are a list of 27 questions to help you interview a potential candidate.</p>
<p><strong>What to ask about the company:</strong><strong> </strong></p>
<ol>
<li>What makes your company different from other outsourcing options?<strong></strong></li>
<li>How long have you been providing your services?<strong></strong></li>
<li>Do you have client testimonials?<strong></strong></li>
<li>What percentage of clients would refer you?<strong></strong></li>
<li>What makes your services worth the investment?<strong></strong></li>
<li>What security measures do you have in place to protect your clients?<strong></strong></li>
<li>How will you meet the needs of my organization?<strong></strong></li>
<li>How often would I receive communication from you if I were a client?<strong></strong></li>
<li>How many individuals will work on my account?<strong></strong></li>
<li>What type of oversight will my account have?<strong></strong></li>
<li>How long would it take your company to become familiar with my account? To completely take over my function?<strong></strong></li>
<li>How often do you train your employees?<strong></strong></li>
<li>How can I be sure you are up to day on nonprofit regulations and requirements?<strong></strong></li>
<li>How will problems with my account be addressed?<strong></strong></li>
<li>If your company makes a mistake, how will that be dealt with? Will I be notified immediately?<strong></strong></li>
<li>What if my needs change?<strong></strong></li>
<li>Will I be reimbursed if you are responsible for an error?<strong></strong></li>
<li>Who can I contact to provide feedback on my experiences?</li>
<div><p><strong>What to ask about YOUR role: </strong></p></div>
<li>What would my obligations as your client be?</li>
<li>How much time would I need to devote to working with your employees?</li>
<li>Would I have deadlines to meet?</li>
<li>Will I still have access to my records?</li>
<div>
<p><strong>What to ask about contract obligations: </strong></p></div>
<li>Will I be required to sign a contract?</li>
<li>What is the minimum duration of the contract?</li>
<li>Will I be charged for canceling early? At the end of my contract?</li>
<li>What services are not covered under my contract?</li>
<li>Will I be made aware if a service I desire comes at an extra fee?</li>
</ol>
Don’t Get Scammed: Corporate Compliance Center Notice2016-11-28T00:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/don-t-get-scammed-corporate-compliance-center-notice/<p>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.</p>
<a href="https://www.jitasagroup.com/images/blog/compliance_notice_scam_full.jpg" target="_blank"><img src="https://www.jitasagroup.com/images/blog/compliance_notice_scam.jpg" alt="Compliance Notice Scam" class="img-right" />
</a>
<p>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 "<strong>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</strong>."
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. </p>
<p>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.</p>
<h2>What to do if you receive this letter or a similar scam</h2>
<p>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. </p>
What's the Difference Between a Contribution and a Grant?2014-02-07T00:00:00Zhttps://www.jitasagroup.com/jitasa_nonprofit_blog/contributionvsgrant/<p>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.</p>
<p>In their accounting policy on the subject, <a href="https://controller.nd.edu/assets/91697/classification_gift_or_grant.pdf" target="blank">The University of Notre Dame</a> 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.</p>
<h2>Defining grant vs. contribution</h2>
<p>The University of Notre Dame states that a <strong>gift</strong> (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.</p>
<p>Loyola University Chicago states that a <strong>grant</strong> (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.</p>
<p>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.</p>
<h2>Contributions</h2>
<p>Individuals and businesses usually make contributions, though they come in several types.</p>
<h3>What are the types of contribution transfers?</h3>
<p><b>Unconditional transfer of funds</b></p>
<ul>
<li>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.</li>
</ul>
<p><b>Conditional transfers</b></p>
<ul>
<li>These depend upon certain events happening or not happening in the future.</li>
<ul>
<li>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</li>
</ul>
<li>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</li>
</ul>
<p>In either situation, your organization cannot claim rights to the funds or assets until the conditional event/time has occurred.</p>
<h3>Understanding contribution classifications:</h3>
<p>Contributions fall into one of three classifications:</p>
<ul>
<li><b>Unrestricted assets:</b> This is revenue that has no impositions from the donor.</li>
<li><b>Temporarily restricted assets:</b> 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.</li>
<li><b>Permanently restricted assets:</b> This contribution is characterized by a restriction that can never be removed.</li>
</ul>
<h2>Grants</h2>
<ul>
<li>Government entities and foundations usually award grants.</li>
<li>They usually have a contract and budget set.</li>
<li>The frequency of grant reports can vary from monthly to quarterly to yearly; failure to report can cause your funding to stop.</li>
<li>Grantors may audit your organization, and can request a refund if the money is not fully spent.</li>
</ul>
<h3>What types of grants are there?</h3>
<ul>
<li><b>Pass-through and nondiscretionary assistance grants:</b> This grant is received by a nonprofit and transferred to another entity, or spent on behalf of another entity.</li>
<li><b>Third-party reimbursements:</b> Payment is made by a third party to a nonprofit for goods delivered or services rendered to the nonprofits beneficiaries.</li>
<li><b>Cost-reimbursement grants:</b> This type of grant reimburses specified costs incurred by the nonprofit in the performance of a specific program activity.</li>
<li><b>Program support (operating) grants:</b> 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.</li>
<li><b>Challenge grants:</b> 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.</li>
<li><b>Unit of service performance grants:</b> A specified amount is paid by the grantor according to a formula based on units of service provided by the nonprofit organization.</li>
<li><b>Clinical trial agreements:</b> A grant provided to an institution to test a new drug, process or product.</li>
<li><b>Research grants:</b> Virtually the same as clinical trial agreements, except funds are used to conduct research and development activities.</li>
</ul>
<h2>Need more clarity?</h2>
<p>If you’re still having difficulty telling them apart, you can view a <a href="https://www.claconnect.com/" target="blank">full guide</a> on these differences from Clifton Gunderson LLP.</p>