Nonprofit Accounting Documentation Ask And Answer
Beth Farley, CPA from Eide Bailly accounting firm, responds to questions received from this Power Week series which explored the vital role of documentation in nonprofit organizations, providing practical advice and highlights the importance of staying organized and proactive to ensure financial stability and compliance. Beth's quote underlines the relevance of these principles for nonprofits of all scales "The finance department . . . . . .when you're talking about the accounting part of an organization, it is absolutely crucial to the organization's long-term success. . . . . . your programs are hugely important . . . . . . But if you don't have the backbone of the organization, your finances strong, and the documentation strong, then you will not be able to continue because you're not going to lose funding over some of these things. And that's what it really boils all down to. " Beth continues by highlighting how accounting firms like Eide Bailly have evolved beyond traditional financial statements and tax returns. Now, they strive to become strategic partners, offering expertise in technology, cybersecurity, compensation analysis, and more. The series emphasized the significance of creating a compliance calendar, which helps organizations keep track of important deadlines and tasks. Beth explains how this calendar should include items like 990 filings, audits, payroll taxes, state charitable registration, and more. She stressed the importance of regular reviews to ensure the calendar remains accurate and helpful. The discussion also digs a bit into donor documentation and recognition, emphasizing the need to clearly define when a planned gift should be recognized and how it aligns with accounting principles. It was underlined that careful documentation ensures fair and accurate recognition for development officers. The role of the board in documentation was discussed, with Beth amplifying that boards must understand their fiduciary responsibilities and ensure that policies and procedures are in place. This can include incorporating documentation expectations into CEO evaluations. The series closed with a discussion on how documentation impacts audits. Beth emphasized that documentation is essential for audits, including financial audits, IRS audits, and single audits for federal funding. Proper documentation helps organizations avoid findings that could lead to financial loss or reputation damage.
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