Tag Archives: Instructions

Why You Need an Accounting System

billsAs I consult with nonprofits in California, I have seen a theme emerge:  A nonprofit’s accounting system may not have been put together in a thoughtful manner.  I don’t mean this as a criticism to the people out there making a difference in their communities who work in nonprofits.  I frequently ask in my trainings, “Who started working in the nonprofit sector because you like accounting and filling out reports?”  In almost five years only one person (besides me) has ever raised their hand.  We go into the sector because we care about the mission, making a difference, building community, or any other number of reasons.  Not so we can crunch numbers.

But some people are shocked when they realize just how much regulation, filing and paperwork comes with a tax exempt status.  Nonprofits do not always grow their internal capacity, including the finance piece, at the same pace as they expand program and development.  That is understandable as those two areas drive most nonprofit funding.  But organizations who ignore their accounting systems do so at their own peril because at some point a Board member, a funder, or even the IRS will ask something like, “How much did we spend on this program?”  Getting that answer — and the answers to other questions like, “How much did we spend of Funder A’s grant?” or, “What is the total cost of that program, including all of the allocable costs?” — largely depends on how well your accounting system is set up.

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Operations Manuals

A ManualI was asked recently how to create an operations manual. The first thing you need to decide is what will be in it.  Will it cover everything or will you have a separate personnel and financial policy / accounting manual?  If you are doing an all-in-one you can always break it into pieces later, you don’t want to have something so unwieldy that it is never looked at.

A great way to start is to create a list of different activities that happen in your nonprofit every week:

  • How is the mail opened?
  • When are deposits made?
  • How is payroll done?
  • Who is making sure our reports are filed?
  • Who approves the bills to be paid?

After five minutes of brainstorming you and your colleagues can have the beginnings of a manual.  It does not have to be fancy, even a simple bulleted list will do the job.

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Final 2008 Form 990

No longer in draft form!On December 24 the IRS released the final versions of the 2008 Form 990, 990 EZ and the associated schedules and instructions. Perhaps not the most exciting Christmas present we could get from the IRS but the updated forms will still help 2009 be a very interesting year for nonprofit agencies.

The above link takes you to the new forms and instructions and also will guide you to the IRS’s own free trainings on the new 990’s as well as other compliance and governance issues. If you can’t make an in person training these are a great resource.

As a reminder, not everybody will have to start filing the updated form this year.  Check here for the phased in filing schedule.

Check your last 990 or financial statements and see where you may fall for your 2008 form. But remember, just because you may get a pass this year does not mean that you still don’t have to get ready. See this post for the things you should still be thinking about.