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Using QuickBooks to Ensure Your Nonprofit Is Audit-Proof: Accounting for NGOs

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Presentation for NetSquared Vancouver by Legacy Advantage.
Event was on April 3, 2018.

Nonprofits have it tough. Not only are you working with a limited budget, you are also required meet a high level of compliance. Concerns and confusion around compliance can eat up precious resources and distract you from achieving your mission.

If your nonprofit doesn't have its books in order, then ensuring you are compliant with tax regulations can be a real drain on resources. Accounting software can help, but only if you know how to use it effectively. In this workshop, Bob Wang and Jean Elwell of Legacy Advantage share some guidance on how to run an audit-proof nonprofit. In the presentation they focus specifically on QuickBooks (desktop version available through TechSoup Canada's product catalogue), but many of their insights and best practices are applicable to any accounting system.

https://www.meetup.com/net2van/events/245927439/

Published in: Economy & Finance
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Using QuickBooks to Ensure Your Nonprofit Is Audit-Proof: Accounting for NGOs

  1. 1. Using QuickBooks to Ensure Your Nonprofit Is Audit-Proof
  2. 2. Hello! Bob Wang CPA, CA Jean Elwell CPA, CA We love charities!
  3. 3. Two main types of audit ● CRA audit (to qualify for Charitable status) ● Year end audit (for compliance with CASNPO)
  4. 4. Agenda × Adequate Controls Around Cash Management × Have a knowledgeable Board × Have a Manageable/Understandable Chart of Accounts × Internal Controls over Expenses × Documentation and Compliance of Grants × Do not co-mingle externally restricted funds × Record Keeping × Common Errors × Deep Dive into some Audit Procedures
  5. 5. Adequate controls around cash management Use Less Cash
  6. 6. Adequate Controls Around Cash Management × Reduce use of Cash × Segregation of Duties × Example: 1 bookkeeper that as collecting cash at fundraising events, counting cash by herself, depositing cash, and reconciling the bank account. × When people are around cash, they become tempted
  7. 7. Adequate Controls Around Cash Management × Take cheques, credit cards, increase online donations × PayPal has a non-profit rate × Rotessa & Plooto are great for recurring donors × Low fee pre-authorized Debit
  8. 8. Adequate Controls Around Cash Management × Plooto × https://www.plooto.com/us/ × Rotessa × https://www.rotessa.com/ × Donors sign a PAD Authorization, give you a void cheque, then you can automate donations × $1/transaction vs % of revenues × They all Sync in Quickbooks Online
  9. 9. Non Profit Child-Care Society Problem × Post Dated Cheques × Pro D days Solution × Rotessa to automate regular payments × Also used to collect extra payments
  10. 10. Have a knowledgeable Board Proper Governance is the foundation to staying Audit Proof https://www.canada.ca/en/services/ taxes/charities.html
  11. 11. Have a Knowledgeable Board × Charities are managed by a volunteer Board who many not have a strong financial background. × Finding a treasurer who can read and interpret financials can help the charity stay on track. × Most people are on Boards are there because they buy into the mission, but they are not business people.
  12. 12. Have a Knowledgeable Board × Charities are very different from for-profit organizations. Their aim is to do as much good as possible using all of the funds. × Profit motivation is discouraged by donors. × Determine budget, analyze budget, do budget vs actual analysis × Use QBO to keep you on track × Board Minutes must be signed..
  13. 13. Have a Knowledgeable Board
  14. 14. Have a Manageable/Understandable Chart of Accounts Keep It Simple
  15. 15. Have a Manageable/Understandable Chart of Accounts × Key: Start with the end in mind. Who are the users of the financial information? At what level of detail? Then create a COA that will provide you with the right level of detail. × More detail doesn’t mean more accuracy.
  16. 16. Have a Manageable/Understandable Chart of Accounts × Have levels of summarization using “sub-accounts”. Most Board members want want a summarized version. ED wants more detail. × When users want more information, see if you can just easily search it instead of creating a new GL account.
  17. 17. Have a Manageable/Understandable Chart of Accounts
  18. 18. Have a Manageable/Understandable Chart of Accounts
  19. 19. Internal Controls over Expenses Keep It Simple
  20. 20. Internal Controls over Expenses × Complete documentation. Auditors will ask for back up support for various transactions. × QBO allows you to attach receipts or bills to the transaction. × Receipt-bank and Expensify × WayPay can be used to add multiple layers of authorization
  21. 21. Internal Controls over Expenses × Payroll Audit Process × Employee contracts. If they are contractors, ensure to have those contracts as well × Need payroll registers that match up to the accounting records × If payroll is broken out into various departments, ensure to have backup on how you calculated those breakouts.
  22. 22. Internal Controls over Expenses
  23. 23. Internal Controls over Expenses
  24. 24. Documentation and Compliance of Grant requirements Respect You Granters’ Wishes
  25. 25. Documentation and Compliance of Grants × Keep all grant compliance agreements and know where to find them. × Read them. Ensure you understand your responsibilities and what you are allowed to use the money for.
  26. 26. Documentation and Compliance of Grants × Don’t get double funding for the same program. × Example: Capital funding for Emergency Vehicle. × Attach the grant document in Quickbooks Online for easy reference.
  27. 27. Do not co-mingle externally restricted funds This creates a hornets nest
  28. 28. Do not co-mingle externally restricted funds × Set up different “classes” when fundrasing for different projects. × Don’t transfer funds from one account to another without documentation of appropriate approvals. × Not necessary to open a separate bank account for each fund, but be sure to keep proper records
  29. 29. Record Keeping Keep them for at least 7 years
  30. 30. Record Keeping × Keep records of PPE additions. Attach them to the transaction itself. × Keep records of insurance × Keep for 7 years × Separate folder for each grant × Ensure donation receipts are compliant with CRA requirements.
  31. 31. Record Keeping × Tools × Receipt Bank & Expensify × Does CRA accept digital records? × Use a Donor Management Software, to manage donation receipts. × Reconcile it monthly to GL (i.e. accounting system)
  32. 32. Common Errors Avoid them
  33. 33. Common Errors × Don’t net revenues and expenses. Track them separately × Don’t record Pledges as Revenues until Received. This is different than “Grants”. Grants are legal documents; pledges are not × Gifts in Kind > $1K must be appraised × Donations for services not allowed. Perform a cheque exchange
  34. 34. Common Errors (cont) Receipts missing info: ● a statement that it is an official receipt for income tax purposes ● the name and address of the charity as on file with the Canada Revenue Agency (CRA) ● a unique serial number ● the registration number issued by the CRA ● the location where the receipt was issued (city, town, municipality) ● the date or year the gift was received ● the date the receipt was issued ● the full name, including middle initial, and address of the donor ● the amount of the gift ● the amount and description of any advantage received by the donor ● the eligible amount of the gift ● the signature of an individual authorized by the charity to acknowledge gifts ● the name and website address of the CRA
  35. 35. Common Audit Procedures & How to Prepare Yourself Balance Sheet × Cash × AR × Capital Assets × AP × Debt × Deferred Revenues × Rental Deposits × Opening Equity = PY Closing
  36. 36. Common Audit Procedures & How to Prepare Yourself Income Statement × Income - procedure depends on source of income × Expenses - analytical procedures or sampling × Payroll
  37. 37. Thanks! Any questions? You can find us at bwang@legacyadvantage.ca jelwell@legacyadvantage.ca Facebook: LegacyAdvantage

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