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Using QuickBooks to Audit-proof Your Nonprofit
The document outlines essential strategies for nonprofit organizations to ensure they are audit-proof, highlighting the importance of cash management, knowledgeable governance, and proper record-keeping. Key recommendations include implementing internal controls, managing accounts comprehensively, and adhering to grant compliance requirements. It emphasizes avoiding common errors, such as mingling restricted funds and mismanaging receipts, to maintain accountability and transparency.
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Using QuickBooks to Audit-proof Your Nonprofit
- 1. Using QuickBooks toEnsure Your Nonprofit Is Audit-Proof
- 2. Hello! Bob Wang CPA,CA Jean Elwell CPA, CA We love charities!
- 3. Two main typesof audit ● CRA audit (to qualify for Charitable status) ● Year end audit (for compliance with CASNPO)
- 4. Agenda × Adequate ControlsAround 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
- 5. Adequate controls aroundcash management Use Less Cash
- 6. Adequate Controls AroundCash 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. Adequate Controls AroundCash 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. Adequate Controls AroundCash 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. Non Profit Child-CareSociety Problem × Post Dated Cheques × Pro D days Solution × Rotessa to automate regular payments × Also used to collect extra payments
- 10. Have a knowledgeable Board ProperGovernance is the foundation to staying Audit Proof https://www.canada.ca/en/services/ taxes/charities.html
- 11. Have a KnowledgeableBoard × 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. Have a KnowledgeableBoard × 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. Have a KnowledgeableBoard
- 14. Have a Manageable/Understandable Chart ofAccounts Keep It Simple
- 15. Have a Manageable/UnderstandableChart 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. Have a Manageable/UnderstandableChart 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. Have a Manageable/UnderstandableChart of Accounts
- 18. Have a Manageable/UnderstandableChart of Accounts
- 19. Internal Controls over Expenses KeepIt Simple
- 20. Internal Controls overExpenses × 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. Internal Controls overExpenses × 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. Internal Controls overExpenses
- 23. Internal Controls overExpenses
- 24. Documentation and Compliance ofGrant requirements Respect You Granters’ Wishes
- 25. Documentation and Complianceof 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. Documentation and Complianceof 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. Do not co-mingleexternally restricted funds This creates a hornets nest
- 28. Do not co-mingleexternally 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. Record Keeping Keep themfor at least 7 years
- 30. Record Keeping × Keeprecords 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. 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.
- 33. Common Errors × Don’tnet 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. Common Errors (cont) Receiptsmissing 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. Thanks! Any questions? You canfind us at bwang@legacyadvantage.ca jelwell@legacyadvantage.ca Facebook: Legacy Advantage