Nonprofit Accounting Basics

Internal Controls

Allocating Expenses

Expenses are allocated to show the total cost of activities, services, and projects.  It is very important for the board and management to know the total costs of activities, s

Assessing Fraud Risk

One question I frequently ask nonprofit organizations I speak to is, “What processes are in place for identifying, responding to, and monitoring fraud risks?” Most times, the response describe


Cash is an area with a high-risk of error and fraud.

Credit Card Transactions

Many people will opt to charge a contribution or a fee for a service or publication given the option.

Facilities Expenses

  • All leases for office space should be reviewed by an attorney experienced in office leases.
  • Reconcile invoices for rent to the office lease.  Any addi

Financial Reporting

  • All financial reports are based on the general ledger.  Adjustments and estimates modifying the information from the general ledger will be documented.
  • Review i

Fixed Assets

  • Establish a policy for fixed assets detailing which fixed assets are capital (depreciated rather than expensed) assets.  This will be included in the organization's footnote disclosures t

General Information

  • The internal control system needs to be documented (the expected results or outcomes of the system and what everyone does need to be put in writing) and constantly evaluated.  A con

General Ledger

The general ledger documents all of the organization’s transactions over the course of a year for all accounts.

Internal Controls

What are internal controls?

Internal controls are the financial processes and procedures that enable the organization to safeguard its assets.

Internal Controls for Medium and Large Non-Profits-Part II

Internal Controls for Medium and Large Non-Profits-Part II, which is presented by Shawn Miller of Calibre CPAs, continues the discussion relating to controls that can be implemented to mitigate the

Journal Entries

Most transactions are posted automatically through the accounts payable and accounts receivable modules of the general ledger software owned by the not-for-profit.


If a large volume of checks is received by the organization, a lockbox may be appropriate. Banks receive the checks directly and the deposit is made upon receipt.

Meeting Expenses

  • Meetings should have formal budgets.
  • Each meeting should be assigned a unique department or project code.  This will help with analyzing variances to

Other Cash

While writing checks and making deposits fall under the category of “cash,” there are other activities involving cash.

Other Issues

Grant Funding

Grant funding may require accounting and compliance different from normal nonprofit operations.


  • Verify that the vendor invoice has not been previously paid before processing the invoice for payment.
  • Do not pay from statements if a vendor submits both invoices a


There are many payroll services that will process the regular payroll, make direct deposits, prepare quarterly and annual tax filings and remit taxes due for a very reasonable fee.

Payroll Expenses

  • The initial information for each employee and every change impacting payroll (terminations, overtime, compensation changes, employee deductions, etc.) will be in writing and appropriatel

Petty Cash

It's amazing how much cash is stolen each year from petty cash funds.

Phishing and Spoofing Attacks Growing Ever More Common

You know the scam; someone in a foreign country has inherited a large sum of money and needs your help to get the money delivered to them.

Preventing Nonprofit Banking Fraud!

Technology has dramatically changed how we all work, play, and use our mobile phones, computers, and i-Pads.  So, it should come as no surprise that fraudsters are using this same technology t


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