Not-for-profits should usually make do with few assets. As recipients of donations, authorities grants and different public funds, they’ve an ethical obligation to be good stewards of these funds.
Moreover, administrators and officers have fiduciary duties beneath tax, chapter, incorporation, environmental and different statutes, with private publicity for unpaid wages, salaries, and statutory deductions, and different liabilities.
Due to this fact, competence in monetary issues—together with issues which might be straight monetary, and non-financial points with probably important or catastrophic monetary penalties—is crucial. Administrators, officers, and senior administration ought to put together to handle these matters once they seem on board agendas and equip themselves to present significant enter into discussions or choices. The next are some important issues for these roles:
- Perceive monetary ideas and monetary statements. It’s useful to grasp key monetary definitions like accruals, capitalization, depreciation, amortization, deferred revenue, and related phrases.
- Keep away from working deficits, with exceptions for board-approved, time-limited deficits or unavoidable circumstances.
- Guarantee prudent investing.
- Guarantee fee or remittance of wages, pension contributions, statutory deductions, payroll taxes, value-added taxes, gross sales tax, and related quantities directly and on time. Boards ought to ask senior administration to certify to the board that a majority of these funds and reporting are present.
- Diversify income sources if doable.
- Adjust to Earnings Tax and different statutes. As an illustration, adjust to charity reporting and donation receipting necessities.
- Preserve sturdy inside controls. Administration is accountable for inside controls, and the board should be certain that administration fulfils this accountability.
- Guarantee efficient accounting software program and different data and expertise programs.
- Adjust to accounting requirements.
- Preserve efficient danger administration mechanisms. Mechanisms embrace adequate insurance coverage, budgets, forecasts, securing tangible and intangible belongings, and cyber safety.
Assembly your obligation of care
It isn’t a defence for the board and administration to say that monetary issues are complicated and require specialised coaching or that it’s the auditor’s accountability. Competence in monetary issues to the extent essential to carry out these roles is crucial. Search assist from auditors, accountants, consultants and others if wanted. The Not-for-Revenue library in PolicyPro®, significantly SPP NP 4.01 – Monetary Administration Primer, contains steerage.
Insurance policies and procedures are important, however the work required to create and preserve them can appear daunting. The Finance and Accounting, Operations and Advertising and marketing, Not-for-Revenue, and Info Know-how libraries in PolicyPro®, co-marketed by First Reference and Chartered Skilled Accountants Canada (CPA Canada), include pattern insurance policies, procedures, checklists and different instruments, plus authoritative commentary to save lots of you effort and time in establishing and updating your inside controls and insurance policies. Not a subscriber? Request free 30–day trials of Finance and Accounting, Not-for-Revenue, Operations and Advertising and marketing, and Info Know-how librairies in PolicyPro® right here.
Apolone Gentles is a CPA, CGA and Ontario lawyer and editor with over 20 years of enterprise expertise. Apolone is leveraging 20 years of enterprise and accounting expertise to construct a industrial litigation observe with an emphasis on development regulation. She has held senior management roles in non-profit organizations, main finance, human assets, data expertise and amenities groups. She has additionally held senior roles in audit and assurance companies at a “Huge 4” audit agency. Apolone has additionally lectured in Auditing, Economics and Enterprise at post-secondary faculties.