The 10 Things your Not-For-Profit Auditor wants you to know. Here are the 10 secrets our team has put together to help your Not-For-Profit.

1) Call us for advice BEFORE you make any major financial decisions  

We do more than provide your yearly audit. As experts in the not-for-profit sector, we know about the implications of certain transactions. If you plan to make a significant change within your organization, please let us know. These changes include new service offerings, purchasing a building, or anything else. We can create a plan to ensure all details are considered and work to minimize the financial impact. After making a significant change, clients often come to us and are shocked by being offside with funders, bank covenants, or not-for-profit or charitable rules and regulations. We can also assist with many other services such as human resources consulting, controllership duties, systems and internal control process reviews, and additional financial oversight. If your accountant is aware of what is happening, we can work with you to make the entire process easier and check all the boxes.  

2) We are not lawyers  

While we want to answer all your questions and have knowledge and experience with various legislation, we are limited to our expertise. We can certainly answer any questions you may have. However, we are not lawyers, and you should consult a legal professional for those specific matters.  

3) Accurate accounting records provide timely and relevant information on organization financial health and create audit efficiencies  

Monthly accounting reconciliations of the organization’s accounting software and review thereof provide accurate financial information that is both relevant and timely. This extends to more than just bank reconciliations. These can include ensuring the accounts receivable, accounts payable, prepaid expenses, investments and other asset or liability accounts are accurate. Monitoring the financial health on a ‘do as you go’ basis makes preparing for the annual audit very straightforward.    

When it comes time to prepare for and planning your audit, you and your auditor need to coordinate timelines for all deliverables so that we all do our parts. As management, you would ensure preparing working papers to show all major reconciliations of all asset and liability accounts. This also includes being available during the audit. Even if the audit is completed virtually, it is good to review all the prior year journal entries the auditor provides to see they have been recorded in the prior-year accounting records so that retained earnings reconciles to the prior year.

We also suggest evaluating whether any prior year journal entries are recurring every year and should be entered but updated for the current year. Give any journal entries provided by the auditor as part of the year-end audit to the organization’s accountant to enter them into that year’s accounting software. We do not mind doing these reconciliations and bookkeeping as part of our audit; it just takes more work, which will increase the fees, as more time will be needed to complete the audit.  

4) Be proactive  

We can help you plan and develop policies and procedures. Small organizations may not have considered what financial policies they need for investments, capital asset purchase thresholds, amortization rates and gift-in-kind contributions, to name a few. This could also include other non-financial policies and procedures such as a Board of Directors’ terms of reference, an employee handbook, remote work policy, etc. Taking the time to develop and provide clear policies and procedures will give clear direction and ensure that activities align.  

5) It is time to budget… and forecast throughout the year 

Creating a yearly budget and comparing it to actual revenue and expenses is a vital oversight control for both management and the board of directors. Many organizations have few financial staff, and the lack of segregation of duties often limits implementing fulsome controls. Timely budget to actual review provides a terrific detective control whereby anomalies are detected, and significant variances explained. It also offers clues to the financial position of the organization throughout the year. To go a step further, organizations can develop a forecast where they merge the year-to-date actuals with a forecast for the remaining months of the year so that the year-end net surplus or deficiency position can be fine-tuned. It is crucial to keep the yearly budget as approved, but the forecast is a valuable tool to help predict financial health as the year progresses.    

6) Put practices in to replace you  

While there are benefits of running your not-for-profit organization around you, when you are the heart and soul of its operation, there are considerations we wish you knew. Being a hands-on leader is nothing to balk at but having a not-for-profit that could not run without you is a recipe for disaster. Having both systems and people in place to ensure the organization can run independently from you is vital for both a healthy work-life balance and succession planning. Your organization could also face significant issues if a health emergency or injury arises for key management. If your not-for-profit cannot survive without you, it likely won’t. Your organization’s dependence on you could ultimately be its downfall.  

7) Let us know if there are changes  

Remember to include your auditor and Canada Revenue Agency (the CRA) when there are changes to authorized signing officials. It is important to update us and the CRA too. We will need to know if there is a change in where we send your documents or how we contact you. With increased screening tools to counter fraudulent access to your organization’s CRA accounts, the government has implemented stringent criteria to determine which individuals have access to approve changes to the organization’s CRA accounts.

We have seen that the Board of Directors and authorized signing officials change over the years, without updating the CRA. The result can be that no one in the organization is authorized with CRA. Nor do they know who is authorized. Once that happens, it is incredibly challenging to get approval from authorized officials with the organization’s CRA accounts. This is easy to overlook, and both your accountant and the CRA should be notified when these changes occur.  

8) Have an experienced accountant while the organization grows 

As your organization grows and develops, it is crucial to have a financial professional on your side. As you continue to build your organization, you will be faced with changing economic situations. An expert will help you navigate new legislation and revenue streams while maintaining proper records throughout. An accountant who knows your organization inside and out can help you plan ahead and ensure your organization is onside. Your accountant can be a new hire or a part-time external consultant. Please reach out to your RLB advisor if you’d like to discuss what makes sense for your organization and budget. 

9) Not everything aligns with your strategy, vision, or charitable purpose  

We know not-for-profits and charities are passionate about what they do. We often see them engage in an altruistic endeavour that may not always align with their purpose. This typically arises from good intentions but is contrary to what is allowed. For example, not-for-profits and charities cannot “carry on a business” within the organization; or choose to restrict for a particular purpose unrestricted donations and contributions. We can appreciate wanting to do as much good as possible, but we still need to play by the rules.

Some organizations also try to take on too many programs and find out too late that they don’t have the people or resources to support them. If you are unsure of what the implications are, ask us. We are happy to help guide you through this. We might even be able to find a new way of doing what you wish to accomplish while being compliant!  

10) We are here to help  

The biggest takeaway we want to share is that we want to help. We are more than your organization’s auditor. As accountants and auditors, we are more than happy to share our expertise and answer your questions. You do not have to wonder or guess when you could email us or pick up the phone. We’re experts in assurance and accounting, but if we don’t have an answer, we’ll connect you with someone at RLB who does. Our client’s success is a priority for us. We want you to know that our doors and phone lines are open to you. We will happily answer your questions; all you need to do is ask.  

 For questions or comments, feel free to contact Colleen Gallagher.