5 Essential Responsibilities of a Nonprofit Accountant

Proper financial management is essential for your nonprofit’s success. It increases your productivity in delivering services, boosts your operational efficiency, and better equips your organization to further its mission in its community.

The best way to ensure your nonprofit is managing its finances well is to work with a professional accountant. According to Jitasa, “Nonprofit accountants help organizations ensure financial health and stability, analyze financial data and make decisions based on the nonprofit’s unique financial position.”

In this guide, we’ll dive deeper into five of the important responsibilities of a nonprofit accountant, which include:

1. Reviewing Financial Records
2. Analyzing Budgets
3. Developing Fiscal Policies
4. Compiling Financial Statements
5. Filing Tax Forms

Whether you’re considering hiring an accountant for the first time, or your nonprofit has worked with one before and you want to get a better understanding of what they do, you’ve come to the right place! Let’s get started by looking at one of your accountant’s most important day-to-day duties: reviewing your organization’s financial records.

1. Reviewing Financial Records

In most cases, the job of financial recordkeeping falls to nonprofit bookkeepers. Since these professionals typically don’t have the specialized education and CPA certification that accountants do, they take on the basic responsibilities of data entry, writing checks, and making bank deposits. This division of labor allows the accountant to focus on more complex tasks related to your organization’s financial records, such as:

• Balancing the debit and credit sides of various transactions
• Reconciling your nonprofit’s internal records with its bank statements
• Checking for and fixing any errors in the bookkeeper’s work
• Recommending strategic adjustments to help your nonprofit reach its financial goals

Many organizations start out tracking their transactions in a spreadsheet, but as your nonprofit’s financial needs become more complex, it’s best to switch to specialized accounting software for more comprehensive and streamlined management. Your accountant can help you choose the right platform, set it up and walk your bookkeeper through using it so they can work together on financial activities more effectively.
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2. Analyzing Budgets

Your nonprofit’s operating budget is its master financial plan for a given fiscal year. Your Chief Financial Officer (CFO) will usually take point on creating this document with input from your fundraising and development staff, and your board of directors will approve the budget before it goes into effect.

Your accountant also has a few analytical responsibilities related to the budgeting process, including:

• Managing your organization’s expenses to strike the best balance between programming expenditures and overhead costs
• Ensuring your revenue targets are realistic for individual donations, corporate philanthropy, grants, investment returns, and other income sources
• Developing budget vs. actual comparison reports that help keep your nonprofit on track with its spending and revenue generation throughout the year

Operating budgets likely aren’t the only type of budget your nonprofit creates. Your accountant will also perform similar analyses on your budgets for specific programs, grant proposals, capital campaigns, fundraising events and any other initiatives that require careful resource allocation.
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3. Developing Fiscal Policies

Along with your operating budget, fiscal policies govern your team’s day-to-day fund management. Creating them is also a collaborative process, but your accountant should take a look at them before they go into effect to ensure they’ll benefit your organization’s unique financial situation.

Here are a few of the fiscal policies your accountant should help your nonprofit establish:

• Gift acceptance policy. This policy provides guidelines for the types of contributions that your organization can and can’t accept, as well as the circumstances under which you can take each donation. It’s especially important for protecting your nonprofit when it accepts non-monetary gifts of goods, services or assets like stocks and real estate.
• Expense reimbursement policy. There may be times when your employees or volunteers spend their own money on behalf of your organization. For instance, if a staff member represents your nonprofit at an industry conference, they might book their flights and hotel room with their personal credit card and request a reimbursement later. So, this policy outlines the requirements and procedures for issuing reimbursements.
• Staff compensation policy. This policy ensures your nonprofit’s employees are compensated fairly—but not excessively—for their work. When developing it, this policy, Astron Solutions recommends taking a total rewards approach, meaning you should set guidelines for direct compensation like salaries and indirect compensation like paid time off, health insurance and retirement benefits.

Work with your accountant to create a handbook outlining these and other fiscal policies and procedures, then share it with your team so they can reference it as they go about their daily tasks.
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4. Compiling Financial Statements

Reporting is an essential part of an accountant’s role, as it helps your team and external stakeholders better understand your nonprofit’s finances. One type of report your accountant will compile each year is a set of financial statements, which organize and summarize different aspects of your organization’s fiscal data to provide actionable insights.

The four types of nonprofit financial statements your accountant will compile, as well as the core information included on each one, are:

• Statement of activities (or income statement): Revenue, expenses and change in net assets
• Statement of financial position (or balance sheet): Assets, liabilities and net assets
• Statement of cash flows: Cash movement from operating, investing and financing activities
• Statement of functional expenses: Program, administrative and fundraising costs

Your accountant will help your nonprofit interpret these reports upon completion and will likely recommend attaching them as appendices to your organization’s annual report so donors can learn more about your financial situation. Additionally, they’ll reference the statements when completing your nonprofit’s annual tax return.
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5. Filing Tax Forms

The most important tax form for nonprofits is IRS Form 990, the return for organizations exempt from income tax under section 501(c)(3). When the time comes to file this form each year, your accountant will help you:

• Determine whether you need to file the full Form 990, Form 990-N, Form 990-EZ, or Form 990-PF, depending on your nonprofit’s status and annual gross receipts
• Answer every question on your required form thoroughly and accurately
• Ensure your filing is completed by the deadline (the 15th day of the fifth month after your organization’s fiscal year ends), or secure an extension or payment plan if necessary

Although your nonprofit is exempt from federal income tax, it’s still an employer, meaning you also need to help your staff members file their tax returns. So, your accountant will complete a Form W-2 or 1099 for each of your employees and contractors respectively, and make sure they go out by the January 31 deadline.

While large nonprofits often benefit from having a full-time accountant on their team, this option often isn’t feasible or necessary for small to mid-sized organizations with limited resources for hiring and less complicated financial needs. If this is the case for your nonprofit, consider leveraging outsourced accounting services to get the financial expertise you need at a lower cost.

No matter which option you choose, make sure your accountant has experience working with nonprofits. Nonprofit accounting is different from its for-profit counterpart in both focus (ensuring accountability vs. maximizing profits) and practice, so your accountant should be familiar with nonprofit-specific processes and committed to helping your organization fund its mission.