Useful Accounting Fundamentals

Tips

Tools

21. For very small NPOs with little money flows, simple accounting on a receipts and payments basis alone may suffice (i.e., no need to adopt the more sophisticated accrual basis).

Charities Aid Foundation’s Venturesome Web Resources (UK)^*
New funding and loan options for charities, including the Charity Bank

BRAC (Bangladesh)^*
Sample independent auditor’s report for 2005

InterAction’s Guide to Appropriate Giving in Disaster Response^*

Good Bookkeeping and Simple Accounting Rules^*

Carter McNamara’s Basic Guide to Non-Profit Financial Management^*

Guidestar.org Database^*
Tax returns and other publicly filed documents by NGOs in US and other jurisdictions

Nonprofit Integrity Act of 2004 (California)^*
Summary of Key Provisions prepared by California Registry of Charitable Trusts

US Internal Revenue Service Official Web Site^*
Tax information and forms for US charitable organizations, including links to individual states’ web pages

UK Treasury’s Portal on Guidance to Funders^*

Nonprofit Finance Fund^*
Provision of financial capital and advice to NPOs to improve their capacity

22. The key elements of a sound control system over legal and financial commitments include a serious control environment; appropriate procedures for your size; good information, communication, and monitoring systems; firm written policies against corruption; and board review of compensation for officers.

23. Even a small NGO will benefit from having an extra pair of eyes check over some accounting transactions or payments. Although it frequently happens, it is not a wise idea to have the same person occupy the jobs of making disbursements, keeping the books and holding the cash or bank accounts.

24. Commingling of funds belonging to an NGO and its founders are commonplace and dangerous when sloppy bookkeeping is practiced. It is usually a very bad idea for an NGO to consider making personal loans or advances to any of its members or executives.

25. Avoid the temptation to compromise on what seem like minor or unimportant decisions at the time. The road to serious governance meltdowns and major fraud often starts with condoning minor indiscretions on the basis they are small-scale and in themselves would not harm the NGO or can be rationalized on their particular facts.

26. Preserve confidentiality of staff information, but sometimes there could be very good reasons to disclose the salaries and short bios of the top 5 paid officers to convince outsiders that an NGO’s money is being well spent.

27. Be careful not to give any preferential treatment or priority payments to certain favored suppliers, creditors, related parties or insiders if the NGO is starting to experience difficulties in meeting its debts as they become due.

28. If there is sufficient warning and funds left over, the winding-up of an NGO can be properly managed by the existing members in a way so as to ease down ongoing activities without an abrupt halt to those who may be relying upon those programs.

29. It is in everyone’s interest to try to prevent abuses, waste and fraud in the NGO sector.

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