If you're new to the nonprofit sector, no doubt you've already realized that the financial standards are stricter here than they were in the for-profit world. That can make end-of-year bookkeeping a stressful process — especially at the end of this year, due to new procedures that the Financial Accounting Standards Board (FASB) has implemented for 2019.

So before any more sand slips through the hourglass, let's review the vital end-of-year bookkeeping tasks your nonprofit needs to accomplish to avoid fines or penalties — up to and including the loss of your nonprofit status.

Reconcile Your Restricted and Unrestricted Fund Accounts
As the names imply, the designations "restricted" and "unrestricted" determine how nonprofits can use different funds. Simply put, restricted funds can only be used according to the donor's specifications. This can be simple (e.g. funds for an event) or complicated (e.g. funds for the purchase of a particular item or to be held for a specified amount of time). These funds cannot be used or transferred without the consent of the donor and approval by the nonprofit's board of directors.

For a nonprofit director, a budget is a blueprint, not a limitation. Once you realize this, you can drive your organization forward in ways you never dreamed possible. To get the absolute most out of your budget, however, you must find a bookkeeper with the proper combination of talent and expertise.

Nonprofit bookkeeping poses unique challenges, starting with IRS Form 990. At a minimum, you need a bookkeeper who is thoroughly familiar with the government's many nonprofit compliance requirements involving contributions and grants. Some grants carry specific classification guidelines that require tracking and categorizing expenses to a granular level rarely seen in the private sector.

There's no doubt that nonprofit bookkeeping can be intimidating. So, if nothing else, landing top talent will bring you peace of mind. You'll be free to focus on your organization's long-range goals without worrying that you or someone on your staff may inadvertently do something to jeopardize your tax-exempt status. You'll also feel more confident preparing for board meetings, knowing all your financial ducks are in a row.

It's always gratifying to receive an award for your work — especially when you had no idea you were even nominated. But that was the case recently when our Supporting Strategies | Chicago Far West Suburbs learned we had received the Turnaround Management Association (TMA) Pro Bono Transaction of the Year award for our role in helping a distressed nonprofit straighten out its financials and position itself for sale.

Assessing a Community Asset
West Suburban Senior Services (WSSS) in Bellwood, Illinois, had long been a valuable community resource. The nonprofit has provided adult day wellness support for seniors in western Chicagoland since 1972.

When some of its government funding dried up, however, several key executives and staff members departed. WSSS fell behind and missed several deadlines. It would be very difficult for any organization to find a buyer with those unmet obligations hanging over it.

Most nonprofit organizations have multiple revenue streams. Tracking all those funds and their associated expenses can easily overwhelm the administrative staff, particularly at smaller organizations. Or, to put it another way: Admin costs often consume a disproportionate amount of a nonprofit's budget, measured in both money and time.

Here's how you can streamline your nonprofit's bookkeeping to cut admin costs:

Stay Current
Instead of allocating revenue and expenses as they occur, many nonprofits wait and assign them to funding sources as a separate process. But with so many buckets and so many costs, it's a poor use of time to do all that scrubbing, trying to back every dollar into where it needs to be. It can also be stressful, especially if mistakes or discrepancies start piling up.

When he became Executive Director at Arlington Thrive in March 2016, Andrew Schneider encountered a problem common among mature nonprofits: "Over time, as in any organization, internal systems develop that make sense to the people who are operating them but might not make sense to new people coming in."

In fulfilling its mission of providing same-day, emergency financial assistance to residents of Arlington County, Virginia, the organization relied on a steady flow of cash. A legacy bookkeeping system, coupled with a nearly indecipherable method of donor classification, threatened to disrupt that flow. Schneider needed to resolve the problem quickly. Supporting Strategies | Northern Virginia and Managing Director Indre Bauza delivered a solution.

A Clearer View
Supporting Strategies took a proactive approach to solving the problem — from modernizing the bookkeeping system to establishing monthly conference calls with the finance committee. The result? Real-time financial reporting, enhanced communication, and greater financial transparency.

Change has become a constant in the nonprofit sector. Recently we saw new regulations under the 2017 Tax Cuts and Jobs Act that eliminated certain deductions. The Financial Accounting Standards Board (FASB) has also been hard at work instituting sweeping changes in procedures aimed at reducing complexities while making it easier to understand nonprofit financial information — notably, updates to the accounting standards in 2016 (impacting 2018 financial statements) and in 2018 (impacting 2019 financial statements).

Here's a summary of the most significant revisions.

New Revenue Recognition Standard Focus Clarifies Contributions
You might think that, when it comes to charitable giving, a dollar is a dollar. But in the nonprofit sector, it's important to determine the giver's expectations in providing that dollar. Are the expectations nonreciprocal and unconditional, meaning the nonprofit can spend that full dollar however (and whenever) it sees fit? Or does the giver expect something in return of equal (or "commensurate," in FASB parlance) value, thus an exchange transaction? That return could range from "membership" status to branded merchandise, like a pin or a mug, to funding clinical drug trials, performing public services or conducting scientific research under a grant.

The Sierra Nevada Children's Museum, a popular family destination in Truckee, California, is poised for growth with a projected 80% increase in visitation over the next 20 years. To keep pace with this growth, the museum needs to boost fundraising to finance building a larger facility.  

Working with a complex chart of accounts and item list, combined with a slow, server-based software system, occupied much of Executive Director Carol Meagher's time. She wasn't able to fully focus on fundraising and community outreach — which were vital for the museum to keep pace with its projected increase in visitation.

To compound this problem, the museum's bookkeeper decided not to return from maternity leave, and a prospective replacement didn't pan out. In order to reach its potential for growth, the museum needed to establish a strong foundation in bookkeeping that included special events tracking, operational reporting, grants management, and preparing financials for the board.

Individuals and tax preparers need to be aware of a significant impact on charitable giving that likely will result from a provision in the Tax Cuts and Jobs Act (TCJA).

While the consequences of the law, passed in December 2017, might be unintended, they are no less real for taxpayers — especially for charities. Vikki Sprull, President and CEO of the philanthropic network Council on Foundations, projects the new law "will result in a decrease of $16–$24 billion in charitable giving every year."

Subtraction by Addition
The bad news for charities came about as a result of what was supposed to have been good news for taxpayers. Under TCJA, the standard deduction doubles to $12,000 for individuals and $24,000 for married couples.

To maintain good financial health, nonprofit organizations should adopt the same bookkeeping best practices as for-profit organizations.

Here are some simple bookkeeping tips to help keep your nonprofit on the plus side of the ledger.

Get with the (Software) Program
There's no shortage of bookkeeping software you can use at your nonprofit. However, you should also consider applications that will integrate with your accounting software to drive operational efficiencies through workflow automation. If you haven't already graduated from using basic accounting software, now is the time to do so.

Not all events that raise funds are fundraisers. If you operate a nonprofit, it's critical that you know the difference. Because holding an event that isn't properly identified and recorded appropriately in the general ledger could cause problems for you down the road.

Here are a few things you need to know.

Is the Event Tax-Deductible?
Nonprofits have lots of ways to raise money. Awards banquets, raffles, "fun runs" — there's no shortage of creative ideas.

Whether you call an event a "fundraiser" matters less than whether any of the amount guests pay to attend is tax-deductible. Organizations should always publish a full disclosure (on invitations, electronic media, etc.) of all information related to tax-deductibility. This is usually done through fine print with wording such as this: "Amounts over $xx are tax-deductible to the extent provided by law. (Organization name) is a 501(c)(3) nonprofit organization, federal tax ID number xx-xxxxxxx."