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Reporting Your Organization's Finances: Making It All Add Up

July 2004

I took accounting in college—for one day. Although I have never regretted dropping the course, I have since learned that into every life a little bookkeeping must fall, both at work and at home.

So my sympathies are firmly with the GuideStar Newsletter reader who asked, "Is there some way to determine how much of each dollar donated goes for expenses, salaries, fundraising cost, etc.?" As another subscriber noted, this task isn't always easy: "Some … [costs] need to be split and … how to handle that is often a guess."

Unfortunately, answering these questions requires familiarity with some accounting basics. Fortunately, there are resources to help you gain this knowledge.

One of the first places to go is Statement of Financial Accounting Standards No. 117 (scroll down to the link for SFAS 117). Although the IRS does not require organizations to use SFAS No. 117, many people regard it as the official bible for nonprofit financial reporting. Developed by the Financial Accounting Standards Boards, SFAS 117 is where you'll find official definitions of nonprofit accounting terms, learn why you should include mission and program descriptions with budget numbers, and see examples of how to report financial data. Be sure to check the "Status" link at the beginning of the file to ensure that there are no updates you need to be aware of.

Although SFAS No. 117 notes that expenses may need to be allocated between categories, it does not tell you how to allocate them. Several places on the Web, however, can help with this and other financial/budgetary tasks.

  • Alliance for Nonprofit Management—offers a sample cost allocation methodology. The site's financial management FAQs address nearly 30 other topics, from the differences between nonprofit and for-profit accounting to how to determine whether your organization needs an audit. To find the FAQs, go to Alliance for Nonprofit Management Web site and select the "Frequently Asked Questions" link in the left toolbar.

  • Clearinghouse for Volunteer Accounting Services—has a state-by-state search to help nonprofits find accountants to assist them. All of the accountants work on a volunteer basis and offer their services free of charge. Search for a volunteer for your organization >

  • Community Accountantsalso matches nonprofits with accountants who provide short-term, pro bono accounting assistance.

  • Internet Nonprofit Center—posts the "Nonprofit FAQ," including an entire page of accounting FAQs that range from "How can I determine my program costs easily?" (short answer: you can't; it's going to take some effort) to "What's the best kind of accounting software?" See the Nonprofit FAQ index page >

  • Nonprofit Financial Center—describes one method of allocating expenses on its Web site. Other free resources on the site include step-by-step instructions for reconciling a bank statement, guidance on choosing a bookkeeping system, a sample executive budget summary, and a sample cash-flow worksheet. Additional information is available to NFC members (membership starts at $150 per year for individuals and nonprofits with budgets under $500,000 and $250 for all other nonprofits). NFC also offers fee-based financial management training and consulting services to nonprofits.

  • State nonprofit associations—support nonprofits in their regions in a number of ways, including providing technical assistance and professional development. Some 34 states and the District of Columbia have nonprofit associations; to find the association for your location, search the directory on the National Council of Nonprofit Associations Web site. If there is no association in your state, e-mail the NCNA at ncna@ncna.org and check out the site's other resources for nonprofits.
Suzanne E. Coffman, June 2004
© 2004, Philanthropic Research, Inc. (GuideStar)

Suzanne Coffman is GuideStar's director of communications and editor of the Newsletter.