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The annual audit scramble:

The hidden costs for not-for-profit organizations


Every spring, not long after the annual Easter-egg hunt, charities and not-for-profit organizations (NPOs) scramble to prepare for year-end. The majority of NPOs are audited every April or May, a requirement of maintaining charitable or not-for-profit status. Government-funded organizations are subject to a second yearly audit, called a transfer payment annual reconciliation (TPAR) audit, reviewing spending by program.

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Whether preparing for one or two audits, the annual scramble is often a source of stress for not-for-profit, charitable, and non-governmental (NGO) executive directors (EDs) and for volunteer board members.

Audit-season stresses run the gamut from bookkeeping inefficiencies to public-relations crises. Audits can go "offside" because:

  • the books are messy (entries are in the wrong account, for instance)
  • finance teams don't have everything ready (support for the journal entries―invoices, for example―isn't available)
  • the discovery of fraud or theft.

One very common consequence of bad bookkeeping: audits take more time. They cost more money.

The most damaging impacts of poor-quality records are measured as opportunity costs: poor bookkeeping can influence all from the viability of an NPO to the capacity to innovate on program delivery―ultimately preventing executive directors and boards from accomplishing the organization's mission.

Fortunately, a new fiscal year presents new opportunities. June is an ideal time for EDs and board members to take a fresh look at working on the organization―rather than working in the organization.

Time spent on bookkeeping is necessary, but it is not necessarily the best use of an ED's time (especially not time spent chasing inefficiencies or errors) or the board's (which is most often "wasted" by receiving out-of-date or incorrect financial data). Rather, executive directors and board members should focus on the viability and vision of the charity or not-for-profit, and on what helps accomplish those ends, such as volunteer or staff engagement. No ED should have to say, “I can't take a meeting with a donor―I'm caught up in an accounting nightmare.”

The first step toward working in the organization rather than on the organization: identify the sources of stress in the not-for-profit. Then, identify solutions.

  • If bookkeeping is an issue, as it frequently is, then accounting and audit services are of value. Few charities can justify hiring an $100,000-a-year chartered professional accountant (CPA), but most not-for-profits can save by investing in a less costly outsourcing option―even over the expense of a less-skilled bookkeeper, when the impact of the books is measured in audit costs and lost opportunities.
  • If payroll-tax compliance is a source of stress in the organization, payroll solutions will lessen time spent focused on anything other than what produces results for the charity, not-for-profit, or NGO.

How BDO can help

BDO offers bookkeeping, accounting, auditing, payroll, HR, and cybersecurity solutions individually or in a suite to help organizations be more efficient and effective―so EDs and boards can work to fulfill the strategic plan and not worry about year-end audit stresses.

To increase strategic success and decrease audit stress next fiscal year, contact us to learn more about how BDO Outsourcing can help your charity, not-for-profit, or non-governmental organization.

To learn more about preventing fraud or theft, check out our fraud and theft prevention checklist below.

Fraud and theft prevention checklist

BDO Outsourcing may be the answer for your NPO. Consider the questions on our fraud and theft prevention checklist.

NPOs are often cash-strapped, and one person, frequently the executive director (ED), is tasked with wearing too many financial-management hats—doing the books, handling the cash, and signing the cheques.

BDO Outsourcing helps organizations create financial checks and balances—and accountability in accounting.

Many NPOs do not have designated employees—the ED to the administrative assistant are expected be jacks-of-all-trades. It may not be necessary to hire a Chartered Professional Accountant (CPA) in-house to do relatively simple bookkeeping, but many charities, NGOs, and NPOs find it helpful to outsource 'the financial piece’ to those who are masterful.

BDO Outsourcing helps NPOs eliminate the stress of shifting priorities to cover absences, or other forms of leave, and allow staff to use their strengths in service to the mission and vision of the organization.

Boards of directors, who carry fiduciary responsibility and personal risk, need to be able to delve into the numbers, to know what has happened and what is happening in the NPO they volunteer to support.

BDO Outsourcing is trusted, accurate, and cloud-based—cybersecurity is built-in to protect the financial and other personally identifying information (PII) of NPO donors.

Having a diverse board, with professionals from, for example, accounting to engineering, offers a resource for paid employees—and insight into appropriate spending in the areas of expertise represented by the membership of the board.

Example: A builder will know how much a roof repair should cost.

BDO Outsourcing offers NPOs a third-party perspective. Our financial reporting offers important context for financial decisions.

Many NPOs have implemented policies and procedures for the prevention of fraud and theft.

Common examples: the practice of considering not fewer than three competitive quotes before the purchase of large goods and services, and the practice of not allowing cheques to be signed without at least two signatories, one a member of the board.

BDO Outsourcing takes fraud and theft prevention policies and procedures to the next level to ensure the longevity of NPOs—we help clients implement best practices, which allows for better controls, in turn supporting the viability of the organization for the next generation.

Learn how we can support the success of your not-for-profit—and help you to prevent fraud and theft.

Contact us

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