Presentation for NetSquared Vancouver by Legacy Advantage. Event was on April 3, 2018. Nonprofits have it tough. Not only are you working with a limited budget, you are also required meet a high level of compliance. Concerns and confusion around compliance can eat up precious resources and distract you from achieving your mission. If your nonprofit doesn't have its books in order, then ensuring you are compliant with tax regulations can be a real drain on resources. Accounting software can help, but only if you know how to use it effectively. In this workshop, Bob Wang and Jean Elwell of Legacy Advantage share some guidance on how to run an audit-proof nonprofit. In the presentation they focus specifically on QuickBooks (desktop version available through TechSoup Canada's product catalogue), but many of their insights and best practices are applicable to any accounting system. https://www.meetup.com/net2van/events/245927439/

1. Using QuickBooks to Ensure Your Nonprofit
Is Audit-Proof

2. Hello!
Bob Wang CPA, CA
Jean Elwell CPA, CA
We love charities!

3. Two main types of audit
● CRA audit (to qualify for Charitable status)
● Year end audit (for compliance with CASNPO)

4. Agenda
× Adequate Controls Around Cash Management
× Have a knowledgeable Board
× Have a Manageable/Understandable Chart of
Accounts
× Internal Controls over Expenses
× Documentation and Compliance of Grants
× Do not co-mingle externally restricted funds
× Record Keeping
× Common Errors
× Deep Dive into some Audit Procedures

5. Adequate controls around cash
management
Use Less Cash

6. Adequate Controls Around Cash Management
× Reduce use of Cash
× Segregation of Duties
× Example: 1 bookkeeper that as collecting cash
at fundraising events, counting cash by herself,
depositing cash, and reconciling the bank
account.
× When people are around cash, they become
tempted

7. Adequate Controls Around Cash Management
× Take cheques, credit cards, increase online
donations
× PayPal has a non-profit rate
× Rotessa & Plooto are great for recurring donors
× Low fee pre-authorized Debit

8. Adequate Controls Around Cash Management
× Plooto
× https://www.plooto.com/us/
× Rotessa
× https://www.rotessa.com/
× Donors sign a PAD Authorization, give you a void
cheque, then you can automate donations
× $1/transaction vs % of revenues
× They all Sync in Quickbooks Online

9. Non Profit Child-Care Society
Problem
× Post Dated Cheques
× Pro D days
Solution
× Rotessa to automate
regular payments
× Also used to collect extra
payments

10. Have
a knowledgeable Board
Proper Governance is the foundation
to staying Audit Proof
https://www.canada.ca/en/services/
taxes/charities.html

11. Have a Knowledgeable Board
× Charities are managed by a
volunteer Board who many not
have a strong financial
background.
× Finding a treasurer who can read
and interpret financials can help
the charity stay on track.
× Most people are on Boards are
there because they buy into the
mission, but they are not
business people.

12. Have a Knowledgeable Board
× Charities are very different from
for-profit organizations. Their aim
is to do as much good as possible
using all of the funds.
× Profit motivation is discouraged by
donors.
× Determine budget, analyze budget,
do budget vs actual analysis
× Use QBO to keep you on track
× Board Minutes must be signed..

13. Have a Knowledgeable Board

14. Have a
Manageable/Understandable
Chart of Accounts
Keep It Simple

15. Have a Manageable/Understandable Chart of
Accounts
× Key: Start with the end in
mind. Who are the users of
the financial information?
At what level of detail?
Then create a COA that will
provide you with the right
level of detail.
× More detail doesn’t mean
more accuracy.

16. Have a Manageable/Understandable Chart of
Accounts
× Have levels of
summarization using
“sub-accounts”. Most Board
members want want a
summarized version. ED
wants more detail.
× When users want more
information, see if you can
just easily search it instead
of creating a new GL
account.

17. Have a Manageable/Understandable Chart of
Accounts

18. Have a Manageable/Understandable Chart of
Accounts

19. Internal Controls over
Expenses
Keep It Simple

20. Internal Controls over Expenses
× Complete documentation.
Auditors will ask for back
up support for various
transactions.
× QBO allows you to attach
receipts or bills to the
transaction.
× Receipt-bank and Expensify
× WayPay can be used to add
multiple layers of
authorization

21. Internal Controls over Expenses
× Payroll Audit Process
× Employee contracts. If they
are contractors, ensure to
have those contracts as well
× Need payroll registers that
match up to the accounting
records
× If payroll is broken out into
various departments,
ensure to have backup on
how you calculated those
breakouts.

22. Internal Controls over Expenses

23. Internal Controls over Expenses

24. Documentation and Compliance
of Grant requirements
Respect You Granters’ Wishes

25. Documentation and Compliance of Grants
× Keep all grant compliance
agreements and know
where to find them.
× Read them. Ensure you
understand your
responsibilities and what
you are allowed to use the
money for.

26. Documentation and Compliance of Grants
× Don’t get double funding
for the same program.
× Example: Capital funding
for Emergency Vehicle.
× Attach the grant document
in Quickbooks Online for
easy reference.

27. Do not co-mingle externally
restricted funds
This creates a hornets nest

28. Do not co-mingle externally restricted funds
× Set up different “classes” when
fundrasing for different projects.
× Don’t transfer funds from one
account to another without
documentation of appropriate
approvals.
× Not necessary to open a separate
bank account for each fund, but
be sure to keep proper records

29. Record Keeping
Keep them for at least 7 years

30. Record Keeping
× Keep records of PPE
additions. Attach them to
the transaction itself.
× Keep records of insurance
× Keep for 7 years
× Separate folder for each
grant
× Ensure donation receipts
are compliant with CRA
requirements.

31. Record Keeping
× Tools
× Receipt Bank & Expensify
× Does CRA accept digital
records?
× Use a Donor Management
Software, to manage
donation receipts.
× Reconcile it monthly to GL
(i.e. accounting system)

32. Common Errors
Avoid them

33. Common Errors
× Don’t net revenues and expenses.
Track them separately
× Don’t record Pledges as Revenues
until Received. This is different than
“Grants”. Grants are legal documents;
pledges are not
× Gifts in Kind > $1K must be
appraised
× Donations for services not allowed.
Perform a cheque exchange

34. Common Errors (cont)
Receipts missing info:
● a statement that it is an official receipt for income tax purposes
● the name and address of the charity as on file with the Canada
Revenue Agency (CRA)
● a unique serial number
● the registration number issued by the CRA
● the location where the receipt was issued (city, town,
municipality)
● the date or year the gift was received
● the date the receipt was issued
● the full name, including middle initial, and address of the donor
● the amount of the gift
● the amount and description of any advantage received by the
donor
● the eligible amount of the gift
● the signature of an individual authorized by the charity to
acknowledge gifts
● the name and website address of the CRA

35. Common Audit Procedures & How to Prepare
Yourself
Balance Sheet
× Cash
× AR
× Capital Assets
× AP
× Debt
× Deferred Revenues
× Rental Deposits
× Opening Equity = PY Closing

36. Common Audit Procedures & How to Prepare
Yourself
Income Statement
× Income - procedure depends on
source of income
× Expenses - analytical procedures or
sampling
× Payroll

37. Thanks!
Any questions?
You can find us at
bwang@legacyadvantage.ca
jelwell@legacyadvantage.ca
Facebook: LegacyAdvantage