Books and records

The reality is, however, it’s a pretty good idea to retain all such financial documentation permanently. You will need to prepare annual financial statements, and maintaining financial records will help make that process easier and more efficient. This is especially important if you’re working with banks, creditors, contributors, and funding organizations. Some states even require you to make audited financial statements public for your nonprofit, so be sure to check with your state to see if this is the case. Developing a document retention policy may seem overwhelming at first, but think of it as simply a record of what types of documents the nonprofit must retain and for how long.

• For CRA’s purposes, documents can be kept in electronic format, provided this format can be analyzed by CRA’s equipment.
• Additionally, Ontario NFPs must file an Income Tax Return as well as an Annual Return with the CRA.
• Nonprofits need to keep records of income and expenses, including donation receipts, invoices, and receipts for expenses.
• These records also help the organization make informed financial decisions, comply with legal and regulatory requirements, and prepare accurate financial reports.
• The statute of limitations has run when the organization can no longer amend its return and the IRS can no longer assess additional tax.
• Developing a document retention policy may seem overwhelming at first, but think of it as simply a record of what types of documents the nonprofit must retain and for how long.

Why You Should Never Comingle Personal and Business Finances

Program data and fundraiser success stories also makes great https://greatercollinwood.org/main-benefits-of-accounting-services-for-nonprofit-organizations/ content for communicating to your donor base all the incredible things your nonprofit is accomplishing. Donors like to support what is going well to help you keep in moving in the right direction. All photos on this site are for representation purposes only, and do not portray any clinic clients. The Queen’s Legal Clinics gratefully acknowledge the support of Legal Aid Ontario, the Law Foundation of Ontario, Pro Bono Students Canada, the class of Law’81, and our many alumni and industry sponsors.

For each document, add its location or where it is stored.

It’s important to make sure that this privacy is protected when the records are destroyed. For electronic documents, once a document is deleted you should confirm that it has been permanently deleted by checking your ‘back up’ location and the computer’s trash. Board minutes are the written record of the actions and decisions taken at a board meeting.

• Maintaining records is important to keep your nonprofit in compliance with the rules and regulations that govern 501(c)(3)s, but doing so also helps you assess and plan the growth of your nonprofit.
• If the nonprofit cannot show through its records that it qualifies for exemption, it could lose its tax-exempt status.
• But your nonprofit’s list of directors and officers only needs to be kept for 6 years.Your nonprofit may have to follow other rules, beside ONCA’s.
• Jacob manages a variety of accounting, audit, review, and compilation engagements for the firm’s Columbus, Ohio, clients in numerous industries, including Nonprofit, Retail, Construction, and Auto Dealers.
• The United States Internal Revenue Service has a guide, Publication 4221-PC, to help walk you through compliance for public charities.

Identify Sources of Receipts

• Do you save everything, “just in case,” or do you throw the records out as soon as you are finished with them to keep your desktop (physical or digital) clean?
• Retaining documentation of contracts, major purchases and sales, and insurance policies will help you defend yourself if any disputes or lawsuits arise.
• Nonprofits rely heavily on funding to implement their programs and services, and without it, they may struggle to achieve their mission.
• There are many avenues of recordkeeping we could explore, but here are 4 big areas of concern.
• What’s most important is capturing the overall nature of an agenda item, and the resulting decision, including details of votes.
• You should check with your state’s specific employment law provisions to determine what needs to be kept on file and for how long.

Although we work with nonprofits and events daily, our team members are not Event Consultants. We encourage you to consult with your event consultant, executive team, and/or affiliate organization before making any major changes to your events. While fraud may seem unthinkable in an organization’s staff, it is possible. Ineptness can be just as crushing, and internal controls will help monitor, enforce and update policies regarding keeping your records up-to-date, accurate and secure.

For records that fall under “money coming in” or “money going out,” you’ll want to save 5 Main Benefits of Accounting Services for Nonprofit Organizations these records for three years after the date the return is due or filed, whichever is later. Keep in mind that some interested parties such as grantors, insurance companies, creditors, or state agencies may require you to hold on to records for a longer period. However, when minutes are used as evidence, courts usually value minutes that are approved soon after the original meeting, and approved by the board members who were present at the meeting.

Organizations can check with their legal counsel if this situation arises. Organizations should also keep paper and electronic files that would be needed to comply with Single Audit requirements. Government grants and other types of government relief usually have their own document retention standards. Actual method – using the actual method allows nonprofit organizations to report only the income during the tax year. Expenses, whether they are paid or not, are usually recorded in the year they happened. If your nonprofit is ever involved in a legal dispute of any kind, board meeting minutes are one of the first things to be subpoenaed.

I believe it’s a unique and concise place to get answers to this often wispy area called nonprofit. Whether your nonprofit has 10 employees, 200 employees, or more than 1000, you probably have a personnel policy “handbook.”  You give it to new employees and require that they sign to acknowledge receipt. In addition to the above timeframes, there are a few other guidelines that not-for-profits need to adhere to.

Assets and Liabilities

• If a source document is initially created in electronic format, then it must be kept in an electronic format.
• To optimize the management of financial records, nonprofits should adopt best practices that enhance both organization and security.
• This data-driven approach not only enhances operational efficiency but also fosters a culture of accountability within the organization.
• You simply cannot fulfill even the most basic of legal and fiduciary duties if thorough recordkeeping isn’t an ingrained part of your standard operating procedures.

All information, including how much was paid, should be on the receipts so that the proper authorities can scrutinize them in the event of an audit or examination. Gross receipts are documents showing the amount of money received from different donors and contributors. Bank deposit slips,  credit card information, correspondence, and invoices are all examples of gross receipts that need to be recorded and maintained. As you can easily see, recordkeeping cannot be an afterthought for your nonprofit. Perfecting the habit of properly documenting the activities of your nonprofit is one of the most important disciplines any nonprofit leader must master.