The failure rate at 41% to meet the new reporting requirements demanded of charities serves as a wake-up call to all non-profit entities. It is indicative of a deficiency in the most important and critical performance area. Treasury and accounting functions are the backbone of every functional organisation regardless of size. The qualifications and competence of the person or team entrusted with the financial performance impact on every other department. Unfortunately the accounting functions are often an add-on to other administration in many small membership associations and charities, whereas larger and more complex entities have a team to deal with the various aspects of financial management. There is a requirement for five essential skills that should be present in every non-profit entity regardless of size and complexity.
- Day-to-day financial tasks
Financial record keeping with data entry, processing membership subscriptions and donations should be performed on a daily basis.
- Financial planning and budgeting
Budgeting for income and expenditure and reporting actual financial performance against budgeted provisions should be on a monthly basis. An annual budget should not be considered as being cast in stone. It is a fluid document calling for frequent adjustments to keep pace with changing circumstances, new revenue streams and their associated expenditure calculations. In fact, every new project should be subject to its own mini-budget that slots into the master document.
Prudent housekeeping demands a close watch on cash flows and with it the timely investment of surplus funds on terms that correspondent with expected annual expenditure peaks. A contingency allowance is called for to cover unexpected calls on funds without the need to break term deposits.
- Understanding of NFP sector
Accounting personnel drawn from the commercial sector may find it challenging to get used to the resource constraints in a voluntary and non-profit environment. Being used to sophisticated industry specific IT tools and operating software that may not be available or affordable in a small member or donor dependent organisation, calls for greater effort to achieve the same outcomes. This limits the talent pool for many non-profit entities.
- Sourcing Funding
Essential elements in the existence of non-profits is their reliance to a greater or lesser extent on government contracts, grants and sponsorships. Their ability to successfully compete for funding and dealing with prescriptive funding regime calls for special knowledge and skills on the part of submitters. This makes additional demands on the treasurer or financial officer, who has to have the necessary competencies and experience.
While a formal accounting qualification and relevant experience in the non-profit sector are desirable, it is a reality that the majority of entities requiring accountancy capable staff are unable to afford such an appointment. A viable solution, which is successfully applied in many non-profits, is to either outsource these disciplines or to involve an independent practitioner with the necessary skills as a back-up to their employed treasurer or accounts person. Readers requiring advice or assistance in this regard are invited to contact Laura Jenkins at the NZARC secretariat.