Easy Office Blog

Blue Avocado recently published a great letter from a lawyer regarding the difference between a Financial Review and a full-blown Audit.  Check it out here: http://www.blueavocado.org/content/attorney-recommends-review-instead-audit

Clients frequently ask us if they need an audit or a review.  This can be dictated by state requirements, the need for a Federal A-133, or by specific funders requirements.  The state of New York has especially onerous requirements that have a very low threshold for when non-profits have to conduct an audit.  Each organization should be aware of the state requirements and requirements of funders - both current and future prospects - when making this decision.  There are two basic differences between the two:  One, the cost of a review is typically 1/2 that of an audit.  And secondly, a review is just that... a review.  The CPA doesn't perform in-depth 'testing' as they do in an audit.  They review for material issues and obvious deviations from GAAP.  But they won't go in and test unique individual transactions in the same way an audit is done.  A review provides some assurance, but does not independently validate transactions.

The moral of the story is to make sure you comply with government regulations based on your size and geography.  And be proactive to understand funders requirements.  (i.e. the United Way requires a review for organizations of a certain size, an audit for larger ones.)

Keeping track of all these regulations can be tricky, so make sure you have an active informed Finance Committee or a partner like Easy Office who can help you through the issues.

As our collective eyes turn towards 2010, it isn’t too early – or too late – to get your budget prepared for the New Year.  Most organizations focus their time and energy budgeting expenses.  But remember to take the time to also budget your income and cash flow.  It can also be very helpful to break the budget out on a quarterly or monthly basis, not just on an annual basis.  This will help you prevent cash flow shortages from sneaking up on you as expenses tend to be smoother than donations.  Lastly, Easy Office does prepare budgets for many of our clients, large and small, so if there is any way we can help, please contact us.

Cash is king.  Make sure to take the time to monitor your cash flow.  In these times it is especially important to stay on top of your finances monthly, if not weekly.  Don’t let cash shortages sneak up on you.

Closing the books.  It can be a really helpful discipline to “close the books” once they are reconciled for a period, for example at the end of the month.  After a period is closed, most accounting software, including Quickbooks, can be set up to require a password or provide users with an alert before editing ‘closed’ transactions.  This may help prevent inadvertent changes to your past which can throw off reconciliations, financial statements and more.  Just the simple act of closing your books regularly can help keep them nice and clean.