What to Look for When Hiring a Nonprofit Accountant

Hiring the right nonprofit accountant is one of the most critical decisions for any organization. Nonprofits have unique financial needs, from managing restricted funds to ensuring compliance with donor requirements and federal regulations. A skilled nonprofit accountant ensures your organization operates efficiently, remains compliant, and maximizes the impact of every dollar received. Here’s what you should know when looking to hire a nonprofit accountant.

1. Experience with Fund Accounting

One of the most important aspects of nonprofit accounting is fund accounting. Unlike for-profit organizations, nonprofits must track and report funds according to donor restrictions or grant requirements. This involves managing multiple funds that may be earmarked for specific programs or projects, with the funds categorized into:

• Unrestricted Funds: General-purpose funds that can be used freely.

• Temporarily Restricted Funds: Resources that are restricted for specific uses or time periods.

• Permanently Restricted Funds: Endowments or donations that must remain intact.

When hiring, look for candidates with proven experience in fund accounting. They should understand how to allocate and track funds, ensuring donor intentions are respected and reported accurately.

2. Knowledge of Nonprofit-Specific Regulations

The regulatory landscape for nonprofits can be complex. Nonprofit accountants must be familiar with IRS regulations, particularly the accurate and timely filing of Form 990, which provides transparency to donors and ensures compliance. They should also be knowledgeable about GAAP (Generally Accepted Accounting Principles) as they apply to nonprofits, as well as any local or state requirements.

When hiring, seek out candidates who have a thorough understanding of nonprofit financial regulations and have experience navigating audits, grant reporting, and compliance issues. This expertise can help your organization avoid costly errors and maintain good standing with regulatory bodies.

3. Revenue Recognition and Grant Management Expertise

Nonprofits often receive income from multiple sources, including donations, grants, and program fees. Each type of revenue has different recognition requirements. For example, a donation may be recognized immediately, while grant income might only be recognized once certain conditions are met. A skilled nonprofit accountant understands these nuances and can ensure accurate financial reporting.

If your organization relies heavily on grant funding, it’s important to hire a nonprofit accountant who is experienced in grant management. They should be able to track grant conditions, ensure compliance, and handle reporting requirements from start to finish.

4. Strong Expense Allocation Skills

Nonprofits are accountable not just for how much they spend, but how they spend it. Donors, grantmakers, and the public want to know that a large portion of an organization’s funds is going toward its mission rather than overhead. Expense allocation is the process of distributing costs (like salaries, rent, and utilities) between program services, management, and fundraising activities.

A strong nonprofit accountant will have the expertise to accurately allocate these expenses and report them in the Statement of Functional Expenses, a critical part of the Form 990. This ensures your organization can demonstrate responsible financial management and maintain trust with donors.

5. Internal Controls and Financial Safeguards

Nonprofits often manage multiple streams of income and have many stakeholders to answer to, making internal controls essential for preventing fraud and ensuring financial integrity. A qualified nonprofit accountant will implement and maintain strong internal controls, such as segregation of duties, financial oversight, and regular audits.

During the hiring process, ask candidates about their approach to safeguarding financial resources and maintaining transparency. Strong internal controls help protect your organization’s assets and reputation.

6. Budgeting and Financial Planning Capabilities

Effective budgeting and forecasting are critical for the financial health of a nonprofit. A good nonprofit accountant should be skilled at developing realistic budgets, monitoring financial performance, and helping leadership make informed decisions. They should be able to forecast revenue and expenses, ensuring that the organization can respond to changes in funding or unforeseen expenses.

Look for candidates who can demonstrate a strategic approach to budgeting and financial planning. They should not only understand the day-to-day accounting but also provide insights that contribute to long-term financial sustainability.

Conclusion

Hiring the right nonprofit accountant is a significant step toward ensuring your organization’s financial health and long-term sustainability. The ideal candidate will be experienced in fund accounting, knowledgeable about nonprofit regulations, and skilled in revenue recognition, grant management, expense allocation, and internal controls. With the right nonprofit accountant, you’ll have a financial partner who can help you build trust with donors, maintain compliance, and use your resources effectively to achieve your mission.