Nonprofit Financial Management in a Nutshell by Rebekah Leopold

July 3, 2012

Our friends from Kerkering, Barberio & Co. stopped by the Community Foundation of Sarasota County to give a packed room of community leaders tips about nonprofit financial management.

Though finance hardly encompasses the full picture of your organization, it can be a determining factor for receiving support as donors are increasingly showing a strong demand for more and better financial information.

The main topics discussed were:

  • financial statement basics
  • budget management
  • annual audit basics
  • the role of board treasurers and finance committees.

Financial Statements

When organizing financial statements, it is important to understand the difference between accrual and cash.  An accrual statement may be more accurate in reflecting the economic state of the nonprofit. With an accrual basis, revenues are recognized when earned and realizable, and expenses when owed and in the period in which the related revenue is recognized.

Nonprofits have unique assets and liabilities. These can include pledges receivable, gift promises, split interest agreements, liabilities related split interest agreements, agency liabilities and uncommon to for-profit corporations. Net assets are classified as either unrestricted, temporarily restricted or permanently restricted.

Contributions designated for a specific purpose or certain time period are temporary restricted until used. Contributions where the donor stipulates it must be held in perpetuity are permanently restricted.

Reserve Funds

It is beneficial to find the right balance for a “healthy” reserve fund. Often, the reserve fund may be too large and donors view the organization as having excess capacity and decide their gifts would be better served elsewhere. On other occasions, the reserve fund may be too small and is prohibitive to future development.

A good goal is to have enough reserve funds to cover 3-6 months of operating expenses. Further reserve growth must be accompanied with a purpose in mind for future expansion. Typical revenue sources for a nonprofit are contributions, membership dues, program fees, fundraising events, grants, investment income, gain on sale of investments and revenue released from restrictions.

Budget Management

The budget should be viewed as a tool to help transform goals and objectives into realized outcomes. It aids in prioritizing and understanding programs which can be realistically pursued with the available resources in order to achieve the organization’s mission.

When creating a budget, it is important to consider upcoming changes in the economy, the community and in laws that may affect a nonprofit. It is often more valuable to have current and reasonably accurate financial information than old and very accurate information.


Auditing basics were briefly discussed, particularly the difference between audits, reviews and compilations. Not every organization will need an audit. Typically larger nonprofits and those receiving grants need to be audited by an independent CPA firm. Reviews and compilations provide slightly less assurance, and can be performed instead of audits.

Board Treasurer & The Finance Committee

The final topic was the roles of the board treasurer and finance committee. These roles can vary according to the organization’s size, regulations and other factors. Generally, the board treasurer is a person with financial expertise who will set a tone of integrity in regards to finances and will work with the management to plan and evaluate the budget.

The general responsibilities of the finance committee are to review and monitor the financial statement and budget, approve significant monetary decisions and set policies and procedures related to the administration, collection and disbursements of economic resources.


A big thanks to Rob Lane and Jennifer Glassmoyer at Kerkering, Barberio & Co!

Helpful resources relating to nonprofit finance:

The Nonprofit Finance Fund works with organizations to create lending portfolios for nonprofits.

Download Kerkering Barberio’s presentations for nonprofits here.

Rebekah Leopold

Guest blogger Rebekah Leopold is a recent graduate of Riverview High School’s International Baccalaureate Program and will be attending Boston University this fall to study Economics and Sociology. She is working as a summer hire for the Community Foundation of Sarasota County.


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