Sunday, August 12, 2007


What words strike fear into the hearts of nonprofit accountants? Here is my list so far:

Matching Costs
In-kind Donations
Cost Allocation

If auditors want to play "gotcha" all they have to do is utter these 4-letter words. No matter how properly a nonprofit handles these, they will always be open to question. Auditors know this, and so, when they have no findings, they seem to always pull these out of the hat.

Matching Costs: How did you calculate these costs? How do you ensure you haven't used the same funds to match multiple grants?

Depreciation: Why haven't you depreciated your capital improvements? Because you won't let us own the building!

In-kind donations: How did you value these? Did you reflect them on your general ledger?

Cost Allocations: What is your basis? Do they fluctuate over the year? Did you allocate based on budgets (g-d forbid!)

Overhead: You can't charge this here, it's unallowable. Then who is going to pay for it?

Learn more about how auditors assess risk

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