Yulia Kosareva, auditor, general director of AuditOrIya LLC
Over more than twenty years of working with non-profit organizations, I have become convinced of one pattern. Most of the heads of NGOs sincerely believe that if the organization works honestly, all money is spent on charitable purposes, and employees faithfully do their work, then serious problems cannot arise. Unfortunately, practice shows the opposite.
I will tell you one story. The name of the organization and some details have been changed, but the situation itself is absolutely typical.
A charity foundation that had been operating for several years approached our company. The foundation had successfully implemented social projects, won grants, and regularly received donations from businesses and individuals. The founder was fully immersed in helping their beneficiaries, so accounting matters received only as much attention as was necessary for reporting purposes.
Until a certain point, everything seemed to be going well.
However, problems arose during the preparation of a grant report.
The numbers did not add up.
The funds were spent correctly.
All the events were held as planned.
The participants received assistance.
However, it was much more difficult to document this.
During the audit, several issues were identified:
Some expenses were paid from a bank account that simultaneously held both grant funds and donations.
There was no separate accounting for these funds.
There were no documents to support the connection between certain expenses and the project.
Some contracts were signed much later than the actual provision of services.
And for several payments, it was impossible to determine at all which sources of financing they were made from.
The most annoying thing was that the money was actually used for its intended purpose. But it wasn’t easy to prove it.
For several weeks, the fund’s staff, together with the accounting department, literally restored the history of each operation: they searched for acts, correspondence, additional agreements, bank statements, and memos. Fortunately, the situation was rectified.
But the fund’s head later admitted, “If we had known about these risks in advance, we would have spent one day setting up proper accounting instead of a month restoring documents.” This phrase perfectly captures the challenges faced by non-profit organizations.
Why is this happening?
Unlike commercial organizations, the activities of NGOs have many specific features. It is not enough to simply maintain proper accounting and tax records.
It is necessary to be able to confirm:
the origin of each monetary receipt;
the targeted nature of expenses;
compliance with the conditions of grants, subsidies, and donations;
compliance with the organization’s statutory goals.
This must be confirmed not only verbally but also through documents. These documents serve as the primary evidence of the organization’s integrity for grantors and regulatory authorities.
The most common mistakes
Over the years, we have identified several issues that are repeated in almost every second NGO.
First. Targeted income is accounted for formally or not at all.
Second. Documents are collected after the transactions are completed, making it much more difficult to reconstruct the chain of events.
Third. The manager believes that if the accountant has submitted the reports, there will be no more questions. However, the activities of an NGO require compliance with a much greater number of requirements than a regular commercial organization.
Fourth. When the project is changed, the estimates, internal decisions, contracts, and other documents are not adjusted in a timely manner.
Fifth. The organization only starts checking the documents after receiving a request from the grantor, the Ministry of Justice, or the tax authority.
Each of these errors may seem insignificant on its own. However, it is these small details that can lead to serious problems in the future.
What helps to avoid such situations?
The most effective way is not to wait for a check.
Practice shows that most violations can be detected long before they are of interest to regulatory authorities. Periodic independent audit of accounting, tax reporting, document management and compliance with the requirements of the legislation allows you to identify weaknesses when they can still be quietly eliminated. This is especially important for organizations that receive grants, work with donations, implement several projects simultaneously or actively develop.
Instead of concluding
Non-profit organizations are not created for profit. Their main goal is to help people, develop education, culture, sports, science, preserve historical heritage, and support those who are in difficult situations. Therefore, it is especially important for leaders to focus on their mission and not waste time dealing with the consequences of accounting, reporting, or document management errors.
Over the years, our team has supported hundreds of non-profit organizations, including charitable foundations, autonomous non-profit organizations, public associations, unions, and other NGOs. We have a deep understanding of the challenges faced by these organizations.
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Source:https://buh-a.ru/o-companii/novosti/11-novosti/383-nko-pod-ugrozoj-odna-bukhgalterskaya-oshibka-mogl…
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