NewViews - One Company's Answer to the Challenge of Non-Profit Accounting
by Mary Tersigni

The non-profit sector in Canada is a large part of the Canadian economy. The following statistics will highlight how large it really is.

• Canada’s non-profit and voluntary sector is the 2nd largest in the world; the Netherlands is the largest; the United States is the 5th largest.
• There are an estimated 161,000 nonprofits and charities in Canada.
• Half of these (54%) are run entirely by volunteers.
• 2 million people are employed by these organizations, representing 11.1% of the economically active population.
• The sector represents $79.1 billion or 7.8% of the GDP (larger than the automotive or manufacturing industries).
• Smaller provinces have a higher number of organizations relative to their populations.
• The top 1% of organizations command 60% of all revenues.

Given its size, this sector of our economy is not well served by most accounting software companies.

Non-profit organizations (NPOs) and government agencies have a myriad of financial reporting requirements that go far beyond the basics of profit and loss reporting that most programs provide. Unlike profit oriented businesses, which use a single set of self-balancing accounts (or general ledger), non-profits often require more than one general ledger (or “fund”), depending on their structure. Accounting software for such an entity must be able to produce reports that detail activities for each of the individual funds, as well as reports that summarize the organization's financial activities across all its funds. Often, this information must also be presented in ways that are beyond the scope of ‘traditional’ accounting programs.

For example, take an NPO such as a scientific research organization that may be working on different projects and receiving funding from many different sources. The firm’s revenue may be made up of private and government grants or contracts, private donations, or sales of research documents. Some revenues may be restricted to specifice expenditures and the rest unrestricted. The accounting challenge is to report the revenue and expenses accurately for each fund or project, and be able to combine all the funds into one cohesive financial statement without resorting to the use of a complicted set of deferred revenue accounts.

The need to report the balance of each individual fund, both internally (management) and externally (funders), requires more complexity in record keeping. Unless you have special software, it may require manual calculations. For example, when using straight fund balance accounting, you need to report each fund’s revenue and expense statement as shown below:

However, it is a challenge to produce a report that combines beginning and ending fund balances (balance sheet information) with revenues and expenses (income statement information) without resorting to exporting reports to a spreadsheet and manually combining and manipulating the results.

To my knowlege, most accounting software packages on the market today are unable to provide reports with both balance sheet information (such as opening fund balance) and income statement information (such as revenue and expenses) for the period, with a closing fund balance. Many programs provide a general ledger/chart of accounts that use “segments”, “departments” or “jobs” that can be used to record the activities of funds or programs. To track the flow of restricted, temporarily restricted and unrestricted funds, the best they can do is to provide a system of “due to/from entries” as part of the process. So far, the only accounting package on the market that allows you to have a true general ledger for each fund is NewViews from Q.W. Page Associates.

NewViews’ ability to provide this feature is made possible by the product’s capacity to allow the user to specify if an account is an “opening”, “perpetual” or “periodic” account. Specifying that one characteristic enables the user to control how transactions are reported for that account. As a result, it is possible to show the opening fund balance, revenue received and expenses incurred for a specific period in time, and the closing fund balance – all on one report. This type of reporting is of immense help to any of the NPOs that need to closely track and report on money received and the money spent for a specific program.

For example, if a church choir was given a donation with the specific restriction that the money be used only for expenses incurred by the church choir, it would need to know exactly how much money was available before it decided to make purchases for that specific purpose. If there were unspent funds from the prior year, the choir director would need to make sure that those funds were part of the calculation of the money available. So, it would be helpful for the choir director to have a report listing the available funds from the prior year (if any), the receipts to date, the expenditures to date, and the closing balance of the fund.

Most accounting packages are unable to present this type of information because they are usually restricted to having one general ledger. NewViews can provide the user with an unlimited number of general ledgers, with each fund having its own general ledger.

The following is a sample report produced by NewViews that would be suitable for an NPO that does not require revenues and expenses by category. The bottom section of the screen shot shows the drill down capabilities whenever detailed information is required.

The following format might be more appropriate for NPOs that require more detailed reporting of each fund.

The setup is a bit tricky, but once the setup is in place, it is easily modified and replicated to accomodate new funds. Also of note is the fact that with NewViews, both the above report styles can be set up and are available at any time.

NewViews is undergoing contiuous development, but even in its present form it is well suited to accommodating the reporting requirements of NPOs.

Mary Tersigni of Softrite has extensive experience in accounting software setup and training in a variety of industries. One of her areas of specialization is reporting for non-profit organizations.