I recently hosted a successful NGO governance seminar and had quite a bit of questions relating to the right accounting package and where to begin with regards to good record keeping. I have audited a couple of NGOs and the main reason NGOs outsource their accounting is because it is often too costly to hire a full-time accountant or just fear of having to do bookkeeping in-house.
Here are some of the questions I have been asked and my best response to it:
I need to start recording the NGO’s income and expenses. Where do I begin?
1. How long ago was the last audit conducted?
2. What does the Auditor’s Opinion say – is it qualified or unqualified?
3. Does the organisation have enough ready cash (see ‘Cash at Bank’ listed under Current Assets) to pay off its immediate debts (see Creditors)?
4. How long could the organisation survive if all of its funding dried up? (Calculate the ‘survival ratio’) How does this compare to last year?
Income & Expenditure (or Profit and Loss) Account