Magazine article The CPA Journal

Selecting Accounting Software for Nonprofit Organizations

Magazine article The CPA Journal

Selecting Accounting Software for Nonprofit Organizations

Article excerpt

Nonprofit organizations frequently have specialized accounting requirements demanding distinct software features. The identification of these requirements should be integrated into the software-selection process early enough to decide whether an off-the-shelf package will suffice or if the software requires modifications to meet minimum requirements. Particular attention should be paid to the nonprofit organization's special characteristics with a careful analysis of the features needed.

While accounting, computer, and business literature is rich in descriptions of the generalized process of how to select and identify features of accounting software, little is written about selecting accounting software for nonprofit organizations. Of particular concern are those characteristics that are either unique to the field of nonprofit organizations or derive directly from the environment in which they operate. These characteristics are not commonly addressed in accounting software not specifically designed for such organizations.


The field of "nonprofits" is incredibly diverse, encompassing colleges and universities, hospitals and nursing homes, religious organizations, museums and many others, all of which come in all sizes and shapes. The very large nonprofits typically have sophisticated management information systems operating on main-frame computers. At the other end are many small and medium-sized organizations that may not have strong financial managements but have many of the same demands for financial information needs. It is this latter group that often turns to software vendors and off-the-shelf software for their information needs.

During the last few years, there have been some significant factors influencing financial reporting and information gathering at nonprofit organizations. Some changes include-

In general:

* Greater reliance upon more diversified funding sources;

* More complex reporting and information (e.g., the single audit requirements of Office of Management and Budget Circular A-133); and

* Calls for a greater degree of accountability

Changes in financial statement formats:

* SFAS 117, Financial Statements of Not-for-Profit Organizations, mandates changes in financial statement display (compliance required for years ending after December 15, 1994, and later for smaller organizations); and

* Industry audit guide for health-care providers.

What has not changed in the nonprofit sector is that change is constant and rapid, and with that change comes a requirement that the organization's information reporting system be quickly adaptable to such changes.

For example, in New York State, certain organizations must submit a Consolidated Fiscal Report (CFR) annually. That report is a multi-purpose document serving multiple agencies each with their unique information requirements and funding methods. For many of those agencies, the level of required information is at the site level, and in recent years the number of sites has increased rapidly. Some CFRs submitted include hundreds of pages. Compounding the situation, there have been so many changes to the CFR format that new manuals have recently been published bi-annually.

Other sectors of the nonprofit world experience change just as frequen tly. With the shrinking of resources being made available to nonprofits from governments and from the public, their managements are being called upon to use those resources in more innovative and creative ways, requiring timely and accurate financial information.

At the same time as information needs have increased, so has the availability of computer hardware and software to meet those needs. Disposable or off-the-shelf software operating on high-powered personal computers have stepped forward to provide information not previously available to the small and medium-sized nonprofit organization. …

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