Working as an accountant in an NGO can be very challenging and complex. It is very different from accounting in a company. You have added responsibility for reporting to donors and board members.
We have put together 5 tips on becoming an efficient accountant in an NGO that will help you impress your donors and your managers.
1. Maintain Separate books of accounts for separate projects
NGO’s run various projects funded by donors, governments, and other grantors that are restricted or unrestricted in nature. It is very important to maintain separate books of account for separate projects which means that you should maintain separate accounting vouchers and separate documentation for every project. Maintaining separate books for separate projects helps you in transparent project documentation and makes your project reporting process much easier. Having separate books also provides transparency in your project auditings.
2. Maintain Supporting Documents for every voucher
Accountability and Transparency are the most important values for any NGO. Supporting documents are invoices, receipts, bills, reports, attendance sheets, and any other documents that provide sufficiency, genuineness, and accuracy of your financial transactions. Donors are very strict on supporting documents and you should maintain adequate and appropriate supporting documents for every accounting voucher. Never compromise on maintaining supporting documents. Maintain supporting documents for your vouchers and encourage your team to produce adequate supporting documents to justify the expenditures.
3. Know how to account for Restricted & Unrestricted Fund
Funds in NGOs are generally categorized into Restricted & Unrestricted Fund based on their nature. Restricted funds are those funds provided that are restricted to a certain project or purpose. You cannot use restricted funds besides for the purpose agreed while obtaining the funds. Donors set out guidelines and conditions while utilizing the funds and require regular reporting of the restricted fund. Example: Grant provided for a certain project to an NGO by a donor is a restricted fund.
Unrestricted funds on the other hand are those funds that do not have any restriction attached to it. They can be used for any social purpose as desired by the NGO. They can be used by NGOs in any programs or for covering administrative expenditures.
4. Know the TDS rules and regulations
Tax Deducted at Source (TDS) is a process of deducting taxes while making payment to the vendor/supplier. It is the process of collecting tax at its source by the Government. NGOs should comply with the TDS rules and regulations of Nepal and every accountant should know when to deduct taxes while making payments to its vendors. Auditors, as well as tax officers, are very strict when it comes to TDS, so make sure you deduct TDS in all applicable payments that you make to your vendors.
5. Plan your project budget efficiently
Budgets are the financial plan on how you will achieve the objectives of your project. Budget should be realistic. Collaborate with your program team on creating the budget of the project. You have to report to the donors on the expenditures according to the budget. Any miscalculations in the budget can negatively affect your project, so make sure you use sound assumptions and clear accountability while planning your budget.