Not-for-Profit Accounting: How to Find the Best Partner for Your Organization

Picture this: A community nonprofit loses a major grant not because their mission failed, but because their financial reporting wasn’t audit ready. Or a board member resigns in frustration over unclear budgeting. These situations aren’t uncommon, and they all share a common thread: a disconnect between purpose and process. In the nonprofit world, that’s a risk we simply can’t afford.

At James Moore, we’ve seen how the right accounting partner becomes more than just a numbers person. They’re a safeguard for your funding, your compliance and your impact. When your mission relies on every dollar counting, generic accounting solutions fall short. Finding a financial partner who understands the stakes of your work is not a luxury. It’s a necessity.

With high stakes, specialized nonprofit accounting matters.

Nonprofits today operate in one of the most financially scrutinized sectors in the country. Between ever-changing IRS rules, growing donor expectations, political uncertainty and complex funding structures, there’s little room for error. According to the IRS, more than 1.5 million tax-exempt organizations are required to file Form 990s annually. Incomplete or inaccurate filings can result in costly penalties or even a loss of tax-exempt status (IRS, 2024).

Beyond compliance, we’re also seeing increased public demand for transparency. Donors, grantors and watchdog groups like Charity Navigator and GuideStar review nonprofits’ financial disclosures closely. That means one poorly organized statement of functional expenses or a misunderstood revenue recognition issue can quickly snowball into reputation damage or  funding loss.

Let’s not forget the tricky tax terrain of unrelated business income (UBI), fundraising reporting and navigating in-kind donations. Missteps in these core areas can mean thousands in missed revenue or compliance costs.

And yet, many nonprofit leaders are still relying on generalist CPAs who don’t specialize in our sector. That’s like hiring a general contractor to restore a historic building; you might get the job done, but will it hold up under scrutiny? Probably not.

That’s why the first step in protecting your mission is finding an accounting partner who’s fluent in the nonprofit world. From understanding the nuances of donor-restricted funds to preparing for a federal single audit under the Uniform Guidance, your CPA should bring both technical skill and sector-specific insight (and share that insight proactively, not just at year-end).

 

 

Know the traits of a true nonprofit accounting partner.

When you’re selecting an accounting firm, it’s tempting to treat all CPAs as interchangeable. After all, numbers are numbers. Right?

Not exactly.

Nonprofit accounting is governed by a completely different set of principles than for-profit businesses. The terminology, the objectives and the compliance standards are distinct. If your accountant doesn’t live in this space, you’ll be the one paying the price.

Here’s what to look for in a firm that understands the nonprofit world.

Expertise in Form 990 Preparation and Interpretation

Form 990 is more than a tax return. It’s a public document that reflects your organization’s mission, financial strength, governance and transparency. Donors, grantors and the media scrutinize it, so your accountant should know how to position it as an asset (not just a filing requirement).

Knowledge of Funds With and Without Donor Restrictions

Your accounting partner must understand how to properly track and report contributions with donor-imposed restrictions. Failure to do so can lead to inaccurate financials and fund misallocation. And in the eyes of funders and watchdogs, that erodes trust.

Audit Readiness and Experience with Federal Single Audits

If your nonprofit receives federal funding above $1,000,000 annually, you’re required to undergo a single audit under Uniform Guidance. Not every firm can navigate this, and even fewer can do it efficiently while supporting your staff and minimizing disruption.

Familiarity with Nonprofit Budgeting and Board Reporting

Your firm should help you prepare budgets that reflect program goals and operational realities. It should also translate these numbers into clear reports for your board and key stakeholders. A strong partner helps you anticipate questions before they arise.

Insight Into Nonprofit Operations and Strategy

A truly effective advisor will understand the rhythm of your fundraising cycles, your seasonal cash flow needs, and how financial reporting intersects with program outcomes. You want a firm that speaks the language of nonprofit leaders, not one that needs to be brought up to speed.

If you’re wondering whether a potential partner checks these boxes, start by reviewing their existing client base. Do they work with organizations like yours? Have they written or spoken on nonprofit tax and accounting issues? Do they maintain a nonprofit services team with dedicated staff?

At James Moore, we maintain a full team of professionals who focus solely on nonprofit clients. We offer everything from outsourced accounting and controllership to tax consulting and audit services, so your organization can scale confidently and compliantly. Learn more on our Nonprofit Accounting Services.

Common Mistakes to Avoid When Selecting a Partner

Choosing an accounting partner is a major decision. Unfortunately, it’s easy to get it wrong if you don’t know what red flags to watch for. Based on what we’ve seen across the industry, here are some of the most common (and costly) missteps nonprofits make:

Mistake 1: Hiring a generalist CPA with little nonprofit experience

A firm that primarily serves for-profit clients may not be familiar with the intricacies of fund accounting, FASB ASU 2016-14 presentation standards or Uniform Guidance audit requirements. These gaps can lead to errors in financial statements and regulatory filings.

In 2023, a Georgia-based nonprofit lost more than $400,000 in federal funding after an improperly filed single audit resulted in flagged deficiencies by the U.S. Department of Education. The cause? An accountant unfamiliar with federal grant compliance requirements (source: Urban Institute).

Mistake 2: Choosing based solely on cost

While budget constraints are real, going with the cheapest option often leads to higher costs later in the form of penalties, rework and lost funding opportunities. A quality nonprofit accountant helps you avoid these outcomes and identifies strategic savings opportunities that more than offset their fee.

Mistake 3: Underestimating the value of credentialing

Credentials like CNAP (Certified Nonprofit Accounting Professional) and the AICPA’s Not-for-Profit Certificate, or CPA firms that are members of the AICPA’s Governmental Audit Quality Center (GAQC), signal a meaningful commitment to nonprofit excellence. Don’t overlook these qualifications. They demonstrate sector-specific knowledge that matters.

Mistake 4: Not vetting communication and responsiveness

Nonprofits often operate in real time with grant deadlines, board meetings and audits. Your accounting partner should be available when needed, not just during tax season. Ask how quickly they respond to inquiries and whether you’ll have a consistent point of contact. And look for a team, not just qualified individuals, so someone is there for you if your normal CPA isn’t available.

Mistake 5: Ignoring technology compatibility

Does your potential CPA know how to work with nonprofit-friendly tools like Sage Intacct, QuickBooks for Nonprofits or donor management systems? If not, you may be adding friction to your internal operations rather than reducing it.

Avoiding these pitfalls doesn’t just protect your finances; it protects your mission. When it comes to stewardship, your accounting partner is either an asset or a liability. Make sure yours is the former.

 

 

What to expect from a high-performing accounting partner

A great accounting firm doesn’t only show up during tax season. They’re by your side year round, helping you meet your mission with confidence. For nonprofits, this means maintaining clean, audit-ready books, building trust with stakeholders and anticipating issues before they become obstacles.

First and foremost, your accounting partner should bring clarity to your financials. This includes timely reconciliations, detailed tracking funds with and without donor restrictions, and reports that are always ready for an auditor or a board chair. It’s not just about getting the numbers right; it’s about presenting them in ways that align with FASB standards and resonate with your leadership and funders.

An experienced partner will also ensure your financial statements reflect your actual operations and outcomes. Whether you’re preparing for a board meeting or a grant application, your reports should clearly separate program, administrative and fundraising costs. This level of transparency is essential in earning the trust of watchdog organizations and major donors.

Beyond compliance, the right partner brings insight into the systems and processes that support your work. That means helping you identify weaknesses in your internal controls, improving workflow efficiency and recommending tools that match your staffing and technology needs. Whether you’re working through a federal single audit or managing multiple funding sources with different restrictions, you should feel confident that your accounting partner knows exactly how to support you.

Just as important, your partner should act as a financial sounding board. Strategic conversations about budgeting, grant planning and reserves should be an ongoing part of your relationship. The best accounting relationships are collaborative, and that means being available to brainstorm, troubleshoot and plan whenever you need it.

That’s the kind of support we provide through our Outsourced Accounting Services. Because for nonprofits, a high-performing accounting partner is a mission-critical asset. We’re here to help your organization stay accountable, compliant and ready for what’s next.

Questions to Ask When Vetting a New Firm

When interviewing potential accounting partners, many nonprofit leaders focus on resumes and pricing. But to get a true picture of how a firm will support your organization, you need to go deeper. Here are essential questions that uncover the real value behind the proposal:

How many nonprofit clients do you serve?

Experience matters. Ask for references from similarly sized organizations, and look for signs that the firm understands the language and lifecycle of nonprofit management.

How do you handle donor-restricted funds and grant tracking?

Restricted fund accounting is central to your operations. Your partner should have a clear process for maintaining separate ledgers, providing fund-level reports and ensuring accurate revenue recognition.

Do you provide support with Form 990, UBIT and other nonprofit-specific tax matters?

A qualified firm should do more than just prepare your 990. They should help you understand how it presents your mission and ensure that unrelated business income (UBI) is correctly identified and reported.

What’s your process for helping nonprofits prepare for single audits or financial statement audits?

Federal grant recipients must comply with Yellow Book and Uniform Guidance standards. Ask about the firm’s experience with these requirements and how they support clients through the process.

Will we have a dedicated point of contact, and how often will we meet?

A responsive team is critical to your operations. Make sure you understand their availability, how they handle urgent questions and how often you’ll review financials together.

What financial systems do you support, and can you advise on technology integration?

Today’s nonprofits need their accounting software, donor CRM and grant tracking tools to talk to each other. Your partner should be able to support or consult on software like QuickBooks, Sage Intacct or other nonprofit-specific platforms. They should also have solid knowledge of BILL and other accounts payable platforms.

These questions will help you move beyond surface-level impressions and uncover whether a prospective partner truly understands your needs and has the tools to meet them.

For reference on audit standards, visit the GAO’s Yellow Book, which outlines key principles for government and nonprofit audit engagements.

Find an accounting partner who supports your mission — and strengthens it

Choosing the right accounting partner is one of the most strategic decisions your nonprofit can make. With the right support, your organization gains clarity, confidence and financial insight that directly impacts your mission.

From accurate financials and audit readiness to donor trust and strategic growth, your accounting function touches everything you do. And at James Moore, we’re not here to provide cookie-cutter services. We offer nonprofit-specific expertise that reflects decades of experience, a passion for purpose-driven organizations, and a dedication to doing the work right the first time.

If your organization is ready for a true accounting ally, contact a James Moore professional. Let’s talk about how we can help you stay focused on what matters most: serving your community and expanding your impact.

 

 

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a James Moore professional. James Moore will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.