How to Select the Best Accounting Firm for Your NPO / Charity (And Why It Matters)

Do you need to select a new auditor or accounting firm for your not-for-profit organization or charity?

If so, this comprehensive guide is for you.

Why? It offers insider information.

Yes, this article contains candid advice from a real-life, successful, not-for-profit auditor on how to select the best auditor (or accounting firm) for YOUR not-for-profit organization or charity. We also cover why it matters!

You’ll hear from industry insider and specialist Laura Gay, CPA, CA, LPA.  Laura is a Partner at Stern Cohen in Toronto and she leads Stern Cohen’s Nonprofit Specialist Team. You can read more about Laura and her credentials on her bio page here.

Before we dive into our recommendations, let’s cover off a bit of important background info.

WHO should read this article?

• Someone tasked with finding a new auditor for your not-for-profit or charity in Toronto. You could be a board member, executive director, manager or CEO.
• Your organization has had difficult audit experiences in the past OR you’d like to change accounting firms;
• Your board of directors has a policy to tender an RFP (Request for Proposal) every 3-5 years for a new auditor and accounting firm;
• Your nonprofit or charity needs an audit for the first time and you want to make it as smooth a process as possible.

WHEN do you need an auditor?

Charities:

• If your registered charity is federally incorporated and has revenues over $250K you are REQUIRED by law to have an audit.
• Charities are also required to file the T3010 Charity Information Return annually.

Not-for-profit corporations:

• If your not-for-profit corporation is federally incorporated and has annual revenues over $250K you are REQUIRED by law to have an audit.
• Not-for-profit organizations are also required to file a T2 Corporate Income Tax Return annually.
• Not-for-profit organizations may also be required to file the T1044 Non-Profit Organization Information Return annually.

Ok, now to our insider recommendations…

6 Top Tips to Ensure You Select the Best Auditor / Accounting Firm for Your Nonprofit or Charity

#1. Look at Their “Fit” & Personality

This is a big one. And you probably didn’t expect to see it mentioned. After all, personality is something one doesn’t always associate with accountants!  All joking aside, it’s very important to take “fit” into consideration when you pick an auditor or accountant because you will be working with them on a regular basis. In many cases, nonprofits and charities don’t have the budget or funds for a large internal finance team. As a result, your new accountant and auditor will be a trusted advisor and key resource to your organization. You’ll be spending a good deal of time speaking with them and working with them. In fact, the Accounting Standards for Not-for-Profit Organizations in Canada place a strong emphasis on the importance of good communication. Your auditor will need to have frank discussions with board members and management. Find someone who will gel with your organization and who understands and respects your organization’s goals.

#2. Uncover Their Level of Service and Responsiveness

Here’s a factor you were definitely expecting to see in this list! We know that service and responsiveness is important to you. So getting a service guarantee is key. Ask them questions like:

• Are you available to answer my questions throughout the year (or just at audit time)?
• Will you bill me the minute I call you with a question? (or am I “on the clock” when I call?)
• What is your response time when your clients email or call you?
• Do you regularly survey your clients to find out if they are happy with the service you provide?

Of course, they might promise you the world, but how do you know if they’ll live up to these promises? One way to uncover their commitment to service is to ask for some proof.  At Stern Cohen, we have an independent third-party firm survey our clients annually. And we use a popular metric called “Net Promoter Score” to rate our level of service. We also make our results publicly available for anyone to scrutinize here. We’re very proud of them because we received world class scores for the last two years! In addition, we have a 24 hour or better response time guarantee (during business hours) for our clients.

#3.  Sleuth Their Expertise: Are They a Specialist?

When selecting a new auditor, it’s important that they have an understanding of your industry, its specific risks, processes, systems and operations. The deeper the understanding the better. If possible, you’ll be looking for an industry specialist. A specialist is someone who is highly regarded among their peers, and who can effectively zero in on and explain auditing and accounting issues that your organization will be facing. But if you’re not a CPA, how can you tell? Is there a litmus test you can use to determine industry specialization? In fact, there are a few techniques you can use. Try the following:

• Check out their online profile (on their website and LinkedIn). What kind of experience do they have in the not-for-profit world?
• Ask if they exclusively service nonprofit clients or if that’s only a segment of their “book” (accountant speak for client base).
• Do they serve on a nonprofit or charity board ?
• Do they speak on industry topics and issues at conferences? Hint: These might be areas you would love insight and knowledge on!

These are all easy ways to check their credentials.

#4. Do They Have “Capacity”?

Again, you probably didn’t expect to see this word. And if you’re not an accountant you are probably not familiar with it. Capacity is a common word at accounting firms. Accountants need time in their schedules or “capacity” to take on new clients. That’s why it’s particularly hard for individual CPA’s or small firms to service larger or more “needy” clients. When you’re looking for a new auditor, make sure you ask them “Do you have capacity to take on a new audit client at this time of year?”

TIP: Busy season for non-profit auditors and specialists is May to June. If your audit falls at this time, you may be hard-pressed to find a new auditor who has capacity.  As a result, select your year-end carefully and find your auditor well in advance of your audit deadline!

#5.  Read Testimonials and Confirm Your Final Choice with a Reference Check

To learn more about your prospective auditor, ask to see testimonials from similar clients. Testimonials are often posted on the accounting firm’s website or available upon request. They validate your prospective accountant’s services.

You can also contact a reference for peace of mind at the final stage of your search for a new auditor.  At Stern Cohen, we have great respect and consideration for our clients. So, when one of our clients is willing to be a reference for our services, we want to protect their generous time investment.  As a result, we suggest that you only check a reference to confirm your “final choice” of a new auditor. Please don’t waste the time and goodwill of a reference unless you are interested in proceeding with that auditor.

#6.  What Kind of Value and Advice Will You Receive?

Your accounting firm should add value. If the only thing they provide is an accurate financial statement, then you are missing out on a lot more! Chartered Professional Accountants are, as CPA Ontario says: “On the right side of change.” Your accountant should be able to introduce you to trusted industry resources, tools, share trends and best practices with you, help ensure you are compliant and not incurring any penalties, and provide you with much needed guidance that you may not even be aware you need.

Conclusion:

Selecting a new auditor or accountant is a very important decision with far reaching consequences for the survival and financial health of your organization. Select your new auditor carefully, taking into consideration all of the factors shared in this article.