Do you need to select a new accounting firm or auditor for your nonprofit organization or charity?
If so, this comprehensive guide is for you.
We offer candid advice on how to select the best accounting firm for YOUR not-for-profit organization or charity. We also cover why it matters!
You’ll hear from industry expert Laura Gay, CPA, CA, LPA. Laura is a Partner at Stern Cohen in Toronto and she leads Stern Cohen’s Not-for-Profit Specialist Team. You can read more about Laura and her credentials on her profile page here.
Before we dive into our recommendations, let’s cover some important background info.
WHO should read this article?
- Someone tasked with finding a new accounting firm or 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 (as opposed to an accountant)?
- 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 annually file the T3010 Charity Information Return.
- 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.
Note: Not a Canadian NPO or Charity? If you’re looking for an audit for your business, check out our business accounting page here.
Ok, now to our insider recommendations…
6 tips to ensure you select the best 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 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.
How can you do that? We strongly recommend a zoom or phone call to speak one to one with any new provider you are considering. Don’t just email an RFP and evaluate the resulting proposal.
You might also want to take a deep dive into the exact services that the firm provides. In many respects, nonprofit accounting and reporting is more complicated than for-profit accounting. Do they have expertise with the accounting software and apps you currently use or can they recommend an improved cloud platform? These are all things to consider when selecting the best provider for your accounting needs.
#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 for phone calls and emails?
- What is your response time when your clients call or email?
- 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!
#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. Especially because of the seasonality of the industry. 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 accounting firm, make sure you ask them “Do you have capacity to take us on?”
TIP: Busy season for nonprofit 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 accountant 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 strategic recommendations and the much needed guidance that you may not even be aware you need.
Selecting a new accounting firm 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.
For more information about working with Stern Cohen’s Not-for-Profit specialist team, we invite you to contact us today.
Disclaimer: While the information in this article is meant to be helpful, it is not meant to be advice for your unique situation.