What Does a Nonprofit Accountant Do?
Written by:
Wilson College
• Aug 26, 2024
According to Giving USA, Americans donated an estimated $557 billion to U.S. charities in 2023, an amount roughly equivalent to the gross domestic product of Ireland. Nearly $375 million of that—approximately 67%—came from individual donors.
With so many dollars pouring into nonprofits, it’s crucial that these organizations track the funds they’re receiving carefully and apportion them appropriately. Like for-profit entities, nonprofits rely on the expertise of accountants to manage their financial resources. However, nonprofit accountants aren’t simply responsible for balancing an organization’s books—they also help drive its mission forward.
As long as people continue donating to nonprofits, accountants will be in demand to help them manage their finances and achieve their goals. Earning a bachelor’s degree in accounting is a critical step toward becoming a nonprofit accountant.
Nonprofit Accountant Job Description
A nonprofit accountant’s job is similar to that of a corporate accountant. They help their organization remain financially healthy by tracking and analyzing the organization’s financial data, identifying areas of opportunity and risk, and advising executives in making financial decisions.
They also ensure that the organization’s financial records are accurate and in compliance with applicable laws and regulations.
A nonprofit accountant’s primary responsibilities include:
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Reviewing their organization’s finances for accuracy
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Assessing the organization’s financial health by compiling and analyzing its financial records, including its income statement, balance sheet, and cash flow statement
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Assisting in budget preparation and regularly assessing the budget’s performance
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Advising the organization on ways to minimize expenditures and boost revenues
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Ensuring financial records adhere to generally accepted accounting principles (GAAP)
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Preparing and filing tax returns
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Maintaining compliance with relevant laws and regulations
Nonprofit Accounting vs. For-Profit Accounting
While the day-to-day duties of accountants at for-profit and nonprofit entities are similar in many ways, there are important differences between for-profit and nonprofit accounting practices that impact how they do their jobs. The key distinctions include the following:
Tax Status
For-profit entities need to pay federal income tax, along with applicable state and local taxes. Most nonprofit organizations are tax exempt. However, they still must file tax returns to maintain their tax-exempt status. Nonprofits also pay payroll taxes, as well as taxes on unrelated business income.
Revenue and Spending
For-profit organizations generate revenue from the sale of goods and services and typically can spend that money how they see fit. However, nonprofits earn revenue from donations and grants and often have limitations on how they can spend that money.
Fund accounting is a type of accounting used by many nonprofits that allows them to allocate their money so it can be spent for specific purposes. Funds are generally grouped into the following categories:
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Restricted funds: These funds can only be spent on certain projects and programs related to the nonprofit’s mission.
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Temporarily restricted funds: These funds are also earmarked for certain projects and programs, but only for a particular length of time. After that, they must either be returned to the donor or be classified as unrestricted funds.
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Unrestricted funds: Nonprofits can spend unrestricted funds however they see fit. This is often referred to as an organization’s annual fund.
Nonprofit accountants are responsible for keeping track of all their organization’s funds and ensuring they are allocated and spent appropriately.
How to Become a Nonprofit Accountant
Nonprofit accountants and corporate accountants follow similar academic and career paths . However, aspiring accountants can better position themselves for roles at nonprofits by taking a few key steps.
Education
Accountants typically need to have at least a bachelor’s degree in accounting or a related field. Bachelor’s programs help students develop the foundational knowledge and skills they need to enter the profession, teaching fundamentals such as statistics, accounting methods, tax law, and business communication.
Work Experience
Aspiring accountants can gain practical experience through internships or entry-level positions at accounting firms. Some nonprofit employers may prefer applicants with previous experience working in the nonprofit sector. Taking on an internship or volunteer role can help prospective nonprofit accountants boost their chances of getting hired.
Certification
Earning a certified public accountant (CPA) credential can significantly enhance an accountant’s job prospects and salary potential. In fact, this credential may be required by some employers in the nonprofit sector. Any accountant who files a report with the Securities and Exchange Commission (SEC) must be a licensed CPA.
Becoming a CPA entails passing a national exam and meeting other state requirements, set by each state’s board of accountancy. CPAs must also complete 150 semester hours of college coursework, 30 hours more than the standard bachelor’s degree.
Nonprofit Accountant Salary and Job Outlook
Nonprofit accountants serve a crucial role in ensuring the financial health of organizations that contribute to the social good, and their value to these organizations is often reflected in their compensation.
According to the U.S. Bureau of Labor Statistics (BLS), accountants and auditors had a median annual salary of $79,880 in 2023, which is $30,000 more than the median salary for all occupations. Several variables can affect an individual accountant’s compensation, including their level of education and experience, the industry they work in, and the geographic region where they work.
Factors including globalization and economic growth are expected to drive demand for accountants and auditors in the coming years, fueling 4% employment growth—about 67,400 new jobs—between 2022 and 2032, according to the BLS.
Although technological advancements such as artificial intelligence and cloud computing may take over some routine accounting tasks, the BLS doesn’t expect this change to impact overall demand for accountants. Rather, it will make accountants’ advisory and analytical duties more critical, likely further driving demand for their expertise.
Launch Your Accounting Career With Wilson
Nonprofit accountants support and sustain the financial stability of their organizations, helping them manage their resources, comply with laws and regulations, and maintain the trust of their donors. In doing so, they help the organization achieve its mission.
If you’re interested in an accounting career, whether in the for-profit or nonprofit sector, consider enrolling in the Bachelor of Science in Accounting program at Wilson College Online. Our asynchronous program will help you develop the foundational accounting knowledge and skills you need to begin your career. Additionally, the program’s focus on ethics and advancing social good aligns neatly with the mission of nonprofit accountants.
Find out how Wilson College Online can help you join this in-demand profession.
Recommended Readings
Financial Planning for Millennials
Accounting vs. Finance: Which Degree Should You Pursue?
Sources:
Giving USA, Giving USA: U.S. Charitable Giving Totaled $557.16 Billion in 2023
Jitasa, “Working With a Nonprofit Accountant: What to Expect”
NetSuite, “4 Ways Nonprofit Accounting Differs From For-Profit Accounting”
QuickBooks, “Nonprofit Accounting Beginner’s Guide and Key Financial Statements”
