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Barbara Clemenson 1 Chart of Accounts
Developing a Chart of Accounts for a Nonprofit Organization
Barbara Clemenson, CPA, CFRE
1999, Revised December 2003
The goal of any information system---accounting, donor management, or
client management---is to provide useful information to those making decisions.
This is especially complicated in accounting, since we must provide internal
users with the information they need while still conforming to Generally Accepted
Accounting Principles (GAAP) for outside reporting purposes. Our task is further
complicated because our internal users have a broad range of interests, varying
levels of financial knowledge, and different levels of information needs.
The key to fulfilling these requirements is to develop a Chart of Accounts
that will permit easy reporting of useful information at a variety of levels in an
intuitive manner. In other words, with any information system design you begin
at the end and work backwards:
• What information
• Does who need
• At what level of detail
• In what format?
You can then implement that Chart of Accounts into an appropriate accounting
software program.
The City Mission [www.TheCityMission.org], a member of the Association
of Gospel Rescue Missions [www.agrm.org], had been using a Chart of Accounts
developed by an outside accountant primarily interested in formal, external
financial statements. He ordered our expense accounts in an outwardly logical
manner:
• Food and kitchen supplies, cleaning, and repair expenses
• Client-related expenses
• Wages and pension expenses
• Utilities
• Insurance (liability, health, auto, building, workers' compensation)
• Repair and Maintenance expenses
• Cleaning expenses
• Staff Development expenses
• Taxes (FICA)
• Auto-related expenses
• Development expenses
• Office expenses
I was hired by a new Executive Director to bring our accounting in-house.
He required an internal monthly income statement that made intuitive sense,
grouping expenses operationally: