NPO Software Measures Up

An in-depth look at accounting packages for not-for-profits
BY ROBERTA ANN JONES

  

 
 

If you’re in the market for nonprofit organization (NPO) accounting software, you’re in luck. Most of the products have undergone major upgrades in recent years that have made them far more powerful, feature-rich and easier to use. In our last survey of such software (“ Sizing Up NPO Software,” JofA , Nov. 00, page 28) the available products generally lacked sophisticated functionality and were hardly user-friendly.

Now, seven years later, we again examine in detail most of the available accounting software designed to meet the requirements of FASB Statement no. 117, Financial Statements of Not-for-Profit Organizations.

POWER TO THE USER
The improvements go beyond cosmetics, such as prettied-up graphics and less-than-vital bells and whistles. The new products generally were thoughtfully redesigned to meet users’ diverse needs. For a detailed assessment of each product’s major accounting tasks, see Exhibit 1.

The following is an overview of how NPO software publishers deal with each major accounting task:

Exporting data. Just a few years ago, exporting data from accounting software into such applications as Excel, Access and SQL Server was a difficult task. But products like QuickBooks, Kintera and Blackbaud have simplified data exporting into Excel. With just a few mouse clicks, for example, AccuFund gives users these options: print the data to PDF; transmit the information via e-mail; or convert it to HTML for display on a Web site. FUND E-Z has a special speed button, Data Access Component (DAC), which exports any part of your database into Access.

Drill-down functions. Uncovering the various layers of accounting data—such as tracking the complete audit trail backward and forward through the system—requires drill-down functions. This is the first batch of products that adequately addresses this function.

For example, QuickBooks, Frey, CYMA and Araize allow users to go from the general ledger to, in some cases, the source document. Some even allow you to make changes to journals, ledgers and source documents without adequate controls to bar the way. In a small organization this might be acceptable, but it would present a major fraud risk for others.

Use of the Internet. Today’s software makes extensive use of the Internet. Almost all provide online help and update services; some even offer online demonstrations that train new users. Traverse’s demo is particularly effective. Several vendors, including Araize, Blackbaud, Cougar Mountain, CYMA, GMS, FUND E-Z and Traverse, offer sophisticated help programs in which users surrender control to remote experts at the vendors’ sites, who then “walk” through complex functions on the users’ computers. These programs are so popular, it’s likely that other software vendors who market complex products will eventually adopt similar training.

 

Vendors That Opted Out
Although we invited every vendor of Statement no. 117 software we could locate to participate in the study, some declined or did not respond to our repeated requests.

Those who opted out were Mirasoft, New Generation, Epicor, Sungard Bi-Tech and MIPs. A few products, although they performed some or all of the Statement no. 117 requirements, were too specialized to be included. They included ACS Technologies, Hunter Systems, Public Sector Solutions and Executive Data Systems.

To assure accuracy, each responding vendor was allowed to review—and in some cases challenge and cause us to re-evaluate—our assessment.


Customization.
Since not all NPO users have the same needs, customization is vital. Several vendors have developed innovative ways to address the diversity problem. Blackbaud, for example, has developed a page called Dashboard that allows users to rearrange different software components to meet their unique needs. Cougar Mountain has developed a powerful interactive help program to guide the user through setup. Frey’s pooled cash account allows a user to eliminate the need for “due to/due from” accounting when using one checking account.

Controls. In a Sarbanes-Oxley world, controls are critical for some entities, such as SEC-regulated organizations, but much less important for others. Although that makes for some programming complexity for vendors, it is a gift to users who need to customize controls to meet unique needs. To our delight, every package we examined provided controls that were configurable to some extent. As you’ll see in the table, only one package, Serenic Navigator, provides controls configurable at the field level; it also has role-based security or role-based configurable controls. Others, including Frey, FUND E-Z, Kintera and Traverse, give users a range of control levels.
In general, an application was judged excellent if its controls were configurable down to the field level. Of course, not all Statement no. 117 entities need that level of security.

 

The Search for Nonprofit Software
If you search the Internet with the words nonprofit software , you’d be surprised at what turns up. Although we expected just to locate Statement no. 117 products, we were flooded with everything from church software to volunteer management software.

In addition, we discovered that GASB accounting software had evolved into sub-specialty packages aimed at municipal, state and other local entities.

So if you’re doing a search, recognize that NPO has become too generic to be useful. You have to be more specific: Are you looking for Statement no. 117 or GASB software? And are you looking for church or fundraising software?


THE EVALUATION PROCESS

To get the most out of the information in this article, it’s important that I explain my evaluation process—that is, my standards for assessing a particular component of a product and my expectation for the type of report its accounting process produces. In addition, I need to confess my personal accounting biases so you’ll understand my reasoning and be able to adjust my evaluation to your special need. With that knowledge, you should be able to mine this data more effectively.

Basic fund accounting. In assessing how well a product handles the basic accounting issues raised by Statement no. 117, I considered the following: encumbrance accounting, automatic “due to/due from” recording, fundraising record-keeping, accounts-payable voucher system and strong budgetary controls.

Budgetary controls. Vendors appear to be moving away from strong budgetary controls, viewing it as a GASB requirement. This is a switch from prior years. The move makes sense because it is within GASB entities, not Statement no. 117 entities, that the budget has force of law. The last time I evaluated these products, the budgetary controls were uniformly stronger. But now, with the trend toward specialization, many products have omitted or weakened those controls.

Accounting and integration. All the products we examined are well integrated with the general ledger—but not with the general journal. As a result, if the CPA makes a general journal entry that involves accounts receivable, for example, the software would update the general ledger but not the customer account. This is disappointing. Because of this omission, accountants must be careful during month-end reconciliation for those pesky general journal entries that mess up control accounts and throw off reconciliations. A few products—Frey, QuickBooks and Serenic Navigator—are integrated well enough to avoid this problem.

Posting. The packages are uniformly good at allowing posting to multiple periods and allowing posting to closed periods, which means users do not have to make duplicate copies of databases, with the year-end held open for adjusting entries, while we proceed with the new year’s entries.

I also looked at what kind of posting was allowed: real-time, batch or user option. The better software is flexible. While I prefer real-time, many accountants prefer batch, so packages with a user option get higher grades.

User friendly. A product’s ease of use is not easy to quantify; the measurement is, after all, very subjective. The measuring method I used—installing an evaluation copy of each product and then using it without training or guidance from the vendor—while imperfect in many ways, does give some indication of the software’s friendliness. I not only assessed how well I could navigate the software, but also whether the help menus were really useful and whether the screens guided me accurately. So when I judge that a package is easy to use, keep in mind I use a very personal assessment process. As a practical matter, if you decide to purchase a package, I recommend, instead of slogging through without guidance, getting all the training a vendor offers.

Be aware that I did not install every package. Sometimes the software was too large to install on a PC, or a demo of the product was arranged online, or I traveled to a site where the software was already installed.

GASB and FASB reports. It is relatively easy today to prepare GASB and FASB reports by either exporting to Excel or Access or using reporting tools. Nonetheless, I examined each product’s built-in method for creating these reports because that contributes to a package’s ease of use.

Except for Frey, none of the products produces a true statement of cash flow. Instead, the reports generally produce just a change in the account balances from one period to the next.

ASSESS YOUR NEEDS
I’ve presented lots of technical information here. But as you know, software that is excellent for one user can be a total disaster for another. So use the data in this article as a starting point in shopping for NPO software for your organization. Only you can judge how well a product meets your needs. The only way you can make that judgment is to test the product. It saves time to test a product with made-up information, but you’d be better served if you did the assessment with live data. It will tell you with far more accuracy how well the product can serve your needs. All vendors can make an evaluation copy available to you. If they don’t offer, ask. Although testing is time-consuming, it’s the only sure way to know you’ve got the right product for you.

Roberta Ann Jones, CPA, Ph.D., is an assistant professor of accounting at the University of Hawai’i at Hilo. Her e-mail address is rajones@hawaii.edu.

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