Accounting for a non-profit-making association under the 1901 Act: what are the requirements?

Accounting for non-profit-making associations under the 1901 Act: where do I start?

This is a legitimate question when you set up an association under the 1901 Act or become treasurer, and you want to do things properly.

So what are the association's accounting obligations? What accounting documents are required? Do you have to follow the association's chart of accounts?

All the answers, our advice and a selection of tools in this article!

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The accounting obligations of a not-for-profit association

While all not-for-profit organisations are required to keep accounts, there is no set format for the presentation of these accounts. They are therefore free to choose whether or not to keep accounts.

A non-profit association under the 1901 Act may therefore choose to keep cash accounts, either :

• single-entry: the association enters the year's receipts and disbursements in a journal,
• double-entry: receipts and disbursements are also recorded in a journal book, but with offsetting accounts.

On the other hand, certain associations are still subject to obligations regarding the presentation of their accounts, depending on :

• the nature of the activity
• the amount of funding received
• the size of the organisation.

Why keep accounts for an association?

When you're a small association, it's easy to be tempted to see bookkeeping as a constraint, and to devote as little time to it as possible.

But just because your association's mission is not for profit doesn't mean that properly kept accounts can't bring you benefits - quite the contrary!

Here are just a few of the benefits:

• greater transparency vis-à-vis members, who have a right of access to the accounts of the association to which they belong
• in the event of an audit by the authorities, the association must be able to present its accounts up to date and in accordance with the rules ;
• better management of the association to steer its development, thanks to a clear overall view of the financial situation that enables informed decisions to be taken;
• applying for grants, which requires the presentation of accounts and financial statements to justify the use of resources.

Auditing bodies

Who can audit an association's accounts? There are a number of bodies that can audit an association's accounts:

• the Inspectorate General of Finances, if your association has received subsidies from the State, the EU or a public body,
• territorial delegates, if your association has received grants from a local authority,
• a regional chamber, if your association has received a grant of more than €1,500 from a public body or local authority,
• the Cour des Comptes, if your association has received a grant from the State or the European Union,
• URSSAF, for all matters relating to social security charges and contributions,
• the tax authorities, if the association is subject to corporation tax.

See also: A complete guide to managing your association properly

Certification of a charity's accounts

Does your association need to have its accounts certified?

You must have your annual accounts certified by a statutory auditor if your association :

• includes this obligation in its articles of association
• receives more than €153,000 in public subsidies per year,
• is responsible for monitoring air quality,
• is responsible for managing a housing solidarity fund,
• is a continuing vocational training organisation and exceeds two of the following three thresholds,
  • 228,000 € balance sheet
  • 153,000 in resources
  • 3 employees
• is engaged in an economic activity and exceeds two of the following three thresholds
  • 1,500,000 balance sheet
  • 3,100,000 in resources
  • 50 employees

If you are not required to have your accounts certified, you can still call on the services of a statutory auditor on a voluntary basis.

How do you go about certifying an association's accounts?

First of all, you need to choose an auditor who will be appointed when the articles of association are drawn up, or at the General Meeting if the association already exists.

The auditor will check the accounts at the end of the year, carrying out an audit to verify that everything has been done according to the rules and that the documents provided correspond to reality. If the treasurer or a chartered accountant has already carried out this verification work, he can pass it on to the statutory auditor to facilitate his task.

What type of accounting is required for a non-profit association under the 1901 Act?

Association cash accounting

Cash accounting involves recording and monitoring only expenditure and income.

Each cash inflow or outflow gives rise to an accounting entry that must reflect :

• the date of the transaction
• the nature of the transaction
• the amount of the transaction,
• whether it is an expense or a receipt.

At the end of each month, the difference between expenditure and income gives a simplified result.

🤔 For which associations?

This type of accounting is sufficient for newly created associations or small structures, which do not have to manage debts and receivables.

✅ Advantages

It requires no special knowledge of accounting and takes little time to complete.

❌ Disadvantages

It does not allow you to keep track of debts and receivables, to properly steer the association's management and development, and does not allow you to apply for grants or hire staff, for example.

See also: How do you manage your association's cash flow? Advice and a toolkit!

Commitment accounting

As well as recording cash flows, commitment accounting also records debts and receivables when an invoice is received or issued.

To check that the entries correspond perfectly to the financial flows, bank reconciliations need to be carried out regularly. To do this, each accounting entry linked to the bank account must be compared with the actual movements recorded on the statements.

🤔 For which associations?

An association will use accrual accounting if:

• its articles of association provide for it,
• it wants to apply for grants,
• it wants to recruit,
• it wants to carry out an economic activity,
• its purpose is commercial and it pays corporation tax,
• its activity requires it to have debts and receivables,
• it simply chooses to do so.

✅ Advantages

It gives a complete picture of the financial situation, and makes it easier to steer the association.

❌ Disadvantages

More complex than cash accounting, it is time-consuming and can be difficult to keep for someone who is not familiar with accounting, especially if they are not equipped with accounting software or not accompanied by a chartered accountant.

2020 Association chart of accounts: new rules

Depending on the situation, there is nothing trivial about accounting for a non-profit association under the 1901 Act. For associations required to present their accounts, in particular, it can be complex.

It was with this in mind that the association chart of accounts was introduced in the early 2000s. This serves as a reference for keeping accounts.

An amended version has been in force since 1 January 2020.

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Accounting software to automate your bookkeeping?

Just because you're an association doesn't mean you can't get good accounting software. They offer a number of advantages, such as

• fewer manual errors
• real-time visibility of cash flow thanks to dashboards,
• automation of certain tasks (accounting entries, bank reconciliation, for example),
• and considerable time savings.

Here is a selection of software that may be of use to you:

• EBP's Itool dynamically updates your data and reminds you of your tax return deadlines.
• Sage 100c keeps you informed of late payments in real time. Good to know: the Sage Foundation is offering two free licences to eligible non-profit organisations.
• With Zervant, you can easily track your cash receipts and generate financial reports automatically. This solution even lets you create your own website.
• With memboGo, which specialises in managing associations, you can manage your accounting journal, subscriptions, renewals and financial contributions from a single interface.

Find the right management software for your association with this quiz:

So, are you ready to manage your accounts properly?