How to choose an outsourced accounting firm for a nonprofit Six questions to ask before you sign.
To choose an outsourced accounting firm for a nonprofit, ask six things before you sign: whether it tracks restricted funds and grants every month, what the monthly fee includes and whether anything is billed by the hour, whether your books stay in your own systems, who prepares the audit schedules and the Form 990 schedules, how much notice ends the arrangement and who owns the data, and whether its AI vendors have agreed in writing not to retain your data. Millrace Finance Partners is an outsourced accounting and fractional controller firm for small and mid-sized US companies and nonprofits, and we wrote these questions to work for any firm you are considering, ours included.
Updated
These services do not require a state licence, and we are not a CPA firm.
Restricted funds and grant tracking
Ask the firm to show you how it tracks restricted funds and grants every month, not only at year end: which funds carry a restriction, how much of each grant has been spent and on what, and how expenses are allocated by function. A clear answer names the report you would receive, how often, and who prepares it.
What the monthly fee includes
Ask for the fee in writing and for what it covers: payables, receivables, the month-end close, fund and grant tracking, and the monthly reporting. Ask whether anything is billed by the hour on top, such as a call, an email or a revised schedule, and how the fee changes when the work grows or shrinks.
Whose systems your books live in
Ask whether your books stay in your own accounting system, on your licences, or move into a platform the firm controls. Ask what you would lose access to on the day you stop working together, and whether the firm takes a commission or referral fee from any software vendor it recommends.
How the firm works with your auditor and tax preparer
Ask who prepares the audit schedules, who answers your auditor’s questions, and what the firm gives your tax preparer for the Form 990. Ask the firm to state in writing what it does not do, such as signing or filing the return, holding signing authority on your accounts, or giving an opinion on your financial statements. That opinion comes from your auditor, so ask how the two will work alongside each other.
How you leave, and who owns the data
Ask how much notice ends the arrangement, whether your data and working papers stay with you, and whether the firm hands over to whoever comes next with the process written down.
How the firm uses AI on your books
Ask which AI tools touch your data, whether each vendor has agreed in writing not to retain it or train on it, whether a named person reviews anything before it reaches your ledger, and whether every entry in your systems is recorded against a named user with a timestamp.
How we answer each point
The same six questions, answered for our own service.
- Restricted funds and grant trackingFund accounting, restricted-fund and grant tracking, and functional expense allocation are part of the monthly accounting service, with a reporting package on a day you pick.
- What the monthly fee includesPayables, receivables, reconciliations, the month-end close and the monthly reporting pack. The fee starts from $2,000 a month for a smaller set of books and scales with the work; at about $5,000 a month it covers the work of roughly one staff accountant plus half an accounts payable clerk. There is no hourly billing, and the fee is reviewed against the work every quarter, in both directions.
- Whose systems your books live inYours. Everything runs in your systems, on your licences, in your tenancy, and there is nothing you lose access to on the day we stop working together. We take no commission, referral fee or rebate from any vendor, ever.
- Your auditor and tax preparerA fractional controller owns audit readiness, prepares the audit schedules and is your auditor’s first point of contact. For the Form 990 we prepare the financial information and schedules your tax preparer needs; we do not sign or file the return. We are not a CPA firm and we are not a member of the American Institute of Certified Public Accountants. We never hold signing authority on your accounts or custody of your funds.
- LeavingThirty days’ notice, your data, and a documented handover if you go. Working papers are kept in a folder you own.
- AI on your booksOnly under three written rules: the vendor agrees in writing to zero data retention, a named person reviews anything before it reaches your ledger, and no tool is used that cannot write as a named user with a timestamp. Ask to see which vendor agreements we hold, and we will show you.
The detail is on our pages about outsourced accounting for nonprofits and how we take over and run your accounting, and every fee is on the pricing page.
Ask us all six on the call.
The discovery call is forty-five minutes and carries no fee, and it ends with a direct answer on whether we fit, including a no.
No lock-in: thirty days’ notice ends an engagement, and nothing is billed by the hour.