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Why Nonprofits Need to Track Staffers’ Time

April 29, 2023 by ERNST WINTTER & ASSOCIATES LLP

Managers that oversee the operations at nonprofit organizations have to worry about a wide variety of issues, from achieving fundraiser goals to coming up with creative ways to recruit volunteers. One of the concerns of nonprofit managers that often flies under the radar concerns staffing. How many employees do you need to run a nonprofit organization? Another staffing issue involves tracking each staffer’s time while on the clock.

According to both state and federal laws, nonprofit organizations must fulfill a certain amount of time-tracking responsibilities. Managers should consider leveraging the convenience and accuracy of timekeeping software, but technology alone does not ensure total adherence to state and federal timekeeping regulations for nonprofit organizations.

An Overview of the Tracking Requirements for Nonprofits

As a general rule, nonprofit organizations must document the hours put in by hourly employees. Although salary employees do not receive compensation by the hour, you still need to provide physical evidence that shows the amount of time each salary employee has worked. Keeping track of the time put in by salaried employees is important in case a dispute arises over wages. Employees that are exempt from timekeeping regulations include executive, professional, and administrative workers that receive a salary, granted they qualify as exempt under the standards established by the Fair Labor Standards Act (FLSA).

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Under the stipulations established by the Affordable Care Act (ACA), nonprofit organizations also have to keep track of the amount of time worked by staffers. The ACA requires nonprofit organizations to designate staffers that work at least an average of 30 hours a week as full-time employees. Nonprofit organizations that do not provide sufficient health care coverage for full-time employees can be penalized according to the ACA.

If your organization follows Generally Accepted Accounting Principles (GAAP), you must link labor costs to specific programs and every type of supporting service.

What Are Benefits of Time Tracking for Nonprofits

Tracking the time worked by staff members is much more than following state and federal regulations. Nonprofit organizations also benefit from implementing accurate timekeeping strategies for three other reasons.

Transparent Grant Reporting

If your nonprofit organization receives funding from grants, it is responsible for reporting how it uses the funds awarded by each grant. This includes describing in detail how much of the funds paid staffer wages and salaries. Because payroll represents around 50 percent of nonprofit organization budgets, you can expect to spend considerable time explaining the reasons for your staffing decisions.

Better Management of Programs

Managing a nonprofit program requires you to align the program goals with your organization’s larger mission. This means providing your staff members with the proper tools to achieve success, without exceeding the operational budget. Tracking the time worked by staffers allows nonprofit managers to allocate the correct amount of labor resources to each program. Since your nonprofit organization operates on a razor-thin budget, smarter staffing decisions can be the most influential factor to keep your organization financially afloat.

Smoother Audits

Going through an audit represents one of the most difficult challenges faced by nonprofit organizations. Rapidly changing audit guidelines combined with new and improved record-keeping tools can turn an ordinary audit into a protracted nightmare. By closely and accurately tracking each staffer’s time, your nonprofit can simplify the audit process by handing over the right documentation. Make sure to include a document that lists every activity of every employee to ensure compliance with audit requirements.

At Ernst Wintter & Associates LLP, we provide comprehensive audit, review, examination and compilation services as well as tax services that fit your business needs. Our professionals have specific expertise in the financial services industry, nonprofit sector, and employee benefit plan audit requirements. Please contact us today.

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