Is there a single published list of financial management best practices for nonprofit organizations? The answer is probably not, but there is an avalanche of information available from sources in the nonprofit community, the Financial Accounting Standards Board, federal (SOX) and state regulations, and the IRS. Well, we are starting an unofficial list that will be posted as a permanent feature on our website along with links to resources and additional information. We fully realize this is not a perfect exercise, but hopefully will be useful for nonprofit executives and managers WHO WANT TO DO THE RIGHT THING and DO THINGS RIGHT.
Attitude and awareness cannot be over emphasized in successfully implementing financial management best practices in a nonprofit organization. Namely, the Board and Chief Executive Officer of the organization must understand their responsibility for fiscal stewardship and the attendant risks, and then make sure the resources are in place for actualization. Too often, financial management receives secondary attention until some dire crisis occurs. That being said, the following is a starter list. We encourage your comments and contributions through the blog. Let’s see how it goes.
- There is a qualified accounting person on-staff or on contract.
- The accounting member is a meaningful part of the management team.
- There is a qualified Board member or other resource to provide oversight of the accounting function.
- An annual audit is performed.
- There is a functioning audit and finance committee.
- Internal controls are in place and documented.
- Financial policies and procedure are developed and documented.
- Board members understand their fiduciary responsibility and essential governance documentation is in place and promulgated.
- An annual budget is prepared and adopted, and integrated with financial reporting.
- Generally Accepted Accounting Principles (GAAP), as supplemented for nonprofit organizations (FASB 116 and 117), are followed.
- Accountability and disclosure (transparency) measures as required or recommended in Part VI of the Form 990 are observed in spirit as well as fact.
- Periodic financial statements are prepared timely within 10 working days from the end of the reporting period.
- Financial statements are relevant in content and presentation to the intended internal, Board and external recipients, and include minimally the following:
- Statement of Financial Position
- Statement of Revenues and Expenditure, current month and year-to-date compared to budget and prior year activity at the organizational summary level and by relevant budget control centers
- Statement of Activity showing unrestricted and restricted revenues and expenditures, and a reconciliation of beginning and ending net assets
- Combined Statement of Revenues and Expenditures showing distribution by relevant program, function, fund, grant, organization unit, etc.
- Statement of Cash Flow