There is a lot of talk regarding accountability today, particularly in the case of financial accountability for nonprofit organizations.
Nonprofit organizations need to embrace accountability in order to protect the organization, its mission, and the people it serves. Accountability helps nonprofit organizations fulfill their financial responsibilities to the government, donors, and the public, as well as demonstrates an openness and transparency that the public can trust.
While financial accountability sounds like a good idea in theory, how can nonprofits embrace it for their organization? First of all, nonprofits need to have a good governing body. No organization can run effectively without participating board members and directors. These people are key to ensuring that your nonprofit organization is compliant with all applicable rules and regulations as well as best practices. Proper governance ensures that your organization is keeping in line with its mission and guiding principles, including the integrity of your finances.
When it comes to nonprofit accountability, the responsibility lies on your board. For this reason, it is crucial for your board to understand its responsibilities and focus on carrying out the organization’s mission – not the day-to-day processes that can be completed by nonprofit staff.
Effective financial reporting is also critical to embracing financial accountability. Ensuring that your organization’s financial records are spotless is important. Complete regular, board-approved audits, and have management present financial statements to the board on a quarterly basis. Also make sure that your organization is complying with all financial reporting requirements from federal and private donors. If one of your funders requires you to provide key performance indicators or other reports, make sure you do so. Effective financial reporting requires some work, but in the end your organization will be better because of it.
Financial accountability requires you to make the best use of your resources. Make sure that your resources and funds are only being used for carrying out your mission and benefiting the community in which you serve. Evaluate your organization’s program accordingly to ensure that they coincide with your organization’s mission. If not, your funds and resource could be better used elsewhere.
Communication is key if you plan on embracing financial accountability and maintaining effective financial reports. Your annual report should reflect your organization’s mission and summarize the year’s activities. Make sure that the report also includes financial data and other information for the year, including a list of board members, staff and other key employees.
Giving the public access to your Form 990 is key to establishing and embracing accountability. This form will give the public a good overview of your organization’s activities, finances and compliance, governance, and compensation methods.
Embracing accountability will generate a positive response from the public. Once the public sees that your organization is committed to being open and transparent, they will want to support your efforts even more through donations, funding, volunteering, or simply spreading the word about your organization. Contact us today if you’d like to learn how our CPAs and accountants can help you create more effective financial reports and maintain a level of transparency the public will trust.