Being part of a nonprofit provides many rewards, both individually and communally. However, too often, a nonprofit’s life span is cut short because of finances, failure to plan, or a lack of oversight and internal controls. Often, this leads to questions of “Why did this happen?” or “How did we get here?”
A nonprofits financial health, as well as its adherence to legal, moral and ethical guidelines depends on the precise execution of key components of the annual operating cycle. Having the right financial structure will require you to have policies and structures in place such as a chart of accounts, a budget development and bill payment process, payroll system, internal controls, quarterly processes, and risk management measures.
While the Financial Officer and Executive Director are responsible for providing day to day management, fiscal oversight and accountability (legally and financially) remains with a nonprofit’s Board of Directors. If there are problems, the IRS will hold the Board to account for the nonprofits activities, so it is vital that Board members remain engaged in the process, review financial reports regularly and ensure your nonprofit has instituted and uses proper internal controls.
For more information on solid financial management practices, visit our Resources page.
Internal Revenue Service
Don’t lose your tax-exempt status! Did you know the IRS requires nonprofit organizations that meet certain criteria to file an annual return and comply with certain operating standards? To learn more about Form 990 and maintaining your tax exempt status, click here.