Non-Profit Accounting Policies and Procedures
It’s no surprise that our Nonprofit Experts believe that all nonprofit organizations will benefit from a customized and individually tailored approach to accounting policies and procedures. Overgeneralized policies and procedures can leave you open to risk and lead to ongoing frustrations within your organization.
This checklist outlines some of the essential considerations for the formulation and adoption of accounting policies and procedures at your organization.
Policies
While financial policies are the “what” of financial management, financial procedures are the “how”. The policies describe the who, what, where, and when of a process. The policy should identify the who by title and specify any resources needed.
Policies to be considered and adopted by the board:
Conflict of Interest Policy
Purpose: Fulfill board member’s duty of loyalty to act in the best interest of the Organization and not for personal gain.
Action: At least once per year, board members sign and complete the questionnaire and disclose any potential conflicts.
Whistleblower Policy
Purpose: Establish the process for protecting individuals who report violations of policies or illegal actions.
Action: Regularly communicate policy to all directors, officers, and volunteers and include the designated contact for reporting.
Document Retention and Destruction Policy
Purpose: Outline expectations for maintenance and destruction of vital records, both paper documents and electronic records.
Action: At least once a year review policy and confirm compliance.
Read more about Document Retention and Destruction Policies.
Other policies to consider if applicable:
Purpose: Manage expectations of donors and optimize nonprofit value and minimize risks.
Action: At least once a year review policy and communication methods for needed updates.
Purpose: Communicate expectations for volunteer involvement, including recruitment, screening, and performance.
Action: Annually review volunteer needs and determine relevant procedures are being performed.
Purpose: As part of the board’s oversight, provides clarity on the board’s responsibilities to hire, supervise, evaluate performance, and determine compensation the executive director.
Action: The policy should be reviewed annually to ensure it still meets the needs and circumstances of the organization.
Read more about Executive Director Policies.
Purpose: To clarify the roles, authority, and responsibilities of the Organization’s financial management and reporting.
Action: Annually review policies to ensure alignment with strategic plan and determine procedures are being followed.
Financial policies to consider:
- Basis of accounting
- Journal entries
- Budgeting
- Cash disbursements
- Cash receipts
- Credit cards and expense reimbursements
- Bank reconciliations
- Cost allocations
- Capitalization
- Monthly close and reporting
- Year-end close and reporting
- Internal controls
- Reserves
- Computer authorizations and maintenance
- Maintenance of financial policies and procedures
- Annual filings
Policies
The financial procedures are the instructions on how to complete the task. They may include screenshots, videos, flowcharts, or other visual tools to facilitate understanding and application by someone new to the procedure. Procedures detail every step of the process and identify the responsible person, applicable documents, required approvals, independent reviewer (if applicable), software utilized, and timing.
Financial procedures to consider
- Cash disbursements
- Cash receipts
- Credit cards and expense reimbursements
- Payroll
- Bank reconciliations
- Budgeting
- Monthly close and reporting
- Year-end close and reporting
- Internal controls
- Independent review documentation
Looking for an Experienced Nonprofit Advisor?
This checklist is meant to serve as a starting point for the development of your unique policies and procedures manual. As Nonprofit Advisory Experts, we aim to arm you with the knowledge you need to thrive as a financially strong and resilient nonprofit. We’re here to help! If you are looking for hands-on guidance with establishing, evaluating, or implementing policies and procedures specific to your organization, contact our team.
