Last week, we shared information on the importance of good policies for your nonprofit organization. A strong financial policy is the foundation of effective financial management.
One of the most important responsibilities for your board is the fiduciary duty. A strong financial policy will clearly define the roles, authority and responsibilities for financial management activities and decisions, makes this duty easier.
Your financial policy should cover everything from how and where organizational funds are housed, to investment policies and processes for selecting an investment firm, to approval requirements for different levels of spending. This policy should set forth protocols for handling incoming funds, addressing cash handling if applicable; the policy should have processes for organizational credit cards. It should cover how to manage assets and property.
Your financial policy should include a conflict of interest statement and process for revealing potential conflicts. Conflicts of interest can have a detrimental impact on a nonprofits tax-exempt status and its reputation with donors. Your board is charged with upholding the public’s interest and confidence in your nonprofit organization and, thus, should ensure all possible conflicts are revealed and addressed.
There are several topics to include in your financial policy document, and these topics correspond to significant financial management areas and include: accounting processes, internal controls (checks and balances), financial planning and reporting, accounts receivable, revenue, expense accounts and asset management.
Read more at Financial Policy.