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Nonprofit organizations are under increased and intense economic pressures to attract and retain qualified staff in their critical finance and accounting functions, leading to instability and inaccuracies that could place an entire organization at great risk. By leveraging the expertise of a firm that understands and specializes in nonprofit finance and accounting operations, organizations not only sidestep the industry’s talent crunch but also improve productivity, compliance, and accuracy; it allows them renewed focus to develop strategies to ensure their communities and stakeholders thrive. Schedule a no obligation appointment today with Veracity Pros to learn more.
To obtain a comprehensive understanding of your organization’s financial health, your nonprofit should be evaluating the robustness of the following areas critical to effective financial operations: policies and procedures, regular financial reporting to stakeholders, budgeting (including cash flow analysis), audit readiness, financial literacy of governance (board), and strategic planning. Find out more by reading the Veracity Pros guide to a financially healthy nonprofit.
There are a number of key performance indicators (KPI) and measures that a nonprofit organization can use to monitor its performance in a meaningful way. Some common KPIs include: fundraising efficiency, net margin, savings indicator, management & fundraising expense level, days of cash on hand, current ratio, and the unrestricted net assets to debt ratio. But the list doesn’t stop there; other key indicators can provide you powerful and efficient insight on how your organization is performing. Discover how your organization is performing by obtaining your Veracity Score.
Financial reports should be on the agenda at every board meeting. At a minimum, the leadership of a nonprofit organization should regularly review the organization’s statement of activities (showing revenue and expenses for the period compared to budget), a statement of financial position (showing the organization's assets, liabilities, and net assets available compared to the prior fiscal year), a statement of cash flows, and a statement of functional expense. The reports should be clear, concise and provide insights into what's going well, what's not going well, and what needs to change from a financial perspective. Find out more by reading the Veracity Pros guide to creating great board packets.
Nonprofit board members have three fundamental areas of legal and fiduciary responsibility, often referred to as the duty of care, loyalty, and obedience. The duty of care requires that a nonprofit board member participate actively in governance and oversight of an organization’s activities. The duty of loyalty requires that a nonprofit board member act in the best interest of the organization at all times. The duty of obedience requires that a nonprofit board member work to ensure that the organization complies with applicable laws and regulations, acts in accordance with its own policies, and carries out its mission appropriately.
For nonprofit board members to be effective in fulfilling their fiduciary duties, they must have the opportunity to be completely informed about the programs, history, strategic direction, finances, and organizational structure of the nonprofit. The best way to do this is to provide a complete orientation to the board and to their specific responsibilities as a board member. The financial orientation should be conducted by the Executive Director (CEO), Chief Financial Officer, or board Treasurer. New board members should be given an overview of the organizational budgeting process, taken on a walk-through of recent financial reports and financial metrics, and provided with the most recent Form 990 and audit reports package. Learn more about creating clear, concise and informative reports for your board out more by reading the Veracity Pros guide.
Federal, state, or even local governmental entities may require an audit or at least request a copy. Organizations that spend more than $750,000 a year in federal funds are also subject to specific requirements as called for by federal regulations. State laws and regulations may also require audits in certain cases. Also, many private funders require that grant applicants and recipients submit audited financial statements (or certified financial statements) in order to be eligible for funding. Find out more by reading the Veracity Pros article on how to get through a nonprofit audit without the stress.
There are several key reasons to have an audit performed. It demonstrates that the organization is committed to transparency and accountability and stewardship of the funds entrusted to it. Second, it inspires donor trust and helps maintain that trust. Finally, it helps the board have confidence in the organization’s finances. Find out more by reading the Veracity Pros article on how to get through a nonprofit audit without the stress.
Internal controls are financial management practices that are systematically used to prevent misuse (i.e. through theft or embezzlement) and misappropriation (i.e. through incorrect or inconsistent coding) of assets. The goal of strong internal controls is to create organizational practices that serve as “checks and balances” on staff, board members, volunteers, and/or outside vendors, in order to reduce the risk of misappropriation or misuse. Learn about an example of strong internal controls in action by reading the Veracity Pros guide about how to create a secure accounts payable process.
Nonprofit organizations should be concerned and aware of financial risk; being unprepared can lead to financial insecurity and hurt the organization’s reputation. Nonprofits should evaluate and have a mitigation plan in place for the following risk areas: fraud and theft, investment fluctuation, tax liabilities, maintaining tax-exempt status, inaccurate financial reporting (or failure to report), inaccurate (or absent) budget planning, fundraising, sponsors and partners, physical assets, and IT infrastructure. Find out more by reading the Veracity Pros article about what your board needs to know about risk management.
Cash reserve funds are intended to be a “rainy day fund” that can act as an internal line of credit when unexpected shortages in revenue or unforeseen expenses occur, such as loss of a major donor, economic or inflationary shifts, demands for services provide by your nonprofit, competition with other not profits, and unexpected replacement of physical assets (just to name a few). Nonprofit organizations should avoid the temptation to repeatedly use those reserves to solve short-term problems. Learn more building cash reserves by reading the Veracity Pros guide.
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