Be True to Donors

The nonprofit sector relies on public trust. Without ethical standards and a way to convey accountability to donors, that trust will degrade and support suffer. Accountability is the way an organization conveys its ethical standards for fundraising to donors, how it shows donors the measurable results from their gifts.

In the whitepaper, Accountability Matters: Without the Public Trust, Nonprofits Wouldn’t Exist, Liz Marenakos discusses the need for nonprofit accountability, beginning by listing the three components of accountability: financial and regulatory compliance, stewardship, and donor trust. Marenakos is product line manager for Blackbaud’s financial management and data analysis solutions.

According to Marenakos, because of the breadth of these components, it’s necessary for every department within an organization to comply with nonprofit financial standards and demonstrate to stakeholders that it has the necessary oversight to manage funds.

In the whitepaper she offers tips to help nonprofit organizations “make their financial processes more effective and their activities more transparent.” They are:

1. Establish an audit committee. The audit committee should be made up of several board members and is responsible for monitoring financial reporting, internal controls and business risks. Committee members should understand finances, specifically those used to track the organization’s finances.

2. Ensure the auditor communicates with the board. When an audit is complete, the auditor should meet with the board to discuss the findings.

3. Define organizational policies and monitor compliance. The board should ensure the organization has written policies and procedures and that they’re being followed at all levels within the organization.

4. Report finances. The organization’s CEO and CFO should provide consistent and timely reports — like a balance sheet, revenues and expenses, pledged receivables, cash flow and utilization — to the board.

5. Establish internal controls to ensure that donations are properly authorized, recorded and reported.

6. Provide for whistle blowers. An organization should encourage people with concerns about its ethics and accountability to come forward. “Nonprofit directors and officers should let staff members, volunteers and other stakeholders know how they can raise concerns. If an organization listens to its whistle blowers early on, it can save itself a lot of trouble in the long run,” Marenakos writes.

7. Disclose financial and governance information on a regular basis to donors and the general public. “An organization’s annual report, its tax filing and program activities should be accessible on the Web site, available to be mailed out, and on hand in case someone walks into the office and asks for this information,” Marenakos says. “Timely, consistent reporting to external stakeholders reinforces an organization’s accountability and promotes good stewardship.”

Download the complete whitepaper.