Nonprofit Accounting Basics
The board is the accountable and liable body for the organization. Accountability means the board takes the responsibility of ensuring the organization follows the laws, behaves in an ethical manner, and does not waste the resources trusted in its care.
Accountability is directly tied to earning the public’s trust. Trust is earned through honesty and functioning in a transparent manner. Without trust there are no supporters. Without supporters it is impossible to survive and advance the mission of the organization. Sharing information freely, voluntarily, and proactively sends a message that the organization has nothing to hide and is following the laws and general ethical standards.
When the board assumes its role as the accountable body for the organization, it ties performance to meeting goals. With clear objectives and guidelines within a transparent structure, responsiveness and responsibility work hand-in-hand.
What to do:
- Know the laws
- Respect the donor intent
- Publish an annual report and make it available to the public
- Comply with the IRS 990 regulations: file on time, fill the form accurately, and make it easily available
- Eliminate policy vacuums
- Monitor executive compensation
- Adopt a code of ethics and conflict-of-interest policy
- Understand the value of diversity
- Draft performance indicators and set measurable goals
(please see also section on Code of Ethics under Policies)