Nonprofit Accounting Basics

Decision-Making Policy & Procedures for Small and Midsize Nonprofit Organizations

Nonprofit organizations are routinely faced with making decisions of varying magnitude and impact. Much angst and churning can be avoided by having a decision-making policy, procedures, and a set of criteria to refer to in considering purchases, leases, the initiation of new projects, or taking advantage of an unexpected opportunity.

A policy will provide guidelines for staff and board members to determine who needs to be involved in which kinds of decisions and set background requirements for when a decision has been determined to be major, that is, affecting the whole organization or the mission.

Sample policy

Documenting and circulating procedures for making internal operating decisions (such as engaging a contractor or which copier to purchase or lease, etc.) can help staff to set timeline expectations and other parameters, and establish authority and responsibilities.

Sample procedures

A criteria checklist for making major decisions (such as adding a new program, undertaking a facility project or capital campaign) can ensure that important organization-wide impacts of the decision have been considered. Addressing these criteria would inform decision-makers of the need and mission-relevance and ongoing viability of a new activity and its impact on the organization’s financial status, reputation, and organizational capacities including human resources and facility considerations, as well as any legal implications.

Criteria checklist

For an especially entrepreneurial organizational culture, the board may consider creating a special reserve fund to position the organization to seize good opportunities without threatening the stability of ongoing operations and finances.

Good decisions do not have to be binary, go/no-go. A well-conceived pilot program that is clearly communicated to the organization’s constituencies can provide an opportunity to experiment and time for evaluation to inform subsequent decisions. Limited one-off projects to address specific immediate problems/needs may be totally appropriate. Thinking in advance about how your organization should handle decision-making can streamline the process while promoting due diligence and avoiding analysis paralysis.