Nonprofit Accounting Basics


Board Accountability

The board is the accountable and liable body for the organization.

Board Member Compensation

There is no federal law that prohibits nonprofits from compensating their board members but some states may forbid compensation for board service.

Building a Competent Board

"A good board is a victory, not a gift," said Cyril O'Houle, a governance guru, a few years ago.


Bylaws form a legally binding document that outlines the organizational authority levels, how the board functions, and how it is structured.

Code of Ethics

One of the most constructive and proactive ways a board can send a message that its organization is committed to accountability, responsiveness, and stewardship is to draft a code of ethics to guid

Compensation Philosophy

Salaries and compensation packages are determined as part of employment negotiations.


One of the legal obligations for board members is a duty of loyalty. One aspect of this duty expects board members to keep confidential issues confidential.

Conflict of Interest

What is conflict of interest?

A conflict of interest arises when a board or a staff member is in a situation where his decision making may be impaired by personal, financial, or other busin

D&O Insurance

Directors and Officers (D&O) liability insurance is an extension of all the other protection mechanisms for board members and the organization.

Decision Making Policy Example

ORG Decision-making Policy

To promote making good decisions, ORG adopts the following principles:

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

Nonprofit organizations are routinely faced with making decisions of varying magnitude and impact.

Drafting a Gift Acceptance Policy

A gift acceptance policy explains an organization’s position on accepting both cash and non-cash gifts and outlines any prohibitions on the type of donor or donations to be accepted by the organiza


An endowment refers to a fund or funds that are generally kept permanently. Their interest income provides for the overall operations of the organization.

Ensuring Adequate Resources

The board must ensure adequate resources to allow the organization to carry on its mandate. Financial resources feed into the health and stability of the organization.

Example Criteria for Major Decisions: A Strategy Screen

  • The proposed action must align with the organization’s core mission.
  • The proposed action must serve all or a substantial subset of the organization’s

Examples of Decision-Making Procedures

  • Define the decision to be made.
  • Set a specific deadline by which the decision needs to be made.
  • Identify who should be involved in the process and whether board approval will b

Fiduciary Responsibility - Board Governance for Charitable Non-Profit Organizations

Fiduciary obligations require charitable non-profit organizations to adhere to the highest ethical and legal standards. In every decision made and action taken, a charitable non-profit must:

General Liability Insurance

The purpose of the general liability insurance is to pay for damages that the organization is liable for and to cover legal costs for its defense.

Gift Acceptance

A gift acceptance policy allows the board to define the parameters and guidelines for eliminating controversial or risky donations. Unwelcome donations might include gifts that:


Through incorporation the board and the managers create a legal entity that will protect them from potential personal financial losses.


By incorporating your nonprofit you create a legal entity whose primary function is to provide limited personal liability protection to those managing the organization.


Indemnification is the organization’s direct expression of willingness to protect its board members (and its senior staff) from the financial burdens of liability.

Individual Board Member Responsibilities

Board members must realize they have personal expectations and responsibilities for their board service.


Investment policies

Investment policies refer to policies the board has defined and/or approved guiding how the various organizational funds should be invested.

Legal Duties

To protect the organization, itself, and its members, the board must start by following the legal obligations common to all boards: duty of care, duty of loyalty, and duty of obedience.


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