There is much talk about accountability, especially financial accountability for charitable and other exempt organizations.
Nonprofits need to embrace accountability to protect the organization and its people, to demonstrate openness and forthrightness in external dealings and to support the greater good. Embracing accountability also helps not-for-profits fulfill their fiduciary responsibilities to donors, constituents and the public. But how can nonprofits truly embrace this abstract term?
Draw the Big Picture
There can be no accountability without good governance. You must put in place the means and measures to keep your organization in compliance with all applicable laws and rules as well as best practices. And most important, your not-for-profit must keep in line with its mission and guiding principles, including integrity.
Author and nonprofit expert J. Steven Ott describes an organization’s governance as “a product of its purposes, people, resources, contracts, clients, boundaries, community coalitions and networks, and actions as prescribed (or prohibited) in its articles of incorporation and bylaws, state laws and codes, and the IRS codes and rules.”
When it comes to accountability and governance, the buck unquestionably stops with your board. Therefore, it’s critical that you help the board understand its responsibilities and focus its attention on carrying out the not-for-profit’s mission — not the process-oriented details best handled at the staff or committee level.
Watch the Numbers
Keeping the financials spotless, and understanding the story your financial statements tell, is critical. So make sure you conduct regular, board-approved audits that are attested to by the executive director and principal financial manager. Management should present internal financial statements to the board — or its audit or finance committee — and review performance against approved budgets on at least a quarterly basis. In addition, the board should establish and regularly assess financial performance measurements.
Your nonprofit must comply with all legally required reporting procedures — and certain financial practices that may apply to a specific activity. For example, one of your major funders or a national affiliate of your organization might require you to provide key performance indicators or other reports linking operational results with financial information.
Respect Your Mission
As you carry out your initiatives, do so fairly and in the best interests of your constituents and community. Your status as a nonprofit means you’re obligated to use your resources only toward your mission and to benefit the community that you serve. Programs should be evaluated accordingly, both in respect to the activities and the results or outcomes.
Make It Clear
Communication is a big part of accountability. Your annual report, for example, should reflect your mission and summarize the year’s activities. It’s best practice for the report to also provide financial data for the year and other information, such as a list of board members, management staff and other key employees.
As a public document, your nonprofit’s Forms 990 for the previous three years will give your public a good overview of your organization’s exempt activities, finances, governance, compliance and compensation methods.
Accountability Pays Off
Your organization’s demonstration of accountability is likely to generate a positive response from your constituents, whether it’s in the form of donations, funding, volunteering or simply spreading the word about the merits of your nonprofit. And that’s the kind of outcome worth pursuing.
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