- All revenue and expenses, including grant funds, are accurately recorded and capably managed.
- Resources are allocated appropriately:
- To programs that achieve the mission of the organization,
- To enable proficient oversight by management, and
- To support all fundraising activities.
- The organization can demonstrate the indicators of good overall financial health by:
- Covering current liabilities with current cash and receivables,
- Increasing total revenue and/or decreasing total expenses,
- Increasing total net assets each year, and
- Monitoring the accumulation of Liquid Unrestricted Net Assets (LUNA).
Indicators of Good Governance
- The Board has established sound internal financial controls and reviews them annually.
- The Board approves an annual operating budget before the start of the fiscal year.
- The Board approves large expenditures in excess of a pre-determined limit.
- The Board reviews regular financial reports to monitor budget compliance and fiscal health, and responds appropriately when performance varies from original plans.
- The Board approves the annual audit after it has been recommended by the audit committee and/or presented by the auditor to the Board in Executive Session.
- The Board actively oversees or manages the organization’s investments and financial assets.
- The Board understands the organization’s exposure to risk and actively manages that exposure.
- The Board approves the executive compensation level and ensures that it is within the range of community norms and within legal bounds regulating excessive compensation.
Questions for the Board to Ask
Has the board approved a fiscal policies and procedures manual, including policies on record-retention, conflict of interest, and whistle-blower protection?
Yes, because the absence of internal controls, or lack of clarity as to the Board’s role in maintaining them, places the organization at high risk for mismanagement.
Does the board approve the budget prior to the beginning of the fiscal year?
Yes, although for some organizations, the Board approves a preliminary budget prior to the beginning of the fiscal year and then reviews it quarterly or as necessary.
Does the board regularly receive: accurate balance sheet, cash flow statement, and year-to-date comparison budget reports with a management narrative that highlights significant areas?
Yes, and an emphasis is placed on comparison budget reports and cash flow projections.
Is there a standing committee that oversees and evaluates the organization’s fiscal performance?
Yes, and while the Board Treasurer can offer advice to the operating management, a committee of Board members should fulfill this role.
Is the annual audit overseen by an audit committee and approved by the Board?
The Audit Committee oversees an annual audit that is then approved by the full Board.
Does the organization have strategies for creating and/or maintaining liquid financial reserves that are invested and monitored competently?
Financial reserve accumulation is considered on an annual basis as part of the budget process. The reserves are monitored by a Board Committee.
Does the board have strategies that ensure its fiduciary responsibilities are fulfilled by the actions of the organization’s management
Yes. While the Board cannot make management decisions, it provides the overall direction for the organization.
Does the board have policies and procedures regarding investments, reserves, and spending rates?
Yes, investment, reserve, and spending-rate policies are under the auspices of a Board Committee and are reviewed annually.
Has the board approved a risk-management policy that dictates how the organization will act in order to maintain the public trust?
Each year, the Board reviews and approves an organization-wide policies and procedures manual (including a risk-management policy) that demands the highest standards of ethics, transparency, and accountability.