Wednesday, January 25, 2012

Transparency In Non-Profit Organizations

In today’s economic climate, donors want to know what their contributions will be used for.  When an organization provides transparency it fosters collaboration with staff, donors and volunteers that makes the donor feel as if they contribute more than money to the organization’s operation.  Transparency helps to develop a relationship with the donor that is long lasting and vital to the organization fulfilling its mission.

Achieving transparency is not easy. In the hectic world of nonprofit management, transparency and financial oversight are often relegated to non-urgent status as staffs and boards at times view these responsibilities as “chores” that do not advance the organization’s mission. But research and experience has shown, time well spent on creating and implementing financial oversight systems and a culture of openness are significantly beneficial in the long run. To maintain relevance, stability and  growth, nonprofits should develop systems that are open, compliant and diligent.

Here are some recommended steps an organization can take to achieve transparency:

1.            Nonprofit boards should institute formal policies and procedures to ensure that there is responsible management of all financial documents (e.g. budgets, audits, expense reports, compensation, petty cash and invoices).

2.            Board members and relevant staff should review, approve and track budget and organizational financials on a monthly basis.

3.            Accurate and complete financial records should be maintained at all times.

4.            Nonprofit organizations should undergo annual audits or reviews by an independent and qualified financial expert.

5.            Clear policies for reimbursement of documented business and travel expenses should be created.

6.            Board members should question patterns of spending that seem at odds with stated organizational policies and objectives.

7.            Boards should create or enhance their audit or finance committees and recruit directors or committee members with relevant professional experience.

8.            Charitable organizations should use the Internet and other electronic media (e.g. blogs, Twitter, Facebook, website, Flickr, YouTube, Linked In, e-newsletter) to disclose information such as annual reports, names of board members, as well as mission and vision statements.

Clearly, the nonprofit sector has come under increased scrutiny by the government and private contributors. Establishing consistent and transparent financial oversight systems will go a long way in maintaining the public trust and cultivating financial support.

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