Nonprofits have a public purpose and the public puts their trust in them to do right, both for the community and as stewards of public resources. Maintaining financial transparency in nonprofit organizations is critical for several reasons: it builds trust with donors and stakeholders, satisfies regulatory and compliance requirements, and ensures that resources are being used efficiently and effectively to fulfill the organization's mission. Here are 8 strategies to enhance financial transparency in your organization:
Utilize Technology: Use technology to improve your financial transparency. This could include using a CRM like ResultsPlus to track donations, communicate with stakeholders, and organize financial information.
Training and Education: Regularly educate and train staff to ensure they understand their role in maintaining financial transparency. Also, make sure board members understand how to read and interpret financial statements so they can provide effective oversight.
Accurate Financial Reporting: Proper record-keeping is the backbone of financial transparency. Nonprofits should make sure they have comprehensive, accurate, and up-to-date financial records, which include sources of income, expenses, investments, and in-kind donations. These reports should be presented in an easy-to-understand format.
Annual Audits: A regular audit by an independent external party provides an objective assessment of the organization's financial health. Audit results, including any findings or recommendations, should be shared with the board of directors, key staff, and stakeholders.
Public Access to Financial Information: Nonprofits should make key financial documents, such as annual reports and Form 990s (the annual reporting return that federally tax-exempt organizations must file with the IRS), readily available to the public. This could be through posting on the organization's website, or via a platform like Guidestar.
Board Oversight: The board of directors should play an active role in reviewing the organization's finances. The board should approve the annual budget, review financial reports, and be informed of any significant financial decisions.
Conflict of Interest Policy: The organization should have a clear conflict of interest policy and ensure it is strictly followed. This includes disclosures of potential conflicts from board members and staff.
Communicate Financial Information: Clearly communicate your organization's financial status to stakeholders, including donors, volunteers, and the communities you serve. This could be in the form of an annual report, newsletters, or updates on your website. A CRM like ResultsPlus is a great tool for communicating with stakeholders.
These strategies are not exhaustive but should help you get started on your transparency journey. ResultsPlus can play a key role in that journey, so get in touch with us today to get started!