Nonprofit fundraising stewardship means responsible planning and management of resources. How does this relate to accountability?
As managers and executives of nonprofit organizations, you must be good stewards of the public trust. You are responsible for ensuring the resources of your organization are well protected and used efficiently for the organization to fulfill its mission.
Restrictions for the use of government grants continue to rise, along with additional scrutiny from the public with the use of their funds. Most important, you must be certain that you are implementing management practices that will ensure the long-term survival of your organization.
Nonprofit fundraising stewardship compliance
I recently had a spirited discussion with a Board Member of a small nonprofit who insisted that the financial statements of the organization be changed so the Board can understand them. The changes suggested were not in compliance with nonprofit accounting principles and required a substantial reworking of their current financial systems. The main motivation for this change was the Board didn’t understand nonprofit accounting and needed to see the total financial picture of the organization “on one page,” even if key metrics were missing.
I explained the concept of accountability and stewardship of donor funds and how the current financial system is set up properly by tracking unrestricted and temporarily restricted funds and with the segregation of revenue and expenses by functional area. But, the Board still didn’t budge on their demands. Finally, after bringing the auditor in to explain how the changes they wanted would result in extra work by the audit firm to prepare their year end audit and financial statements, resulting in increased audit fees, the Board finally acquiesced on their demands. So now the Board has to learn how to read financial reports that provide them with the relevant content to make better and more informed decisions.
Why you need stewardship now more than ever
Not only is being accountable of your organization’s financial and program management an absolute necessity, but it is imperative now more than ever. Even small or all-volunteer organizations should put good systems in place that will position the organization to grow without having to endure an overhaul to its financial operations as it grows.
This is why it is important that your board members have appropriate accounting and analytical skills, and fully understands the complexity of nonprofit accounting. This is the first sign that your organization is committed to good stewardship.
Accountability improves communication
Accountability also means keeping the lines of communication open with your donors and funding sources. According to the IRS “a donor cannot claim a tax deduction for any single contribution of $250 or more unless the donor obtains a contemporaneous, written acknowledgment of the contribution from the recipient organization.” The worst thing you can do as an organization who receives donations is to not acknowledge and thank the donor for the donation, no matter how small.
To be accountable you must have the right systems in place to assist with reporting, tracking, and communications. Annual audits are a must, and being able to give auditors, grantors, and stakeholders a clear trail to verify the accuracy of financial statements and donor intention is critical. As you look for ways to satisfy the demands of outcome measurements, be sure that your accounting system not only tracks and reports outcome measurements on financial statements, but that it can also be used to budget outcome measurements for accurate forecasting.
Likewise, keeping donor information in a comprehensive system allows for acknowledgment of donations in a timely manner, storage of communication histories, usage of donor profiling, creation of reminders for following-up, and the personalization of communications with the programs and projects that build long term relationships with your donors and cement your organizations standing in your community.
Having the right people in your organization, who are committed to your mission, that have the right tools to demonstrate accountability, transparency, and stewardship will keep your organization’s goals and mission alive and will keep your donors engaged in your cause.
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