The Nonprofit FAQ

Policies for Financial Accountability

Gary J. Tribble, the
Director of Finance at http://www.seattleopera.org">Seattle Opera offered this document as an example for use by other nonprofits on October 11, 2000.

He also suggests checking out http://www.mrsc.org/ and
http://www.oba.uiuc.edu/manual/u-table.html for more extensive policy statements.

NonProfitOrg
Board of Trustees
Accounting and Control Policies

1.0 Authority -- In accordance with Article IV, Section 2 of the Corporation bylaws :

1.1 The Executive Committee adopts the following Accounting and Control Policies.

1.2 The Treasurer will monitor and evaluate compliance with these policies for the Executive Committee.

1.3 The General Director, directly and/or through his or her designee(s), will administer those policies not otherwise assigned.

2.0 Control Policies -- In order to ensure that the assets of NonProfitOrg are used in accordance with the legal restrictions of donors and the purposes designated by the Board:

2.1 The Treasurer, directly or through the Finance Committee, shall:

2.1.1 Recommend the Board Designation of any accumulated operating surplus for Executive Committee approval.

2.1.2 Report to the Executive Committee on the status and disposition of Board Designated and Donor Restricted Net Assets.

2.2 The General Director of NonProfitOrg, directly or through his or her designee, shall:

2.2.1 Account for Donor Restricted and Board Designated funds separately from General Operating Funds.

2.2.2 Clearly define the restrictions applicable to these funds.

2.2.3 Report the financial results of Company operations on the basis established by the Audit Committee in consultation with the Companyâ€™s external auditors, including
a) GAAP (generally accepted accounting principles),
b) AICPA Audit and Accounting Guide: Non-for-Profit Organizations,
c) Accrual accounting, and
d) Fund accounting.

3.0 Financial Policies -- In order to ensure that the ongoing financial condition of NonProfitOrg is consistent with the priorities approved by its Board of Trustees, the General Director of NonProfitOrg, directly or through his or her designee, shall:

3.1 Report quarterly to the Company Treasurer on the financial position and financial operating results of Company activities by Board-designated fund categories.

3.2 Pay all debts and file required reports in a timely manner.

3.3 Plan and control Company operations so as to work within approved budget amounts, reporting to the Executive Committee any line-item expense variances in excess of $10K and the reason for these variances.

3.4 Require a minimum of three competitive bids before making purchases where appropriate.

3.5 Limit Company credit cards to prudent and necessary levels.

3.6 Limit vendor credit accounts to prudent and necessary levels.

3.7 Make no contractual commitment for bank loans or for real estate lease or purchase without the approval of the Board.

3.8 Avoid conflicts of interest in purchases and in all other uses or disposition of Company assets.

3.9 Periodically assess the adequacy of reserves as they relate to current and long-range spending plans.

4.0 Budgeting Policies -- In order to ensure that planned activities minimize the risk of financial jeopardy and are consistent with Board-approved priorities, long range Company goals, and specific five-year objectives, the General Director of NonProfitOrg, directly or through his or her designee, shall:

4.1 Maintain a budget schedule that will include:

4.1.1 Deadlines for submission of five-year budget plans,

4.2.2 Timelines for submission of preliminary and final budgets for specific fiscal years.

4.2 Submit operating and capital budgets to the Treasurer:

4.2.1 In time for reasonable approval by the Board of Trustees prior to each fiscal year.

4.2.2 Which limit expenditures in any fiscal year to no more than amounts the Administration has reasonably qualified and reasonably expects to receive during that fiscal year or accumulated in advance.

4.2.3 Supported by sufficient information to provide reasonably qualified projection of revenues and expenditures.

4.2.4 Support organizational capability to achieve the companyâ€™s approved goals in future years.

5.0 Asset Protection Policies -- In order to ensure that the assets of NonProfitOrg are adequately protected and maintained, the General Director of NonProfitOrg, directly or through his or her designee, shall:

5.1 Insure against theft and casualty losses to the Company and against liability losses to Board members, staff or the Company itself to levels indicated in consultation with suitable professional resources.

5.2 Enforce industry-standard controls (as confirmed by the Audit Committee in consultation with the Companyâ€™s external auditors) over access to material amounts of funds.

5.3 Plan and carry out suitable protection and maintenance of property, plant and equipment.

5.4 Avoid actions that would expose the Company, its Board or its staff to claims of liability.

5.5 Protect intellectual property, information and files from unauthorized access, tampering, loss, or significant damage.

5.6 Receive, process and disburse funds under controls that are sufficient to meet the Board-appointed auditorâ€™s standards.

5.7 Clearly identify personnel authorized to establish accounts and contractual relationships with vendors and other outside organizations.

5.8 Invest money in accordance with Board-approved investment policies.

6.0 Major Risk Policies -- In order to ensure that the Company is suitably prepared to face the following significant risks:

6.1 The Executive Committee shall promptly meet to take appropriate action in the event that the following operational risks emerge:

6.1.1 Loss of key personnel, such as the General Director, Administrative Director, Director of Education, and other department Directors.

6.1.2 Loss of key performance or administrative facilities.

6.1.3 Labor disruption.

6.2 The Finance Committee, directly or through its Investment Sub-committee, shall promptly meet to take appropriate action in the event that a significant risk in the financial markets develops.

6.3 The General Director of NonProfitOrg, directly or through his or her designee, shall provide in the annual revision of the long range plan for the following strategic risks:

6.3.1 Succession planning.

6.3.2 Revenue diversification.

6.3.3 Reserves suitable to the Companyâ€™s goals and plans.

Posted 10/11/00 -- PB