Recently, I've been asked a lot about what organizations, particularly churches can do to avoid being the target of a Senate or IRS investigation.Actually, the chances of any organization being targeted are pretty slim, especially when they really try to be financially accountability and relatively transparent with their donors and the general public . However, the question is a good one and there are many good business and financial practices that come to mind.
Before we talk about the integrity of financial matters, I want to emphasize the sheer genius (not mine, but many who have preceeded my tenure) of encouraging all organizations to have an independent board of directors that actually takes their role seriously. All too often we hear of strange financial practices and lackluster nonprofit performance and all you really have to do is ask, "Where was the board".
A board should be comprised of not less than five individuals that meet at least twice annually. An overwhelming majority of the board members present at any meeting (a quorum) should not be relatives of the founder/current leader nor employees of the nonprofit.
Regarding, financial matters, rather than reinventing the wheel, one of the nations top CPA firms working with nonprofits. Capin Crouse LLP, happens to be one of ECFA's "Integrity Partners" so I thought I would reference their recent newsletter that speaks to the same subject.
They (and I) suggest churches and organizations should consider the following:
- Is your financial data up to par? To evaluate accounting and financial reporting practices, accountable nonprofits undertake an independent audit annually. They also maintain effective processes and strong controls over financial reporting to assure its accuracy, completeness, timeliness, and transparency.
- Do you have an audit committee? For many nonprofits, an audit committee is an effective way to carry out board responsibility to oversee financial reporting, internal controls, and auditing processes.
- Is your staff diligent about accountability? In transparent organizations, every staff person and board member does what’s necessary to conduct business transparently and ethically. For example, CFOs file tax forms and public documents on time and provide accurate financial reports, and fund-raisers maintain truthfulness and accurate representations in all communications and reports.
- Are you a good communicator? Nonprofits should have nothing to hide. Donors and the public will be confident that your organization is trustworthy if you share information openly. So post pertinent financial information, descriptions of programs and their outcomes or accomplishments, and other key information about your organization and its operations on your website.
- Organizations promote an open and honest image by regularly providing watchdog groups with information requested. They also respond to inquiries from rating agencies, such as Charity Navigator, GuideStar and the Better Business Bureau, and the media. And they maintain membership in accountability groups such as the Evangelical Council for Financial Accountability (ECFA). see why I like this group!!
