This article was originally published in the Standards for Excellence® Institute series, “52 Tips in 52 Weeks” in April 2020. The series provides nonprofit leaders with a brief nonprofit governance and management tip weekly over the course of 2020. Standards for Excellence is a Replication Partner of Sacred Sector.
Editor’s Note: This article is currently being highlighted on this blog due to its relevance to the shifting work landscape created by the spread of COVID-19.
By colin fedor
This has been an exceedingly stressful time for people, a time of uncertainty and mixed messages and having to adapt to a new style of operations. For some, this pandemic has meant that operations have ceased; but, for many, your programs continue.
Your nonprofit's revenue may be significantly lower for the next few months now that physical interaction is a safety hazard, and stay-at-home orders are in effect in many states. Nonprofit fundraisers and programming cannot proceed as anticipated, and many individuals are not able to work. Therefore, how you monitor, assess, and make use of your limited resources is critically important, and keeping track of your spending is even more so. The Standards for Excellence: An Ethics and Accountability Code for the Nonprofit Sector provides guidance here, stating: “Nonprofits should have written financial policies that are adequate for the size and complexity of the organization. These policies should address investment of the assets of the organization, internal controls, purchasing, and unrestricted current net assets.”
Ideally, you already have a policy for internal controls and are continuing to make use of it in these challenging times. Of course, during the COVID-19 pandemic, many nonprofits, by necessity, are finding that they must modify or revise some of their internal controls processes (whether due to staffing changes, inability to work in the physical office, or other challenges experienced in the midst of the crisis). Any modifications you are instituting in your practices should be carefully documented. The Standards for Excellence Code recommends that the internal controls policies should be in writing and should be approved by the board, so appropriate steps should be taken to ensure approval by the board as it is practical. (See our resource on Remote Board Meetings.) The following guidance from our resource packet on Internal Control and Finance Policies may be helpful to consider:
Nonprofits should segregate duties so that steps in recording transactions are not all assigned to a single person.
Nonprofits should limit access to passwords and physical media.
Nonprofits should have a regular process for archiving transactions regularly and starting out fresh with new financial records.
Nonprofits should have clearly written procedures for handling transactions (checklists that can be initialed after steps are completed can be helpful).
Nonprofits should use sequentially numbered forms and documents, and accounting for all numbers.
Nonprofits should take care to review procedures regularly and update them from time to time.
The Standards for Excellence educational packet on Internal Controls and Finance Policies includes helpful resources on what your Internal Control Policies should address, common misconceptions about why they are in place, and guidelines on what you should do.
This educational resource packet and the full series of all packets - including sample policies, tools and model procedures to help nonprofits achieve best practices in their governance and management - can be accessed by contacting a licensed Standards for Excellence replication partner,- one of the over 150 Standards for Excellence Licensed Consultants, or by becoming a member of the Standards for Excellence Institute.
We share our sincere wishes for your continued good health and patience as we all navigate these challenging and uncertain times.
About the Standards for Excellence® Institute
The Standards for Excellence originated as a special initiative of Maryland Nonprofits in 1998 and has since expanded into a national program to help nonprofit organizations achieve the highest benchmarks of ethics and accountability in nonprofit governance, management and operations. The program has been formally adopted by twelve state, regional, and national affiliate organizations. It is supported by over 170 Licensed Consultants and over 100 volunteers with professional experience in nonprofit governance and administration. Since its inception, the program has accredited or recognized over 200 individual nonprofit organizations that completed a rigorous application and review process to demonstrate adherence to the Standards for Excellence: An Ethics and Accountability Code for the Nonprofit Sector. www.standardsforexcellence.org.
Amy Coates Madsen is the director of programs for Maryland Nonprofits and the director of the Standards for Excellence Institute, a national initiative to promote the highest standards of ethics and accountability in nonprofit governance, management, and operations, and to facilitate adherence to standards by all organizations. Amy received her Master of Arts in Policy Studies from the Johns Hopkins University Institute for Policy Studies in Baltimore, Maryland, and her bachelor’s degree from the Virginia Polytechnic Institute and State University in Blacksburg, Virginia. Amy is a member of Phi Beta Kappa and was appointed by the U.S. Department of the Treasury to serve on the Internal Revenue Service Advisory Committee on Tax Exempt and Government Entities (ACT), serving one term as the co-chair of the ACT’s Exempt Organizations subcommittee. The Standards for Excellence Institute is a program of the Maryland Association of Nonprofit Organizations where Amy has served for more than twenty-four years. Amy is responsible for coordinating all aspects of the association’s comprehensive ethics and accountability program and efforts to replicate the program nationally. She serves as a frequent trainer and writer in the areas of board conduct, program evaluation, program replication, fundraising ethics, and nonprofit management. She has taught courses on nonprofit ethics and accountability at the Johns Hopkins Institute for Policy Studies Certificate Program on Nonprofit Management.