Financial Management for Nonprofit Organizations, 3rd Edition

CHAPTER 5DEVELOPING FINANCIAL POLICIES

1. 5.1 INTRODUCTION
   1. (a) What Is Policy?
   2. (b) Why Are Policies Required?
   3. (c) Complying with and Establishing Policy and Procedure
   4. (d) Who Sets Policy?
   5. (e) Where to Start?
2. 5.2 FINANCIAL POLICIES
   1. (a) Roles of Board, Board Treasurer, and CEO/ED
   2. (b) Financial Policies: Prescriptive or Restrictive?
   3. (c) Categories of Financial Policies
   4. (d) Accountability and Regulatory Compliance Policies
   5. (e) Financial and Financial Management Policies
   6. (f) Data Integrity Policies
3. 5.3 PUTTING POLICIES INTO PLACE
4. 5.4 ESTABLISHING PROCEDURES
5. 5.5 FINANCIAL POLICIES AND PROCEDURES IN PRACTICE
6. 5.6 ADDITIONAL RESOURCES
7. APPENDIX 5A: NONPROFIT FINANCIAL POLICY EXAMPLES ON THE INTERNET
8. APPENDIX 5B: GOOD, BETTER, AND BEST MEASURES OF TARGET LIQUIDITY

5.1 INTRODUCTION

As a potential incoming board member, I (Tim) wanted to know several things about the organization. I answered “yes” to service because I was interested in the organization's mission and thought I could make a contribution to this mission. I asked to see its bylaws, its latest audit, and the current budget, as well as minutes, a board list, its latest IRS Form 990, and a set of its financial policies. The organization was able to provide all the requested items, except for its financial policies. Apparently the board and management did not have them but did not seem to think that policies were important enough to prioritize creating them. I responded that I would accept the board position only if there was ...