Giving Compass' Take:

• Mareeha Niaz, writing for Independent Sector, examines the process of maintaining strong financial oversight in nonprofit and charitable organizations. 

• What are the challenges for nonprofits to sustain financial control? How can donors help?

• Here are the top indicators of nonprofit financial health.

Keeping it Ethical is our weekly blog series highlighting the 33 Principles for Good Governance and Ethical Practice. Throughout the series, we hope to highlight the importance of each Principle, the helpful resources associated with it, and learn more from you about how you’ve incorporated these Principles into your charitable organization.

It’s time to celebrate! Congrats, we have made it through the arduous hike across the land of effective governance. Woohoo, I am ready for the fun that is strong financial oversight and I hope you are, too! Principle 21 kicks us off with a basic rule on financial compliance — maintaining complete, accurate, and current financial records while preserving robust financial controls.

Hopefully, you know by now that we got you. So, let’s begin by breaking down what it means to maintain strong financial records and controls. Your charitable organization must:

  1. Retain a qualified financial expert. Look to your qualified, independent board member on this.
  2. Ensure financial statements are prepared and audited according to generally accepted accounting principles (GAAP).
  3. According to your state rules, ensure annual financial statements are audited or reviewed as dictated by law.
  4. Report on your annual form 990 series whether (or not) your financial statements were a) compiled, reviewed, or audited by an independent accountant and b) an audit committee exists to select the independent auditor and oversee the process.
  5. Make sure your board is using the correct process to delegate audit and financial oversight, taking into account your organization’s size and structure.

Read the full article about financial oversight by Mareeha Niaz at Independent Sector.