This is the first of several articles about financial management best practices to be posted to our blog and included in future newsletters. Let’s call this one Best Practice Number 1: “Have and Maintain a Financial Policies and Procedures Manual.” Pretty basic and hard to argue about but something that is seldom done in small- and even mid-sized nonprofit organizations. More typically, what passes for documentation are fragmentary memos and checklists that often are created in reaction to a problem that has occurred. Although there are well-intended motives to create a more complete document, it seldom gets completed because of the hubris of day-to-day work priorities.
I think everyone can agree that having an FP&P Manual carries several benefits, among them:
- Forces critical thinking and collaboration to organize functions, processes and deploying resources most efficiently.
- Ensures compliance with regulatory and accounting standards.
- Achieves standardization across departments and locations.
- Demonstrates accountability and transparency to stakeholders and the public.
- Provides framework for training and continuity of personnel.
- Helps prevent fraud and inadvertent misallocation of assets.
- Facilitates the auditor’s review of internal controls.
Why is creating an FP&P manual so difficult? As many of you would agree, it is because writing a good one is a big job, even though there’s a plethora of sample manuals, how-to instructions, templates, etc. in hard copy and digital form to draw from and help you get started. Here is one representative article about developing an FP&P manual that may be useful for motivation and assurance that the effort is doable.
As a provider of outsourced accounting services to nonprofits, we are painfully aware of the need for documented policies and procedures, which in our case, is a necessity and pre-requisite to our growth. So over the next few weeks, we will be working on documenting financial policies and procedures that apply to most nonprofits that can be used as practice templates for each of our clients, and can be modified for individual special circumstances. As this evolves, we plan to share the results with the nonprofit community via our web site and blog. Getting your feedback and improvement suggestions will only make the effort better. Wish us well.