Accountaability In Nonprofit Organizations

The nonprofit board and its governance are critical to an organization’s success. Brown (2007) stresses the need for governing boards to be informed, effective, and engaged, especially because the current environment (i.e. increasing competition for resources, etc.) demands high-quality board performance. The purpose of this paper is to examine existing literature as it relates to nonprofit board governance and performance. This analysis includes an examination of nonprofit boards’ roles, responsibilities, and functions along with a review of best practices. In addition, board roles and best practices, and their correlation to board performance is emphasized. Finally, a discussion of the practical implications of the literature as it relates to DavidsonWorks’ board ties the literature to real-world application.

ReferencesRobert D. H. & Associates (2005). THE JOSSEY-BASS HANDBOOK OF NONPROFIT LEADERSHIP & MANAGEMENT (2nd ed.). San Francisco, CA: John Wiley & Sons, Inc.

The diversity of nonprofit organizations, services provided and the problems faced shows that nonprofits require leadership with an in-depth understanding of the multifaceted nonprofit landscape. Understanding the culture of nonprofit work is also crucial and much easier to understand once you have been through a nonprofit management program. My career interests lead me towards an avocation of a deeper knowledge of strategic management/planning, legal structure and standards, increase my skills in quantitative analysis of policy, financial governance and developing fundraising strategies. These areas allow for macro management within the nonprofit

Most nonprofit agencies follow the same management structure. The structure normally consists of a vertical hierarchal structure with the chief executive manager at the helm, and divisional leaders rounding out the strategic leadership team. Since 9/11, then government shutdowns, multiple wars, natural disasters, and the government sequester, the challenge to most nonprofits is to compete for every available charitable dollar. Chief Executive Officers (CEO) of nonprofits must not only be skillful in maximizing the outcomes with fewer dollars, but also politically savvy in vying for monies for federal, state, local, foundation, and private funding sources.

Nonprofits are made up of key team players that contribute to all of the work that goes into making the organization a success. Without members who don’t align with the core values, mission, and ethical practices of a nonprofit it cannot produce the outcomes it desires. A governing board is the group of people entrusted with and accountable for the leadership and governance of a nonprofit corporation (Renz, p. 127). This board holds the accountability and trust for the community and clients it serves. The importance of these members and their actions for the organizations they work for contribute to the success and good work it produces for the community they serve. Stated on p. 136 by David O. Renz “Nonprofits exist to meet community needs, and it is important for the board to be well connected to both sets of clients so it can make legitimate and useful judgments about whether the organization’s programs and activities are valued by those they are designed to serve,” exemplifies how nonprofits practice ethics through their

Guidance for financial statements for nonprofit organizations is provided by FASB Statement of Financial Accounting Standard 117 (FASB117). The goal of FASB117 was to “enhance the relevance, understandability, and comparability of financial statements” and “requires that those financial statements provide certain basic information that focuses on the entity as a whole and meets the common needs of external users of those statements” (FASB, 1993). FASB117 is considered important because it mandates functional reporting of expenses by nonprofit organizations. FASB117 requires a nonprofit organization to prepare 3 financial statements: a Statement of Financial Position, a Statements of Activities, and a Statement of Cash Flows. In the Statement of Financial Position, the nonprofit must categorize net assets as unrestricted, temporarily restricted

According to the bylaws, the Finance Committee provides support and resources to the President and CEO, assists the treasurer and President & CEO in developing the annual budget and ensure that proper financial controls are in place, annually review and make recommendations regarding executive compensation, including benefits and ensure that all are consistent with arts and culture nonprofit organizations of similar size and gross revenue and verify that published reports properly reflect the operating results and financial condition of the museum (Board of Trustees, The Neon Museum Inc., 2013). In actuality the President and CEO and Chief Financial Officer (CFO) oversee the financial leadership of the organization in connection with the Finance Committee. It’s primarily the responsibility of the CFO to create the organizational budget along with the help of the President & CEO. The budget is then approved by the Finance Committee and then goes before the full board for final approval. The CFO ensures that the organization is in compliance with generally accepted accounting principles (GAAP) and Statement of Financial Accounting Standards 116 and 117

Copley, P. (2015) Essentials of accounting for governmental and not-for-profit organizations (12th Ed) New York, NY: McGraw-Hill Education

One of the things that I have seen happen repeatedly is that some Executive Directors truly “fall in love” with their agency and fail to adjust to the needs of the stakeholders. One of the things that nonprofits need to do is to learn from the

Professor Master, I understand what you are saying, from my research that is why a CPAs assist not-for-profit organizations in following manner. “Whether a CPA is on the staff of a not-for-profit organization or serves in an advisory capacity, he or she can help the organization solve tax problems, set up an internal control system, budget resources and prepare financial data for fund raisers”(CPAs in Non-Profit, Retrieved 2015). Therefore, the CPA who are capable could read, interpret, understand standards used in preparing the presented financial statements. Furthermore, the CPA would be available to present relevant information for fund raising purposes to donors, to auditors, and all other entity’s that may have a need legitimate reason

The main approach would be for the board to provide a strategic plan set in place for the nonprofit organization and its mission. Once the funds have been allocated, it is the responsibility of the CEO/Executive Director to see that those funds are applied as assigned. All funds disbursed for day to day operations, weekly and monthly are tallied. If the forecast for a certain program was over estimated, the CEO/Executive Director can inform the board and suggest other avenues for unassigned funds. It also presents itself in the form of first-hand knowledge, like being on the front line and reporting back to headquarters of the current positions. CEO/Executive Directors in the nonprofit sector are focused and balanced at the same time for maximum success. Lacking knowledge on finances, most executive directors need to know what financial information is essential. Having that information or financial statements in an understandable format and knowing how to analyze those reports to assess the financial health of the organization is crucial for making programming decisions and financial goals. (Brickman, P. 2005). This information of analysis is transferred to staff for proper processing. Some programs based on actual report may need to be decreased or increased depending on which way the arrow is pointing and for whom.

It is essential that a well-managed nonprofit organization identifies potential activities that jeopardize all facets of the business. More to the point, a charity will not survive if it cannot be trusted by the community in which it serves. According to Michael Worth (2014), internal control is the process of implementing policies that identify conflicts of interest, establishing checks and balances so that no person handles a complete transaction, and maintaining independent functions of the board and staff to prevent improprieties (p. 356). Because of the lack of internal controls, TCFA owners and executives were able to manipulate and distort the records, so the scheme continued for a number of years. The Charity's failure to implement internal controls eventually caused its

There are few laws or regulations that directly state how nonprofit organizations must operate their finances internally. However, there are indirect influences like the IRS reporting requirements and the accounting standards most fund agencies require. Thus, these “recommended” standards demand certain accounting and other financial practices be followed by nearly all nonprofit firms. Many nonprofit health care organizations are required to use fund accounting. They must show how money is spent rather than how much was earned in the financial statements and reports. Fund accounting is used for emphasizing accountability rather than profitability. Fund accounting was developed to help trustees fulfill their legal obligation to use each

Financially healthy nonprofits use income-based, rather than budget-based spending which allows them to have income projections that are realistic and helps to determine realistic costs (Zietlow, Seidner, 2014). The most successful nonprofit should have an operating reserve to finance shortfalls and hopefully allows them to have a positive cash flow at the end of the year (Zietlow, Seidner, 2014). However, most nonprofit organizations fight to manage cash flow due to how income and the expenses often may occur at different times, so that there may not be enough cash to pay for the expenses as they become due and payable (Zietlow, Seidner, 2014).

The stakeholders associated with nonprofit organizations (NPO) are very diverse including not only clients but volunteers and donors (Daft, 2016). With this the nonprofit organizations have to rely on donations and volunteers to make the organization successful while the for-profit organizations have every aspect of an organization including cost of operations, inventory, revenue, internal funds, etc. Stakeholders in for-profit organizations are focused on profit maximization while stakeholders in nonprofit organizations focus on how the organization is impacting on their goal. These stakeholders focus on the difference they are making with their nonprofit organization. I do believe nonprofit managers must focus more on the stakeholders as they are more focused on what the organization is doing as a whole rather than just profit maximization. “Financial performance is not the primary objective of NPO’s, so financial measures alone are insufficient to measure their performance. Rather, NPO’s mostly