Professional Accounting Blog

    Accounting For Your Prosperity

    4 Considerations for Non Profit Transparency

    Posted by Lynn Koster on Mar 27, 2014 1:09:00 PM

    4-considerations-non-profit-transparencyTransparency. In the non profit community, transparency is one of the critical requirements if an organization wants to maximize their success and potential to achieve their mission goals. As a public charity, donors will demand it, employees will expect it and in some instances, the law may require it. There are many opportunities for a non profit organization to take advantage of the opportunity to be transparent. Consider these suggestions:

    Conflicts

    Implementing an effective conflict of interest policy for employees and for volunteers, especially for those volunteers in governance roles, is an obvious step towards being transparent. In a decision making position, it should be known if there are hidden agendas, or apparent reasons that might influence or even perceive to influence an individual not to make the best decision for the organization a priority. Implementation of a policy is only step one. Monitoring the policy is essential. Ensure that there is a periodic request for the policy to be completed. Require that the policies are reviewed by management, a committee and/or the board chair.  Evidence of this process can be from a brief report to the entire board that is documented in the minutes.

    Whistle-blowing

    An effective whistle blower policy encourages an individual to come forward without fear of retaliation. The policy could be written as part of the organization’s code of conduct, as suggested by an example located within the AICPA Audit Committee Toolkit. Outline the reporting responsibility and obligation of everyone associated with the non profit organization to report questionable or improper accounting or auditing matters, and/or violations of the code of conduct.

    Online Profile

    While the first two items are specific to policies that the non profit organization can implement, monitor and, to some extent, control and respond, it may not be so easy to control the online profile of an organization.  Reputation is everything, and when it is jeopardized, it could have a disastrous effect on an organization. Transparency practices help to support that your organization is not deliberately hiding something. Consider using your website more effectively and keep it updated and relevant. Add or create documents or visuals to enhance and highlight the success and reach of the non profit’s programs. Posting a copy of the annual report, financial statement audits, and/or the Form 990 also makes it clearer that the non profit is proactive in making important information easily available. 

    Tax Form

    The IRS Form 990 Return of Organization Exempt from Income Tax, as everyone in the non profit community is aware, is not actually an income tax form, but a report to the IRS and to the public which contains financial information. There are many opportunities in the Form 990 for the non profit to highlight the mission, the strength of significant programs, special issues or circumstances surrounding activities. Complete Schedule O with details to support a response to a question on the form that might be helpful in responding to the “why.” 

    While these are a few of the most commonly discussed, there are many other items an organization can do to demonstrate transparency. A non profit organization should be concerned with doing everything possible to protect their reputation and to minimize distractions that take away from focusing on their mission.

    Use this opportunity to challenge how transparent your organization is and consider how Meaden & Moore might be able to help you.

    Image courtesy of iprostocks via FreeDigitalPhotos.net

     

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    Topics: Not For Profit

    Lynn Koster

    Written by Lynn Koster

    Lynn Koster is a Senior Manager at Meaden & Moore in the Assurance Services Group and serves both closely held businesses and not-for-profit clients.

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