Checklist to Assess Financial Activities in Nonprofit Organizations

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    Checklist to Assess Financial Activities
    in Nonprofit Organizations

    (certain sections of the following
    may be specific to the U.S.)

    Edited by Carter McNamara, MBA, PhD

    (Be sure to read How to
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    before using information in this document.)

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    Rating
    *
    Indicator Met Needs
    Work
    N/A

    E

    1. The organization follows accounting practices
    which conform to accepted standards.

    E

    2. The organization has systems in place to provide
    the appropriate information needed by staff and board to make
    sound financial decisions and to fulfill Internal Revenue Service
    requirements.

    R

    3. The organization prepares timely financial
    statements including the Balance Sheet [or statement of financial
    position) and Statement of Revenue and Expenses [or statement
    of financial activities!] which are clearly stated and useful
    for the board and staff.

    R

    4. The organization prepares financial statements
    on a budget versus actual and/or comparative basis to achieve
    a better understanding of their finances.

    E

    5. The organization develops an annual comprehensive
    operating budget which includes costs for all programs, management
    and fundraising and all sources of funding. This budget is reviewed
    and approved by the Board of Directors.

    R

    6. The organization monitors unit costs of programs
    and services through the documentation of staff time and direct
    expenses and use of a process for allocation of management and
    general and fundraising expenses.

    E

    7. The organization prepares cash flow projections.

    R

    8. The organization periodically forecasts year-end
    revenues and expenses to assist in making sound management decisions
    during the year.

    E

    9. The organization reconciles all cash accounts
    monthly.

    E

    10. The organization has a review process to
    monitor that they are receiving appropriate and accurate financial
    information whether from a contracted service or internal processing.

    E

    11. If the organization has billable contracts
    or other service income, procedures are established for the periodic
    billing, follow-up and collection of all accounts, and has the
    documentation that substantiates all billings.

    E

    12. Government contracts, purchase of service
    agreements and grant agreements are in writing and are reviewed
    by a staff member of the organization to monitor compliance with
    all stated conditions.

    E

    13. Payroll is prepared following appropriate
    State and Federal regulations and organizational policy.

    E

    14. Persons employed on a contract basis meet
    all Federal requirements for this form of employment. Disbursement
    records are kept so 1099’s can be issued at year end.

    E

    15. Organizations that purchase and sell merchandise
    take periodic inventories to monitor the inventory against theft,
    to reconcile general ledger inventory information and to maintain
    an adequate inventory level.

    R

    16. The organization has a written fiscal policy
    and procedures manual and follows it.

    E

    17. The organization has documented a set of
    internal controls, including the handling of cash and deposits,
    approval over spending and disbursements.

    E

    18. The organization has a policy identifying
    authorized check signers and the number of signatures required
    on checks in excess of specified dollar amounts.

    E

    19. All expenses of the organization are approved
    by a designated person before payment is made.

    R

    20. The organization has a written policy related
    to investments.

    R

    21. Capital needs are reviewed at least annually
    and priorities established.

    R

    22. The organization has established a plan identifying
    actions to take in the event of a reduction or loss in funding.

    R

    23. The organization has established, or is actively
    trying to develop, a reserve of funds to cover at least three
    months of operating expenses.

    E

    24. The organization has suitable insurance coverage
    which is periodically reviewed to ensure the appropriate levels
    and types of coverages are in place.

    E

    25. Employees, board members and volunteers who
    handle cash and investments are bonded to help assure the safeguarding
    of assets.

    E

    26. The organization files IRS form 990’s in
    a timely basis within prescribed time lines.

    R

    27. The organization reviews income annually
    to determine and report unrelated business income to the IRS.

    R

    28. The organization has an annual, independent
    audit of their financial statements, prepared by a certified
    public accountant.

    R

    29. In addition to the audit, the CPA prepares
    a management letter containing recommendations for improvements
    in the financial operations of the organization.

    R

    30. The Board of Directors ,or an appropriate
    committee, is responsible for soliciting bids, interviewing auditors
    and hiring an auditor for the organization.

    R

    31. The Board of Directors, or an appropriate
    committee, reviews and approves the audit report and management
    letter and with staff input and support, institutes any necessary
    changes.

    E

    32. The audit, or an organization prepared annual
    report which includes financial statements, is made available
    to service recipients, volunteers, contributors, funders and
    other interested parties.

    A

    33. Training is made available for board and
    appropriate staff on relevant accounting topics and all appropriate
    persons are encouraged to participate in various training opportunities.
    Indicators ratings: E=essential; R=recommended;
    A=additional to strengthen organizational activities

    This information may be copied. Please cite credit to the
    Greater Twin Cities United Way.


    For the Category of Organizational Development:

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