This post was written by Shelley Heil, who has been interning at the Charities Review Council this summer. Shelley is pursuing degrees in Sociology and Spanish at Wheaton College in Illinois.
This standard relates to the one highlighted in last week’s post, Federal Tax Filing Review. Both emphasize the importance of a board being aware of the organization’s formal documents and the nonprofit’s overall financial standing. The Board Fiduciary Oversight standard is one that we currently utilize in the review process and has not changed with the new Draft Standards.
As the philosophy states, the governing board is responsible for supervising the finances of their organization. Management, described in the standard, is two-fold: initially creating a budget and then monitoring how effective and appropriate, the year’s budget has been. Frequent and detailed financial oversight assures board involvement in the financial realm of the organization. Additionally, it serves as a form of accountability. It is easiest and most common for misuse of funds to occur in nonprofits where boards are not overseeing the budget and financial statements. In our experience, the majority of charity fraud cases (which are often highlighted in the media) are the direct result of financial information being withheld from boards or insufficient oversight. The standard aims to promote transparency and prevent financial deception.
What are your thoughts on this. Is it enough to ask that the board review at least quarterly financials or should it be more often? Less often?
For the next few posts we will be highlighting the Financial Activity section of the Accountability Standards. The next post will be on the Financial Health standard.