posted August 24, 2017

Basic Financial Policies for Non-Profits 

by Kristen M. Conway, CPA, Audit Manager


Financial policies play an integral role in the success of non-profits. Financial policies guide how staff and Board members are expected to operate, while providing clarity and setting expectations. Non-profits are also required to disclose whether they have certain policies on the Form 990. Below are some basic financial policies every non-profit should consider:

Gift Acceptance Policy – What gifts does your non-profit accept? You cannot answer that question if your non-profit’s Board has not established a gift acceptance policy. Some gifts may run counter to your non-profit’s mission or may require more work to stay in compliance with IRS regulations. A written gift acceptance policy can help manage the expectations of donors, and also serve as guidance for board and staff members who are on either the asking, or receiving end, of contributions.

Conflict of Interest – This policy should require employees and board members to disclose any conflict or potential conflict they may have. The policy should define what a conflict is and also require any individual with a conflict to abstain from being involved/voting on any matter related to the conflict of interest. As a best practice, employees and board members should review the policy on an annual basis.

Whistleblower Protection – Federal law prohibits retaliation against employee whistleblowers. A whistleblower protection policy sets the tone for how the organization will handle any complaints. It can also help to encourage staff to come forward with any concerns they may have, since they know they will be protected under this policy.

Review of the Executive’s Compensation – The Board has a responsibility to hire and retain the best possible Executive Director/CEO. One of the ways to attract and retain the Executive Director/CEO is through compensation that is reasonable. The IRS Form 990 specifically asks the entity to describe to the process for determining compensation. Reasonable compensation can be determined through approval by an independent person or comparing compensation to that of the organization’s peers. The Board should establish a policy which outlines the process and how often it is to be performed.

Records Retention Policy – Adopting this policy ensures staff, volunteers, and board members know what documentation needs to be retained or destroyed. The policy should also address both paper files and electronic files. Files that are retained permanently should be protected from accidental destruction or deletion.

The content of these pages is for general information purposes only and does not constitute advice. Heinfeld, Meech & Co., P.C. tries to provide content that is true and accurate as of the date of writing; however, we give no assurance or warranty regarding the accuracy, timeliness, or applicability of any of the contents.