Pressing Issues

Financial Budgeting, Reporting, and Monitoring

December 28. 2015

  • The board should annually approve the organization’s budget and the organization should be operated in accordance with this budget.
  • The organization should periodically assess the organization’s financial performance in relation to the budget. A nonprofit should create and maintain reports on a timely basis that accurately reflect the financial activity of the organization. Internal financial statements should be prepared at least quarterly, should be provided to the board of directors, and should identify and explain any material variation between actual and budgeted revenues and expenses.
  • The board should annually review the percentages of the organization’s resources spent on program, administration, and fundraising.
  • For nonprofits with annual revenue in excess of $500,000, the annual financial statements should be subject to audit by a Certified Public Accountant. The board should hire the auditor. The full board should approve the audited financial statements and receive a copy of the management letter (if any). The board should monitor the implementation of the recommendations of the management letter, if applicable.
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