Elements of Effective Nonprofit Policies and Procedures
by Ben Hancock, CPA
Developing or updating your organization’s policies and procedures (P&P) is often one of the last items on the to-do list. However, written P&P matter and serve as the backbone of your organization to ensure efficiency, help prevent fraud, define roles, and establish a culture of compliance.
If you're unfamiliar with your P&P or have not been asked to provide them before, it is only a matter of time before they will be needed. A compliance audit, contract dispute, internal controls implementation, employee issue, or other scenario can arise where P&P are necessary. When developing or updating your P&P, nonprofit organizations should keep the following in mind:
Keep it Simple
Nonprofit organizations should generally have written policies for the following areas:
- General operations (i.e., an employee handbook)
It’s important to gather the input of all departments involved, which will empower employees to have a say in their duties and become more familiar with the who, what, why, where, when and how of their job responsibilities. However, collaboration can sometimes go too far and involve too many meetings and differing viewpoints, so ensure hard deadlines are used to put a timetable on the work.
Federal Awards Require Specific Written Policies
If your organization receives and expends federal awards, it’s crucial to stay mindful of the compliance requirements of the awards in order to avoid having to pay back funding, losing out on new opportunities for additional funding, or receiving audit findings. The Office of Management and Budget (OMB) issued the Uniform Guidance in 2013, which aims to reduce the risk of fraud, waste, and abuse of federal funds. Within the Uniform Guidance (2 CFR 200.303), the OMB requires an entity to establish internal control over the federal awards and for the following policies to be documented in writing:
- Cash management
- Determination of allowable costs
- Financial management
- Standards of conduct covering internal and external conflicts of interest
It is important to take a fresh look at your P&P regularly to ensure they stay current and are properly followed by staff. If you've never established P&Ps, it's crucial to perform a comprehensive analysis to develop them. If your organization consistently reviews and updates their P&Ps, then you're on the right track and focus should be spent on continually getting to know the P&P and making sure they are followed. However, if you're like many organizations who infrequently update its policies and procedures, it’s a good idea to review and update them as needed.
Once a comprehensive P&P is developed, it will serve to promote a more accountable, transparent and enjoyable workplace by providing guidance to existing personnel, protecting your organization in the event of turnover, reducing the likelihood of funds being misused, and maintaining an effective internal control environment.
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Ben Hancock, CPA
Ben Hancock has practiced public accounting since 2004, specializing in serving nonprofits. His specific areas of expertise include single audits, policies and procedures development and creating training programs for nonprofit staff and board members.