Financial Stability
The Directors of a Board and senior staff must be fully aware of their legal responsibilities.
The Directors of a Board and senior staff must be fully aware of their legal responsibilities. In general terms, Directors of the Board are responsible for:
- Appointing financial officers with appropriate qualifications and competencies
- Ensuring that specialists (accountants, auditors) are appropriately qualified and competent
- Ensuring responsible investment of outside funds using outside expertise
- Enacting by-laws concerning the organization’s financial affairs
- Establishing financial policies
- Reviewing financial reports at regular intervals
FINANCIAL STABILITY CHECKLIST
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Books and Records
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Yes
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No
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Are the books and records of the organization kept up to date?
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Are books and records maintained in a neat and organized manner?
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Is responsibility for record keeping clearly delegated to specific individuals?
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Are accounting/bookkeeping and clerical demands processed promptly?
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Financial Statement Analysis
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Yes
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No
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Are financial statements produced on a regular basis and reviewed by management?
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Are financial statements audited or reviewed by an accredited and publicly licensed accountant or accounting firm?
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Are we satisfied that accounts receivable are bona fide and that there are no significant balances owing over 90 days?
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Are there any significant accounts receivable from officers, management, employees or board members of the organization?
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Are inventory levels reasonable?
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Have all long-term commitments and obligations been identified in the financial statements? (Consider long-term leases, long-term debt)
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Has the organization been able to justify all significant differences between budget and actual for major revenue and expense accounts?
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Has the calculation of key financial ratios highlighted any areas of concern? (Consider quick ratio, current ratio, debt to equity/membership ratio)
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Has the organization had significant operating losses in the previous two years?
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Is the organization’s current working capital position acceptable?
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Is there any correspondence from the auditors/accountants indicating weaknesses in internal control or other accounting procedures?
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Have any recommendations from the auditors/accountants NOT been adopted?
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General
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Yes
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No
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Is the organization’s incorporation documentation up to date?
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Does the organization have title to all major assets?
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Are major assets pledged as security against any debts?
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Does the banking resolution governing sign authority correspond with the Board’s decision or the organization’s by-laws?
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Is there any possibility that key sources of revenue to the organization will be lost?
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Is the organization realizing the revenue potential of its current membership base?
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Content excerpted from "An Overview of Governance," from The Effective Not-for-Profit Board – Governance of Not-for-Profit Organizations, Deloitte & Touche, 2013.
Dive deeper on this topic
More in Financial Management
Financial Stability
The Directors of a Board and senior staff must be fully aware of their legal responsibilities.
Budgeting and Financial Planning
The budget provides a base to make sound decisions on resources available, and the ability to adjust to change.
Financial Policies
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How To Read Financial Reports
Responsibility for an organization’s financial reporting is shared by management, the board and an external auditor.
Financial Audit
An organization’s audit offers a key measure of accountability and control for a non-profit organization.
Audit Committees
Good governance systems focus organizations on activities that best contribute to organizational objectives.