Goal Directive

• Grant funds are to be managed capably and resources allocated efficiently.
• Accurate financial reports enable the funder to track use of the funds.
• The organization shall maintain good financial health overall, at a minimum, 80% of the time.

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Indicators of Good Governance

• The board has established sound internal financial controls.
• The board approves an annual operating budget.
• The board reviews regular financial reports to monitor budget compliance and fiscal health.
• There is a finance/audit committee that engages the auditor, and maintains open and direct communication with the audit firm.
• The board approves the annual audit after it has been recommended by the audit committee and, preferably, presented by the auditor.
• The organization has financial reserves that cover at least 3 months of operation.
• The board actively oversees or manages the organization's investments.

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Sample Q & A Guide 

Funders’ Questions For Nonprofits		Best Board Practices
Has the board approved a fiscal policies and procedures manual, including policies on record retention and whistle blower protection?		Yes. Note that an absence of internal controls, or a clear Board role in maintaining them, places the organization at high risk for mismanagement.
Does the board approve the budget prior to the beginning of the fiscal year?		Yes.
Does the board receive regular, year-to-date, comparison budget reports with a management narrative highlighting significant areas of focus?		Yes.
Is there a standing committee that oversees and evaluates the organization's fiscal performance?		Yes. Note that the treasurer alone should not fulfill this role, but should work in conjunction with board members to whom s/he has no familial or business ties.
Is there an annual audit? Is it overseen by an audit committee? Is the audit approved by the board?		Yes. Yes. Note that the treasurer alone should not fulfill this role, but must work in conjunction with board members to whom s/he has no filial or business ties. Yes.
Does the organization have financial reserves? How are the reserves invested? Who monitors or manages the investments?		Yes. The reserves are managed or monitored by a board committee.