Last week, I wrapped up my three-part Nonprofit Finance Series at Arlington Chamber of Commerce. A major theme was the need for nonprofits to invest in processes and systems to fulfill their fiduciary role. It’s difficult, yet essential, to make a compelling case so donors understand what it takes to track and manage donated funds, and to use funds effectively.
The information and perspective I shared with nonprofit leaders last week were based on my experience, and on research reported by GuideStar USA, Inc. Their research debunks the “overhead myth” about expecting nonprofits to run their businesses on a shoestring.
Like any other business, a nonprofit must have reliable and accurate methods for managing operations and finances. Nonprofits can make a compelling case for investing in infrastructure with these four talking points:
1. Explain Fiduciary Responsibility
Nonprofits pledge to use donated funds to support the mission. Nonprofits accept donations with the promise to be good stewards of those funds. Nonprofit Boards and management own the lead role for fiduciary responsibility.
2. Describe Processes to Meet Fiduciary Role
Reliable processes and systems are necessary for nonprofits to keep their financial stewardship promises. Effective tracking and reporting methods are needed to produce accurate and complete financial and program information, and to effectively tell their story.
3. Identify Process Gaps and Investment Needs
Nonprofits should examine their capacity to fulfill their fiduciary role. If the necessary processes and systems are not in place to keep stewardship promises, the Board should assist management to obtain the necessary funding for infrastructure investment.
4. Explain Process Investment Outcomes and Value
Increasing a nonprofit’s stewardship capacity and story-telling ability represents a huge value to the organization and its donors. The ability to produce accurate information efficiently translates into credibility that can attract donations and grants.
So that’s my “compelling case” — Nonprofits have a fiduciary responsibility to use donor gifts to support the mission. Processes and systems are needed to ensure nonprofits are keeping their promise to protect funds and report outcomes.