Stewardship is a promise to engage in responsible planning and management of resources. The stewardship concept can be applied to nature, economics, health, property, and information. For nonprofits, stewardship usually means the responsibility to make sure that the organization spends donations cost-effectively in support of the mission.
Nonprofits need to have good processes and systems to fulfill their stewardship role. Nonprofit Board members and management each have roles and responsibilities to implement and manage the processes needed to fulfill the promise to spent donations wisely and sustain the organization.
Nonprofits need to have good processes in three important areas to manage donations and make sure they are spent effectively:
- Verification – Collecting financial information and verifying that it is complete and accurate sounds basic, sure, but it’s so important! Capture donation information from all sources, like credit cards, checks and third parties. Reconcile deposits to donation reports. Confirm that all donor restrictions are documented so that promises to use funds for a specific purpose can be fulfilled.
- Anomaly Management – Identifying and following-up on occurrences that shouldn’t happen, or anomalies, helps nonprofits correct issues. Managing anomalies early in the process helps people work more efficiently and saves time researching issues. This approach can also help to identify the root causes that cause anomalies so they can be corrected to avoid recurrences.
- Independent Oversight – An important role of nonprofit Boards is to perform independent reviews of the organization’s financial performance and to take remedial action to address any issues. The Board is also tasked with assuring that financial accounting and standards of practice for nonprofits are followed and that financial functions are performed by qualified staff or consultants.
Nonprofits have a stewardship responsibility to use donations effectively to support their mission. By focusing on three important areas to manage donations and make sure they are spent effectively, the Board and management can fulfill those stewardship responsibilities.