Why are Written Policies and Procedures so Essential for Nonprofits?

CPAs & Advisors

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The importance of written policies and procedures for a nonprofit organization is evident now more than ever before. By definition, they are a set of principles, rules and guidelines formulated and adopted by an organization to reach its long-term goals, typically published in a booklet or other form that is widely accessible. Well written policies and procedures allow management and employees to clearly recognize their roles and responsibilities within the organization’s established guidelines. They are important for ensuring continuity in the event that an employee leaves the organization for any reason. The need for written policies will become more obvious as many organizations begin seeing the retirement of experienced management and key employees, and as baby boomers continue to exit the workforce. Written policies and procedures will help ensure an easier transition for the new wave of management and other employees.

Outside of the benefits of written policies and procedures from an operational standpoint, depending on the organization’s funding sources, certain written policies and procedures may be required. Specifically, an increasing number of policies are required under the implementation of the new Uniform Grant Guidance. Also, written policies could provide a base for legal protection for an organization while providing employees a clearer understanding of their responsibilities. Furthermore, an organization’s IRS Form 990 provides donors and other users of the Form 990, information about some of the organization’s existing policies.

We recommend developing and implementing written policies and procedures, or reviewing those already in place, to ensure they are operating effectively and addressing the organization’s needs and goals. Some key policies to consider implementing or revisiting at an organization level include but are not limited to:

  • Procurement (purchasing) policy
  • EFT/ACH policy
  • Capitalization policy
  • Vacation/Sick time policy (including payout and carryover guidelines)
  • Investment policy
  • Whistleblower protection policy
  • Document retention/destruction policy
  • Conflicts of interest policy
  • Gift acceptance policy (to include the receipt of non-cash gifts including gifts-in-kind, land, vehicles, etc.)

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