4. Ensure that the Board of Directors Understands and Can Fulfill Its Financial Responsibilities

The board has the legal—as well as ethical—responsibility of ensuring the exclusive and effective use of all assets for charitable purposes. As part of this obligation, the board or appropriate board committee should review and approve all financial statements for completeness and accuracy. To perform this function effectively, the board should include individuals with financial literacy or adopt other mechanisms for drawing on independent financial expertise.

Resources:

The following publications and articles provide helpful insights on what it means to build a culture of accountability:

The Sarbanes-Oxley Act and Implications for Nonprofit Organizations by Independent Sector and BoardSource, makes recommendations on how nonprofit organizations and foundations can voluntarily incorporate certain provisions of the Sarbanes-Oxley Act into their operations.

BoardSource, a nonprofit organization that strengthens boards, offers tools on financial responsibilities and other resources for board members of nonprofit organizations.

Next Page: Conduct Independent Financial Reviews, Particularly Audits