Financial Regulations and Compliance for Non-profits
Expert-defined terms from the Professional Certificate in Financial Management for Non-profits course at Stanmore School of Business. Free to read, free to share, paired with a professional course.
Accountability refers to the responsibility of non #
profit organizations to ensure that their actions and decisions are transparent and justifiable to their stakeholders, including donors, beneficiaries, and the general public. This concept is closely related to transparency and governance, as non-profits must be able to demonstrate that they are using their resources effectively and efficiently. Accountability can be achieved through various means, such as regular audits, financial reporting, and evaluation of programs and services. For example, a non-profit organization may establish an independent audit committee to review its financial statements and ensure that they are accurate and complete.
Accrual Accounting is a method of accounting that recognizes revenues and… #
This approach is in contrast to cash accounting, which recognizes revenues and expenses when cash is received or paid. Accrual accounting is commonly used by non-profits to provide a more accurate picture of their financial performance and position. For instance, a non-profit organization may recognize donations as revenue when they are received, even if the cash is not received until a later date.
Activity #
Based Budgeting is a method of budgeting that involves allocating resources to specific activities or programs based on their expected costs and outcomes. This approach is designed to help non-profits allocate their resources more effectively and efficiently. For example, a non-profit organization may establish an activity-based budget for its fundraising program, which includes specific line items for direct mail, special events, and major donor solicitations.
Annual Report is a document that non #
profits are required to file with the Internal Revenue Service (IRS) each year, which provides information about their financial activities, governance, and programs. The annual report is an important tool for non-profits to demonstrate their accountability and transparency to their stakeholders. For instance, a non-profit organization may include information about its mission, goals, and accomplishments in its annual report, as well as financial statements and governance information.
Asset is a resource that has value and is owned or controlled by a… #
Assets can be used to generate income or to support the non-profit's programs and services. For example, a non-profit organization may own a building that it uses for its operations, or it may have investments in stocks or bonds.
Audit is a process of examining and evaluating a non #
profit's financial statements and internal controls to ensure that they are accurate and reliable. Audits can be conducted by independent auditors or by government agencies, and are an important tool for non-profits to demonstrate their accountability and transparency. For instance, a non-profit organization may undergo an annual audit to ensure that its financial statements are accurate and complete.
Budget is a plan for how a non #
profit organization will allocate its resources over a specific period of time, such as a year or a quarter. Budgets are used to help non-profits manage their finances and make informed decisions about how to allocate their resources. For example, a non-profit organization may establish a budget for its program expenses, which includes specific line items for personnel, travel, and equipment.
Cash Flow is the movement of cash into or out of a non #
profit organization over a specific period of time, such as a month or a year. Cash flow is an important indicator of a non-profit's financial health and stability. For instance, a non-profit organization may experience a surplus of cash during certain periods of the year, such as during a fundraising campaign, or it may experience a shortfall during other periods, such as during a slow fundraising period.
Charitable Contribution is a donation made to a non #
profit organization that is tax-deductible for the donor. Charitable contributions can take many forms, such as cash, goods, or services. For example, a non-profit organization may receive a donation of cash from a major donor, or it may receive a donation of goods or services from a corporate sponsor.
Compliance refers to the responsibility of non #
profit organizations to adhere to laws and regulations that govern their operations, such as tax laws, labor laws, and financial reporting requirements. Compliance is an important aspect of non-profit management, as it helps to ensure that non-profits are operating ethically and legally. For instance, a non-profit organization may be required to file annual reports with the Internal Revenue Service (IRS) or to obtain licenses and permits to operate in certain states or localities.
Conflict of Interest refers to a situation in which a person or organi… #
Conflict of interest can be a challenge for non-profits, as it can compromise their integrity and credibility. For example, a non-profit organization may have a board member who also serves as a vendor to the organization, which could create a conflict of interest.
Corporate Sponsorship is a partnership between a non #
profit organization and a corporate entity, in which the corporate entity provides financial or in-kind support to the non-profit in exchange for recognition or promotional opportunities. Corporate sponsorships can be an important source of revenue for non-profits, but they can also pose challenges and risks, such as conflicts of interest or reputational risks. For instance, a non-profit organization may partner with a corporate sponsor to host a fundraising event, or it may receive in-kind donations of goods or services from a corporate sponsor.
Donor #
Advised Fund is a type of fund that allows donors to make tax-deductible contributions to a non-profit organization, which are then invested and distributed to other non-profits or charitable causes over time. Donor-advised funds can be an attractive option for donors who want to support multiple causes or organizations, but they can also pose challenges and risks for non-profits, such as administrative burdens or reputational risks. For example, a non-profit organization may establish a donor-advised fund to allow donors to support its programs and services over time.
Endowment is a fund that is established by a non #
profit organization to provide a permanent source of income or support for its programs and services. Endowments can be established through donations or bequests, and are typically invested to generate income or appreciation over time. For instance, a non-profit organization may establish an endowment fund to support its scholarship program, or it may establish an endowment fund to support its operating expenses.
Financial Reporting refers to the process of preparing and presenting<… #
Financial reporting is an important aspect of non-profit management, as it helps to ensure that non-profits are transparent and accountable to their stakeholders. For example, a non-profit organization may prepare annual financial reports that include audited financial statements and management discussion and analysis.
Fundraising is the process of soliciting and securing contribut… #
Fundraising can take many forms, such as events, mail campaigns, or online solicitations. For instance, a non-profit organization may host a charity run or walk to raise funds for its programs, or it may send direct mail solicitations to its donors and supporters.
Gift Acceptance Policy is a policy that outlines the terms and … #
Gift acceptance policies are important for non-profits, as they help to ensure that gifts are properly valued and recognized, and that donors are treated fairly and respectfully. For example, a non-profit organization may establish a gift acceptance policy that outlines the types of gifts that will be accepted, such as cash, securities, or real estate.
Governance refers to the system of rules , policies , and … #
Governance is an important aspect of non-profit management, as it helps to ensure that non-profits are accountable and transparent to their stakeholders. For instance, a non-profit organization may establish a governance committee to oversee its operations and decision-making processes.
Grant is a of funding that is provided to a non #
profit organization to support a specific project or program, often with strings attached, such as reporting requirements or evaluation metrics. Grants can be an important source of funding for non-profits, but they can also pose challenges and risks, such as administrative burdens or reputational risks. For example, a non-profit organization may receive a grant from a foundation to support its education program, or it may receive a grant from a government agency to support its research activities.
Internal Control is a system of policies , procedures , and <… #
Internal controls are an important aspect of non-profit management, as they help to prevent errors, fraud, and mismanagement. For instance, a non-profit organization may establish internal controls to ensure that its financial transactions are properly authorized and recorded, or it may establish internal controls to ensure that its physical assets are properly secured and maintained.
Investment is a type of asset that is purchased or acquired by a n… #
Investments can be an important source of income for non-profits, but they can also pose risks and challenges, such as market volatility or liquidity risks. For example, a non-profit organization may invest its endowment funds in a diversified portfolio of stocks and bonds, or it may invest in real estate or other alternative investments.
Liability is a type of obligation that a non #
profit organization has to pay or perform in the future, such as debt, accounts payable, or accrued expenses. Liabilities can be an important aspect of non-profit management, as they can affect the organization's financial health and stability. For instance, a non-profit organization may have liabilities such as loans or credit card debt, or it may have liabilities such as accrued expenses or accounts payable.
Non #
Profit Organization is a type of organization that is established to serve a public or charitable purpose, rather than to generate profits for its owners or shareholders. Non-profit organizations can take many forms, such as charities, foundations, or associations. For example, a non-profit organization may be established to provide education or healthcare services to a specific community or population.
Operating Budget is a plan for how a non #
profit organization will allocate its resources over a specific period of time, such as a year or a quarter, in order to support its programs and services. Operating budgets are used to help non-profits manage their finances and make informed decisions about how to allocate their resources. For instance, a non-profit organization may establish an operating budget that includes specific line items for personnel, travel, and equipment.
Program Evaluation is the process of assessing and evaluating the… #
Program evaluation is an important aspect of non-profit management, as it helps to ensure that non-profits are achieving their goals and objectives. For example, a non-profit organization may conduct a program evaluation to assess the effectiveness of its education program, or it may conduct a program evaluation to assess the impact of its advocacy efforts.
Regulatory Compliance refers to the responsibility of non #
profit organizations to adhere to laws and regulations that govern their operations, such as tax laws, labor laws, and financial reporting requirements. Regulatory compliance is an important aspect of non-profit management, as it helps to ensure that non-profits are operating ethically and legally.
Risk Management is the process of identifying, assessing , and m… #
Risk management is an important aspect of non-profit management, as it helps to ensure that non-profits are prepared for and can respond to challenges and crises. For example, a non-profit organization may establish a risk management plan to identify and mitigate risks such as cyber attacks or natural disasters.
Social Enterprise is a type of organization that combines socia… #
Social enterprises can take many forms, such as cooperatives, mutual organizations, or hybrid organizations. For instance, a non-profit organization may establish a social enterprise to provide job training or employment opportunities to a specific community or population.
Stewardship refers to the responsibility of non #
profit organizations to manage and oversee their resources, including financial, human, and physical resources, in a responsible and ethical manner. Stewardship is an important aspect of non-profit management, as it helps to ensure that non-profits are accountable and transparent to their stakeholders. For example, a non-profit organization may establish a stewardship committee to oversee its financial management and investment practices.
Tax #
Exempt Status refers to the status of a non-profit organization that is exempt from paying federal income taxes, often because it is organized and operated exclusively for charitable, educational, or religious purposes. Tax-exempt status is an important aspect of non-profit management, as it helps to ensure that non-profits are able to retain their earnings and reinvest them in their programs and services. For instance, a non-profit organization may be granted tax-exempt status by the Internal Revenue Service (IRS) if it meets certain requirements and standards.
Transparency refers to the quality of being open and honest … #
Transparency is an important aspect of non-profit management, as it helps to ensure that non-profits are accountable and trustworthy to their stakeholders. For example, a non-profit organization may establish a transparency policy to ensure that its financial information and governance practices are open and accessible to the public.
Volunteer Management refers to the process of recruiting, training … #
Volunteer management is an important aspect of non-profit management, as it helps to ensure that non-profits are able to engage and retain their volunteers and maximize their contributions. For instance, a non-profit organization may establish a volunteer management program to recruit and train volunteers to support its education program, or it may establish a volunteer management program to engage and retain its volunteers through recognition and reward programs.