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Is it time to update your Financial Policy and Procedure Manual?

by Lauren Frary, Director of Strategic Business Transformations at SAX 



It seems that every time there is a story on the news about a financial institution in trouble, or worse, collapsing, we turn to our Financial Policy and Procedure Manual to make sure the same fate does not befall our nonprofit organization. 


Certainly, having robust internal controls and a culture of risk management from the top is the best way to mitigate these issues. Another key activity is to have a regular, scheduled review of the policies and procedures that are in place and ensuring the appropriate staff are trained. A policy is no good if it is not being followed. 


Financial policies clarify the roles, authority, and responsibilities for essential financial management activities and decisions. In the absence of an adopted policy, staff and Board members are likely to operate under a set of assumptions that may or may not be accurate and productive.


So, how often should the manual be reviewed and updated?


According to Jamie Johnson, of the US Chamber of Commerce, you should update your business/ finance plan: 

  • If it’s been over a year since you reviewed/ updated 

  • The nature of your work/ services is changing 

  • The market is changing – for instance inflation or fears of recession 

  • You’ve experienced a significant financial change – either growth or reduction of revenue/ expenses 

  • There are changes in leadership roles 

  • You’re changing your funding/ fundraising strategy  

 

All of the scenarios above have the potential to influence the policies, procedures and process of the finance department and should prompt a review or partial review of the manual. 


How to get started: 

  • Determine the best timeframe for an annual review (the start/ end of the fiscal year, prior to the audit, prior to budget development) 

  • Ensure key leadership and Board Treasurer are involved 

  • Schedule 2-3 shorter meetings as opposed to one long meeting 

  • Assign sections of the manual review to relevant employees  

  • Hire an outside consultant to provide guidance on Best Practices  

  • Have the board finance or audit committee review and approve the manual 

  • Make sure the manual is dated after each review/ update 

  • Ensure all staff are trained on the new/ updated policies and procedures 

 

By creating a regular routine of reviewing the financial manual, you will be positioning your organization to be engaged in an ongoing analysis of potential risks and threats and continuous quality improvement to the financial health of your organization. 


To explore how to begin this process, contact our friends at SAX LLP


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