Finance Best Practices for Your Grantmaking Organization

As a grantmaker, you expect organizations you support to manage their awards effectively, accurately, and responsibly. Those same expectations should apply to the way your management and board handle your organization’s finances. Does your entity have all the essentials? Here are some finance fundamentals that will enable your trustees and management to understand and address their accounting needs. 

The Importance of a Finance Calendar 

What’s the easiest way to make sure things in the finance department don’t fall off the radar? Use a finance calendar to keep everyone in the loop. Just as you expect grantees to meet their reporting deadlines, you want your team to stay on top of upcoming responsibilities.  

Every finance calendar should include meeting dates, fiscal events, regulatory responsibilities, and other deadlines that are integral to your entity’s financial health.  

Meeting dates: Don’t just include the ongoing board and finance meeting dates. Set aside dates for the board and management to review the annual budget, financial policies and procedures, the financial statement audit, and the Form 990 or 990-PF.  

Fiscal events: Plan out due dates for fiscal activities such as payroll, bank, and credit card reconciliations. Your calendar should note your monthly close and financial reporting deadlines, and completion of the annual operating budget. 

Regulatory responsibilities: Incorporate external due dates for regulatory items like payroll tax remittances, W-2s to employees, and 1099s to independent contractors. Be sure to list your Form 990/990-PF and business registration filing deadlines, and completion of your annual audit. 

Other deadlines: Don’t forget about renewal deadlines for your organization’s medical plan and business liability insurance, as well as your worker’s compensation audit and state charitable registration. 

Tip! Claiming and regularly updating your organization’s profile on Candid’s GuideStar is a great way to enhance your visibility to potential donors, partners, and grant recipients. Not only will it provide an opportunity to showcase your entity’s impact, but it can also connect you with a network of stakeholders in the philanthropic sector. Be sure to include this update on your finance calendar. 

Board Education Opportunities 

Help your board meet its fiduciary and fiscal responsibilities by providing members with the education they need to make strategic decisions and lead effectively. Here are three ways to provide valuable board training opportunities: 

• Create a board orientation: Set board member expectations by sharing your entity’s organizing documents and history, access to financial reports, and attendance requirements for meetings and other events. 
• Establish committees and the criteria for serving on them: Typical committees might include Executive, Finance, or Governance committees, as well as those for Programs and Grants, Development, Public Relations, or Technology and Innovation. Even small foundations should have an Executive Committee and a Finance Committee.    
• Review key policies: Your board will want to meet at least annually to identify policy decisions that might impact the operating budget, such as changes in focus or strategy, as well as fiscal policies that reflect the values and strategies of the organization. These might include creating or updating policies for investments, grantmaking, expense reimbursement, or risk management.   

Tip! Contingency planning is a must. Make sure your board is aware of your entity’s Disaster Recovery Plan and has been briefed on: 

• Emergency contact information 
• Data backup and recovery procedures 
• IT and systems recovery, including alternative solutions 
• Insurance providers and claims procedures 
• Financial continuity plans for payroll, accounts payables, and receivables 

Basic Finance Functions 

To provide board members and management with the information they need to make informed decisions, there are a few basic finance functions that your finance team should provide: 

• Monthly bank reconciliations that are performed within your entity’s accounting software—not using Excel 
• Timely and accurate monthly reports that are completed within 2-3 weeks after month-end 
• A memo that helps to translate and explain the financial story to your board 
• Metrics reporting on the financial and non-financial KPIs that your entity uses to monitor its operations and impact  
• Access to finance team members who can answer questions about financial performance, or provide training to board members on reading financial reports 
• Separation of duties so that no one person can initiate, approve, and record a transaction 

Tip! Even in small organizations, it is possible to successfully implement limited control over finance functions with involvement from an Executive Director, board members, or others outside of the finance department. For example, a board member might review the bank reconciliations or payroll reports. 

Using Outsourced Help to Address Financial Challenges 

Outsourced help can provide cost-effective access to specialized expertise and bring a fresh perspective to an entity’s processes and procedures. Consider outsourced solutions when your organization needs support for a temporary or short-term project, to fill gaps left by retirements or transitions, or to ease the burden on a small staff. Plus, outsourcing can provide another level of internal control and minimize the loss of institutional knowledge that often occurs during turnover. Use outsourced help to: 

• Supplement and support finance functions, such as helping with account reconciliations, documenting policies and procedures, creating cash forecasts, or reviewing and analyzing grantee information 
• Tackle special projects, such as software implementations, cyber security training for staff, or setting up a chart of accounts for a new organization or during an accounting system conversion 

Tip! One great use of outsourced help is to provide training on nonprofit financial reports for grant application reviewers. Not only will this help reviewers better assess the financial health of potential grant recipients, but it will also provide staff with a greater appreciation for your own entity’s finance functions. 

Ready to learn more about how your grantmaking organization can have more control of your finances? Check out our webinar, “Finance Fundamentals for Your Foundation.”