Touchstone

Benefits

Developing a written financial policy is a necessary step in establishing your ministry as both accountable and trustworthy.

Financial policies clarify the roles, authority and responsibilities for essential financial management activities and decisions. Without a finance policy, the organization is left to operate under a “what seems best to me” mindset that may be insufficient or even damaging to the organization.

Building a complete financial management system requires both an accounting system and an administrative system made up of financial policies.

A financial policy has many different functions:

• An organizational reference document – explaining how things will be done.
• Building a control environment (eliminating fraud and theft).
• Guiding organizational decision-making.
• Enhancing credibility with donors and partners.
• Helping with fundraising.
• Providing accountability to donors.
• Use as a training aide.
• Supporting documentation for a financial audit.

Planning Considerations

• Identify the purpose of a finance policy for your organization.
  • Some essentials to the purpose are:
    • Conforming to sound accounting principles and practices.
    • Enabling management to obtain accurate and timely financial reports whichpromotes sound financial management.
    • Ensuring correct and accountable use of funds and resources.
• Conduct a needs assessment with your finance and executive committee.
• Identify roles and responsibilities.
• Conduct an informal risk assessment.
• Draft the financial policy.
  • Suggested areas for a finance policy:
    • Philosophy
    • Authority
    • Roles and Responsibilities
    • Conflict of Interest
    • Budgeting
    • Gifts
    • Organizational Financial Processes
• Review, discuss and document feedback from staff and board leadership.
• Present the final version to the board for approval.
• Train staff on the financial policy.
• Review the policy regularly (recommend every six months).

Required Resources

1. Human Resources

• Someone will need to lead the development of the policy.
• Someone will need to document the policy discussions and decisions.
• Someone will need to gather feedback from stakeholders.
• Someone will need write the policy.
• Someone will need to conduct training.
• Someone will need to lead regular policy review.

2. Collateral

• Document the draft(s) and final approved policy.

3. Time

• Time to conduct a needs assessment.
• Time to meet with stakeholders.
• Time to write draft policy and make changes.
• Time for the board to meet to approve the policy.
• Time to train staff and volunteers on the policy.
• Time to review the policy regularly.

4. Space

• Space to hold meetings and to conduct training.

5. Cost

• The cost varies.
• Considerations include meeting/travel expenses and types of communication (email, phone, text).