Best Financial Rules For a Nonprofit COO

Best financial rules for nonprofit

Nonprofit organizations are criticized for not spending donated funds responsibly. The general perception is that only a small portion goes towards charity program needs – the rest pays for CXOs high salaries.

In African countries where there’s a dire shortage of skills, COOs are self-taught and lack necessary skills in critical areas like operation management, monitoring and evaluation and strategic planning – but still, draw high salaries.

The World Bank defines nonprofits as “private organizations that pursue activities to relieve suffering, promote the interests of the poor, protect the environment, provide basic social services, or undertake community development.” These organizations have been trying to fill in the gaps that poor governments will not. They are governments in their own right. It’s important that they are led by competent leaders following a strict financial discipline.

Generally, nonprofit COO’s are expected to achieve more by using fewer funds. They’re expected to improve fundraising efforts, ensure proposal budgets are well-planned and that targets are met. Also, those direct costs are kept at a minimum level.

Spending money well is a habit that no one is born with. We learn our ways from our parents or cultivate it later in life and it becomes  part of us. Nonprofit COOs with good financial habits hardly encounter financial problems.

All the same, here are five financial rules every COO should observe.

  • Be honest…all the time

NGOmonitor reports that Mohammed El-Halabi, the manager of operations in Gaza, from World Vision (NGO), funneled 60% of World Vision’s Gaza budget to the terrorist group Hamas. Such reports are damaging to the nonprofit’s reputation and the damage can be irreparable.

Nonprofit COOs are expected, to be honest in all their financial dealings. Any financial decision that should be approved by more than one person needs to go through the right process. Honest dealings will not only enhance the image of the COO but also that of the organization. A nonprofit known for honest dealings with the public is likely to secure future funding. Donors will know that their funds are handled by a principled COO who preserves a prudent culture across the organization.   

This culture can be encouraged by rewarding any honest deed by subordinate employees, but by equally punishing any dishonest deed. This can be achieved without compromising confidentiality. In other words, without involving external forces.

  • Be transparent to donors

There are other reports that Woman Wage Peace (WWP) is not transparent about the amounts received from funders. The organization only mentions four funders on its website which are European Union, New Israel Fund, Heinrich Böll Stiftung Israel (Germany), and One Voice.   However, NGO Monitor research was able to identify some funding amounts from 2015. The New Israel Fund provided Women Wage Peace with $18,215. The European Union’s Directorate-General for Neighborhood and Enlargement Negotiations funded a two-year grant of €476,108.

Negative reports like that of WWP cause the perception of nonprofit being seen as conduits of illegal activities. This may also erode all revered work done and discourage donors from increasing funds.

In finance, transparency is “a process of making information accessible, visible and understandable when needed”, this can be done without compromising security measures.

According to Procurement and Supply, donors and governments alike prefer collaborating with nonprofits to improve their supply chain system and to minimize risk.

  • Automate all organizational affairs

There’s a need for more collaborative approaches to project funding and implementation. Donors want to see what their CCO’s plans are for spending funds. Also how quick COO’s will approve purchase orders during disaster relief.

The list below illustrates why it’s important that nonprofit organizations automate all their affairs, from fundraising campaigns to purchases.

  • Automated transactions save time and money and build a unified organizational identity.
  • They render regular field visits by busy COOs unnecessary.
  • COOs can achieve  much more in a few hours.  

CJ Jacob from Arkansas School for the Deaf automated all her purchases: “Approvals go through faster, no papers to be lost, no fudging of dates by people who wait until the last-minute! What’s not to like?”

By adopting an automated system, you can rest assured that donated funds go towards paying for only NGO needs.

If you’d like more info about (an automated purchase control system), please contact us: [email protected]

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