NGOs should have proper financial and legal procedures and safeguards in place, not only to
stay within the law, but also as a measure of the organization’s health and to assure donors,
members, and the general public that investments in the organization are safe and being
correctly used. NGOs should employ sound internal financial procedures, maintain financial
records carefully, and make available to the public financial statements. They should also
have their financial records reviewed periodically by a qualified, independent, outside
examiner who can certify that the organization is operating legally and according to generally
accepted accounting practices. NGOs must also be diligent that they are complying with applicable federal, state and local laws.

A. Financial Transparency and Accountability

1. Fiscal responsibility. Members of the governing body hold ultimate fiscal responsibility for their organizations and should understand the organization’s financial statements and reporting requirements.

2. Annual budget. An NGO’s annual budget is to be approved by the governing body, and should outline projected expenses for program activities, fundraising, and administration.
The NGO should operate in accordance with that budget.

3 . Internal financial statements. Internal financial statements should be prepared regularly
and provided to the governing body. Any and all significant variations between budgeted
expenses and actual expenditures, and between budgeted revenues and actual revenues, should be identified and explained to the governing body.

4. Financial policies. An NGO should have established financial policies, suitable for the size of the organization, regarding the receiving and disbursement of financial resources, investment of assets, purchasing practices, internal control procedures (such as policies for signing checks), and so forth.

5 . Internal control procedures. An NGO’s internal control procedures should have a safeguard against a person having the power to issue a check to himself or herself, such as requiring a countersignature on the check. An NGO’s internal control procedures should have a safeguard against one person being able to issue a check over a certain amount (such as two signatures are needed over $5,000) and should have restrictions on checks made out to cash.

6. Audit. For NGOs with substantial annual revenue, the accuracy of the financial reports should be subject to audit by an independent, qualified accountant. NGOs with small gross incomes should have a review by a qualified accountant. NGOs with very small revenues may suffice with an internally produced, complete financial statement.

7. Professional standards. An NGO should adhere to professional standards of accountancy
and audit procedures as stipulated by the law in its nation, and fulfill all financial and reporting requirements.

B. Legal Compliance

1 . Laws and regulations. An NGO’s activities, governance, and other matters should confirm to the laws and regulations of its nation and locality. (An NGO may seek to change those laws and regulations, if such activity is consistent with its mission.)

2. Liability insurance. An NGO should consider having liability insurance, if available and applicable.

3. Internal review. An NGO should conduct an internal review regarding compliance of
the organization with current laws and re gulations and summaries of this review should be presented to members of the governing body.

4. Attorney review. An NGO should obtain attorney review of the organizing documents of the NGO to make sure that they are in compliance with existing laws and regulations.