Nonprofit Financial Stewardship: What is it and Why is it Important?


The principles of good financial management apply to all types of organizations, including nonprofits.

Success comes from striking that delicate balance between making an impact, fulfilling your mission, and serving your constituents—all while adhering to sound fiscal protocols. Nonprofits have the added responsibility of being good custodians of public trust.

In this article, we’ll take a deeper look at nonprofit financial stewardship and share five indispensable elements that every organization needs to realize its vision.

Financial stewardship defined

Nonprofits exist to accomplish specific missions. Proper financial governance means that resources must be well-protected and used efficiently to accomplish those goals. Long-term organizational sustainability is another important facet of nonprofit management practices. Board members carry this fiduciary responsibility and must ensure that the organization’s leadership fulfills all regulatory, legal, and reporting requirements of federal, state, and local governments, as well as meeting accounting guidelines and standards specific to the industry. Every nonprofit must also comply with donor restrictions on the use of their contributions.

It’s a complex undertaking and to do it well, it requires cohesive financial management with some specific characteristics:

  • Robust internal controls: To preserve financial resources and protect them from fraud or misappropriation, ample safeguards have to be established for the handing of cash and other assets. For example, no single individual should handle all aspects of a transaction from beginning to end. Proper checks and balances can be achieved by segregating these duties. Controls should be established and maintained over the authorization, recording, processing, and reporting of all transactions and events. 
  • Transparency:  It’s become increasingly important for nonprofits of all sizes to maintain openness and transparency regarding their operations. While they’re required to file an annual information return (Form 990) and tax exemption documents must be made available to the public, leaders should consider sharing more about financial information with stakeholders, including donors, board, staff, and volunteers. When people understand the organization’s financial health on a deeper level, they become more engaged and committed to being a part of its success. 
  • Real-time financials: To effectively streamline funding so that as much as possible goes toward programmatic efforts rather than administrative costs, it requires accurate, real-time operational information that allows the best decision-making. Timely financial statements can provide a realistic assessment of where resources are going, as well as how much and what types of revenue are coming in.
  • Thorough documentation: Nonprofits are dynamic and ever-changing. By documenting existing processes and systems for internal controls and regularly updating these protocols, it reduces the risk of errors that can impact operations, reduce efficiency, and erode trust.
  • Specialized partners: When it comes to vendors, nonprofit specialists can be excellent sources of new technologies, best practices, and valuable enhancements. Vendors who primarily support commercial organizations may not fully understand the nuances of the nonprofit landscape and may not be as adept at providing proper support amid ongoing regulatory changes.

It’s virtually impossible to deliver on your mission when your operations are inefficient.  For more than 20 years, IBC has been helping nonprofits realize more rewarding futures. To find out how our strategic technology solutions can propel your organization forward, please contact our knowledgeable team. 

About IBC: At IBC, we have a deep understanding of the critical business needs and processes specific to associations, non-profits, and unions. We ‘get’ your culture, your goals, and what drives you, too. Focused exclusively on and dedicated to delivering the most effective AMS, LMS, and Cloud Financial Software for our clients, we’re well-versed in identifying and applying the integration techniques that will save you time and money. Since 2001, our cutting-edge products, unparalleled responsiveness, and award-winning services have helped organizations like yours increase their operational and financial performance by leveraging best practices and proven solutions. For more information about IBC, please visit the website at or call 443.603.0215.

email user
Want More Content Like This?
Sign up to receive tech tips. It’ll make you feel better!