Board Fiduciary Oversight
Philosophy: A governing board is responsible and accountable for the financial management of the nonprofit.

Standard: The Board of Directors approves an operating budget prior to the beginning of each fiscal year and receives financial reports, at least quarterly, comparing actual to budgeted revenue and expenses.

Use of Funds
Philosophy: A nonprofit should strive to efficiently and effectively use funds to achieve its mission, balancing the need to expend the majority of its funds on current programs with the need to invest in the infrastructure and administrative capacity necessary to carry out its mission over the long-term.

The Council recognizes that there is no optimal balance point between program, administrative and fundraising expenses for all nonprofit organizations.

Standard: At least 65% of the nonprofit’s three-year average annual expenses are used to directly support programming (ideal range is 70% to 90%). On an annual basis the board monitors this ratio and, if necessary, develops a plan to address any shortage of investment in programs, infrastructure or administrative capacity.

Range:

• 65-70% - Meets standard, provides explanation
• 70-90% - Meets standard, no explanation needed
• 90-100% - Meets standard, provides explanation

Financial Health　
Philosophy: A nonprofit should use its resources prudently and maintain a healthy financial picture, including positive unrestricted net assets, which is a leading indicator of financial health. When making a contribution, donors want to know that the organization has the financial strength to pursue its mission on a long-term basis.

Standard: The nonprofit organization:

• Has a gain in unrestricted net assets at least once in the three most recently completed fiscal years;
• Has a positive balance of unrestricted net assets (for current use) at the end of the most recently completed fiscal year.

Balanced Reserves
Philosophy: While a nonprofit should maintain a reasonable level of cash to safeguard against unexpected financial challenges, maintaining excess unrestricted reserves indicates a nonprofit is not maximizing the use of its resources in pursuit of its charitable mission. In such cases, it may not be appropriate to continue soliciting from the public unless it is clear that donations could be held in reserve.

Standard: Unrestricted net assets (for current use) are not more than three times the current or next year’s budgeted operating expenses.

Prohibition of Loans
Philosophy: The financial resources raised and invested by a nonprofit should be used only in support of its mission and not any other purpose. Thus a nonprofit should not provide loans to directors or officers, even if it is legally acceptable.

Standard: The nonprofit neither provides loans or loan guarantees nor relieves a debt or lease obligation for its directors or officers.

Travel and Entertainment Reimbursement Policy
Philosophy: Travel and entertainment expenses should serve a business purpose, be cost-effective, and be properly documented.

Standard: The nonprofit maintains a board and staff policy that describes acceptable travel and entertainment expenses, sets reasonable limits, and sets procedures for reimbursement.