Accountability is the management of resources, services, and internal processes for the purpose of serving the public trust, which is the ultimate mandate of a nonprofit organization. To be fully effective, accountability principles should go beyond formal rules and be incorporated, explicitly or implicitly, into the strategic planning of nonprofit organizations. (From Kevin Kearns' Accountability Concepts and Controversies: Historical Precedents and Contemporary Trends, 1996.)
A voluntary report issued by a nonprofit organization to provide an annual accounting of program and financial accomplishments to its constituents. Annual reports are important tools for a potential donor to assess the performance of organizations. They often consist of four parts: Chairman of the Board and Chief Executive letter; description of the charities’ mission, actions, and accomplishments; financial statements; and directors and officers.
One of the key sections is the description section. It should state clearly what the organization has accomplished and whom it supports. The list of directors and officers is useful to give some idea of who is associated with the organization. Finally, the income statement included in the financial statement section has to be carefully evaluated. The Charities Review Council of Minnesota recommends that organizations spend at least 70% of annual expenses on program activities.
A gift of personal property or money through a will, given to an organization upon the death of the donor.
Board of directors/trustees
Governing board of a nonprofit organization responsible for formulating the organization’s strategy, ensuring and effectively managing financial resources, and overseeing the chief executive. Boards hold management accountable for performance. Board members are, in turn, accountable to donors and to official regulators such as the IRS and state charity officials.
Unlike the board of directors in a business venture, nonprofit governing boards are not owners but rather stewards, with the responsibility to pursue the goals of the organization as well as the interests of the public and the organization’s intended beneficiaries.
While there are many different kinds of funds that can be established, donor-advised funds enable those who establish them to contribute personal assets into the funds at any time, dedicated for eventual release for charitable purpose. Donors can also recommend that grants be made from the fund to qualified nonprofit groups in any amount and at any time, anywhere in the world. They are the fastest-growing charitable giving vehicle in United States.
A permanent fund invested by a charitable organization to provide income for continued support of the organization.
An entity that is funded by an endowment or donation with the purpose of making grants to charitable organizations. Foundations are regulated by a set of complex tax laws that differ for private and public foundations.
Private foundations typically derive their funds primarily from one source, whereas public foundations must rely on multiple sources of support to retain public status. Private foundations can be further classified into corporate foundations and family foundations. A corporate foundation is a foundation that derives its income from the profit-making parent company but is an independent legal entity. Family foundations derive their income from members of a single family. Family members often serve on the board and have a significant role in grantmaking decisions. Public foundations can be defined as community foundations if they make grants for charitable purposes in a specific community or region. They are the fastest growing sector of philanthropy in the United States.
Standards of conduct that prescribe how a philanthropic organization should conduct its fundraising and donor relationship activities, promoting the interests of the organization while respecting the rights and dignity of donors and the voluntary nature of philanthropy. Codes of ethics provide assurance to donors that they will be treated with professionalism.
A non-monetary contribution by individuals or organizations -- including equipment, property, services, space, or time.
A gift made on condition that it be matched within a certain period. Also a gift by a corporation matching a gift by one of its employees.
A corporation or association formed for the primary purpose of providing services to a set of constituents and whose profits may not accrue to the benefit of any shareholder or individual.
Actively promoting human welfare through charitable aid or donations.
A gift made during the donor's lifetime, but whose principal benefits do not accrue to the charitable institution until some future time, usually at the death of the donor.
A written or oral agreement to donate funds within a specified period of time. The promise to give can be either conditional or unconditional.
Responsibility for taking good care of resources entrusted to an organization’s care. In a nonprofit context, stewardship is a key dimension of accountability and implies all of the following:
- To govern and manage in a responsible manner;
- To generate adequate resources, manage resources effectively, support and recognize volunteers, and appropriately compensate staff;
- To avoid conflict of interest and abuse of power.
Tax exemption is not an entitlement but a privilege given to nonprofit organizations that meet the requirements set by the IRS and continuously do so. The fact that a nonprofit is tax exempt does not necessarily mean that donations to it are tax-deductible. With some exceptions, the nonprofit has to be registered as a 501 (c) (3) entity in order for donations to be deductible. To preserve tax-exempt status, a nonprofit needs to meet certain requirements, including adhering to its mission and filing an annual tax return with the IRS, called Form 990.