You might be tempted to think that “accountability” is just the latest in a long line of management buzzwords. But if properly embraced, it can transform an organization. When nonprofit leaders consistently own outcomes (whether successes or setbacks), they foster a proactive mindset that anticipates challenges and addresses them head-on. The result? Stronger performance, healthier governance and deeper trust among stakeholders.

Foundational compliance

Accountability starts with following all applicable laws and rules for your nonprofit. Make sure new hires and board members understand these requirements as well as your organization’s code of conduct. Ask employees and board members to sign a code of ethics — and hold them to it.

As your organization pursues its mission, it must do so in the best interests of its constituents and community. Your status as a nonprofit means you’re obligated to use your resources to support your mission and benefit the community you serve. Evaluate programs accordingly, both in terms of their activities and their outcomes.

Top-down governance

There can be no accountability without good governance. This begins with your nonprofit’s executives and managers, who must take ownership of both failures and successes. But ultimately, governance is your board’s responsibility. Your board needs to understand the importance of its fiduciary duty and focus on the big picture, not the process-oriented details best handled at the staff or committee level.

For example, management might prepare internal financial statements and review performance against approved budgets on a quarterly basis. But it should present these statements to the board (or its audit or finance committee) for review and approval. Your board is also responsible for establishing and regularly assessing financial performance measurements.

Clear communication

Communication is a big part of accountability. Your annual report, for example, is designed to summarize the year’s activities and detail your nonprofit’s financial position. But the report’s list of board members, management staff and other key employees can be just as important. Stakeholders want to be able to assign responsibility for results to actual people.

Your nonprofit’s Form 990 also provides the public with an overview of your programs, finances, governance, compliance and compensation methods. Notably, charity watchdog groups use Form 990 information to help evaluate nonprofits in such areas as fiscal responsibility and charitable impact.

Accountability in action

When accountability becomes part of your nonprofit’s culture, the benefits ripple throughout the organization. Trust grows, collaboration improves and mission-driven results become more consistent. By contrast, weak accountability can undermine credibility, fundraising efforts and service delivery. Making accountability a visible, ongoing priority helps position your nonprofit for long-term success.

© 2026

For nonprofit boards, 2026 looks to be a year of difficult questions. How do you encourage donor confidence amid economic uncertainty? Should you embrace artificial intelligence (AI) technology? If so, how do you do so responsibly while guarding against increasingly complex fraud risks? And behind all of this, one foundational question continues to challenge many nonprofits: How big should your board be? Understanding the pros and cons of small vs. large boards can help you design a sustainably sized governing body that’s equipped to engage whatever comes your way this year.

The trade-offs at each end of the spectrum

Both small and large boards come with perks and drawbacks. For example, smaller boards often facilitate easier communication and greater cohesiveness among members. Scheduling is less complicated, and meetings tend to be shorter and more focused. Several studies have shown that collective decision-making is most effective when the group comprises five to eight people. But boards on the smaller end of this range may lack the experience or diversity needed to facilitate healthy deliberation and debate. What’s more, members may feel overworked and burn out easily.

Larger boards, by contrast, can spread the workload more evenly, reducing burnout, increasing sustainability, and expanding an organization’s reach and fundraising network. Large boards also may include more perspectives and a broader base of professional expertise — financial, legal, community outreach and more. At the same time, large boards may struggle with engagement if members feel disconnected from decision-making or unclear about their roles. Larger boards also require more staffing support to manage onboarding, communications, logistics and more.

There’s no magic number

State law generally sets a minimum number of directors for nonprofit organizations. But beyond that baseline, board size is essentially a governance choice. When forming or resizing a board, nonprofit leaders should carefully consider director responsibilities, required skills and expertise, fundraising expectations, and staffing resources. A board that’s too small or too large relative to these factors can struggle to fulfill its fiduciary and strategic duties.

And while there’s a touch of wisdom in settling on an uneven number of board members (to avoid 50/50 votes), keep in mind that your board chair can break a tie when appropriate. Moreover, a split vote often signals that an issue deserves deeper exploration rather than a rushed decision.

Designing for strong governance

From a governance standpoint, growing a board is usually easier than shrinking one. Asking directors to step down can be uncomfortable, and reducing board size may require amendments to an organization’s bylaws. Many nonprofits benefit from defining a range for board size — rather than a fixed number — in their governing documents. This approach sets clear expectations while allowing for flexibility as the organization evolves. Ultimately, the “right” board size is that which supports thoughtful decision-making, meaningful engagement and long-term mission success.

© 2026

Tension between Accounting and Development teams is more than a simple workplace issue. It can have real financial consequences for a nonprofit organization. Misaligned processes and poor communication can affect financial reporting, compliance and even grant funding. Strengthening coordination between these departments may require refining procedures and fostering collaboration.

Speaking different financial languages

The first step is to ensure staff understand that the two departments often record financial information differently. Accounting typically records contributions, grants, donations and pledges in accordance with Generally Accepted Accounting Principles (GAAP). Development, meanwhile, may use cash basis accounting. This means that the two departments may produce different — but correct — sets of numbers.

For example, a donor makes a payment in February 2026 for a pledge made in December 2025. Development enters the payment amount as a receipt in its donor database in February. But Accounting records the payment against the pledge receivable that was recorded as revenue when the pledge was made in December. Receipt of the check doesn’t generate any new revenue in February because accounting recorded the revenue in December. Although each department’s records for February (and December) differ, they’re both accurate.

Building stronger connections

To truly collaborate, Accounting and Development should reconcile schedules at least monthly. If, for example, Development fails to inform Accounting about grants in a timely manner, Accounting won’t be aware of the grants’ financial reporting requirements, and your nonprofit could ultimately forfeit funds for noncompliance. Similarly, if Accounting doesn’t have the necessary information from Development to record grants or pledges in the proper financial period according to GAAP, your organization could face significant issues during an audit, also jeopardizing funding.

Schedule meetings so that Accounting can educate Development about what information it needs, when it needs it and the consequences of not receiving that information. For its part, Development should provide Accounting with ample notice about prospective activity, such as pending grant applications and proposed capital campaigns. Development should also present status reports on different types of giving — including gifts, grants and pledges. This is especially important for items received in multiple payments, because Accounting may need to discount them when recording them on the financial statements.

Creating a framework for ongoing coordination

When communication gaps persist or resistance to progress arises, it may be time to formalize expectations. Establishing clear policies and procedures can promote timely information sharing, strengthen compliance and protect funding. We can assist in designing and implementing a collaboration framework that helps ensure your Accounting and Development teams work together effectively.

© 2026

With cost-of-living concerns, interest rates and federal funding cuts continuing to be prominent in the headlines, many nonprofit leaders are understandably focused on external economic pressures. Yet some of the most serious threats to an organization’s financial stability don’t come from the broader economy — they originate within the organization itself. Executives and board members alike should stay alert to the following internal red flags that may signal deeper financial or governance issues.

Budget variances without clear reasons

After your board of directors approves a budget, it should be monitored for variances. Although some variances are to be expected, your staff should be able to provide reasonable explanations — such as funding changes or macroeconomic factors — for significant discrepancies. Where necessary, work to mitigate negative variances by, for example, cutting expenses.

Additionally, beware of overspending in one program funded by another, dipping into operational reserves or engaging in unplanned borrowing. These, plus the need to draw from your nonprofit’s endowment for funding, may mark the beginning of a financially unsustainable cycle.

Decreased donor confidence and giving

Let’s say your nonprofit has been receiving fewer and smaller donations lately. Then you start hearing from long-standing supporters that they’re losing confidence in your organization. Investigate immediately. Ask supporters what they’re seeing or hearing that prompts their concerns.

Also note when development staff approaches major donors outside of the usual fundraising cycle. This could mean your nonprofit is scrambling for cash.

Incomplete or noncompliant financial reporting

If your financial statements are untimely and inconsistent or aren’t prepared using U.S. Generally Accepted Accounting Principles, you could be heading for trouble. Poor financial statements can lead to poor decision-making and undermine your nonprofit’s reputation. They can also make it difficult to secure funding.

Insist on professionally prepared statements as well as annual audits. Members of your organization’s audit committee should communicate directly with auditors before and during the process. All board members should have the opportunity to review and question the audit report.

Unchecked executive authority

Even the most experienced and knowledgeable nonprofit executive director shouldn’t have absolute power. Your board needs to step in if an executive ignores expense limits or violates other rules of good fiscal management. The board should also question any executive who attempts to select a new auditor or make strategic decisions without board input.

How to respond

Nonprofits rarely encounter financial trouble overnight. Problems usually develop gradually, with early indicators that are easy to overlook or explain away. By paying close attention to budget discipline, donor trends, financial reporting and leadership accountability, boards and executives can identify risks early and take corrective action.

If any of these red flags sound familiar, now is the time to act. We can help you engage your board, strengthen your internal controls and review any financial and governance warning signs before they become deeper issues.

© 2026

In general, not-for-profits should work with professional financial advisors to ensure they’re complying with the IRS’s rules for tax-exempt organizations and effectively managing budgets, endowments and other financial functions. At the same time, your executives and board members need to regularly monitor financial indicators.

Certain ratios can provide early warnings that, for example, your nonprofit is overspending on fundraising, inefficiently managing cash flow or could benefit from a larger operating reserves cushion. Keeping an eye on financial ratios can also tip you off to potential fraud in your organization. Here’s a short summary of four key ratios and what they can reveal.

Spending numbers

The first ratio is the percentage spent on program activities. It indicates how much of your total budget is used to provide direct services. To calculate this ratio, divide your total program service expenses by total expenses. A result higher than 65% is widely considered to be good, and 85% and above is usually excellent.

Percentage spent on fundraising is the second critical number. It represents how much you spend to raise a dollar and is a prime indicator of overall fiscal health. To calculate it, divide total fundraising expenses by contributions. The standard benchmark for fundraising and administrative expenses is 35%.

Current and reserve percentages

The current ratio represents your nonprofit’s ability to pay its bills, providing a snapshot of financial conditions at any given time. To calculate your current ratio, divide current assets by current liabilities. Typically, this ratio should be at least 1:1.

Then there’s the reserve ratio. This tells you whether your organization is capable of sustaining programs and services during temporary revenue and expense fluctuations. To calculate your nonprofit’s reserve ratio, divide expendable net assets (unrestricted and temporarily restricted net assets less net investment in property and equipment and less any nonexpendable components) by one day’s expenses (total annual expenses divided by 365). For most organizations, this number should be between 90 and 180 days. Base your target on the nature of your operations, your program commitments and the predictability of funding sources.

Other options

Depending on your niche and mission, there may be additional ratios your nonprofit should monitor. For example, a revenue diversification ratio can tell you how much of your funding depends on a single source (no one source should provide more than 30%). Similarly, a government reliance ratio can expose a dependence on potentially insecure grants. To learn more about these and other tools for effective nonprofit management, contact us.

© 2025