The Importance of a Policy and Procedures Manual [Live from AICPA Not-for-Profit Industry Conference]

A Policy and Procedures Manual is an essential part of a nonprofit’s internal control system. The six key benefits include: Communicates an organization’s culture and commitment to excellence; Simplifies decision-making; Provides a forum to challenge existing practices; Encourages innovative thinking; Promotes consistency and continuity; and, helps to ensure compliance with laws and regulations.

    During a “roll-up your sleeves” interactive workshop at the 2017 AICPA Not-For-Profit Industry Conference in National Harbor, Md., Hilda Polanco, founder and CEO of FMA and Amy West, CFO of AHRC New York City, led a discussion on “Developing a Standard Policies and Procedures Manual.” Some of the key points in their discussion were:

  • Many nonprofit organizations have an out of date, poorly understood and inadequately enforced Policy and Procedures Manual. This is due to an ineffective review and monitoring processes, the failure to involve line staff when developing the Policy and Procedures Manual, lack of consequences for noncompliance, the inability to react quickly to changes in laws and regulations, and the absence of endorsement from the Board and the Executive team.
  • Too often developers of a Policy and Procedures Manual attempt to address every situation resulting in “Death by Perfection.” A Policies and Procedures manual is a dynamic document. Focus on developing core policies first. Policies and procedures can always be added, modified and deleted later;
  • Policies and procedures should be clear and concise. Consider using charts instead of lengthy narratives. Avoid the use of acronyms and flowery language;
  • Implementing a policy that can’t be followed exposes an organization to potential liability and can be harmful during an audit;
  • All employees should know how and where to access policies and procedures and never be placed in the position where they need to ask for them;
  • If policies and procedures are not being followed ask why and consider imposing consequences, further training and changing the policy and procedures
  • When evaluating policy and procedures solicit comments from all levels and encourage open communication. Eliminate policies and procedures that are no longer applicable and consider amending policies and procedures that are not producing the intended outcomes and impact; and,
  • Which policies and procedures to include in the manual depends on the type, size and complexity of an organization. Nonprofit managers should consider but don’t always include the following policies and procedures: Maintaining Operating Reserves, Approach to Creating New Programs and Exiting Programs Operating at a Loss, Saying No to Certain Funding, Media Inquiries, Outsourcing Functional Areas and Activities and Social Media.

A Policy and Procedures Manual is of little use if it remains idle and sits on the shelf or its virtual equivalent. For a Policy and Procedures Manual to be effective it is essential that the document is embraced by staff all levels, is relevant, easily accessible, clear, concise and fully supported by the board, CEO and senior staff.