Top 5 Financial Elements of Nonprofit Bylaws

The start of a new year is a great time to check in on one of your governing documents- your Bylaws!  Inside of this important document you will find several things that have importance from a financial perspective.   

Purpose Statement

This is the purpose for which the organization exists. It serves as the funnel through which leadership should run ideas for programs and services.  It is easy to let the mission creep into areas that are not part of your defined purpose.  Revisiting this statement will keep you on track and can also identify when to update the bylaws if the mission does expand. 

Leadership structure

The bylaws will define what makes up the leadership of the nonprofit.  This includes defining the board size, how the board members are selected, who serves as the officers, what terms of service exist and committee definitions. 

You will want to focus on two things in this area:

1. Treasurer.  How does this role connect to the board? Is the treasurer a board director, or can it be the leader of the organization?  What roles/responsibilities are stated for the treasurer.
2. Committees.  Is there a defined committee for audit, investment, or finance?  If not, what is the process to create a committee like that, if needed?

Conflict of Interest

The core distinction of a nonprofit organization is the board/leadership cannot profit from the organization.  The conflict of interest policy helps to document that expectation and define how accountability is ensured by the board on an annual basis. Most commonly, the board members will complete a conflict of interest disclosure annually. 

Meeting frequency

The board has a fiduciary duty to oversee the finances and receive financial reports.  What do the bylaws say about board meeting frequency?  Are there stated expectations about timing and frequency the financial reports?  Can meetings happen “virtually”? Can the board make approvals via emails, outside of normal meetings? 

Now is a good time to pause and look at your bylaws.  They provide a great safety net for the organization in financial matters.