Are Charities Managing Expenses Charitably?

In a recent comprehensive study conducted by the Independent Expert Group on Expenses, one out of every five charities answering survey questions posed by IEG stated that they "did not have an expense policy established.“ Response comments provided by IEG indicated that the Group considered "expense management part of basic internal controls and good governance" and further stated that "charities need to be encouraged to rectify this matter.”

To remain successful and valid as a charitable organization, IEG recommends charities consider expense report software to enhance the transparency of their financial reports. Because charity expenses are consistently scrutinized by donors and agency directors, the advantages to using analytically tuned invoice management and expense management software are numerous and ultimately essential to avoiding the backlash produced by costly errors and financial mismanagement.

The state of a non-profit organization's administrative costs is considered the fundamental indicator of its financial health. Traditionally, this target has been administrative costs at or below 25 percent, indicating a charity has some fiscally responsible expense management practices in place. Fortunately, the growth of cloud-based expense management software hosted on the Internet offers charities a low cost opportunity to become even more financially responsible and transparent around their expenses.

When choosing expense management software, non-profits and NGOs should focus on software that provides the following services:

• Simple yet effective user-focused layout
• Integration of RIA (rich internet application) technology
• Unlimited accessibility through internet connections and smartphone/mobile devices
• Offers a SaaS platform complete with expert assistance and an already configured system accommodating your charity's specific needs.
• Capable of globalized expenditure tracking
• Option to "pay as you go" for use of software

Software as a service (SaaS) is the preferred method of delivering many business applications focused on accounting, management information, invoicing and collaboration activities within organizations. Moreover, charitable agencies are discovering just how much SaaS can substantially reduce the high cost of IT support and decrease or even eliminate the maintenance of in-house software.

In addition to managing expenses as efficiently as possible, compliance with IRS guidelines governing the operation of a charitable organization can be problematic when expense management methods used are outdated and inconclusive. Agencies may suffer from IRS-ordered audits that jeopardize their status as a tax-exempt entity and see negative hits to their reputation and a decline in donations.

Do you manage expenses for your charity? Thoughts to share? Let us know the good and the bad in the comments section below.