MLA from the mountains to the prairies

Financial Management Policy

The MLA Board of Directors has an obligation to act as a responsible steward in managing its financial resources. MLA must comply with all legal financial requirements and adhere to sound accounting principles that ensure fiscal responsibility and build public trust. MLA should use its financial resources to accomplish its missions in an effective, efficient and strategic manner and should establish clear policies and practices to quarterly monitor how funds are used.



  1. MLA has a responsibility to ensure that its assets are used solely for the benefit of the organization and not for personal or other gain.
  2. MLA shall establish an Audit Committee. This Audit Committee shall consist of non-board MLA members who are well-trained and informed to understand financial statements and annual tax filings. The Audit Committee guides the full board to ask questions that enable board members to understand and monitor the financial condition of the organization.
  3. MLA’s Board of Directors annually reviews the percentages of the organization’s resources spent on programs, administration, and fundraising. It is management’s responsibility to meet strategic and budgetary goals set by the board, including the allocation of dollars among these functional categories. The board influences that allocation through its strategic goals and the final approval of the budget.
  4. MLA’s Board of Directors creates, approves, and adopts the organizational budget and operates the organization in accordance with this budget. The budget is regularly reviewed for necessary budget amendments throughout the year, depending on actual results and changes in strategic direction during the year. In the event of unexpected results, the board of directors is made aware of this outcome and participates fully in determining a plan to amend or restore the budget to its approved state.
  5. MLA’s Board of Directors spends an appropriate percentage of its annual budget on programs in pursuance of its mission. Expense allocation represents the mission and activities of MLA. There is a wide range of acceptable expense allocations within MLA’s sector. MLA consults industry and subsector standards to determine an appropriate range for administration and fundraising ratios. MLA also provides sufficient resources for effective administration of the organization and, if the organization solicits contributions, for appropriate fundraising activities. MLA considers relevant industry subsector data to determine the reasonableness of its expense allocations.
  6. MLA’s Board of Directors considers bequests, planned gifts, and pledges when determining the annual budget but does not deploy these dollars for program expenditures until the gift is actualized.
  7. MLA’s Board of Directors establishes and maintains a financial reserve sufficient to sustain its operations for a period of time should a significant loss of funding occur, until replacement funding can be obtained. In addition, budgeting for a financial reserve allows MLA to meet other short- and long-term goals. While three to six months’ reserve is considered a minimum, the target reserve amount is based on a risk assessment rather than an arbitrarily set figure. In addition to risk mitigation, budgeting for a financial reserve is a prudent practice that allows MLA to meet other short- and long-term goals.
  8. MLA’s Board of Directors has written financial policies that are adequate for the size and complexity of the organization and are periodically reviewed and updated. These policies address investment of the assets of the organization, gift acceptance, purchasing, unrestricted current net assets, loans/lines of credit and internal controls to prevent error, fraud, theft or mismanagement.
  9. MLA’s Board of Directors has a board-approved investment policy that outlines the acceptance and use of gifts of appreciated securities and ensures responsible investment of funds in accordance with all legal requirements. The policy shall be periodically reviewed and updated.
  10. MLA’s Board of Directors periodically assesses its risks and purchases appropriate levels of insurance to manage its liability prudently. General liability coverage and Directors and Officers Liability Insurance are strongly recommended. A board-approved risk management policy is developed and then reviewed and updated periodically.
  11. MLA’s Board of Directors must follow legal obligations as stewards of donated funds to expend donated funds responsibly and to ensure the funders’ intent is fulfilled according to funders’ wishes and requirements.
  12. MLA’s Board of Directors follows ethical obligations as stewards of donated funds to expend donated funds responsibly and to ensure the funders’ intent is fulfilled according to funders’ wishes and requirements.
  13. MLA’s Board of Directors develops guidelines for use of donated funds for programs that are subsequently discontinued. These guidelines include a statement that donor will be informed that such redirections may occur as is practical upon acceptance of the bequest/gift.
  14. MLA’s Board of Directors must have a system in place that allows individuals to report misconduct without fear of consequences (commonly referred to as a “whistleblower policy”). Retaliation against whistleblowers or destruction of records related to a government investigation may be in violation of federal law.
  15. MLA’s Board of Directors with board approval and full knowledge of its legal obligations and liabilities, may undertake responsibility for fiscal sponsorship of another organization. (Sheila Cates Scholarship Fund)


  1. MLA’s Board of Directors must annually file an applicable Internal Revenue Service Form 990 according to its annual gross receipts and any state filings as required.
  2. MLA’s Board of Directors performs a meaningful review of Form 990 prior to filing.
  3. MLA’s accounting system tracks functional expenses for reporting on the 990 and generates accurate and relevant financial reports, which include the comparison of actual to budgeted revenue and expense and a year-to-year comparison that identifies and explains any significant variances. These reports are provided to the board of directors for regular review and discussion, preferably no less than quarterly. The full board monitors actual performance against the budget.
  4. When MLA has revenues under $500,000 or exempted by law, considers conducting an outside review of its finances every five years or when there is a change in Executive Director.
  5. The Audit Committee, composed of independent directors, oversees the audit function. The Audit Committee has the opportunity to meet with the auditor without the management of the nonprofit being present. Every member of the Audit Committee must be able to read and understand an external audit or financial review report.
  6. Financial audits and other financial reporting forms are approved by the organization’s board of directors and are verified and certified by the organization’s Executive Director to ensure they are accurate and filed in a timely manner. An organization under the $500,000 threshold, however, meets all requirements of federal, state, local, and/or private granting entities.
  7. MLA is required to make its annual tax returns and tax exemption documents available to the public.

Adopted June 21, 2017

Montana Library Association is a 501(c)3 non-profit organization. PO Box 823, Arlee, MT 59821

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