Financial Management Policy | Village Hope Interna

Village Hope International: Financial Management Policy

01. Introduction

Village Hope International (VHI) is a registered 501(c)(3) nonprofit organization headquartered in North Hollywood, California. VHI is dedicated to transforming the lives of vulnerable children and their Families by providing access to formal education and modern healthcare services, both in the United States and internationally.

This Financial Management Policy establishes the principles, standards, and procedures that govern all financial activities within the organization. It reflects VHI’s commitment to:

Transparency in financial reporting and donor communications.
Accountability in the stewardship of funds and resources.
Compliance with applicable federal laws, California state regulations, and generally accepted accounting principles (GAAP).
Efficiency in financial operations to support programmatic impact and organizational sustainability

This policy incorporates updated practices that align with current nonprofit governance standards. It serves as the primary reference for financial decision-making, internal controls, and operational consistency across all departments and programs.

In the event of any conflict between this policy and other internal documents, the provisions outlined herein shall take precedence.

02. Updating the Financial Management Policy

Responsibility for reviewing and updating the Financial Management Policy rests with the Finance Committee, which shall include representatives from the finance and accounting team, relevant program leadership, and be subject to final approval by the Executive Director or designated officer of Village Hope International.

To ensure continued relevance, accuracy, and compliance with applicable laws and regulations, the Finance Committee shall:

Maintain the policy in an up-to-date format, reflecting changes in federal and California nonprofit regulations, accounting standards, and internal operational needs.
Ensure that the policy continues to clearly define procedures governing financial systems, controls, and reporting practices.
Guarantee that current versions of the policy are readily accessible to all relevant staff, board members, and external auditors.
Properly authorize and promptly communicate any amendments to all affected parties, including maintaining a distribution log of recipients to ensure timely updates.

Policy amendments shall be reviewed at least annually or as needed to reflect regulatory changes, audit findings, or organizational growth. Each amendment must be assigned a unique reference code and effective date. The Finance Manager is responsible for verifying that all issued procedures are accurately updated and that obsolete versions are archived appropriately.

03. Internal Controls and Board Oversight

Village Hope International is committed to maintaining strong internal controls to safeguard assets, ensure accurate financial reporting, and uphold donor trust. These controls are designed to comply with U.S. nonprofit regulations, including IRS guidelines and Generally Accepted Accounting Principles (GAAP).

Internal Controls Framework

The organization shall implement and regularly review the following internal control measures:

Segregation of Duties: Key financial responsibilities such as authorization, custody, and recordkeeping shall be assigned to separate individuals to prevent misuse or error.
Authorization Protocols: All financial transactions must be approved by designated personnel in accordance with board-approved limits and documented procedures.
Bank Reconciliations: Monthly reconciliations of all bank accounts shall be performed by the Finance Manager and reviewed by a senior officer not involved in day-to-day cash handling.
Expense Documentation: All disbursements must be supported by original receipts, invoices, or contracts, and coded to appropriate budget lines.
Restricted Funds Management: Donor-restricted funds shall be tracked separately and used strictly in accordance with donor intent.
Audit Trail: A clear audit trail shall be maintained for all financial transactions, including digital and paper records, to support transparency and accountability.

Board Oversight Responsibilities

The Board of Directors plays a critical role in financial governance and oversight. Their responsibilities include:

Policy Approval: Reviewing and approving the Financial Management Policy and any subsequent amendments.
Budget Oversight: Approving the annual budget and monitoring financial performance against projections.
Audit Engagement: Appointing an independent auditor to conduct annual financial audits and reviewing audit findings.
Conflict of Interest Monitoring: Ensuring all board members and senior staff annually disclose potential conflicts of interest and abstain from related decision-making.
Compliance Assurance: Confirming that Village Hope International complies with all federal, state, and local nonprofit regulations, including IRS Form 990 filing requirements.

The Board shall receive quarterly financial reports prepared by the Finance Manager and reviewed by the Executive Director. These reports shall include income and expense summaries, budget variances, and updates on restricted funds and grant compliance.

04. Financial Reporting and Donor Transparency

Village Hope International is committed to transparent, timely, and accurate financial reporting that reflects faithful stewardship of resources and builds lasting trust with donors, partners, and regulatory bodies.

Financial Reporting Standards

All financial reports shall be prepared in accordance with:

Generally Accepted Accounting Principles (GAAP) as applicable to nonprofit organizations in the United States.
IRS requirements, including timely filing of Form 990 and related schedules.
State-level reporting obligations, including California Attorney General’s Registry of Charitable Trusts filings.
Grantor and donor-specific reporting formats, where applicable.
The Finance Manager shall prepare monthly internal financial statements, including:
Statement of Financial Position (Balance Sheet).
Statement of Activities (Income and Expense Report).
Budget-to-actual comparisons.
Cash flow summaries.
Restricted funds tracking and grant utilization reports.

These reports shall be reviewed by the Executive Director and presented to the Board of Directors on a quarterly basis, or more frequently as needed.

Donor Transparency and Stewardship

Village Hope International recognizes that financial transparency is a spiritual and ethical responsibility. To honor donor intent and foster confidence, the organization shall:

Provide timely acknowledgments for all contributions, including IRS-compliant receipts for tax-deductible gifts.
Report on impact and fund utilization through quarterly donor updates, annual reports, and campaign-specific summaries.
Maintain clear records of donor-restricted funds and ensure they are used solely for designated purposes.
Publish key financial documents, including audited financial statements and Form 990, on the organization’s website or upon request.
Respond promptly to donor inquiries regarding financial stewardship, program outcomes, and organizational governance.

The Executive Director, in collaboration with the Finance Manager and Development Team, shall ensure that all donor financial communications are accurate, mission-aligned, and reflect the values of integrity, accountability, and compassion.

05. Grant Compliance and Fund Allocation

Village Hope International receives funding from a variety of sources, including private donors, foundations, corporate partners, and government agencies. To ensure responsible stewardship and compliance with all grantor requirements, the organization maintains rigorous standards for grant management and fund allocation.

Grant Compliance Protocols

All grants awarded to Village Hope International shall be managed in accordance with:

Terms and conditions outlined in the grant agreement or contract.
Federal and state regulations, including the Uniform Guidance for federal awards (2 CFR Part 200) when applicable.
Donor restrictions, including purpose-specific use, reporting timelines, and allowable costs.
Internal controls that prevent misuse, duplication, or misallocation of grant funds.

The Finance Manager, in collaboration with program leads, shall ensure that:

Grant budgets are developed and approved prior to fund disbursement.
Expenses are tracked against approved budget lines and coded appropriately.
Required financial and programmatic reports are submitted on time and in the format requested by the grantor.
Supporting documentation is maintained for all expenditures, including invoices, receipts, payroll records, and procurement files.
Any deviations from the grant agreement are documented and communicated to the grantor for approval

Fund Allocation and Budget Integrity

Village Hope International allocates funds based on strategic priorities, program needs, and donor intent. The organization shall:

Develop annual budgets that reflect projected income, programmatic goals, and administrative costs.
Allocate restricted funds strictly in accordance with donor or grantor specifications.
Monitor budget performance monthly and adjust allocations as needed with appropriate approvals.
Avoid commingling of restricted and unrestricted funds to ensure clear tracking and reporting.
Maintain reserve funds when possible, to support financial sustainability and risk mitigation.

All fund allocations shall be reviewed by the Executive Director and approved by the Board of Directors as part of the annual budgeting process. Adjustments to allocations during the fiscal year must be documented and justified through formal budget amendments.

06. Procurement and Expense Authorization

Village Hope International is committed to ensuring that all procurement and expense activities are conducted in a manner that is ethical, cost-effective, and compliant with applicable laws and donor requirements. This section outlines the procedures for purchasing goods and services, authorizing expenditure, and maintaining financial integrity across all programs and departments.

Procurement Standards

Procurement activities shall be guided by the principles of fairness, transparency, and value for money. All purchases must:

Be necessary for programmatic or operational purposes.
Align with approved budgets and funding restrictions.
Follow competitive bidding or vendor selection procedures when applicable.
Be supported by written documentation, including purchase orders, contracts, and vendor invoices.
Comply with federal procurement standards when using government or grant funds (e.g., 2 CFR §200.318–326 for federal awards)

The Finance Manager, in collaboration with program leads, shall oversee procurement planning and ensure that all purchases are properly documented and recorded.

Expense Authorization Protocols

All expenses must be authorized in advance by designated personnel, in accordance with the organization’s approval hierarchy and budgetary limits. Authorization levels are as follows:

Program Coordinators - Up to $ 500 Per Transaction.
Finance Manager - Up to $ 2,500 Per Transaction..
Executive Director - Up to $ 10,000 per Transaction.
Board of Directors - Over $ 10,000 or Non-Budgeted Items.

Additional requirements:

Travel and per diem expenses must be pre-approved and supported by receipts and itineraries.
Capital expenditure (e.g., equipment, vehicles) requires board approval and must be capitalized according to GAAP.
Recurring service contracts (e.g., rent, utilities, professional services) must be reviewed annually and documented with signed agreements.
Credit card usage must follow internal guidelines, with monthly reconciliations and itemized receipts submitted to the Finance Manager.

Unauthorized or undocumented expenses may be subject to reimbursement denial or disciplinary review.

Conflict of Interest and Ethical Conduct

All procurement and expense decisions must be free from conflicts of interest. Staff and board members must disclose any personal or financial relationships with vendors or contractors and recuse themselves from related decisions. Village Hope International prohibits favoritism, kickbacks, and any form of unethical financial conduct.

07. Cash Handling and Banking Procedures

Village Hope International maintains strict controls over cash and banking activities to safeguard assets, ensure accurate financial reporting, and uphold donor and regulatory trust. This section outlines procedures for receiving, depositing, and managing cash and banking transactions.

Cash Receipts and Handling

Cash transactions are minimized whenever possible. When cash is received (e.g., donations, event proceeds), the following procedures apply:

Dual Custody: At least two authorized staff or volunteers must be present during cash collection and counting.
Documentation: All cash receipts must be recorded on a standardized cash receipt form, signed by both custodians.
Timely Deposit: Cash must be deposited into the organization’s bank account within two business days of receipt.
Secure Storage: Until deposited, cash must be stored in a locked, fireproof safe with restricted access.
Reconciliation: Cash receipts must be reconciled against event logs, donation records, or other source documentation by the Finance Manager.

Under no circumstances shall cash be used for direct purchases or held for extended periods.

Banking and Account Management

Village Hope International maintains bank accounts only at federally insured financial institutions. The following controls apply:

Account Authorization: All bank accounts must be approved by the Board of Directors and listed in the organization’s chart of accounts.
Signatory Controls: Each account shall have at least two authorized signatories, with dual signature required for checks over $5,000.
Online Banking Access: Access to online banking platforms is restricted to designated personnel and protected by multi-factor authentication.
Monthly Reconciliation: Bank statements are reconciled monthly by the Finance Manager and reviewed by the Executive Director or Treasurer.
Separation of Duties: Individuals responsible for bank reconciliations shall not be involved in check signing or cash handling.
Changes to banking arrangements must be documented and reported to the board within 30 days.

Petty Cash Policy

Petty cash funds may be maintained for minor operational expenses, subject to the following:

Limit: Petty cash shall not exceed $300 at any location.
Custodian: A designated staff member shall be responsible for petty cash, with a log of all disbursements and replenishments.
Receipts: All petty cash transactions must be supported by itemized receipts and approved by a supervisor.
Reconciliation: Petty cash must be reconciled monthly and replenished through check or electronic transfer, not from incoming cash.

Misuse or undocumented petty cash expenditures may result in disciplinary action.

08. Financial Reporting and Audit Readiness

Village Hope International maintains rigorous financial reporting standards to ensure accuracy, accountability, and readiness for audits, donor reviews, and regulatory inspections. This section outlines the organization’s protocols for preparing financial statements, managing audit processes, and communicating financial performance to stakeholders.

Financial Reporting Standards

All financial reports shall be prepared in accordance with Generally Accepted Accounting Principles (GAAP) and applicable nonprofit regulations. Key reporting practices include:

Monthly Reports: The Finance Manager shall prepare monthly financial statements, including a Statement of Financial Position, Statement of Activities, and Budget-to-Actual Comparison.
Quarterly Board Reports: The Executive Director shall present quarterly financial summaries to the Board of Directors, highlighting trends, variances, and compliance updates.
Restricted Funds Tracking: All donor-restricted funds shall be tracked separately and reported in accordance with donor intent and FASB guidelines.
Functional Expense Allocation: Expenses shall be allocated across program, management, and fundraising categories using a consistent methodology.
Annual Financial Statements: Year-end financials shall be compiled for audit and public disclosure, including IRS Form 990 preparation.

All reports must be reviewed by the Executive Director prior to board presentation or external distribution.

Audit Preparation and Oversight

Village Hope International shall undergo an annual independent financial audit, or financial review if below audit thresholds, to validate financial integrity and compliance. Audit readiness protocols include:

Audit Committee: The Board shall appoint an Audit Committee to oversee auditor selection, engagement, and review of findings.
Pre-Audit Preparation: The Finance Manager shall compile all required documentation, including general ledger, bank reconciliations, grant records, and internal control policies.
Auditor Access: Auditors shall be granted full access to financial records, systems, and personnel as needed.
Management Letter Response: Any findings or recommendations shall be addressed in writing by management and reviewed by the Audit Committee.
Corrective Action Plans: If deficiencies are identified, a corrective action plan shall be developed and implemented within 60 days.

Audit results shall be shared with the full board and made available to donors upon request.

Transparency and Public Disclosure

To promote trust and accountability, Village Hope International does:

Publish annual financial statements and IRS Form 990 on its website.
Respond promptly to donor and regulatory inquiries regarding financial practices.
Maintain open communication with stakeholders regarding financial health, risks, and stewardship practices.

All disclosures must be accurate, timely, and aligned with the organization’s values of integrity and transparency.

09. Internal Controls and Fraud Prevention

Village Hope International maintains a comprehensive system of internal controls to safeguard assets, ensure accurate financial reporting, and prevent fraud, waste, or abuse. These controls are essential to fulfilling the organization’s fiduciary responsibilities and complying with U.S. nonprofit laws, including IRS and California state requirements.

Objectives of Internal Controls

The internal control framework is designed to:

Protect financial and physical assets from loss, theft, or unauthorized use.
Ensure the reliability and accuracy of accounting records and financial reports.
Promote compliance with applicable laws, regulations, and donor agreements.
Support operational efficiency and accountability across all departments.
Detect and prevent errors, irregularities, and fraudulent activity.

Core Control Measures

Village Hope International shall implement the following control mechanisms across all financial functions:

Segregation of Duties: Key financial tasks such as authorization, custody, and recordkeeping shall be assigned to separate individuals to reduce risk of error or fraud.
Dual Authorization: High value transactions (e.g., disbursements of over $5,000) require approval from two authorized signatories.
Access Restrictions: Financial systems, records, and banking platforms shall be protected by secure passwords, user-level permissions, and multi-factor authentication.
Physical Safeguards: Cash, checks, and sensitive documents shall be stored in locked, access-controlled locations.
Monthly Reconciliations: Bank accounts, petty cash, and restricted funds shall be reconciled monthly by the Finance Manager and reviewed by the Executive Director or Treasurer.
Audit Trails: All financial transactions shall be supported by documentation and maintained in accordance with the organization’s record retention policy.

Fraud Prevention and Response

Village Hope International enforces a zero-tolerance policy towards fraud, theft, or financial misconduct. To prevent and respond to such incidents, we implement the following measures:

Code of Ethics: All staff, board members, and volunteers shall adhere to a written code of conduct that includes financial integrity standards.
Conflict of Interest Disclosure: Annual disclosures are required from board members and senior staff, with recusal from decisions involving personal or financial interests.
Whistleblower Protection: A confidential reporting mechanism shall be available for staff and stakeholders to report suspected fraud or misconduct without fear of retaliation.
Incident Investigation: Allegations of fraud shall be promptly investigated by the Executive Director and reported to the Board of Directors. External legal or audit support may be engaged as needed.
Corrective Action: Verified incidents shall result in disciplinary action, restitution efforts, and policy revisions to prevent recurrence.

The Finance Committee shall review the effectiveness of internal controls annually and recommend improvements to the Board of Directors.

10. Record Retention and Document Management

Village Hope International maintains a structured record retention and document management system to ensure that financial, legal, and operational records are preserved in accordance with federal and state laws, donor requirements, and best practices for nonprofit governance.

Record Retention Policy

The organization shall retain records for the minimum periods required by law and longer when necessary to support programmatic, financial, or legal needs. Key retention periods include:

Annual Financial Statements and Audit Reports - Permanent.
IRS Form 990 and Related Filings - Permanent.
General Ledger and Journal Entries - 7 Years.
Bank Statements and Reconciliations - 7 Years.
Payroll Records and Tax Filings - 7 Years.
Grant Agreements and Reports - Duration of Grant + 7 Years.
Donor Record and Contribution Receipts - 7 Years.
Contracts and Vendor Agreements - Duration of Contract +7 Years.
Board Meeting Minutes and Resolutions - Permanent.
Expense Reports and Supporting Receipts - 7 Years.
Petty Cash Logs and Reconciliations - 3 Years.

These retention periods may be extended in the event of litigation, audit, or regulatory inquiry.

Document Management Procedures

To ensure secure and organized recordkeeping, Village Hope International shall:

Maintain both physical and digital records, with secure backups and restricted access.
Use standardized naming conventions and filing protocols to support easy retrieval and audit readiness.
Restrict access to sensitive financial and personnel records to authorized staff only.
Conduct annual reviews of archived records to ensure compliance with retention schedules and identify documents eligible for secure disposal.
Dispose of records securely, using shredding or certified digital deletion methods to protect confidential information

The Finance Manager is responsible for overseeing record retention compliance and coordinating with program leads, administrative staff, and external auditors as needed.

Legal and Regulatory Compliance

Village Hope International’s record retention practices shall comply with:

IRS regulations for charitable organizations.
California Nonprofit Integrity Act.
Federal grant recordkeeping requirements (e.g., 2 CFR §200.333).
Donor and contract-specific documentation obligations.

Failure to retain required records may result in penalties, loss of funding, or reputational harm. Staff are expected to follow all document management protocols and report any concerns to the Executive Director.

11. Policy Implementation and Review

Village Hope International is committed to the effective implementation, monitoring, and periodic review of its Financial Management Policy to ensure ongoing compliance with applicable laws, donor requirements, and nonprofit best practices.

Implementation Responsibilities

The Executive Director, in collaboration with the Finance Manager and Board Treasurer, shall oversee the implementation of this policy across all organizational units. Key responsibilities include:

Communicating policy updates to staff, board members, and relevant stakeholders.
Training personnel on financial procedures, internal controls, and compliance expectations.
Integrating policy provisions into operational workflows, accounting systems, and grant management platforms.
Ensuring alignment with Village Hope International’s strategic goals, donor agreements, and regulatory obligations.

All staff involved in financial activities are expected to adhere to the policy and report any discrepancies or concerns to the Finance Manager.

Monitoring and Compliance

To ensure consistent application and accountability, Village Hope International shall:

Conduct quarterly internal reviews of financial transactions, documentation, and controls.
Maintain a compliance checklist aligned with IRS, GAAP, and federal grant requirements.
Present annual policy compliance reports to the Board of Directors, including findings, corrective actions, and recommendations.
Engage external auditors or consultants as needed to validate adherence and identify areas for improvement.

Noncompliance may result in corrective measures, retraining, or disciplinary action, depending on severity and impact.

Policy Review and Revision

This policy shall be formally reviewed annually by the Finance Committee and updated as necessary to reflect:

Changes in federal, state, or local regulations.
Updates to accounting standards or nonprofit best practices.
Feedback from audits, donor reviews, or operational assessments.
Strategic shifts in Village Hope International’s programs, funding sources, or governance structure.

All revisions shall be documented, approved by the Board of Directors, and communicated promptly to relevant stakeholders. A version history shall be maintained to ensure transparency and traceability.