The Five Core Policies Every Nonprofit Needs
Policies are one of the most effective tools a nonprofit can use to reduce risk and protect its mission. They set expectations, create structure, and provide both the board and staff a framework for making consistent, legally sound decisions. When policies are missing, organizations often end up writing them in response to a problem that has already occurred.
We’ve seen what can happen when nonprofits scramble to create policies following a conflict, a funding issue, or an audit. It’s always more stressful than creating a strong policy foundation from the start.
At a minimum, nonprofit organizations must have written bylaws and a conflict of interest policy to apply for 501(c)(3) status with the IRS. These documents lay the legal and operational groundwork for how the organization functions, from board structure to ethical decision-making.
To build a strong foundation, we recommend developing these five core policy categories.
1. Governance policies
Governance policies define how the board operates, what authority it holds, and how board members are expected to fulfill their responsibilities. This category should include:
• Articles of incorporation and bylaws
• Committee structure and charters
• Conflict of interest policy with an annual disclosure questionnaire
• Whistleblower policy
• Document retention and destruction policies
In addition to bylaws, we recommend creating a governance manual that outlines both board officer roles and committee job descriptions. The most common and effective committees include:
• Governance Committee – Recruits and develops board members. This committee helps avoid common challenges like struggling to find qualified board candidates.
• Finance Committee – Typically chaired by the treasurer, this group reviews financial statements, ensures timely filing of the annual Form 990, and monitors financial health.
• Fundraising or Events Committee – Helps secure revenue through fundraising activities, events, or grant applications, especially in the absence of development staff.
Some organizations also create an executive committee composed of board officers, depending on their size and structure.
Governance policies matter because they help avoid board burnout, ensure long-term leadership stability, and prevent founder’s syndrome, which can occur when a founder or long-term board member has disproportionate power and resists change.
2. Financial policies
Financial policies establish checks and balances that promote transparency, accountability, and compliance with IRS and funder expectations. This category should include:
• Gift acceptance and donor acknowledgment policies
• Budgeting, reporting, and audit procedures
• Check-signing authority and dual-signature thresholds
• Separation of duties and clear role definition for staff and board members
• Record-keeping practices and IRS/state filing requirements
• Record retention and document destruction policies
• Procedures for managing funds received and funds spent
For nonprofits managing or applying for government grants, it is important to understand what federal auditors review. The Office of Inspector General audit reports offer real-world insight into common audit findings and can help organizations ensure their financial policies are comprehensive.
Clear financial policies matter because they help prevent fraud, strengthen board oversight, and support proper fulfillment of fiduciary responsibilities.
3. Employee policies
Whether you have one employee or a growing staff, an employee handbook is essential. These policies outline your legal obligations as an employer and clarify what your team can expect from the organization. These policies should include:
• Hiring and onboarding procedures
• Equal opportunity and nondiscrimination policies
• Paid time off, holidays, and other leave
• Code of conduct and dress code
• Background check and drug testing procedures
• Nepotism policy
• Discipline, termination, and complaint processes
• Training requirements and manager responsibilities
Many HR-related lawsuits stem from inconsistent policies, a lack of training, or unclear expectations. Having the right policies in place is a critical step in managing that risk.
Well-drafted employee policies and an employee handbook protect the organization and create a fair, legally compliant workplace.
4. Volunteer policies
Volunteers need structure and accountability, just like paid staff. Although many policies mirror the employee handbook, they should be adapted for unpaid roles. Volunteer policies should include:
• Minimum age requirements and role descriptions
• Dress code and conduct expectations
• Background check procedures
• Scheduling and communication protocols
• Confidentiality and safety guidelines
• Clear procedures for dismissal
Volunteers should receive a copy of the handbook and sign an acknowledgment form. This documentation helps prevent misunderstandings and protects your team.
Managing volunteers without clear policies can lead to serious conflict. A written volunteer handbook protects everyone involved.
5. Program policies
Program policies are often overlooked, but they are essential for delivering services ethically, safely, and consistently. These policies will vary depending on your mission but often include:
• Eligibility criteria for clients or participants
• Intake and documentation procedures
• Safety protocols for staff and client interactions
• Confidentiality and data privacy practices
• Standards for measuring and reporting outcomes
While your mission is at the heart of what you do, your ability to deliver on that mission depends on having clear, operational structures to support it.
Clear program policies improve service quality, promote equity, and help funders and stakeholders understand how your organization measures success.
Start with the basics
Most nonprofits do not begin with a complete policy framework, but is important to start with some basic policies to create a strong foundation for the organization.
Governance, financial, employee, volunteer, and program policies are the five essential pillars of a healthy nonprofit infrastructure. Without them, organizations often rely on assumptions, which do not hold up under pressure.
Well-written policies create consistency, reduce liability, and support sustainable growth. In many cases, they are also required when applying for grants or managing government funding.
Policies only provide protection when they are followed. Your team should understand what each policy says, know where to find it, and receive training on how to apply it. Review policies regularly, and update them as your organization evolves.
If you are unsure where to start or if you would like a second opinion on your current policies, we are here to help.