Good reporting starts with good record keeping, and good record keeping starts with one thing:

Have the courage of your convictions.

This means you record every penny. No “extra budgetary” projects, meaning they don’t show up on your official budget and are hidden under obtuse line item designations. If you, your board, and your staff think it’s important enough to invest in, then it’s important enough to fess up about. If there’s a project or line item that gives you the willies when it comes to recording, let alone reporting, you shouldn’t be doing it.

So, your books are honest and transparent, who, exactly is seeing them?

Your actual books, be it a 20-column ledger a la Bob Cratchit or the latest version of Quick Books, only you, senior staff and your board treasurer need to see, and I’m on the fence about the staff. These are your working documents, subject to revision and consideration. They need to be honest, they need to be real. What they don’t need to be is public.

Of the staff, the Executive Director, Business Manager and Development Director (assuming you possess these luxuries) need to have access to all reporting functions, although only the person acting as Business Manager should have authority to make actual entries. Anyone with authority to spend money should be able to see both their department’s budget and real-time use—income and outgo—on their projects or department. (Yes, there are organizations that don’t give their department managers budgets to work from. I’ve had clients who told me my goal was to “raise as much money as you can” and gave me blank looks when I asked what my expenses budget was. Or who confused a bank statement with a budget.)

Public disclosure of certain annual documents is both statutory and ethical. As a public charity, the public has a right to know how you’re spending their money. But the only reports they really need to see are your government forms—your 990—and your audit, if you get one. Everyone is required to report to the IRS, but not all nfps are required to have an audit. It varies from state to state and depends on revenue levels. Some states require audit over a certain total revenue, some for gift-revenue measures only. Check with your state’s Secretary of State or Attorney General site.

The IRS990 and your audit are public documents. Organizations with a 501-c-3 designation must release them for the asking, by law. You can put up barriers to this by making people fill out forms and go through specific processes, but what’s the point. You just look suspicious, and it’s on GuideStar anyway.

Many funders require that applicants submit their most recent audit and/or 990 and/or most recent P&L. While you are not required by law to release a P&L, again, what’s the point of objecting. It will cost you the funding. Do not reformat your P&L, just present it the way your accounting software prints it out.

Any budgets that you submit must align with the numbers in these documents. (Don’t laugh. People really don’t understand this.)

There is a new online tool for arts organizations, available in nine states and under development in more than a dozen more, called the Cultural Data Project (CDP). A web-based data-collection application, it offers agencies and funders standardized financial data collection, professional-looking reliable reports, and longitudinal data and metrics based on actual audit/990 numbers. State arts agencies, foundations like the John D. and Catherine T. MacArthur Foundation and others are increasingly requiring applicants to use this site in the states where it is available.

One of the best uses of the CDP is in annual reports. Because it is audit-based, the numbers are unassailable, and the reports are beautifully designed, by which I mean they look nice, even nicer than your intern who is good with computers can do.

The biggest impediment to clean, proper financial reporting is not lack of fiscal acumen. It is fear of being a businessperson. You’re an artist or a social activist, and the business side of things seems distracting, if not downright suspicious.

But that’s how a lot of donors and businesspeople view the artistic or social side of your project. Meet them halfway by speaking their language financially and by reporting honestly, and everyone wins.