Internal controls does not mean a convoluted way of doing daily transactions. You do not need to spend a fortune to have good controls at a small environment, including small businesses and nonprofit organizations.  

Below are some more ideas that can be implemented easily:

1- Have bank statements sent to the home of the executive director or a board member who is not involved in accounting. This person can take a quick look at the statement and at copies of checks for any unusual activity. Then he can give the statements to accounting personnel.  Since many use online banking, someone apart from accounting can take a look online at bank transactions, even before statements are mailed out.  

2- Always have two people counting cash. One person can count first while another witness and then the other person counts it, writing down the total and then securing cash with a rubber band and/or an envelope. Keep it in a safe before depositing it in the bank, not in a drawer or in an obvious place. If needed, get a safe and have it bolted to the floor or wall.

3- Wire transfers must be done by two people- one to initiate the transfer and another one to approve it. Both could have passwords or PIN numbers for extra security.  In the case on online payments where the bank pays someone directly, at least one person outside the process should approve this before it is done.  You can set this up with your bank.

4- Petty cash is kept in a safe- again, not in a desk drawer. Thieves know that drawers may contain petty cash and they go there first.  Keep petty cash small and replenish often, checking on receipts.

5- Review bank reconciliations monthly with no delays and look at odd deposits that have not cleared the bank and old checks that are still outstanding.  Check on deposit amounts on the books and on the bank to make sure they are the same. Also, look at checks being cashed to see if the amount and payee make sense. Many online banks allow you to actually see a copy of the check online, which can be very helpful.

6- Give receipts to everyone giving your organization money, specially cash. The receipt book should have duplicates so that the top receipt goes to donor and the copy stays in the book. Depending on the amount, the person receiving the money could sign a receipt to make sure the organization have proper records.

7- If using faxed forms for donations or payments, mark the original faxed page as "Original" in red. This is especially important in credit card donations. Otherwise it is too easy to charge a card multiple times for one donation. Make sure that donors know that faxed forms are NOT to be mailed. A good option here is to handle most cash inflows through a website.

8-People working with cash and accounting should take vacations. Many fraud cases are discovered when the perpetrator is home sick or away and someone else takes over for a few days. It's good to have more than one person trained in certain accounting tasks, so that if something does happen, someone can fit in with minimum training.

9- Make sure your insurance policy covers losses, such as fraud, just in case. This policy should also cover volunteers and part-timers. Be sure to double check with your insurance company regarding any special events or programs that may require a special rider. 

10- Consider getting background checks on everybody handling financial tasks. It's not that expensive and you can decide about hiring the person upon reviewing the background check. These checks are often required by insurance companies, so it's usually not a big deal.

Read about donations details that matter
Read about volunteer retention ideas
Check out 'Nonprofit Finance: A Practical Guide" -- Nominated for the McAdam Book Award
Website: www.webshanker.com


 


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