Sammy - Your NonProfit Advocate.
First let’s start by finding out what are internal controls, and why they are so important? At the very least they are established protocols that help bring order and cohesiveness to your small business or organization. Good controls can go a step further to help protect against error, fraud, and theft.
An organization must to establish good controls to ensure that board members and officers understand their financial responsibilities, that assets are managed properly, and the purpose of the organization is being carried out.
There are some very easy things that can be done in this area to help protect your organization.
That is all well and good but how does a small organization do all of this? First, take a hard look at your organization. Do you write checks? Where are the checks stored? They should be locked when they are not being used. Do you have account numbers, passwords, etc.? How are they stored? How easily would it be for someone to get to? Start there and make small changes to protect the physical assets of the organization.
I have heard too many stories of trusted employees and advisors writing themselves a large check and cashing it. This could be a big enough impact to shut down the organization. Let’s be sure this does not happen in your organization.
An organization must to establish good controls to ensure that board members and officers understand their financial responsibilities, that assets are managed properly, and the purpose of the organization is being carried out.
There are some very easy things that can be done in this area to help protect your organization.
- Pay Attention: If you are looking at the financial accounts, reviewing how things are being coded and asking questions, then it will be easy for you to find things that are wrong or questionable.
- Keep your contributors and member informed. Where does their money go? Regular reports of monies received and spent helps to reduce the likelihood for fraudulent activity.
- Get your members and contributors involved. Great, now we have regular reports but what good are they if no one is really paying attention to them?
- Divide duties around collecting and spending money. This is called separation of duties. The easiest way for someone to take money is to be able to collect, spend, and record the transactions. If someone is writing a check, then another person should be signing and delivering the check.
That is all well and good but how does a small organization do all of this? First, take a hard look at your organization. Do you write checks? Where are the checks stored? They should be locked when they are not being used. Do you have account numbers, passwords, etc.? How are they stored? How easily would it be for someone to get to? Start there and make small changes to protect the physical assets of the organization.
I have heard too many stories of trusted employees and advisors writing themselves a large check and cashing it. This could be a big enough impact to shut down the organization. Let’s be sure this does not happen in your organization.