Category: Nonprofit

Nonprofit Fundraising in our Connected and Modern World

In order to prepare for a nonprofit financial audit or to expand fund development, you will need to be sure that past, current, and future funds raised from fundraising efforts are properly tracked and recorded. Even if you are simply doing an internal audit to prepare for a campaign, it is necessary to take a closer look at funds raised in the past and to be sure that the proper infrastructure is in place to handle a campaign. Beck and Company’s Certified Public Accountants and Business Advisors can give you insight into auditing processes and other nonprofit services. To learn more about audits and for assistance in this nonprofit financial audit process, take a look at our auditing services.

We all know that nonprofit fundraising is extremely valuable and important. Without it, it is likely there will be insufficient funds to meet the needs and service the mission of the organization because nonprofits can no longer rely on ever-decreasing government funds nor on select special events or grants. How, then, can we successfully do it? Fundraising is becoming more focused on individual giving. Being successful with fundraising efforts online is no easy task, but using the technology tools of today to reach individuals can be an important source of funds in a world where nearly everything is transitioning to the web. Here are five important tips for helping you achieve success in raising funds online:

1.       Use multiple social online tools that others are using, too

Yes, there are indeed dozens of social tools available these days. While you would not want to use everything that is available, you should pick and choose as many as you think will work best for your audiences that you are also capable of managing. For example, different people prefer using Facebook pages over Twitter while others would rather follow Twitter feeds. You’ll want your efforts to be widespread so no one is left in the dark and so no possible opportunity is missed. Therefore, invest in the channels and tools that can really help you reach all of your supporters and donors. Remember, use what those people are using. There is no need to jump on the bandwagon of a new social technology tool until your donors are using it, too.

2.       Networking with bloggers that share your organization’s passion is essential

Take time to build a relationship with the MANY bloggers that are out there. You are likely to find numerous blogs and bloggers that will share your nonprofit’s same passion. These connections can translate into easily multiplying efforts by having others with the same passion spread the word through their blogs. They can become your champions and help you raise awareness and donations through their readers and subscribers.

3.       Don’t forget the power of face-to-face

Asking for support in person is still the number one way to achieve a donation for your organization. Use every correspondence and each opportunity when meeting with others in person to direct traffic to your social media channels and sites. This provides a way for new audiences to stay engaged with your cause and what your organization is doing about it.

4.       Be consistent about informing and educating others

Use every opportunity you have whether it be on social media, over email, or in person to educate people on the impact of their donation. This is most powerful and eye-opening if precise and detailed examples are used that clearly depict how their money can make an impact and what it can fund. Use relevant happenings, events, news, and informational studies as an opportunity to educate others about your cause.

5.       Keep it up and don’t lose heart

There is still no guarantee that funds will start pouring in through donations. It can be disheartening to look at your data statistics and wonder why more isn’t coming in. Although all of these online technological advances are powerful, social fundraising still takes time and does not happen immediately. Keep at it, and you’ll see the efforts will pay off over time.

For more information about nonprofit fundraising and the intended outcomes of it through audits, contact us here at Beck and Company CPAs.

Improving your Non-profit’s Public Perception and Transparency

Generally, transparency is considered as something required of entities that are asking for something whether it be politicians seeking votes, companies seeking to build new plants, or non-profit organizations seeking money. Donor transparency can be a useful means of fundraising for these organizations. On the other hand, a lack of transparency can be extremely costly because donors can choose to give their money elsewhere to organizations that are being more transparent. The public is desirous to engage in and give to causes they care about, but this only happens if your organization’s perception is positive and there is honest transparency. This honest transparency works both ways by allowing the potential donor to be transparent and by responding back honestly and transparently as an organization. Beck and Company Certified Public Accountants and Business Advisors offer many non-profit financial and accounting services to assist you in being truly transparent when it comes to your finances.

Donor Transparency

The process of receiving financial support for your non-profit begins by allowing potential donors the freedom to be transparent themselves. Donor transparency means supporters talking candidly about their reasons for considering giving.

This includes:

  • How important is it for a donor to get personal, public recognition for their generosity? It could be extremely important or something to avoid at all costs.
  • Whose approval is necessary before a sizable contributions can be made?
  • The deeply personal motivation behind a gift – which is different for everyone.
  • The kind of connection the donor wants to have with the organization. Some people want to be consulted regularly; others want anything but that.
  • The larger role played by the charity in the donor’s life. Many people become philanthropists because of a life-changing experience.
  • The worries the donor might have about giving. Many donors have concerns about spending, competence, or realistic chances for success, but they are often reluctant to voice them.

Financial Transparency as an Organization

The final point above is extremely important for your non-profit to address with donors. Financial transparency starts with effective and accurate financial reporting. Visit here to find out more about important tips for maintaining financial accountability in your reporting. These include tracking that raised funds were only used for their intended purpose, communicating openly in both good and hard times, maintaining practices that won’t hinder future networking opportunities, and having an infrastructure in place to manage finances well. If potential donors worry that the organization’s spending or financial competence is not up to par, this can be costly in losing the potential donation or future donations from current donors. On the contrary, having updated and accurate financial statements while being honest and open about common practices your organization follows can create needed trust.

When it comes down to it, transparency means trust. Your organization must be financially in good standing with sound business and finance practices in place to be able to secure donations and continue receiving more. Tell the truth to donors and potential donors about your organization, your partnerships, and your goals. Disclose who benefits from your services, how much they receive, and how and when funds are both raised and then disbursed.

In conclusion, no partnership between donors and non-profits can truly get off the ground until both sides have put all of their cards on the table in an honest manner. Donors need to state clearly what they can provide to the campaign and express concerns openly. Organizations need to prove what will be done and gained through these donor provisions. Transparency and positive perceptions will surely strengthen partnerships and cultivate needed trust. Transparency leading to partnerships can only be possible with sound non-profit practices. Please contact Beck and Company CPAs for assistance in making this a reality for your organization.

Financial Checklist for Non-profit Organizations

Non-profit organizations have a duty to be financially responsible and transparent for their board, themselves, their stake holders, and the government. This is no easy task, but a little organization can go a long way in helping non-profits to have success with regards to their finances and financial reports. This week’s focus is on keeping all of the necessary tasks organized and methodical, but you can visit here to learn more general information about what makes up an effective financial report to get you started.

It is easiest to stay current on needed accounting tasks by splitting them into what needs to be done more and less frequently. A checklist can help guide your organization in knowing what tasks need to be done and when to keep financial information up-to-date and ready for needed submissions to the government and people involved in the organization. Beck and Company Certified Public Accountants and Business Advisors can assist you with this and with your ongoing nonprofit and accounting needs.

Daily and Weekly Reminders to Keep at the Forefront

  • Each day’s tasks and meetings are established and prioritized (important ones are done first and others are scheduled around them).
  • The organization’s goals and mission should be reflected in and aligned to the work done.

Monthly Financial Checklist- Focus on the Budget and Collaboration

  • Review and compare budget projections and actual results: This will help you be sure that your revenue is sufficient to take care of expenses and will clarify how last month’s financial activity will impact future months.
  • Make adjustments based on these results: Your review and comparison should lead you to make immediate decisions about future actions based on your data.
  • Trim the budget’s fat: Analyze each line item to cut unnecessary or underutilized expenses.
  • Analyze costs as a team: Meet together as a budget task force to make decisions regarding variable costs to either remove them completely or determine if they should become fixed costs. Focus on budget efficiency without compromising the quality of your organization.
  • Submit grant proposals: Be aggressive in seeking more funding not only to sustain your organization but also to expand it.
  • Collaborate: Look for businesses and other non-profits to form partnerships with. Businesses with shared interests may support your cause, and other non-profits can be a great source of shared networking and fundraising efforts.

Quarterly Checklist- Focus on Important Board and Government Accounting Requirements

  • Report payroll taxes to the IRS: Submit the required Form 941 which is the employer’s quarterly federal tax return.
  • Prepare financial statements for the board: Knowing the current financial status for future planning and to fix potential finance problems is essential.
  • Submit financial status reports and progress reports for government grants and contracts: The government expects to know the current state of expenditures and what has been accomplished versus what was expected to be accomplished.
  • Meet with the board: It is a federal requirement to meet with the board of directors at least four times per year.

 Annual Checklist

  • Submit Form 990: This annual information report should be submitted to the IRS to report on financial activities, sources of income, and spending.
  • Release payroll reports: The Social Security Administration, IRS, and the employees need to know this information. This could include Form 941, W-2s, W-3s, and 1099s.
  • Get an audit of your financial statements: A CPA’s audit will serve as a second opinion regarding the validity of your finances and adds credibility to your accounting practices.
  • Create next year’s budget task force: Seek out staff and board members skilled to contribute to the assessment of the budget.
  • Organize a grant and contract application team: This important team researches, develops, and submits these applications for your organization.
  • Re-evaluate your goals: Prepare for your annual board meeting by evaluating achieved, ongoing, and new goals that should be put into place.

In addition to resources such as this financial checklist, we offer many nonprofit services to organizations just like yours. We would be happy to assist you with your specific needs.

Tips for a Successful Non-profit Financial Audit

Nonprofit organizations undergo financial audits for a variety of reasons. In addition to being in compliance with various covenant and membership requirements, audits also provide an organization with tools that can help with best practices and offer accountability to the institution. Just like the notion of having surgery, the idea of undergoing a financial audit can be less than appealing. At the same time, it is important to focus on the significant value that results. Here at Beck and Company’s Certified Public Accountants and Business Advisors, we can help you properly prepare for an audit and make the process less painful and more beneficial. We offer an array of auditing services to assist you.

How can your nonprofit prepare for, manage, and benefit from a financial audit? The following tips offer suggestions to do just that.

1.       Before the Audit- The Pre-Op:

Advanced preparation for your audit is essential. Your team should create and use a list of items that will need to be prepared before the auditor arrives. Having all of the necessary documentation ready for the auditor saves time and money in addition to resulting in less staff distractions during the actual audit process. Through many years of auditing and assisting nonprofits with this process here at Beck and Company CPAs, we have compiled a list of task items designed to help you successfully prepare for an upcoming financial audit. You can access it here. Remember that auditors are likely to request additional reports and information based on what is initially supplied. These requested reports should be added to the preparation list for the following year.

Choosing the right professional who will work with your company is extremely important. Just like choosing a competent surgeon that specializes in what needs to be operated on, you’ll want to choose an auditor that you feel comfortable with and who is experienced at working with not-for-profit organizations. Think of your choice in auditor as a partner not a distant professional.

In the preparation process, be clear about deadlines. The time frames for your audit are crucial. If bank submission, board meeting, audit committee session, or grant deadlines need to be met, be sure to communicate these to all teams involved and do this early on in the process. Clear communication eliminates surprises and delays.

2.       During the Audit- The Surgery:

Similar to the notion of having surgery without the surgeon present, the greatest efficiency and most useful results come from maximizing your time with the auditor. Be sure to get as much done and as many questions answered while the auditor is onsite. If there are any open items that cannot be accomplished, set completion deadlines before the auditor leaves.

3.       After the Audit- The Post-Op:

The most significant aspect of an audit is what results from it just as the results of surgery are why you had it in the first place. Without following recovery and therapy instructions, a successful operation still will not produce the intended outcome. Similarly, an audit will not be beneficial to your organization without implementing changes and using suggestions to make improvements. The most valuable part of an audit is often the management comment letter. It should highlight areas of control deficiency, concerns, and needed improvements. The implementation of changes, as appropriate, are the central benefit that an audit affords your organization. In addition, the results can help make future audits even smoother in the upcoming years.

Beck and Company CPAs have helped many nonprofits prepare for annual financial audits and would be happy to assist you as well. Please contact us and request a complimentary audit services consultation by visiting our website.

An Update on 2013 Form 990

Last year, the Internal Revenue Service (IRS) revealed significant changes to the Form 990, resulting in wide-spread confusion among non-profit organizations regarding what they needed to include in the form. Over the past year, our certified public accountants have worked with a variety of non-profit and government organizations to ensure the proper disclosure of financial assets and information. We’ve worked particularly hard at demystifying Form 990 and helping organizations understand the purpose and significance of this form.

In March, the IRS announced more changes to Form 990 and 990-EZ to modify and clarify certain financial reporting requirements. While it may seem like significant changes have been made to the form, the majority of revisions and clarifications have been made to the instructions of the form (rather than the form itself). There aren’t any large-scale changes or additions to the information non-profits have to report on in Form 990. This is good news for non-profits who’ve just had to relearn Form 990!

In an effort to help you understand the changes made to the forms (and their related schedules and instructions), we’ve created a list of the most significant changes below. For a full list, view the changes on the IRS website.

  1. The general instructions clarify that a short period return CANNOT be filed electronically unless the “initial return” or the “final return” box is selected in Item B. As a result, a short period return that results from a change in an organization’s accounting period MUST be paper-filed.
  2. The instructions clarify the specific documentation needed to support a name change, termination, merger, dissolution or revocation of exemption. These documents must be attached to – and filed with – Form 990.
  3. The instructions for Part VII Clarify that directors’ compensation for non-director independent contractor services to the organization and related organizations must be reported in Section A.
  4. Appendix E to the Form 990 instructions has been updated to clarify that the public inspection and disclosure requirements apply to both the original returns and amended returns.

If you are confused about the changes to 2013 Form 990 or would like some assistance filling out the form, contact our CPAs today. Our tax services are designed to help you file all of your non-profit-related forms with peace of mind.

Internal Controls for Businesses and Non-profits, Part 2

As we discussed last week, establishing and maintaining strong internal controls is important for any business or non-profit organization. In order to effectively reduce the risk of fraud and internal theft, you need to implement internal controls in every area of your organization, including management and your accounting system. In this article, we’ll be discussing key internal controls your business and non-profit organization should consider implementing on each level, as well as highlight some important methods of strengthening security throughout your entire organization.

Internal Controls on a Management Level
While accounting and financial management may not be your area of expertise, you still need to play an active role in the process. Having a clear understanding of the accounting process and what is occurring with your finances is always a smart idea. Too often we hear of business managers and non-profit leaders putting too much trust in their employees and taking a hands-off approach to bookkeeping. While it’s good to trust your staff, you can never be too trusting (as recent fraud statistics have shown). By taking the following simple steps, you can reduce the risk of fraud and create a culture of responsibility among your management team:

  • Take an interest in the books. Make it a point to review financial reports periodically and ask questions about any discrepancies you may see. If you don’t understand financial reports or need help identifying key figures, seek the help of a certified public accountant. They can train you on everything you need to know about creating and reading these reports, as well as help you understand how this information impacts the everyday operations of your business or organization.
  • Create an ethics policy. If you want to set your employees up for success, make sure they have a clear understanding of what you will and will not tolerate as an organization. Create a written policy that outlines your policy for ethics and business integrity and ensure that all of your employees sign it. Perform an annual review of this policy to adjust for changes in the work environment.
  • Check in on your employees regularly. The most successful business managers and non-profit leaders have established a clear presence among their teams. Employees who know they are being constantly checked in on are less likely to engage in fraud and theft. By establishing a culture of oversight and review, you are protecting your business or organization from substantial losses.
  • Perform random reviews of important reports and financial documents. While it’s always a good idea to review financial reports on a monthly basis, management should also choose other reports to spot check. Since your employees won’t be able to predict what you’re looking at, you will have a more honest assessment and be able to identify fraud quickly and easily.

Internal Controls in Your Accounting System

Limiting who has access to your accounting system is the first step you should take when implementing internal controls in the accounting process. Many software systems will even allow you to limit users’ access to certain areas of the system so you can more effectively manage who has full access to your financial information. Assign software rights according to each employee’s responsibilities. For example, if a particular employee is in charge of Accounts Payable, they should not have access to Accounts Receivable or be able to balance the bank statement. Clearly defined roles protects your assets and encourages accountability among your staff.

Here are a few more internal controls to consider implementing:

  • Perform regular backups of your financial accounting database
  • Hire an outside CPA to review your books on a periodic basis
  • Set up an audit trail in your accounting software system
  • Password protect all financially-sensitive documents
  • Create a separate sign-on for each user of the system

Internal Controls for Financial Management

Protecting your finances should be your number one priority as a business or non-profit. Keep these methods of strengthening your financial security in mind as you reevaluate your current internal controls:

  • Create a deposit slip for any cash or checks that come through the door. This could include creating a separate log for all cash and check receipts that is then passed on to the bookkeeper and business owner. Once deposits have been made, the owner can then compare the receipts log to the bank deposits.
  • Create an approved vendor list and a vendor approval policy. Each vendor must be approved prior to any business being done with that vendor.
  • Check preparers should be different than the people signing the checks.
  • Consider having two people sign all checks over a certain threshold.
  • Avoid issuing emergency checks whenever possible.
  • Create a policy for submitting employee reimbursements and make sure all employees follow the same policy.
  • Require receipts for all credit and debit transactions.
  • Maintain separate cards for different users for accountability.
  • Reconcile bank accounts and credit card statements monthly.
  • Monitor online banking activity on a monthly basis.
  • Require documentation for any payroll changes.
  • Implement a timesheet approval process before payroll can be completed.

If your business managers or non-profit leaders are not committed to following through on established internal controls, your employees won’t be either. Your management team should be setting an example for the whole organization to follow. For additional methods of strengthening your business and non-profit security, give us a call today. Our certified public accountants would be more than happy to perform a financial management review and help you create more effective accounting processes and stronger internal controls.

Educating Your Board about Nonprofit Financials

As many nonprofits have discovered through experience, not all of your board members are going to understand your nonprofit financial reports and explanations. While many of your board members will come to you with substantial financial experience and understanding, some members of the board will not be as well-versed in reading nonprofit financial reports and understanding financial terms. As a leader in your nonprofit organization, it is your job to ensure that the board understands what is being presented. After all, without financial knowledge specific to nonprofits, your board has no way of understanding the financial implications of their strategic decisions. Arming them with the knowledge they need will not only improve your financial presentations, but it will also help your board make better decisions for the organization.

We’ve created a few strategies to help you educate your board on understanding your nonprofit’s financials. Keep the following in mind as you prepare your board for financial presentations:

  1. Determine what your board needs to know. Don’t overwhelm your board members with useless information they don’t really need. Focus on the specifics related to the type of organization you’re running and instruct them on everything they need to know to uphold their fiduciary responsibilities.
  2. Start with the basics. Once you’ve identified what your board needs to understand to be successful, it’s time to start educating them on the basics. Make sure all board members understand the purpose behind (and can read) the statement of financial position, statement of activities, and statement of cash flows. Your board will need to understand each of these statements, be able to link them together, and find the answers to their financial questions. Keep the format of these reports consistent so as not to confuse your board.
  3. Make sure they understand accrual accounting. Your board members need to understand the basics of accrual accounting and be able to understand terms such as “deferred revenue” and “prepaid expense”. This may take some time to explain, but we promise it’s worth the effort in the end. It will save time and efficiency at meetings, as you won’t have to partake in lengthy discussions clearing up accounting questions and can focus your efforts on solving the real financial issues.
  4. Use your financial presentations as a teaching experience. If you can, carve out 10 – 20 minutes to go over specific accounting items with your board members during the meeting. Create a set plan of topics you’d like to cover across the year and work them into your financial presentations and meetings.  You’d be surprised by how much you can cover in a year.
  5. Send board materials and preparatory items prior to the meeting. Don’t expect your board members to learn everything on the spot; give them time to review concepts before the meeting so you have more time for valuable discussion.
  6. Use visuals in your presentations. As the saying goes, a picture speaks a thousand words. Demonstrate key financial concepts using graphs and charts. Present financial data in graph and chart form as well. This will not only help keep the board interested in your presentation, but it will also help them retain what they are learning.
  7. Bring in an accountant or financial consultant. Have your accountant or financial consultant drop in periodically to clarify the concepts you have been teaching.
  8. Make the information relatable. Find a way to make the information you are presenting relatable to your board members. For example, if one of your members is a corporate businessman, discuss how to calculate the return on investment (ROI) of a new program. If your financial information cannot be easily related to the people making the decisions, the decisions won’t be quality.

Not all of your board members will be financial experts, but you can help them understand the basics so they make effective decisions for the organization. Your board members have a fiduciary responsibility, and it’s important to help them remember that. If you could use some help explaining nonprofit accounting basics to your board members, we can help! Check out our nonprofit accounting services to see how we can help you.

Internal Controls for Businesses and Non-profits, Part 1

Businesses and non-profit organizations face challenges every day that threaten their business longevity and effectiveness. These threats can take a variety of forms, including competition in the industry, rising costs of goods, changes in economic conditions, and human resource challenges. While all of these challenges pose a significant threat to businesses and non-profits, the greatest challenge for many of today’s businesses takes the form of fraud.

Fraud occurs more than you think, and it often goes unnoticed until it’s too late. Fraud can come in a variety of forms, including check fraud, credit card fraud, and employee theft (the most common types including check tampering and billing schemes). Stealing inventory, claiming undue overtime, setting up payments to fictitious vendors, skimming cash, and embellishing an expense account are all fraudulent activities that can occur within a company or organization. These activities threaten the stability of the business and can result in significant financial loss. In fact, according to the Association of Fraud Examiners (ACFE), the typical business loses an average of 7% of revenues due to employee theft alone. For smaller businesses and organizations, the percentage rises to 38% with a median loss of $200,000.

In order to protect your assets, you need to have strong internal controls in place, and your employees need to be aware of your organization’s policies and procedures. Failure to communicate your security procedures and policies with your employees only serves to put your business or organization at risk. It does no good to have strong internal controls if your employees aren’t using them.

Consider the reasons you may want to create strong internal controls:

  • Internal controls can solve current business problems and help prevent fraud from occurring.
  • Businesses with strong internal controls in place have the potential to go public.
  • If you are working with a Sarbanes-Oxley (SOX) compliant customer, you may be required to show proof of strong internal controls.
  • Strong internal controls improve financial reporting accuracy and ensure assurance that your financial statements are correct.
  • Future investors, bankers, and accountants will want to see how you are protecting your financial assets.

Strong internal controls are essential no matter how small or large your company or organization. Just as you wouldn’t leave money lying out in the open for anyone to take, you shouldn’t leave your financial information open for all to see. Creating procedures and policies detailing employee responsibilities and tasks is a step in the right direction when it comes to safeguarding your assets. If you could use some help establishing internal controls in your business or non-profit organization, give us a call today. We offer a variety of client accounting services to help you with all of your financial reporting and management needs.

Stay tuned to our blog for Part 2 of our internal controls article series to learn how you can start implementing internal controls and discover top methods for strengthening your overall business and non-profit security.

Nonprofit Accounting: The Elements of an Effective Financial Report

As we discussed last week, nonprofit organizations are required to present financial information to their board on a regular basis (usually monthly). Clear and effective financial reporting to the board of directors is necessary for good financial management and accountability; however, many organizations do not understand the elements that make up an effective financial report. The information within your financial reports should be relevant, understandable, reliable, and useful. If your reports are not these things, it’s time to sit down and revisit your nonprofit’s financial reporting methods.

Take a closer look at the four characteristics of effective financial reports and see for yourself if your reports are making the cut:

  • The information contained in your financial reports must be relevant.
    The finance committee and board of directors will determine what information is needed to monitor the organization’s financial progress. Your reports should include the financial position of your organization (assets and liabilities), key statistical data to help board members determine the financial outlook of the organization, and a summary of operations (revenue received and expenses incurred). At a minimum, your financial reports should contain the following:

    • Salary and benefits expenses
    • Food costs (if substantial)
    • Revenue from grants, fees, etc.
    • Month-end summary of significant assets, including accounts receivable, accounts payable, grants not yet paid out, and cash

It would also be useful to present a comparison of your actuals versus the budgeted results. These comparisons aid the board in determining whether or not financial policies are being followed and if action needs to be taken. This analysis is most useful when provided with detailed notes explaining any significant variances.

  • The board must understand the information being presented in the report.
    Your financial reports need to be easily read by all of your board members, so make sure they are understandable. Remember, the members of your board have varying levels of financial experience so don’t inundate them with unnecessary information. Find out what they prefer and deliver it. Some boards want a detailed account while others prefer a one page summary. Determine your strategy for creating the reports your board wants and stick with it.
  • The financial information must be reliable and accurate.
    Financial reports are only useful if they are reliable. Double check your data to ensure its accuracy and reconcile your bank statements to your accounting records on a monthly basis.
  • The information contained in your reports must be timely.
    Delivering effective financial reports is all about the timing. Reporting the results of your operations and financial position in a timely manner is crucial if the board wishes to take corrective action.

Overall, creating effective financial reports for your board is not difficult. It just takes a lot of time and attention to detail. By properly maintaining your accounting records throughout the month, you can ensure that the information in your reports is reliable and accurate. Contact us today if you need help maintaining or cleaning up your accounting records. We offer a variety of accounting services designed to help you succeed in your financial reporting efforts.

How Setting Internal Controls Can Protect Your Nonprofit Financials

How are you protecting your nonprofit organization’s financials? Do you have measures set in place to protect your funds from outside theft or internal mismanagement? As we’ve previously discussed, setting internal controls can help you create more accurate and effective financial reports; however, the benefits of setting internal controls does not end there. Internal controls can help you maintain good standing with your grantors, as well as ensure that you are meeting the proper financial guidelines set forth by the government. While accounting software can certainly help your organization manage your funds appropriately, internal controls can safeguard your financials from embezzlement, inaccurate reporting, fraud, and unauthorized expenditures. When you establish policies and procedures to protect your organization’s assets, you are establishing rock solid accountability with your donors and grantors and ensuring that your funds will be available when you need them.

We’ve created a few tips designed to help you set effective internal controls for your nonprofit organization:

  • Have a set definition of the various roles within your organization. All of your employees, volunteers, officers, directors, and trustees should have a clear understanding of their roles and responsibilities within the organization. Make sure to communicate the expectations and limitations of their jobs with each prior to hiring. Failure to do so could put your organization at risk.
  • Create a personnel policy that is easily accessible to your staff. Keep written record of your organization’s personnel policy and be sure to include information on vacation and sick leave, grievance procedures, evaluations, compensation, health insurance and other benefits, and your code of ethics. Provide your staff with a copy of this policy upon hiring and communicate important changes to the policy as they occur.
  • Establish procedures to monitor your organization’s funds. If your organization does not have an accounting procedures and policies manual, now is the time to create one. This manual should detail your organization’s financial controls and be reviewed by all directors and officers, trustees, employees, and volunteers. Your manual should at least include the following controls:
    • Implement general organization-wide internal controls: This includes the preparation of your annual income and expense budget and quarterly reports comparing the actual receipts and expenditures to your budget. Make sure these reports are fully explanatory and address any and all time variances.
    • Segregate financial responsibilities: Segregating financial duties and responsibilities is crucial to ensuring your financial integrity. Have a system of checks and balances in place, and make sure you have multiple people assigned to financial accounting, reporting and cash handling. Letting one person do it all is a recipe for disaster.
    • Establish general IT controls: You will need to establish a specific process for accessing, inputting, and altering electronic data and information within your organization.
    • Accounts Payable and Purchasing: Segregating the duties within the Accounts Payable and Purchasing department is important. Make sure you have multiple people handling the requests, verification, authorization, and recording of all expenditures (including the payment of invoices, petty cash and other expenditures).

Establishing internal controls now can protect your nonprofit financials in the future. Don’t make the mistake of doing nothing. Establish policies and procedures to ensure the financial integrity of your organization. If you’d like guidance on setting internal controls or simply need a review of your organization’s cash flow, contact us today. We offer a variety of nonprofit services designed to ensure that your organization is functioning as effectively as possible.