Nonprofit Accounting Blog – Page 6

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Great Questions Asked by Great Nonprofit Managers

How well do your managers ask questions? Some might not even give any weight to this or consider it a skill. You may not even see “question asking” on any list of managerial expectations. However, asking the right questions, and the tough questions, is an effective part of a manager’s job which implies it may require more attention.

Being a manager isn’t easy. Managers have finite resources and growing task lists. They must handle people and budgets with equal finesse, and in a nonprofit organization, also manage public perception. More importantly, they must be willing to ask the hard questions and to listen and learn from the answer they get as they explore ways in which to enhance and build their organization.

Asking the Hard Questions

The difficult questions are the ones whose answers may yield an unpleasant reality for the asker. In other words, you may not like what you hear! When it comes to nonprofit organizations, these three questions are at the top of the list of the hard questions that must be asked for organizations to ensure they’re doing the best they can to fulfill their mission.

1. Am I doing my job well? Followed by, are we doing our jobs well?

Your “job” at a nonprofit is more than the list of things you are responsible for. It’s also your job to help the organization maintain and achieve its mission, to build public perception and awareness, and to help keep a positive perception in the public’s eye. It’s not an easy task. Your responsibilities in this mix may be weighted more heavily towards one area or another depending on your role in an organization. But you still need to ask if you are doing your job.

Reviewing organization-wide goals and plans and assessing how well you are achieving key performance indicators can help you answer this question.

2. Are we adapting to changing circumstances?

As the proverb goes, “change is the only constant in life.” Situations, personnel, and other facts of nonprofit life can change over time. Organizations that can grow, adapt, and change are ones that thrive.

Look around your organization. How well have you adapted to changing circumstances? If your nonprofit began with one specific task in mind, have you been able to adapt to meet new challenges?

Examine systems, technology, personnel, geography, and other factors. Each area influences how well your nonprofit can do its job. Those that change with the times are those that can continue to grow, prospect, and help others.

3. How well are we using our resources?

The push within most nonprofits is to find ever-increasing sources of donations and funding to fuel growth. Looking at how well you are using your current resources isn’t easy. It can be troubling to realize that you’ve overspent on a marketing campaign or haven’t invested other resources wisely. Yet it’s only by asking these questions and facing the truth that you can find better ways to use existing resources.

Resources aren’t limited to funds, either. They can also refer to personnel. It’s a good idea to look at your team and make sure that you are allowing individuals to work to their strengths. Place them in positions where their unique talents can help the organization thrive. Outsourcing tasks like audit prep or nonprofit accounting can free your team up to do the work they were hired to do. Make sure that you are using people as well as financial resources in the best possible way.

Practice, Practice, Practice

Asking questions is a skill and can be improved with focus and practice. Managers are in place to find ways the organization can function more effectively. The best way to determine this is to ask questions about the people, process and systems being used. Getting curious about why things are done a certain way and if there’s a better approach only makes for a stronger manager, thought process and organization. Asking questions in a way that does not make others defensive is a great skill to hone in on too. As you practice this skill, and focus on getting better in this area not only improves your management style, it sets an example for others to learn and grow too.

How to Help Fundraising and Finance Work as a Team

In complex office environments where nonprofits are comprised of specialists, a high value is placed on leaders and systems that can bring departments together to get things done. Oftentimes, the finance and fundraising departments face similar challenges yet act like they are playing for separate teams. Aligning departments starts with a mutual consideration of roles.

Understanding Challenges

There’s an old saying that you don’t know what it’s like to be someone else unless you’ve walked a thousand miles in their shoes. With fundraising and finance teams, there are perspectives and tasks that each wished the other better understood.

Fundraising wishes that finance could…

Understand the challenges and process of fundraising.
Accept that you must spend money to make money (or get donations).
Help us maintain good donor relations.
Offer us some flexibility—things aren’t always black and white in our world.
Respect that fundraising isn’t easy.

And finance wishes that fundraising could…

Understand the fact that finance’s job is complex and time-consuming.
Accept help from experts in finance.
Help us do our jobs better by providing us with information we need.
Offer to sit with us to learn some basic accounting practices.
Respect deadlines.

Coming to a consensus is much easier when you understand and respect one another’s positions in a situation. Knowing what the other ‘team’ wants can help you step closer to a compromise and to supporting each other’s vital roles in an organization.

Different Departments, Similar Needs

Although finance and fundraising reflect different departments with varying needs, both seem to experience similar challenges when it comes to data and information. Ways in which both departments can help each other overcome their shared challenges include:

Collaborate on budgets and tracking
Improve reports and reconciliation of financial information
Have joint planning and goal-setting tasks
Communicate frequently and in a timely manner
Identify ideal processes and procedures
Integrate fundraising and accounting software

One tool that can help both departments communicate, collaborate, and plan together is nonprofit accounting software. Various software packages such as Intaact, work independently or together to provide data sharing among teams, timely updates, and more. Cloud-based solutions enhance communications because they can be accessed anywhere there’s a web connection. It makes it easier for fundraisers who travel to visit important donors to update their accounts, for example, which in turn provides information to finance to help them do their jobs better.

While the right software can’t solve all internal scuffles, it can help fundraising and finance join hands across the net and play for a winning nonprofit. It’s an important step in the right direction.

Intacct Cloud-based ERP Software

Intacct is specifically designed to provide nonprofits with the control needed to simplify financials and fundraising so you can determine where – and how – to allocate your resources and time. Built in the Cloud environment, Intacct provides organizations with true business visibility and flexibility so they always are in the know. Designed to automate your organization’s financial processes and transform your financial department into one that strategically drives your company toward growth, Intacct has been voted one of the best-in-class financial ERP solutions on the market today.

To learn more about Intacct, or how Beck & Company CPAs can help your finance and fundraising teams work together using our nonprofit accounting services, give us a call at 703-834-0776 x 8001.

Accounting for Nonprofits: The Hallmarks of Top Staff Accountants

Among all the topics surrounding accounting for nonprofits, the characteristics or hallmarks of top staff accountants are things rarely discussed. Of course, it takes accuracy to be an accountant, as well as a logical mind, strong attention to detail, and good communication skills.

But going beyond these requirements is a list of highly specific skills that all top-level staff accountants share. If you’d like to be numbered among the best accountants in your field, then make these skills a priority for your own personal development.

The Characteristics of Top Accountants

The best nonprofit financial managers and top accountants share the following characteristics.

Accuracy: All accountants must be accurate, but top accountants leave no stone unturned in their quest for all the details that matter. Good accountants must regularly review their own performance and look for mistakes in their own work before sending material on to others.
The big picture: Top accountants have the ability to step back and take in the big picture. They’re good at what they do, but they also have the ability to see how their work fits into the larger mission of the organization and, as such, they understand how to be helpful to others.
Deadlines: Many professions are deadline-driven, but accountants are always exceptionally deadline-oriented people. Top accountants set personal deadlines and try to achieve their goals early. They allow extra time in a project for those “just in case” moments when someone calls in sick or competing deadlines take people’s focus away from their project. Good accountants plan; great accountants plan for deadlines along with contingency plans.
Excellent communication skills: Accountants aren’t often thought of as communicators, but strong communication skills are a must for top accountants. Not only are you called upon to share facts and figures with others in your department, but you must be able to translate that information into language everyone within your organization can understand. There’s also the important matter of communicating with subordinates and managers. Keeping everyone informed, and understanding how and when to share information, is a hallmark of an exceptional accountant.
Integrity: We want everyone working with us to have integrity. Accountants must have exceptional integrity. Because they are charged with nonprofit financial management, they must be rigorously honest in everything they do. They must also be responsive to questions, complaints, and problems brought to their attention. Integrity, honesty, and ethics are part of the package that makes a great accountant.
Exceptional computer skills: Conquering spreadsheets, understanding the nuances of your company’s ERP system, and handling all reporting needs with calm assurance are all part of the job for the best accountants. They become the guru that everyone turns to when they need help with the number-crunching aspects of their company’s software. Even if you’re not a technical whiz, becoming fluent with the software package that your company has chosen is one of the ways in which top accountants go the extra mile.

Becoming the Best of the Best: Professional Development

What does it take to become and remain the best of the best? Ongoing professional development is a vital step for nonprofit financial managers and those leading accounting for nonprofits.

Such professional development need not be formal classes, although that can help. Professional development may take the form of attending seminars and online workshops, attending conferences, and networking with others in your profession.

Regardless of the form it takes, top accountants do not remain hunched over their spreadsheets all day. They are a vital and important part of the nonprofit team. Are you a leader among accountants? Set a personal goal for yourself to do all you can to be the best nonprofit accountant your organization has ever met.

Beck & Company

Beck & Company is a certified public accounting firm serving the greater Washington D.C. area and the Eastern seaboard. We offer consulting services, auditing, and software selection to help nonprofits with their accounting needs. Contact us today for more information or assistance.

The Importance of Project Management Skills for Nonprofit Financial Management

Who do you turn to when you need to get things done within your company? Some people turn to their supervisors, but they may not always have the answer. The surprising fact is that accountants within most companies and nonprofits are the true “get it done” people.

Let’s face it—nonprofit financial management brings accountants into contact with all departments and people within an organization. Accountants know where the money leads, and they know where to find the funds to support new work. When you need to get something done, it is the accountant who can make it happen.

One skill, however, that many accountants lack and is important to nonprofit financial management and beyond, is project management. Accountants who can learn the terminology, skills, and general flow of projects will be better able to interface with all within an organization.

Let’s look at the basics of project management and how accountants can partner with project managers.

Project Flow in Project Management

Projects have a beginning, middle, and end. At the end, each project creates a unique output. There are milestones throughout the middle of a project that serve as checkpoints to the completion.

As part of nonprofit financial management, accountants help project managers handle the potential changes inherent in any project. As projects progress, budget needs may change. Accountants can assist during the project flow with any change requests and help project managers monitor and adjust budgets.

Project Charter

The project charter is the document that outlines the scope of the project. Some organizations call it a project plan or by another name, but the document itself is similar no matter where you work. It is an outline of what the proposed project should accomplish, starting dates, milestone dates, end dates, who will work on it, roles and responsibilities, and budgetary needs.

Accountants do not typically create project charters. Instead, your role as an accountant is to review the project charter from the standpoint of nonprofit financial management. You can review it objectively and offer advice and assistance to make sure it follows a logical train of thought.

Instead of being a gatekeeper or keeper of the purse strings, you’ll become a partner in the work. You can shape, guide, and advise during the process of creating the project charter so that the team won’t feel surprised or off guard if there are questions surrounding the finances for the project. In turn, they may have questions for you, from which your extensive experience as a managerial accountant may add quality and wisdom to the project.

Managing Risk

Every project comes with its own share of risk. There’s the risk of change, of missing deadlines … the list goes on and on.

Accountants working alongside project managers and project teams can help manage risks by:

Remaining close to the project: Be sure that someone from the accounting team continues to attend project meetings. By keeping up to date with what’s going on with the project, you can take steps to mitigate risks or to advise the team on how to avoid them.
Play the auditor’s role: An auditor asks key questions to bring to light things that may not have been recognized. Act like an auditor and ask questions of the team that will help them think through and around issues found within the project. Project managers and department stakeholders can help you understand the pros and cons and ramifications of many changes so you can ask questions that will help them get to the best possible outcome.
Avoid scope creep: When project managers come to you seeking more funds for an ongoing project, it may be time to examine the original project charter to see if scope creep has set in. Scope creep refers to additional outcomes that get added to an open project so that it eventually blows the original scope out of proportion. The result is a bloated project that may not be able to achieve its objectives. By remaining close to the project throughout its development and action steps, you can help project managers avoid potential pitfalls like this.

Projects vary according to the organization and the task. But one thing doesn’t vary: your knowledge, skills, and experience as an accountant provides you with exceptional nonprofit financial management skills. Partner with project teams for the best possible outcomes.

Beck & Company

Finding the Best and Brightest Nonprofit Financial Management Talent

An organization is only as good as the people who work there, so finding the best and brightest nonprofit financial management talent is critical. Strong finance leaders can help your organization manage its money so that you can serve more constituents and use your margin to fulfill your mission.

But where do you find the next group of leaders for your organization? Many nonprofits struggle through the hiring process. Here’s how to improve your hiring process to recruit and hire top talent.

Recruiting Is an Ongoing Action

Think about top-rated athletes and sports teams. Wouldn’t it be funny if they simply put out an ad on a website: “Wanted: Quarter Back for NFL Team.” Not only would they be inundated with ill-qualified responses, but there would be thousands, perhaps millions, of people lining up, sending in resumes, and putting their qualifications out there for such a coveted spot.

No, sports teams never stop recruiting. They send talent scouts to the minor leagues or to college campuses to watch young players in action. Recruiters follow good players in the news, on social media, and even meet with them to gauge their interest in joining their teams. It takes months and years to find the best athletes in the nation and to hand-pick the ones teams want to try out.

Companies who want the best people for their staff must also continuously recruit. Most companies are reactive rather than proactive when it comes to recruiting. They wait until there’s a vacancy, then they dust off the job description and post an ad on a website. Then they wonder why they can’t find the best people for the job.

Like a professional sports team, your organization should always be recruiting. It sounds difficult, but you can make it part of your team’s daily work if you include these recruiting tasks in your typical workday.

Network with professors and local colleges: These are akin to the minor leagues of your profession. Get to know the colleges and the professors teaching in the departments that produce graduates for your specialty area. Once you know the professors and they know your organization, they will be more likely to refer people to your company when you’re recruiting.
Develop broad talent networks: Where did you find your best employees? Consider making those routes a priority as you cultivate your talent networks. Joining local business associations and groups is one way to build your talent network. The more people you know, the better the opportunity to find help when you need it.
Offer apprenticeships: In olden days, newcomers to a profession worked as apprentices to the smith, the baker, or other skilled professions to learn the trade. Although apprenticeships are rarely heard of today, you can begin an apprentice program for specific nonprofit skills such as your internal auditing team or your fundraising team. Paid apprenticeships and internships are a great way to find potential candidates for entry-level positions, and your organization will become known as a place that values and helps newcomers to the profession.
Consider a competition: A competition for the best fundraising ideas or other plans may be just the thing to bring really talented candidates to the forefront of the talent pool. Think about the ways in which a competition may be helpful to your company to find and assess potential employees.
Promote your company brand: Companies and organizations have an employment “brand” that helps them develop a reputation in the industry for their workplace. Your company’s workplace has its own style; formal, informal, casual, open, etc. You also develop a reputation for what you do, whether it is an environmental, political, or other cause, a membership organization, or some other nonprofit focus. Understanding and promoting your organization’s workplace brand throughout the year is another way to keep recruiting. By the time you get to posting that ad, candidates will have heard of your organization and what it is known for and may be eager to join.

The next time you have a vacancy, don’t panic. If you’ve taken these steps to heart, you’ve always been recruiting. It will be much easier to pick from among a small, well-known talent pool than to recruit among strangers. You may even have people vying for a job with you if you’ve really handled recruiting well. Always be recruiting!

Beck & Company

Accounting for Nonprofits: Finance and Fundraising Cooperation

Accounting for nonprofits includes both the finance and fundraising departments. These departments may be in the same division: accounting. Yet, although you work in the same office, it may feel as if you’re in entirely different organizations.

Although two entirely different groups, both share similar challenges. It’s important for both finance and fundraising to understand the duties they each perform, as well as the challenges they share. Understanding these facts leads to better communication and outcomes for all.

Similar Challenges

The finance and fundraising departments reflect different functions. Finance manages the money within a nonprofit; fundraising generates income to support programs. Both offer valuable services but have different budgeting needs. Often, these needs come into conflict.

The fundraising department wishes that the finance department could:

Understand that you must spend money on marketing to raise money for donations.
Acknowledge the inherent challenges of fundraising, especially during economic downturns.
Assist with improving and maintaining strong donor relations.
Be flexible with fundraising—it’s not always black and white in this group.

Meanwhile, down the hall or across the room, the people in the finance department also face challenges that they wish the fundraising department understood. Your colleagues in the finance department probably wish that you could:

Ask for help when you need it.
Understand and acknowledge that finance’s job is both time-consuming and complicated.
Help them by providing information when they ask for it and need it.
Learn basic accounting best practices.
Adhere to deadlines.

When you look down the list of things each group wishes the other knew, the commonalities stand out. Respect. Understanding. Better communications. It’s a simple wish list that can be a reality with the addition of a few steps and tools to help all do their work better.

Bringing Together Finance and Fundraising – Happy Together

You can help both fundraising and finance meet in the middle by offering software that makes accounting for nonprofits easier. Software such as Intacct ERP software provides support for all financial transactions and obligations, including fundraising.

Data that is entered into one central database can be shared without barriers. It makes communication around issues related to the data easier. Finance can offer insights and support to fundraising; fundraising can share their needs and goals with finance. It’s a simple best practice that facilitates better communication and shared goals.

Other best practices that both finance and fundraising might consider implementing include group meetings, stand up meetings, and meetings with the entire accounting team. Such meetings need not be lengthy. “Stand Up” meetings come from the literal requirement that people remain standing during a meeting. Because you can’t get comfortable, you keep the meeting short. Each person reports quickly and succinctly on their team’s accomplishments and needs for the week. It’s also a time when groups can ask questions of one another and share information so that everyone is on the same page.

Accounting for Nonprofits: Improvements with Communications

Accounting for nonprofits includes both fundraising and finance. By focusing on what you hold in common and on the shared goals that support your organization’s mission, you’ll find that many aspects of your work improve. Software such as Intacct ERP software facilitates this transition as it provides enhanced reporting and insight into your organization’s data.

Beck & Company

Nonprofit Financial Management – Funding Technology Upgrades and Projects

Nonprofit financial management includes budgeting for special projects. One such project you may be considering is a technology upgrade or special project. Purchasing new systems, updating hardware, or even finding a better smartphone plan for your nonprofit’s employees are all part of technology upgrades.

As a nonprofit organization, you may have even bigger aspirations than new hardware. Perhaps your organization uses technology to help achieve its mission. A big technology project can be costly, but with the right nonprofit financial management and a few tricks up your sleeve, you may be able to find ways to pay for it that won’t break the bank.

Read today’s article to learn how to plan for your next fund accounting investment using Intacct, Beck & Company’s nonprofit accounting solution. If you’d like to know more right now, contact Beck & Company online or call direct: (703) 834-0776 x 8001.

Donated Computers

Donated computers offer many pros and cons. The condition of the equipment affects its value. Newer equipment is, of course, more valuable, and given the two to four-year utility of computers, an important consideration.

Monitors, printers, copiers, and other devices can also be donated to your nonprofit. A donation drive for technology can be a productive endeavor, especially if you are seeking several computers to fill a classroom or as part of a giveaway program.

Corporations may contact your organization to donate computers when they upgrade their own hardware. It’s important to find out all you can about the potential donation before it arrives on your doorstep. Ask how old the computers are, if they are Mac or PC, and when they were last used. Confirm if the company will deliver the equipment of if you should pick it up yourself.

If you cannot use the donation, be honest with the company. What you cannot use, another charity may be able to use.

Donated computers may need their hard drive reformatted and updates installed. It’s a good idea to have a technician run a virus scan on them, as well, to make sure there’s nothing malicious accidentally lingering on them.

The unfortunate drawback of donated computers is that given a short lifespan for the average PC, the donated machines may not last very long. Corporations get heavy use out of their computer equipment and only trade up when they can no longer justify the cost of keeping up old equipment. You may not be getting a great bargain.

Finding Technical Help

If you need technical help with updates, upgrades, or programming needs, there are several options to find volunteers. You can check with your local college or high school’s computer science department to see if they have a job placement board. Ask if they place interns, too. You may be able to offer someone a hands-on internship and a letter of recommendation.

Finding Funds: Focused Donation Drive

Another route you can explore is a focused donation drive, with the proceeds benefiting a specific technology project. A special alert sent to donors, a landing page constructed just to announce the project, and the promise that 100% of the donations received from this drive will go towards the purchase of technology may inspire people to give for your project.

The more specific you can be about the project requirements, the better. Spend time in your marketing and donation materials explaining how the computers will be used and how they will benefit the end users.

An education nonprofit dedicated to helping at risk kids in a poorly funded school may share pictures (with the school’s permission) of the classrooms where the computers will be used, the school budget deficit that led to the drive, and other facts that help paint a clear picture of the need. All these ideas go a long way towards helping donors see how their money will be used to support the organization’s mission and goals.

Approach Your Trusted Donors

There’s a cadre of trusted donors, friends of the organization, and people who you can rely upon to come through for your nonprofit in a crunch. Consider making a personal appeal or pitch to these people, explaining the technology need and requesting donations.

Nonprofit Financial Management Help from Beck & Company

Beck & Company is a Washington D.C. area nonprofit accounting firm with a team of expert auditors, accountants, and advisors available to help nonprofits of all sizes. We provide a variety of consulting, auditing, and accounting services to help you improve operations and efficiency. For more information, please contact us at 703-834-0776 x 8001.

Accounting for Nonprofits Update: Implications of Revenue Recognition changes

Here’s an update from the world of accounting for nonprofits on FASB Accounting Standards Update (ASU) No. 2014-09, Revenue From Contracts With Customers (Topic 606), perhaps the most comprehensive set of changes to accounting principles ever released by the organization. These changes in revenue recognition impact almost every company in the United States applying GAAP. In fact, any company with tax compliance requirements should consider themselves affected by Topic 606.

Find out how Beck & Company can help work smarter the easy way with Outsourced Accounting. Contact Beck & Company online for more information, or call us directly at (703) 834-0776 x 8001. We look forward to hearing from you.

Effective Date

If you handle accounting for nonprofits, you need to know the effective dates. These are the dates by which you should begin applying the changes in revenue recognition. The current dates are as follows:

December 15, 2017: Public entitles, certain not for profits, and certain employee benefits plans.
December 15, 2018: All other entities.
Interim periods in fiscal years after December 15, 2019, will impact other entities.

Improving Transparency and Clarity

FASB launched these recommendations after lengthy consideration, considering feedback from many quarters in the world of accounting for nonprofits and for profits. The goals of Topic 606 are to improve transparency, clarity, and usefulness of reported accounting information.

The goals include the desire to:

Streamline statement preparation
Reduce essential guidance
Offer a more robust revenue framework
Improve comparability across entities
Remove inconsistencies
Fix and remove weaknesses in prior revenue standards

These sweeping changes were well received by most accountants, but as the date for implementation draws nearer, there are some concerns being voiced.

Over time, industry-specific revenue reporting nuances and eccentricities crept into accounting, until the actual revenue reporting became complex and difficult for people outside of the accounting world to understand. The new standard seeks to streamline reporting so that all industries report along similar lines.

Questions and More Questions

Those responsible at nonprofits for implementing Topic 606’s guidelines have voiced several important questions related to implementation.

FASB has, to date, released four sets of clarifications:

ASU No. 2016-08, addressing principal versus agent considerations;
ASU No. 2016-10, identifying performance obligations and licensing;
ASU No. 2016-12, a clarification of narrow scope improvements and practical expedients (directed at items such as the reporting of noncash consideration, contract modification and completed contracts at transition, collectability matters, and other concerns); and
ASU No. 2016-20, 13 specific corrections and/or improvements on an array of issues, including loan guarantees, contract costs—impairment testing, and provision for losses on construction-type and production-type contracts.

People responsible for accounting for nonprofits are encouraged to follow the FASB’s updates online in case additional clarification is released before the first date arrives.

Revenue Recognition and Accounting for Nonprofits

Revenue recognition is one of the biggest areas impacted by Topic 606. The new guidelines request that nonprofits recognize revenue when they reasonably expect to receive it. This may impact donations, such as donations made in wills or trusts bequeathed to a nonprofit. In the past, it was up to the nonprofit to decide when they chose to recognize the revenue. Now, FASB recommends as part of GAAP, that nonprofits only recognize the revenue when they have a reasonable chance of receiving it.

Let’s assume that someone leaves $100,000 in their will to the local animal shelter, a nonprofit organization. The animal shelter should wait until the will is in probate and the executor announces all debts have been settled and there is $100,00 left to give to the shelter before recording it.

Accounting for Nonprofits and Tax Implications: Call Beck & Company

Beck & Company is a Washington D.C. area nonprofit accounting firm with a team of expert auditors, accountants, and advisors available to help nonprofits of all sizes. We provide a variety of consulting and accounting services to help you improve operations and efficiency. For more information, please contact us at 703-834-0776 x 8001.

Nonprofit Financial Management and the Need for Security – Even for People You Trust

“Trust, but verify.” That adage is quite true, especially in nonprofit financial management. Even among the best-managed nonprofit organizations, people can be tempted to commit fraud.

It’s important to trust your employees. No one likes to work in an environment of suspicion and doubt. However, trusting employees is one thing—never checking on their work is another.

Many tasks in nonprofit financial management can provide an opportunity for embezzlement, workplace fraud, theft, check forgery, and other financial crimes. Fraud prevention is an important task that many nonprofits leave until it is too late. Then, the proverbial barn door is wide open, the horse is out, and he’s nowhere in sight. Closing the barn door or protecting your systems by putting into place strong checks, balances, and fraud prevention tips is an important part of nonprofit financial management.

Don’t panic! Setting up internal controls for your nonprofit can be easy with Beck & Company’s nonprofit services. Get fast answers when you contact Beck & Company.

Too Much Trust Leads to Temptation

Nonprofit leaders may be completely unaware that theft is taking place. A little money knocked off the top here and there, a dollar or two skimmed from a charity event … it all adds up, even if you can’t see it.

Too much trust can lead to temptation. Take the hypothetical example of Mary Money. Mary is the bookkeeper for a small nonprofit organization. She has two employees working with her, an accounts payable clerk and an assistant she shares with the donation and fundraising person.

Mary has been with the nonprofit for over 17 years, since it was founded. She volunteered with the organization for a year, then became a paid staffer. Today, volunteers and employees alike know they go to Mary with any question or issue and she has the answer.

Mary is so trusted, in fact, that she can sign checks on her own, without the president’s signature. The present travels often on fundraising trips and isn’t in the office every week to sign checks, so she thinks it expedient that Mary can sign off on checks. The president rarely asks to see the accounts.

Auditors, however, find problems. They discover that Mary has embezzled more than $600,000 in dribs and drabs throughout the years. In the past several months, temptation has gotten the better of her, and she has made out several checks to cash which were easy to spot. With a little probing into the company’s security arrangements, it becomes clear that Mary has been using the nonprofit association as her personal piggybank for several years.

Loss Control Methods

No one likes to work in an organization that doesn’t trust its employees. When it comes to nonprofit financial management, however, loss control methods should be in place to deter fraud. It isn’t a sign that you don’t trust your employees. It’s a sign that you care about your organization and the trust that donors and others have placed in it through their financial contributions.

Loss control methods for nonprofit financial management include:

Employee background screening: While screening would not have picked up anything in Mary’s case since she was a long-time employee, it might pick up applicants who have financial woes that could lead them to succumb to temptation.
Financial oversight: Review your organization’s finances on a regular basis. In Mary’s example, the president didn’t review finances regularly enough, leaving plenty of time for Mary to cover her tracks. Both scheduled and spontaneous reviews can help you catch any errors or fraud attempts early.
Anonymous reporting: Set up an anonymous tip line or email box for employees to voice their suspicions. Perhaps the two people who worked with Mary had noticed something amiss but hesitated to “tell” on their supervisor. An anonymous program makes it easier for people to share any problems or issues.
Quick follow up: Any items reported through the tip line should be followed up on promptly. This ensures early detection of fraud.
Two-fer: Always have two people sign checks or have one person sign with the other giving written approval, and two people present when counting out cash or checks.

These are just some steps to take for fraud deterrence and detection. A comprehensive program and policy, along with a process to follow to both detect and report fraud, can save your organization a great deal of headache and heartache later. We can provide services for both accounting and auditing to assist you.

Although it is admirable to create a corporate culture that inspires trust, it is not always wise to trust blindly. Following simple fraud deterrence procedures isn’t a mark of lack of trust, but rather, a simple step that can prevent good people from making bad mistakes.

Nonprofit Financial Management and Consulting from Beck & Company

If you need help planning, preventing, and formulating a response to potential fraud, Beck & Company can help. We are Washington DC area nonprofit advisors and are Virginia certified nonprofit accountants. We work with nonprofits of all sizes, serving many different constituents nationwide, providing a variety of consulting, auditing, and accounting services. For more information, please contact us at 703-834-0776 x 8001.