Limited resources make internal controls and segregation of duties quite challenging to small not-for-profit organizations. Perhaps there are only a couple of employees to share responsibilities. Maybe there is only a volunteer staff. Regardless of size, there are some basic controls that are essential to be in place to protect the organization from fraud or errors.
First of all, just because you’re small doesn’t mean you don’t need policies. You need them. Take the time as a board to implement basic policies so that staff and volunteers have the guidance they need when issues arise. Often I’ll hear board members say, “We don’t need an expense reimbursement policy because only our executive director submits them.” Fine, but then that’s what your policy should state. If you don’t have a policy that states who may have expenses reimbursed and what types of expenses are allowed, you may find yourself in an awkward position when a board member or volunteer submits a request for a reimbursement the organization doesn’t think it should have to pay (or may not have the budget to pay!) What if your executive director submits one giant expense report a year and the board wasn’t expecting the amounts or types of expenses included? What if receipts are lost? These are just a few scenarios that commonly occur where having a policy in place will protect your relationship with your board, employees and volunteers.
Once you have those policies in place – insist that everyone follow them! Know that behavior of management (or board members) will set the tone for the entire organization. Employees and volunteers will watch your behavior. If you’re sloppy with documentation or make frequent policy exceptions for yourself they will have a much easier time rationalizing that same behavior or worse!
Second, when dealing with actual cash it’s imperative that it’s always counted with two people present. Do you collect money at special events or while serving lunch at your senior center? If so, your risk of theft decreases when two people are handling it at the same time.
Next, that cash needs to be reconciled! Every month! Without exceptions! Someone other than the person who writes checks and makes deposits should reconcile the bank accounts. If you sincerely don’t having someone outside of this function to handle this, you should at a minimum have someone else receive the bank statements and scan through them before handing them over to be reconciled. You should also have a board member review the bank recs on a regular basis.
Finally, never underestimate the value of a lock! Computers should be physically locked whenever possible, and there should be password protection to access data. The same goes for check stock, petty cash, gift cards and bus passes.
Jessica Puckett, CPA, CFE