1.
Financial monitoring system.
Prepare
a detailed annual budget to establish expense guidelines. Record and allocate
expenses to general ledger accounts in the same manner in which they were
budgeted.
2.
Segregation of duties.
Different
people should be given responsibility for authorizing and recording transactions
and for maintaining custody of assets. This reduces any one person's opportunity
to both perpetrate and conceal errors or irregularities.
3.
Conflict of interest policies and ethics
statements.
Many
nonprofits have a conflict of interest policy or ethics statement in place.
These policies call for employees and officers to disclose any interests
they have in companies doing business with the organization. Any contracts
entered into with the related parties should be reviewed and approved by
board members and officers not involved in the transactions.
4.
Controls over cash receipts.
Consider
using a bank lock box service to process receipts. In addition, assign
someone unrelated to the accounting process to open the mail, restrictively
endorse all incoming checks, and prepare a list of the checks received.
This list should be compared to deposits made.
When
a nonprofit receives numerous cash receipts (such as registration fees
at an event or Sunday collections at a church), two or more people should
handle and count the cash receipts and certify the total together.
5.
Bank statement review and reconciliation.
Reviewing
and reconciling bank statements will reveal any unusual cash disbursements
or evidence of check fraud. Unopened bank statements and correspondence
should be sent to someone outside the accounting function to allow an extra
set of eyes to review these critical documents.
