Reconcile and examine bank statements monthly.Even if an organization has no staff, it can still ensure that there is adequate separation by assigning duties to board directors or volunteers.
A similar system can be used for the expense cycle as well. In this manner, no single individual has too much control and there is oversight for each step in the process. The bank statement and cancelled checks should be received and reviewed by someone that is independent of all the steps in the above process (independent oversight). An individual that makes accounting entries (accounting duties) should not be the same person that has check signing authority (management duties). Generally, duties should be segregated into four categories: individuals with access to assets individuals with access to accounting systems and accounting records individuals in management or control positions and individuals exercising independent oversight, such as board directors.įor example, an individual that receives cash and issues a receipt for it (access to assets) should not also record the cash deposit in the receipts journal (accounting duties). Additional internal controls should be considered and adapted to the circumstances and operations of the nonprofit.Įffective internal controls limit any single individual from having control over two or more phases of a financial transaction or operation. The following is a list of minimum internal controls that should be in place in any non-profit organization, regardless of size. Financial controls are often referred to as internal controls. Most financial losses could be easily avoided or quickly identified if organizations implemented basic financial controls, such as regular independent review of bank statements or following a proper expenditure review process. Oregon law requires that nonprofit corporations maintain appropriate financial records, see: ORS 65.771(2). The Department has found that most situations leading to charitable asset diversion are directly related to an organization’s maintenance of reasonable financial records and implementation of meaningful financial controls. Many organizations operating in Oregon experience asset losses related to thefts, embezzlements, or other diversions of assets and these trends are mirrored in charities throughout the country. Financial Control Recommendations for Small Nonprofits Preserving charitable assets is one of the most important responsibilities of nonprofit board service
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