Bookkeeping Tips: Financial Due-Diligence for Non-Profits
February 28, 2019
Non-profit organizations often assume that they won’t be affected by fraud. The sad reality is that fraud often occurs in non-profit environments because of a lack of best practices and proper financial procedures.
Fraud usually starts in one of two ways:
1) A simple, honest error than an employee or member tries to cover up with the intent of correcting it later.
2) A moral lapse starting with a “loan” that the employee or member intends to repay at a later date.
Due diligence is key to help avoid such situations. Here are some tips and best practices for your non-profit to follow to ensure everyone is doing their part to serve your organization’s best financial interests.
Authorizations & responsibilities
Non-profit organizations of all sizes should make certain that there are standard procedures for any money-related authorizations, including purchase transactions.
Your board of directors needs to approve purchases over a certain amount. When filling out cheques, two signatures are required and cheques should only be signed after they are filled out in full – never before. Would you sign a blank personal cheque? … We didn’t think so.
When deciding financial responsibilities for your organization, a separation of duties is essential. When one person makes the bank deposit, another should record the deposit transaction and a third should verify, analyze or reconcile the bank account. This ensures the transaction is completed accurately.
Speaking of bank accounts, it’s important that all cash, except small amounts of petty cash, is held in a bank account, deposited on a timely basis, and distributed by cheque.
A budget is also important to your organization’s financial success. Regular reporting that compares actual results to your budget can flag financial issues sooner than if there’s no budget at all. This will help your organization to fix problems as they are discovered.
Find value in your financials:
Stream-line business processes
Improve client/customer service
Provide greater insight into operating results
Support management decision-making with relevant information
If you have any questions about how to get your non-profit organization’s finances in order, the Centre for Non-Profit Collaboration can help. Contact us at 519-641-6100 or email@example.com.