Introduction
Nonprofits have a disproportionate risk for financial abuses. As such, it is important to establish and maintain adequate financial records and controls. This lesson will go over best practices that, if followed, will protect your organization against malicious malpractice.
Best Practices for Financial Controls
Separation of Functions – approval, spending, tracking
- Board approves/adopts budget
- Executive Director/Staff/Delegated party writes the checks
- Independent party (no check signing authority) tracks funds
Budgeting, reporting, transparency
- Projects should have proper budgets that give line item descriptions of expected expenditures
- Receipts should be maintained for each transaction that occurs
- Accounting records should be transparent
Fiscal/Financial policy
Your organization should have a fiscal or financial policy that outlines how money and other assets are handled within the organization.
Expense reimbursement policy (approved, economical, substantiated)
- Expense needs to be pre-approved
- Expense should make financial sense and be economical
- Expense must have an invoice/receipt
- No receipt = no reimbursement
Nonprofit accounting basics: https://www.nonprofitaccountingbasics.org