Internal Control
Creating good internal control in a non-profit organization is vital for safeguarding assets, ensuring accurate financial reporting, and promoting operational efficiency. Here are some key steps to establish effective internal controls
Establish
Organizational Structure
Define roles and responsibilities clearly. Ensure that there is a separation of duties to reduce the risk of fraud (e.g., one person should not handle both cash receipts and record keeping).
Implement Financial Policies and Procedures
Develop and document financial policies for budgeting, spending, and financial reporting. These policies should cover areas such as reimbursements, expense approvals, and purchasing.
Use Accounting Software
Invest in reliable accounting software to maintain records accurately and facilitate financial reporting. Ensure that only authorized personnel have access to the system.
Regular Reconciliation
Regularly reconcile bank statements with the organization’s financial records to identify discrepancies and prevent fraud or errors.
Control Access to Assets
Limit access to physical and financial resources (like cash, checks, or financial accounts) to authorized personnel. Use locks, safes, and secure digital access controls.
Implement an Approval Process
​Require approvals for expenditures, contracts, and significant financial decisions. This adds a layer of oversight to financial transactions.
Monitor and Review
Continually monitor financial performance and compliance with internal controls. Make necessary adjustments to policies and procedures based on observations and feedback.