With almost 1 million tax exempt organizations classified as public charities and almost 1.6 trillion in revenue reported (source: National Center for Charitable Statistics), there appear to be many opportunities and resources to provide excellent and meaningful services through the not-for-profit sector. However, how do we know that the revenue as reported is accurate - and it should not be 1.7 trillion? As auditors, Meaden & Moore understands the importance of internal controls over the financial reporting as required by auditing standards. But what if your organization does not need a financial statement audit, what if your organization has a limited purpose and is small on purpose? Should you consider internal controls? Absolutely! And even more so. Too many times in local communities, there are reports of a trusted individual absconding with the receipts that were collected for kids sports uniforms, band travel funds, membership dues or to provide assistance to a struggling neighbor. Even a small organization with no employees, run by volunteers can take steps to add safeguards over cash.
And beyond these suggestions, just the awareness by the volunteers and governance of the organization that more than one person should be involved in the cash cycle is a best practice. Individuals should be uncomfortable if there is no oversight because of the implications that there is no check and balance of their activities. And if an individual is overly controlling and offended at the suggestion of adding some oversight, well in our world, this is identified as a red flag!
Take some steps to start the communication in your organization about internal controls and the safeguards over cash and what can be done to make some improvements in the process. Consider how an internal control review provided by Meaden & Moore could help you indentify weaknesses and deficiencies and make recommendations on how to address them.
Other not-for-profit posts by Lynn:
When Should a Not-for-Profit Organization Make a Profit?
4 Considerations for Non Profit Transparency
5 Things to Consider Before Joining a Board of Directors