If you weren’t able to attend the financial workshop in Baltimore in May, you may be interested in some of the questions and answers that came in after the first day. Here are a few about Internal Controls:
Q: How do we have internal controls for reimbursements to the Executive Director? The board member signs checks, but the check request form is signed by the Executive Director and Assistant Director. The board member reviews the check request and then signs the check. Should the board member also sign the check request?
A: This question is around how you assure that an executive director has someone on the board overseeing checks made out to him or her. An ED should never approve his/her own expenses. Best practice is to document that the board member has seen the check request and related documentation such as the actual receipts not just the credit card summary. Signing the check request is certainly one way to do that. Signing the check without reviewing the actual expenses covered would not provide sufficient internal controls.
Q: If we don’t have a policy requiring a purchase request but do have one that states that reimbursements will be approved before they can be paid – do we need a purchase request?
A: You are not required to use a purchase order system, although in larger organizations it might be useful. A check request form, or reimbursement request form in this case, should be enough.
Q: What if bills are paid on line. How does a board member show review and approval of ED expenses?
A: The board member should review whatever document is submitted to request the reimbursement, and sign or initial that document to show it has been reviewed. The person who prepares checks should not pay the bill until that approval is evident. If the bill being paid is a credit card statement, the board member approving p
ayment will need to see all the detail and actual receipts, not just the more general credit card bill, to assure that each of the expenses being paid is reasonable and necessary.
Q: Our board chair’s disability is such that he doesn’t sign his name and I use his stamp to co-sign checks and approval. I email him the bank statements and credit card statement. Is that okay or should I have the treasurer co-sign?
A: A signature stamp should never be used by someone else unless the individual whose signature it is, first reviews the detail and gives permission for the stamp to be used. You might be able to show this by emailing the detail to the board chair, and then have him reply that the detailed expenses are approved and to use his signature stamp on his behalf. We suggest you keep this documentation with a log of the times the stamp is used, if you continue to use a signature stamp. The stamp needs to be carefully controlled as it can be used to release or encumber funds, as well as to sign legal documents. Discuss this wit
h the board chair to see if he has other suggestions. If he does not want to get into that kind of detail, the board treasurer could be another person to review/co-sign those expenses that require a second signature.
Q: How would you word a policy about a financial statement audit if you are not above $750,000 federal funds (requiring a compliance audit) but the board or funder or both want a financial statement audit to clearly be expected in your policies?
A: First, make sure that your policies and procedures indicate that the board requires a financial statement audit if federal funds received are less than $750,000. Second, assure that the audit amount is included in your budgets (for individual grants as well as your organization’s full budget) and finally, assure that the cost is properly allocated to all of your funding objectives. The wording this answer is a good start for a policy.
For more information from this workshop, go to the page for the workshop. As they are available, the captioned videos, PowerPoint Presentations and transcripts will be posted there. The sample financial policies and procedures are already available.