It is all about internal controls. Internal controls assure that more than one person reviews all financial transactions, and that more than one person is involved in any chain of events related to a transaction. When there is a single person office, you need to accomplish separation of responsibilities by involving board/council members in your internal controls. When there aren’t internal controls, an inappropriate temptation is put in front of the employee.
The board/council sets financial policy. You may be used to depending on your SILC staff for a lot of things including policy. When it comes to your responsibilities to the organization, you have a fiduciary duty (to oversee the finances), including setting the policy and procedure for internal controls. While the staff member may say, “Hey, don’t worry about it, I’ve got this”, this is one place you really must step up. and at a minimum review and approve the policies and procedures. We have a set of sample policies, geared to CILs but many apply to your SILC as well. Here is what we said about segregation of responsibilities, modified slightly to better apply to your SILC:
The council and staff of Anystate SILC will ensure the appropriate level of segregation of duties at all times. The board and staff will accomplish that by following the policies and procedures included in this manual.
Cash Receipts: Blank checks, checks or cash held for deposit, and checks held for employees or vendors will be kept in a locked area with access limited to the executive director and the treasurer (those whose responsibilities require access).
Incoming mail will be opened by the executive director. When checks or cash are received, he or she will perform the following tasks:
- Stamp the back of any checks received “For Deposit Only.”
- Count any cash received.
- Complete a deposit slip.
- Make a photocopy, or electronic copy of any checks received and any accompanying documentation.
- Make timely bank deposits not more than a week from the receipt of the check.
- Obtain an office copy of the receipted bank deposit.
- Provide a copy of the checks and deposit slip and receipt (or check scanning report)to the accountant/bookkeeper or the treasurer to record in the accounting system. Under no circumstance shall the accountant (bookkeeper, treasurer) perform any of the above seven tasks, so that segregation of duties can be maintained.
Paying the bills. The Executive Director is responsible for processing any invoices for payment, including:
- Open mailed invoices or print electronic invoices and mark them regarding allocation if the SILC has more than one funding source.
- Assure that itemized receipts are included for credit card transactions and that each is reviewed.
- Initial to show approval and forward to bookkeeper/accountant/DSE to initiate check payment.
The accountant/bookkeeper will enter the payment information and print a check or, if electronic payment is used, print the payment information. The accountant/bookkeper will then present the checks to the ED and treasurer to sign.
- The documentation will be presented with the check (either paper or electronic) for review and signature.
- All checks will be signed by both the executive director and the treasurer/other council member assigned.
- At least quarterly the council chair shall reconcile the bank account by reviewing the check register and comparing payees and amounts to the actual check images on line.
- Time documentation and payroll for the SILC executive director will be reviewed at least quarterly by the council chair.
- Any check made out to the ED shall not be signed by the ED, but requires signature from an authorized board member.
The person doing to review should be familiar with the organization’s operations, and ideally have a budget but at the very least have a good sense for revenue sources and timing.
If this can’t be done, financial administration should be performed by an independent organization (another nonprofit or an organization that administers associations and nonprofits) or by a contracted accounting firm.
If you have found multiple signers a problem in the past there is good news. You can use a service like https://www.bill.com/ to allow remote signatures from multiple parties as expenses are approved and checks signed electronically.