Small organizations
Implementing internal controls is as easy as 1, 2, 3

Does your organization have only a few employees? In such a small world, you may think it’s impossible to put an adequate system of checks and balances in place. But think again.

Take safeguarding cash and checks. In a small nonprofit, one employee may open the mail (that includes the cash and checks), deposit the receipts in the bank, enter the deposit into the accounting system and reconcile the bank account at the end of the month. While you may believe this person is as careful as a trapeze artist and as honest as Abe, the fact that no one else is involved in this process invites error and makes fraud easy.

To segregate the duties in the cycle without hiring more personnel, try this: Have one staffer open the mail and log the checks into a check register and another make the actual bank deposits and enter them into the accounting system. And then the executive director or a board member should reconcile the bank account at the end of the month, or at least perform a detailed review of the bank’s reconciliation.

To get on track with internal controls, you should follow these three simple steps:

1. List each employee on staff and his or her accounting and administrative duties.
2. Scrutinize the list, possibly with your accountant or auditor, and determine if any one employee is handling too many duties in a cycle, as in the example above.
3. If you find a lack of segregation of duties, reassign responsibility. If that’s not feasible, create a supervisory review of these functions, such as the executive director or board member review of the bank reconciliation in the example.

While nonprofits live in a world where everyone often does everything, your organization can set up some internal controls, almost as fast as saying one, two, three. •