Confidently Monitor Non-Profit Accounts

Ah, you’ve become a board member and you are learning the ropes. You joined a committee and recently you put up your hand to be added as a signer for the bookkeeping. The trip to the bank was easy enough, and maybe you thought you’d sign a few cheques, maybe a few deposits, but the signing package just arrived and its 3 inches thick. You realize you might not understand this important job.

Board members are responsible for the legal and ethical integrity of their non-profit organization. It’s a big job and financial monitoring is a critical piece to ensure the organization’s funding is being used legally, fairly, and according to budget. If there are no procedures for what a board member should actually DO when reviewing accounts (bookkeeping), there is a risk for wasted funding (at the least) or fraud (at the worst). Suddenly, being a signer becomes a little scarry.

Board members with the designation of account signer can start with 4 basic questions when reviewing bookkeeping/accounts. All those questions fall within risk management.

Ask: is there evidence that the transaction is valid?

• Is the paperwork included with the transaction clearly demonstrating that the item is a genuine expense or revenue? Look for receipts and invoices with recognizable business names. Look for photocopies of cheques and other payments received.
• Is there a cover page explaining (briefly) why something was purchased, or why money is coming in? Cover pages are an important bookkeeping function to keep financial files organized and easy to understand.

Ask: is there evidence that the numbers match?

• Do invoice amounts and the amounts written on the cheque you are about to sign, match? Amounts that don’t match are a red flag.
• Do the amounts on the deposit, match the details explaining the money received? No match = another red flag.

Ask: is there evidence that the expense or revenue is attributed to a current program?

• Is the program name indicated on the cover page? Expenses outside of pre-approved budget categories may require additional board approval.
• Does the program name match one from the program list in the current operating budget? Programs can’t simply be invented on a whim; they need to follow the operating budget plan.

Ask: is policy being followed?

• Are payments being made within the limitations stipulated by the board? Some boards allow employees to make purchases up to a certain amount using specific payment methods, such as paying for office supplies using the company credit card.

Once a signer can answer YES to all these questions, they can feel more confident to sign the cheques, and sign the cover pages. If any of the answers are NO, then a signer would be wise to request clarification before proceeding further with that transaction.

Let’s go back to the example at the beginning. You’ve become a board member and you are learning the ropes. You recently volunteered to become a signer for the non-profit. The first stack of accounts arrives and its 3 inches thick. No problem!! YOU know exactly what to so. You have 4 risk management checks you can perform on each transaction you’ve been asked to review. After the first few items you start to get the hang of things and you feel much more confident.

Should an item have a red flag, you know who to ask for more details on the transaction. If the explanation clears up your questions, you confidently add your signature to the cover page. If it doesn’t, you request to have the item discussed further, either at a board meeting or with the board chair. When you’re done, you’ll send back that package of accounts, with the confidence that you did your very best to act in the legal and ethical best interests of the non-profit. Go you!!

How can you put these ideas into action at your non-profit today? Ask to have these 4 risk management questions added to all cover documents for every financial transaction. If your non-profit uses questions that are similar, use what works for you. Don’t worry if adding cover documents feels like you are using a LOT of paper. Remember strong risk management loves a good paper trail, as so will your auditor.

Strong risk management loves a good paper trail.

When a non-profit account signer needs guidance in the review of bookkeeping transactions, developing a set of risk management questions will help them know they are acting in the financial best interest of the organization.

Thanks for taking the time to read my ideas. My mission is to take the mystery out of running a small non-profit. If you know someone who needs to read this, why not grab the link, and share it with them. Let’s work together to provide the tools non-profit volunteers can use!

-Christie

P.S. Non-profits are very vulnerable to fraud. The task of risk management and monitoring does not fall to one person alone. Everyone has a responsibility to follow policies and suggest changes when needed. If you suspect something, speak up.

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Hi, I'm Christie Saas, former board member, current Executive Director, and non-profit volunteer. I remember well, those early years when I lacked the training, the confidence, and the work-life balance to focus on becoming the best non-profit leader I could be.

Fast-forward past many bumps in the road, lessons learned, and you’ll find me still in the trenches, but a little wiser, a little calmer, and a whole lot happier. I love my work and I want to help you love yours too.

I created ChristieSaas.com to give you tools, tips, and templates to remove the mystery of learning to run a small non-profit. If you’re a brand-new non-profit leader, or a little more seasoned, someone who’s looking to make a meaningful contribution and still have time for a full life away from the job, you’re in the right place.

© Christie Saas 2022 All Rights Reserved

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