Non-profit organization serves in a unique position. They must accurately share information with the public about their governance, finances, and operations. They are accountable to those who support them and to those they decide to serve. They are responsible for leadership on behalf of the public interest, stewardship, and quality.
They must see to it that managers fulfill their responsibility for the conduct of project activities and become accountable for meeting legal and other required reporting procedures specific to the non-profit industry.
Many alternative methods exist for implementing financial management systems, and the organization should choose methods appropriate for its particular scale of operations.
Generally, Integrated Financial Management features:
The organization must have an accounting system that provides an accurate and complete information about the organization operations. Accounting records should be maintained on a current basis and account reconciliations performed monthly.
The organization must provide safeguards for all grant property, whether cash or other assets, and ensure that these are used solely for its intended purpose.
Internal control will be enhanced if the duties of the members of the organization are divided so that no one person handles all aspects of a transaction from beginning to end. This is called proper segregation of duties to provide check and balance within the organization. To illustrate, if the non-profit organization has an in-house staff handling all the contributions and disbursements (check processing to vendors), an independent person should be handling the recording of transactions and performing the bank reconciliations. This is to ensure that in case of asset misappropriations or fund embezzlement, that this is captured immediately through the internal control procedures performed by the independent party. Ideally, the independent firm can be a bookkeeper familiar with non-profit accounting. According to the Association of Certified Fraud Examiner, fraud is uncovered from 12 months to 18 months from inception. For several non-profit organization, this may be too late. Having a strong internal control will help the organization preserve the assets and protect from fraud or misappropriation.
The organization must meet all federal requirements for public disclosure. The Internal Revenue Service requires that a non-profit organization files annual information return (Form 990) and tax exemption documents available to the public.
If you need help with establishing a strong financial stewardship for your non-profit organization, or you need help with bookkeeping and tax reporting, contact us today at email@example.com or 832-437-0385.
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