How to Maintain Control of a Non Profit? Nonprofits and charities accept funds from nonprofit donors and sponsors, along with contributions and grants from corporations and government entities. Since public money is used to fund campaigns and cover expenses, it is essential for nonprofit organisations to have internal controls in order to be transparent with accounts, and prevent fraudulent activities and the misuse of funds.
Engaging in regular risk assessments and evaluations can benefit the organisation immensely. It can mitigate risks and improve financial reporting while building credibility and integrity. This then makes it easier to find donors for nonprofit funding easier and also helps to attract skilled employees and individuals seeking online volunteer opportunities.
Read below to find out how to maintain control of a nonprofit and why it’s important.
What Are the Two Types of Control?
There are two types of internal controls a nonprofit organisation can implement to maintain accurate financial information while balancing and allocating expenses for programs and campaigns.
As the name suggests, preventative controls detect and foresee errors and prevent them from happening. Some simple ways to enforce preventive controls include:
- Having different employees in charge of various steps in the receiving and documenting processes
- Requiring authorised signatures on important documents
- Keeping accurate documentation
- Locking petty cash in a safe
- Changing system passwords regularly
- Having strong network security
- Doing background checks on employees before hiring
Set in place to help you identify any fraudulent activities that may have occurred within the nonprofit organisation, detective controls are simple and easy to implement. If an error is detected, it’s important to take corrective action to make sure it doesn’t happen again.
Here are some detective control methods that you could implement to safeguard your nonprofit organisation:
- Daily cash count
- Timely and monthly bank reconciliations
- Internal audits
- Regular inventory check
- Employee performance appraisals
- Analysing financial statements
Why are preventative and detective controls important for a nonprofit organisation?
- To attract donors that are looking to find a charity to support.
- To build credibility and trust within the community through transparency and honesty.
- To reduce the risk of fraud
- To apply for nonprofit tax exemptions
- To provide government and legal entities with accurate financial reports
- To abide by the governing laws and regulations
- To safeguard cash contributions and donated material