Not For Prophet:
Protect Your Mission With Best Practices

Zen Mensch Accounting

I love non-profits: the missions, dedication and eagerness to be of service.  Now you didn’t sign up as Executive Director to practice your accounting or legal skills, but without basic structure and controls the fruits of your labor can be washed away quickly.  The names and details have been changed in these examples:

Years ago I was on the board of an established non-profit, Narcissism for All. We ended up being sued by a real estate company for protesting development planned adjacent to our property.  They scoured our corporate records, and discovered we had not properly recorded the election of our officers in all years, if at all. This little error cost us dearly.  It called into question who could speak for us, and contributed to a lengthy and expensive case. ( That, and initially trying to defend ourselves on the cheap.  Take note.)

Flip N’ Stretch teaches yoga to dolphins.  Sarah has left the bookkeeping to Roger without paying much attention. Within every stack of checks he gave her to sign were one or two seemingly innocuous payments to a new vendor for “program supplies.”  By the time Sarah turned the problem over to us, $20,000 had walked out the door to shell companies owned by Roger.

( I am also a Certified Fraud Examiner and uncovered embezzlement in my first auditMy company has been helping non-profits for three decades, conducts forensic audits and can help you implement strong internal controls.)

I know, Florence Nightingale, I know — you are busy saving lives, who has time to reconcile bank statements or take minutes, let alone have meetings?  The least you should do:

-Use a bookkeeping system that simplifies the task, or hire a qualified bookkeeper. It seems basic but Luddites LLC has one employee and he won’t even use a spreadsheet. 

-Even with that, insure that a board member reviews the bank statements and/or the reconciliations (Reconcile! Look it up, or ask me what this means!).  If there is no board member willing to do so either your board is too small or not sufficiently engaged. The board has a fiduciary responsibility for the charity’s assets and board members must be expected to contribute something of their time beyond attending meetings.

-Establish a physical minutes book that records all decisions made by the board. Consider paying a lawyer to maintain this book and remind you when your annual meeting, state annual report and federal information returns come due.  If Alan Dershowitz serves on your board and would not charge you, that’s great. But board members change, so consider paying someone. You can lose your legal charter or tax-exempt status, or incur enormous IRS fines if you are not careful.

–Do not let bookkeepers sign checks, and have an internal policy that requires two signatures or authorizations on large, non-routine disbursements (e.g. not payroll). Limit access and establish controls for on-line investment transfers.

-Talk to your insurance agent about “fidelity bond” insurance that, for a modest fee, can protect you against losses from embezzlement, forgery and the like.

-Above all, lead by example. If the E.D. does not submit credit card receipts then others will conclude there is a double standard or lax controls, or both. Instead, encourage a culture of accountability for all employees.

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