Internal Controls for Medium Organizations
There is no one system of internal controls that is a perfect fit for every nonprofit organization. The larger the organization, the more controls that need to be in place. Although each organization may operate differently, here are a number of common factors to be considered by any medium-sized nonprofit:
• The internal control system needs to be documented and constantly evaluated.
• All staff should be trained on how the internal control system works.
• The organizational chart, accounting procedures, record retention policy, and chart of accounts must be maintained on a timely basis to eliminate outdated information and include current information.
• Standardized and/or pre-numbered forms should be used whenever reasonable. The control over pre-numbered forms is maintained by individuals who do not use those forms.
• All journal entries are supported with information that clearly document and justify each entry.
• The organization needs a conflict of interest policy.
• Appropriate bonding must be maintained on employees.
• Recordkeeping duties are separated from operational and custodial duties.
• Staff assignments should be rotated from time to time.
• The internal control system is reviewed annually with the board committee (typically the audit committee) responsible for assessing the organization’s internal controls.
• Use your financial system to calculate and process financial information whenever possible.
• Use a third party to verify your financial information.