Are you missing money? A few ways small nonprofits and churches can limit susceptibility to fraud

By Alicia Juhl, CPAThe ushers have just finished collecting the offering during the weekly church service or you have two volunteers who collected money for the fall festival fundraiser your organization hosts each year – now what? How do you ensure that the offering and fundraising monies are appropriately included in the financial records of the church or non-profit organization? Churches and non-profit organizations are mission driven and many are faith-based, which provides for an atmosphere of trust. Unfortunately, fraud does happen in churches and non-profit organizations. Anyone, employee or volunteer, is susceptible given the right pressure, rationalization and opportunity. There are several steps that can be taken to minimize the opportunity factor for fraud, thus reducing the potential for someone under financial pressure and the ability to rationalize that they aren’t getting paid enough, for example, to take cash that belongs to the organization. The following five steps help maximize protection of your organization’s contributions.Implement policies and procedures All organizations no matter what their size should have written policies and procedures when it comes to the handling and recording of financial data. The size of the organization will dictate the complexity of the policies and procedures. Policies and procedures should outline responsibilities for separate individuals to approve, maintain custody and record transactions. If your organization has limited personnel and is unable to separate procedural responsibilities, refer to the oversight recommendations below. Smaller organizations will want to include, at a minimum, policies for handling cash, paying invoices, credit card use and monthly financial close procedures. Once policies and procedures have been established, it is imperative that there is a plan for implementation and accountability within the organization.Protect cash contributions Provide volunteers and employees with cash collection procedures prior to the cash collection or event. Two volunteers or employees should independently count the cash and compare the totals immediately after the event. A summary of the count should include cash, checks and credit card amounts, if applicable. Both counters should sign the sheet noting the date and purpose of contributions. The cash and summary sheet should be placed in a secure bank bag or safe. Whether the bank deposit is prepared by the original counters or the next business day, monies should never be handled without two people present – up to and including making the deposit to the bank.Monitor credit cards Credit cards in the organization’s name may simplify the purchase and payment process for personnel, however, they provide the need for extra attention by management or the board. If your organization chooses to use credit cards for purchases and have cards issued to different individuals, it is recommended that your policies and procedures include a requirement that everyone assigned a credit card agree in writing to what constitutes an appropriate purchase, as well as, the requirement to provide receipts or supporting documentation for each purchase. Some of the potential issues include that amounts are already spent once receipts are provided and potentially, items could be purchased with the organization’s credit card and then submitted for reimbursement on an expense report. Also, it is easy for someone to accidently pull the wrong card from their wallet and pay for a personal item on their organization credit card.Perform regular bank reconciliations – don’t ignore this procedureBank reconciliations should be performed each month in a timely manner after receipt of the bank statement. The bank reconciliation ideally would be prepared by someone other than the person who records the transactions. Many times this is not feasible in small to medium organizations, so an alternate procedure would be to have someone in management and familiar with the organization’s financial activity to open the bank statement and review the transactions for anything that looks out of line with the organizations normal deposits or checks issued. Once reviewed, the bank statement can be given to the appropriate person for reconciliation. The completed reconciliation should not have a lot of old, outstanding checks or unidentified reconciling items. Completing this process adds a completeness and review layer to protecting the organization’s contributions.Oversight by a finance committee or similar group Lastly, have a separate individual or group, preferably with financial experience, outside the financial recording function that reviews the bank reconciliation and credit card statements on a monthly basis. This process provides for accountability by the bookkeeper and credit card holders, as well as, rounding out the procedures of the organization aimed at protecting contributions.Contact one of our Certified Public Accountants to discuss policies and procedures specific to your organization and ways to ensure your contributions are protected.