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    Nonprofit Organization Internal Controls

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    In an NPO, what could be the causes of situations ie: federal income tax forms not completed correctly, months delays in paying vendors and departments are late reporting transaction and failing to place in the financial reports?

    What would some recommendations be to prevent this from happening?

    If you could point me to some references, that would be great. Thanks in advance

    © BrainMass Inc. brainmass.com December 24, 2021, 11:26 pm ad1c9bdddf

    SOLUTION This solution is FREE courtesy of BrainMass!

    The causes of situations in an NPO are important. A lack of people are present to assist with the finances of the business, especially if it is small. The checks are not numbered. No software is used to keep track of statements. Vital information is not locked away in a safe location for only certain personnel to use whenever it is needed. Too many individuals have access to company checks. Everyone gets to sign the checks. Multiple invoices are used and vendors. A vendor is paid without the necessary paperwork. Nothing is marked as paid. Procedures are not in place for wire transfers. The program for using positive pay is not in place. Multiple people are receiving the bank statements. Records do not exist for financial accounts and with the accountant. With the journal entries, these do not exist with the documentation. No bonding with employees is maintained. Record keeping is not separated from other duties. An internal control system is not used within the business. Staff assignment are not rotated. An organizational chart is not well organized in regards to who does what with their specific position. A training program is not in place to assist in the development of each employee. Everything is on a spreadsheet to keep track of all accounts, but becomes confusing because it is difficult to decipher which one goes with what specific category.

    Many recommendations are needed to prevent all of these from happening. What is needed is excellent documentation on the financial information. Trustees or the Board of Directors signs the checks, and they are all numbered. Staff assignments are rotated and continuing education programs exist for the development of the employee. One person receives the bank statement, and extensive amount of record keeping is used in order to document everything that comes into the business regularly. Everyone knows what their specific position consists of within the organization. All important information is locked away in a safe for certain personnel to get a hold of it as needed. Positive pay is in place, and the vendor provides the invoice for a payment to come to the business in which he or she works for their services. What is paid is marked as that. Organization is present with all forms of documentation in order to prevent confusion.

    Nonprofit Accounting Basics. (2014). Internal controls for small businesses. http://www.nonprofitaccountingbasics.org/reporting-operations/internal-controls-small-organizations/

    Nonprofit Accounting Basics. (2014). Internal controls for medium-sized organizations. http://www.nonprofitaccountingbasics.org/reporting-operations/internal-controls-medium-sized-organizations.

    I hope you find my answers helpful, and please feel free to contact me for any future assistance. Blessings.

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