A publication from the Virginia Society of Certified Public Accountants brings home the point that good internal controls, through the use of Abila MIP fund accounting and processes around them, can help prevent loss and “keep honest people honest.”
Fund accounting for nonprofits can help them keep safeguards in place to avoid losses. RBP Methods offers Abila MIP fund accounting and other fund accounting software choices to help your nonprofit accurately track its finances. Understand what a fund accounting system can do for you by downloading the Fund Accounting Software Success Kit.
Internal controls provide safeguards against losses, thefts and mistakes. An old-fashioned way of keeping internal controls may be to have someone count out the petty cash box while someone else watches the process. The watcher in this case is the internal control. An extra set of eyes on the counting process keeps the person holding the cash in hand from ‘losing’ some or claiming it wasn’t in the petty cash box when it’s handed over for counting.
In larger, automated accounting systems for nonprofits, such as those that run Abila MIP, internal controls are built into the system. By automating many of the financial processes, it becomes more difficult for someone to circumvent the system and steal from your nonprofit.
Safeguards Against Loss: Simple Internal Controls
The first and best internal control is to avoid handling cash when at all possible. It’s not that cash is bad, it’s just that it seems to have a propensity to find its way into people’s pockets more easily than money that is already in the bank account and tallied in Abila MIP fund accounting.
A system of checks and balances keeps careful watch over your finances. A few internal controls to keep losses to a minimum:
- Lock checks and cash in a safe or drawer both during business hours and afterwards.
- Monitor access to the keys.
- Make it a rule that all employees, regardless of their job title or function, must have another employee present when opening the safe or cash drawer, and counting out money.
- Don’t let checks and cash pile up in the office. Make a bank deposit when the threshold reaches a certain, set amount.
- Use timecards to monitor hourly workers’ wages.
- Have a manager review timecard information regularly to ensure no one is ‘padding’ the hours.
- Do not let anyone borrow funds from the organization’s accounts for personal reasons, or use business credit cards for personal reasons.
It is important to have written policies in place regarding fraud and theft so that you can take the appropriate steps to document, correct, and if necessary, terminate employees who circumvent or ignore internal controls. Depending on the circumstances, your organization may also have a zero-tolerance policy for theft, and a written policy regarding grounds for termination should include such information.
Take steps to create policies and internal controls for your staff. Train and teach them their expectations. Set in place policies regarding termination. Know who is handling your accounts, who has access to cash and checks, and how such resources are handled. Keeping track of your finances using good fund accounting software is a way to detect fraud and act swiftly.
Abila MIP Fund Accounting
Abila MIP Fund Accounting includes fraud protection and analysis within the system, so you can use the data within it to detect patterns of losses, analyze data, and prevent fraud.
Most losses do not occur in isolation. People find that if they can get away with one theft, they return and try again. This leaves a footprint or a recognizable pattern. Data ran from your fund accounting system may be able to display such patterns so that you can take immediate, corrective action.
At RBP Methods, we want to help our nonprofit customers prevent losses and fraud. By utilizing good nonprofit fund accounting software, such as Abila MIP, you can keep careful track of all of your accounts and detect suspicious activity quickly.
Click to learn more about Abila MIP Fund Accounting. Call us today at 503-648-9051.