Category

Internal Controls

Mid-Year Budget Review

By | Abila, Accounting, Accounting Software, Budget, CPA, Grant Management, Internal Controls, MIP Fund Accounting, Nonprofit | No Comments

Let’s face it. Stuff happens. And, though you may wish your hard-fought and well-planned budget was settled, the National Council of Nonprofits says it best, “Budgets should not be ‘written in stone’ because the financial position of the nonprofit may change during the year.”

How is your nonprofit’s budget performing? Have you reviewed it since it was created and implemented? Is your revenue on target? Have any of the following occurred at your nonprofit? …

  • A shift or pivot in strategy or direction
  • Unforeseen events (natural disaster, legal, economic)
  • Organizational structure change (such as consolidations)
  • A change in funding received versus projected funding (such as receiving more or less from planned grant funding or fundraising activities)

A successful budget is one that is carefully crafted and implemented by a thorough budget team, then cautiously monitored and continuously updated throughout the year to reflect the inevitable changes affecting your nonprofit.

Download our Budget Checkup tool to put your Nonprofit budget to the test.

To learn about best practices when it comes to effectively monitoring and reviewing your budget throughout the year, download Budget Checkup: Critical Components of the Nonprofit Budget Review Process.

Feel like you have a pretty good understanding about the importance of the budget review process, but still relying on spreadsheets or an outdated solution? Join a live webinar, “Budget Lifecycle: Key Components to Budget Creation and Support” on Wednesday, June 7, for an in-depth review of how a true fund accounting™ solution can help you improve budgeting, so you can focus on your cause.

Looking for new nonprofit software to track your budget?  Answer these 5 Questions to Measure Fund Accounting System Effectiveness.

 

Welter Consulting

Welter Consulting is a technology firm empowering nonprofit and government organizations with effective software, consulting & training that can help you with your accounting needs. We are committed to finding the most affordable technology, the most powerful solution, and providing expert support. By leveraging technology and superior reporting, our team helps to free more of your time to devote to the important work of your mission. We bridge people and technology together for effective solutions for nonprofit organizations. We are passionate professionals who choose to work in the nonprofit sector for the same reason you do – helping others. Please contact us online or call 206-605-3113 for more information.

 

Responsible Data Collection for Nonprofit Organizations

By | Abila, Accounting, Accounting Software, Cloud, Data, Internal Controls, MIP Fund Accounting, Nonprofit, Technology | No Comments

Many people were shocked to discover the amount of data that Facebook and its partner organizations collect and share about their users. What’s surprising isn’t the amount of data collected and shared, but the public’s ignorance of how rampant data abuse is throughout the online world.

Have you ever had advertisements that seem to follow you online? That’s due to data collection from your browser history. Companies such as Google note which websites you’ve shopped or browsed recently and make educated guesses on behalf of their advertisers on which ads to display on your pages. So-called “remarketing” or “re-targeting” is just one example of how you are inadvertently leaving a detailed data footprint wherever you go online.

Social media websites such as Facebook may be in the news because of their disregard of how sensitive people are to data collection and sharing, but your company could be next on the list if you aren’t careful. Take time now to review your nonprofit’s data collection habits, security, and sharing guidelines, and make changes if needed to safeguard your donor and member privacy.

Create and Display Data Privacy Policies

Data privacy policies should be written and displayed prominently on your website. Some websites request that users accept them as part of their terms and conditions of using the website.

Privacy policies include:

  1. Details on how data is collected, shared, and stored
  2. Users’ abilities to stop data collection or access records
  3. Where to send complaints, questions, comments
  4. How IP addresses, cookies, and external links are used
  5. Any other information related to data use and collection

The Council of Nonprofits has a good privacy policy which you can review as a guideline to help you create your own. It includes the major points most nonprofits should cover in their privacy policies.

How Data Is Used

Most people recognize that some data is collected anytime they visit a website. Few object to simply recording IP addresses of people who visit a site but do disagree with who sites share their data with – they want control over who sees their personal information.

As part of your data privacy policy, be specific about how data is shared. Consider limiting shared data only to necessary third-party vendors, such as mailing companies who help you package donor mailings, or some other third party you manage and control. Selling user data may be a tempting way to make extra money, but it can quickly sour any trust built with your member base.

Improve Data Security

Even if you only collect a few data elements when people register for your site or make a donation, you must make all efforts to safeguard that data from hackers. Small nonprofits are actually at greater risk than larger ones because criminals know that small organizations lack the resources to counter against a cyberattack. They are more likely to pay the ransom when data is hijacked and may lack a dedicated IT resource to protect against attacks.

Take the time now to improve data security. Simple steps such as updating software, creating strong passwords, and adding virus protection software to your organization can act like locks on the front door of a house – not much if someone is truly determined to break in but enough of a deterrent that the average thief walks away for easier pickings elsewhere. Consider working with a cyber security expert to enact greater safeguards against intrusion if you handle highly sensitive data.

Although nonprofit organizations aren’t in the business of collecting and selling data like Facebook and other big companies are, they must maintain a basic level of trust with the public in order to continue their activities. Protecting data and providing transparency into your organization’s data privacy and security is one way to enhance that trust.

 

Welter Consulting

Welter Consulting is a technology firm empowering nonprofit and government organizations with effective software, consulting & training that can help you with your accounting needs. We are committed to finding the most affordable technology, the most powerful solution, and providing expert support. By leveraging technology and superior reporting, our team helps to free more of your time to devote to the important work of your mission. We bridge people and technology together for effective solutions for nonprofit organizations. We are passionate professionals who choose to work in the nonprofit sector for the same reason you do – helping others. Please contact Welter Consulting at 206-605-3113 for more information.

12 Steps to Improve Internal Controls

By | Accounting, Audit, Fraud, Internal Controls, MIP Fund Accounting, Nonprofit | No Comments

There’s no better time than now to review and analyze your organization’s internal controls. We’ve broken up the intimidating task of updating and maintaining proper internal controls while being slightly more focused and productive, with these 12 simple yet necessary steps.

Step 1: Map out your current processes and workflows. Detail out internal accounting procedures with a simple step-by-step checklist or list of rules. Clearly identify how long each step of authorization should take to process.

Step 2: Identify clear separation of duties. Open your workflow documentation back up and assign owners for each procedure, and other process owners who may be involved in authorizations, approvals, or reviews.

Step 3: Bring in an outside expert to review your current processes. Leverage outside expertise like certified fraud examiners (CFEs) or attorneys specialized in evaluating and improving internal controls. They can help identify any gaps or vulnerabilities.

Step 4: Find a new home for your documentation. You’ll want to maintain documentation of your processes in a commonly-used location that is easily accessible by staff. It will need to be continually updated as needs shift throughout the year.

Step 5: Review security permissions in your fund accounting system. Your technology should fully support your desired workflows encompassing your separation of duties. Update your security settings to limit system access, based on defined roles and security groups.

Step 6: Set up monitoring alerts. Ideally, your fund accounting system can be set up with active monitoring alerts to quickly notify other staff about key activities, such as when checks are printed, but not recorded, or vendor hold payment status is changed.

Step 7: Create a digital audit file. Here you’ll organize and maintain artifacts for future audits, including bank statements and reconciliations, investment summaries, fixed asset and depreciation schedules, documentation of donor pledges and grant funds received, and year-end accounts payable and expenses.

Step 8: Update your employee onboarding. Now that your documentation is up to date, you’ll need to update your new employee onboarding to reflect the changes. It’s important to promote a shared commitment of financial responsibility from the start with a new employee.

Step 9: Set a reoccurring monthly budget review. The budget is not just a planning tool – this is a key internal control. Schedule monthly budget reviews for reconciliation, explaining variances to the budget keeps proper checks and balances across departments.

Step 10: Recruit for an audit committee. You’ll want to institute a strong audit committee of independent members (typically from the board) who are familiar with finance and accounting. They should select and review the independent external auditors and help monitor for fraud.

Step 11: Schedule an internal audit. The best prepared organizations perform internal audits to ensure key control activities are being followed, and to identify any reconciliation discrepancies. Find an appropriate time for your team and stick to the date.

Step 12: Set up quarterly staff trainings. You must reinforce your controls with periodic trainings. Take the time now to get these on the calendar and build into the agenda time to discuss any shifting accounting standards for which you may need to adjust.

Remember, the objective of internal controls is to put “checks and balances” in place to help manage and preserve the charitable assets of the organization. It builds a foundation of policies and procedures that ensures employees act responsibly and ethically and prepares the organization for expected scrutiny (for example, audits and budget reviews) and tough to predict events (for example, staff turnover).

Here are a few resources to help you implement the 12 Steps to Better Internal Controls:

 

Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.

Trust, But Verify: Avoid Fraud by Maintaining Internal Controls

By | Accounting, Fraud, Internal Controls, MIP Fund Accounting, Nonprofit | No Comments

Trust, so the experts tell us, must be earned over time. In the workplace, it is earned by consistently performing one’s duties well and by successfully accepting ever-increasing responsibilities.

The nonprofit workplace, like the for-profit workplace, works best in an atmosphere of trust and mutual respect among one’s colleagues. Without it, the workplace can be hostile, unfriendly, and uncomfortable.

But there is a fine line between suspicion and performing due diligence. Nonprofit organizations should guard against allowing trust to blindside them to the potential dangers of fraud and theft in the workplace.

A Cautionary Tale of the Ramifications of Blind Trust

One story that stands out is the story of Marge (not her real name), who worked at a large nonprofit organization. She was like a second mother to the staff. Honest, always willing to work extra hours, diligent in her job duties in the accounting department, Marge was trusted with managing many areas of the organization’s finances.

Although the organization had internal controls in place, they were often waived for Marge and other senior staff members who were so well-regarded and trusted that they weren’t questioned when they dodged the procedures. Marge was especially trusted and valued and did not have anyone present when she counted out petty cash or handled the checkbook.

One day it was discovered that money was missing from the petty cash. An audit revealed that small amounts of money had been taken from the petty cash box as well as from the checking account. Because Marge controlled both, she could make slight adjustments in the entry ledgers to avoid suspicion for a long time. It took the auditors only a short while to uncover the discrepancies and for Marge to confess that her lottery ticket habit had become a necessity and that she had been stealing ever increasing amounts to fuel an obsession with gambling.

Is Marge an isolated case? We think not, and a quick survey of the various nonprofit journals reveals similar patterns of fraud. Fraud doesn’t occur in isolation. It tends to occur when gaps are left within the internal controls that are intended to prevent such situations. In this case, trust and friendship overrode common sense. Exceptions were made that should not have been made. The result was an organization poorer for the loss of both money and a trusted employee who had to be let go when the truth was revealed.

Preventing and Identifying Fraud

Trust is a wonderful thing and a valued commodity in the workplace. That said, it should not preclude the use of standards, internal controls, and audits.

  • Preventing Fraud
    • Standards are the accepted norms for an industry. Accounting standards, security standards, and workplace standards can be codified and recorded in written manuals provided to all employees. Everyone can then be held to the same shared standard of conduct and behavior.
    • Internal controls are the processes and procedures put into place around access to the organization’s finances. These controls should be written down and shared among staff. Training sessions and refresher training session are also important to ensure consistent understanding of the controls among everyone.
  • Recognizing Fraud:
    • Audits bring in outside consultants such as CPA firms, well-versed in accounting for nonprofits to examine your organization’s financial records, provide recommendations, and discover discrepancies.
    • Provide staff with an anonymous method to report incidences of fraud to their supervisors or to the managers in your organization.

Trust doesn’t have to be blind. Assuring people that their work matters, listening to their ideas, implementing their suggestions and other positive examples of trust can build bonds among workers that engender loyalty to your organization. Don’t leave your nonprofit open to fraud or theft due to blind trust. Trust, but verify, and stick to accepted norms and standards of behavior and internal controls to prevent problems before they occur.

About Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.