I recently ran across a situation where the only signatory to one of a nonprofit's special funds, the executive, died unexpectedly. Yes, no one on the board, including the treasurer, had any authority to sign checks or move monies from one fund to the general fund. Now one might wonder why the executive had authority to establish an account that only he could sign (there were no policies or procedures to the contrary). You might also wonder why an audit didn't catch the challenge (mostly because there was no audit). And, you might wonder why, if the board received reports on the activities resulting from the expenditure of funds, that board didn't ask about the source of funds for these activities. And, again, you might wonder why the board wasn't even in the loop to formally vote on and accept funds (as the nonprofit's owners).
A couple of lessons from this situation should remind nonprofit boards not to let this situation happen. One lesson: all funds are under the authority of the board. An exec ensures the daily use of funds but that individual's authority comes from the board which at the very least, approves the budget. Next, co-signing checks for expenditures (pre-and post certain amounts provides a check-and-balance that is in the best interest of the board and the exec. And finally, emergency succession planning is a helpful reference for what might happen if and when the day comes when the person with the daily check-signing authority comes to work no longer.