Following a couple of news stories regarding financial theft by nonprofit execs, the Capitol Gazette editorial board offered the following advice to small nonprofit boards:
But boards of directors must take steps to ensure the people in charge of day-to-day management of a nonprofit group are properly shepherding finances. These common steps are frequently recommended by accountants and financial crime experts to prevent theft and fraud:
Set internal policies and control over finances. This could be as simple as having two people responsible for approval of expenses and generating monthly or quarterly financial reports to the boards that include bank and credit card statements.
Assigning different financial roles to different people over time. If different volunteers or employees come up with different numbers for expenses or account balances consistently, it’s a warning sign that something may be amiss.
Use accounting software designed for nonprofits. It will provide easier oversight and guidance on finance and spending as well as provide a host of other benefits.
Create an annual operating budget. By setting realistic projections of expenses, nonprofit leadership and board members can spot problems early.
The board must be completely independent of the leadership of a nonprofit. That means no one on the board is married to the executive director or has a financial relationship.
The victims of thefts or misappropriation of funds from small nonprofits are first and foremost the people who benefit from the programs. That is who the board of directors is protecting.
Those who run these groups and provide oversight have to take their responsibility seriously.