Blog: Nonprofit Capacity Building

I read an article today about and Executive Director of a non-profit in the District of Columbia, who is charged with embezzlement of $506,000. The man is accused of using the organization’s debit card to make withdrawals of cash while on personal cruise holidays and when out gambling. This blew me away.

In my many years in the non-profit world, one of the most important things we ever did was to ensure that we had transparency where the organization’s money was concerned, and to put safety measures in place to ensure the security of the organization’s financial resources.

So I’d like to share with you my readers, what kinds of safety measures your organization should have in place when it comes to the handling of your organizations financial resources. You should:

• Set up your bank account right – You bank account should not allow any cash withdrawals in any form from the bank. Any withdrawals should be made in the form of a cheque made out to the bookkeeper for petty cash. No organization should have a debit card for their bank account. The bank will issue you a debit card number, but you can turn down the physical card, and only keep the debit card number in your safe.
• Require two signatures on a cheque – Every cheque written by a non-profit should require two signatures. Whenever possible both signatures should come from board members who have been given signing authority. When not possible, then one of the signatures can be the Executive Director, but not if the cheque is issued to the Executive Director.
• Balance and review petty cash disbursements regularly – Your petty cash should be reviewed regularly by the signers of the cheque for petty cash and if that is not possible, then once the petty cash has been dispersed, then the receipts should be reviewed by the Executive Director before another petty cash cheque is written.
• Use a credit card for purchases – Sometimes, cheques are not accepted, if you are buying something from a retail store. In that case, the organization should have a credit card. All the receipts for purchases by credit cards should be turned in and balanced against the credit card statement when it comes in, to ensure all money is accounted for.
• Put someone you trust in charge of cash – When your organization holds events; try to create one place where people purchase their tickets from. Make sure that at least two people are working together on the cash handling, so they can monitor and vouch for each other. Have the people handling cash, count the cash they took in at the end of the event and turn it into your bookkeeper, along with any paper documentation of number of items sold and at how much.
• Have one drop centre for skimming cash – If you are having an event, have a prearranged location for money to be stored safely and securely when skimming becomes necessary due to a lot of cash transactions occurring. Limit who knows the details of this to only the people handling cash. The fewer people know, the more likely you are to keep your funds secure.
• Develop a policy against signing blank cheques – Some NGOs allow blank cheques to be signed in advance if they have difficulty getting their board members out to sign a cheque. But this is bad financial practices, and it would be far better to ensure that you have 4 signing authorities. Three should be board members and the fourth should be the Executive Director. In that way, you are far more likely to always have two signers available and the use of blank cheques becomes unnecessary.

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For more resources, see our Library topic Nonprofit Capacity Building.

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By Ingrid Zacharias, Managing Director, Envisioning the Future International, Website: http://envisioningthefutureintl.ca/