Maintaining strong internal controls over an organization’s cash and bank accounts is critical. A key control in this area is to segregate the duties of the accounting staff. Unfortunately, in today’s economic environment nonprofit organizations often find themselves understaffed in many key areas. One particular area that is often lacking in manpower is the accounting department. Below are some helpful tips that may help reduce the risk of fraud within your organization when the segregation of duties is not possible.

1. Bank statements should be received and opened by someone other than the individual responsible for preparing the monthly bank reconciliations – Simply having another set of eyes on the bank statements may be enough of a deterrent to reduce the risk of fraud. An easy control to implement is to consider having a secretary, the Executive Director or a board member receive the bank statements directly, and in some cases, perhaps offsite.
2. Prepare bank reconciliations regularly – Reconciling the bank balance to the organization’s “book” balance is a simple procedure that should highlight any discrepancies. In addition, all bank reconciliations should be reviewed and approved by an appropriate member of management or a board member.
3. Check signing authority – The authorization to sign checks should be limited to a small number of individuals within the organization and should never include the person responsible for preparing the check. Consider the requirement that all checks be signed by two individuals.
4. Deposits should be made timely – All checks and or cash received by the organization should be deposited with the bank on a daily or weekly basis. In addition, all checks should be stamped “deposit only” immediately upon receipt.
5. Hire individuals with integrity – All new hires should be vetted accordingly via background checks and credit checks.
6. Bonding employees – An organization may want to consider bonding all employees to protect themselves against any dishonest or fraudulent acts. Bonding can limit an organization’s exposure to theft, embezzlement, forgery and many other harmful acts.

Feel free to contact our office at (908) 782-7900 or email info@bkc-cpa.com so that we can discuss these steps and many others that can be taken by an organization to prevent and detect fraud.