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Nonprofit 101: Cash Receipts

One of the best ways to prevent fraud is to implement strong internal controls procedures. First and foremost, the handling of cash receipts which is the money collected from a consumer from the sale of goods or contributions collected from a fund raising event. Having written policies in place to use for training and reference contribute to above-board handling of cash and checks as standard operating procedure. Below are 5 tips to include in the policy to eliminate error or fraud, and provide segregated functions for the organization:

  1. Safeguard funds until deposited – Immediately endorsing checks with the account number and ‘for deposit only’ protects the donation from cashing out. Checks and cash should be kept in a secure/locked box or cabinet until ready to go to the bank.
  2. Funds counted by two individuals – Ideally, the job rotates for counting funds and preparing count sheets, with two people verifying the work. The count sheet, validated deposit slip, general ledger and donor reports should be compared and reconciled.
  3. Segregate donations from general ledger posting – Collecting the funds and processing the deposit should be performed by ndividuals who do not have access to the general ledger. Donations require acknowledgement for $250 or more, and many organizations acknowledge all donations as part of donor relations.
  4. Segregate posting from reconciliations – The person who reconciles bank accounts should not be the same one who posts the receipts to the general ledger.
  5. Review bank reconciliations and related reports – An authorized signer should review the monthly bank statement and the related reconciliation. Compare the reconciled balance with the general ledger reports. Any unusual reconciling items should be investigated on a timely basis.

Donor data base reconciled to contributions – While not a security issue, reconciling contributions to the donor data base provides helpful information for future communications and requests for donations.

For more about internal control procedures and other fraud prevention practices, contact a nonprofit specialist at Salmon Sims Thomas Accountants and Consultants.  If you are a newly-formed or growing nonprofit organization in the Dallas area, please join us for Taco Tuesdays to learn other essential internal controls you can’t ignore. Tuesday, September 22, 2015; 11:45 p.m. – 1:15 p.m. To register for this free event, email lhoward@sstcpa.com.

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