Disbursing funds or paying bills is a critical target for internal controls. Loose policies have multiple consequences such as, lack of a defined paper trail for audits or an open door to fraud. The following six guidelines are helpful to protect an organization’s resources:
- Segregate processing from initiation/authorization of purchase – If staff or time is limited, ask another person in the organization to ‘join’ a transaction. One person should not have responsibility for both processing and authorizing the disbursements.
- Review costs paid with third party support – Electronic payments need the same approval and scrutiny as paper checks. Even if set up for auto-pay, verify the e-payments at least monthly.
- Review/approve invoices before paying – Small organizations are often stretched for personnel, but don’t skip such an important step as invoice review. Catching errors before paying saves time and money.
- Periodically check vendor lists and changes to vendor information – Ask a person unrelated to bill paying (such as the treasurer or executive director) to independently audit vendor lists and identify any red flags.
- Ask someone other than the A/P person to mail vendor checks – Don’t return the signed checks to the a/p clerk for mailing. Policies that segregate duties in an organization make fraud less likely to happen.
- Reimburse employee expenses only when properly substantiated – Make it a rule to not reimburse expenses without approval and tangible back-up, such as a detailed receipt (not a credit card bill).
Learn more about cash disbursements for nonprofit organizations at our upcoming Taco Tuesday event in Dallas on September 22nd. For more information and to register click here: https://www.sstcpa.com/events/taco-tuesday/