Revenue and receipts are an important cycle in any nonprofit organization’s day-to-day business. This is how the nonprofit receives the funds it needs, whether in the form of contributions or exchange revenue, to continue to fulfill its programs and mission. Yet, does your nonprofit have effective internal controls in place for processing revenue and receipts? In this Nonprofit Quick Tip, let’s look at internal controls for receipts.
A nonprofit’s biggest nightmare is becoming a top story in the news for fraud or inappropriate use of funds. Incoming funds are one of the areas most susceptible to fraud and errors. A strong internal control environment can help deter fraud and errors and keep revenue coming in uninterrupted.
So how do you protect your organization when it comes to receipts? Like any internal control matters, you must think about how someone could steal or make an error in the process. Then, you implement controls to help strengthen those identified weaknesses.
All nonprofit organizations should implement a few simple controls regarding receipts.
- Someone who is not performing the general ledger accounting should open the mail and make a receipts listing. Also, it’s a good practice to stamp any incoming checks immediately as “for deposit only.”
- The individual collecting the receipts should not be the person depositing them. This segregation helps ensure that all receipts coming in make it to the bank.
- The receipt listings created when opening the mail should be compared to the general ledger and deposit slips to ensure everything was deposited and recorded.
- Receipts on hand should be kept in a secured location, such as a safe, to which a limited number of people have access.
- Making deposits timely is also a good practice.
Read more in-depth internal controls recommendations in our blog article, Internal Controls: Segregation of Duties in Small Nonprofits. If you have questions about your internal controls or are interested in Yeo & Yeo’s YeoConsults Internal Controls services for your organization, contact us.