We live in a world where things move fast and wearing multiple hats is a reality for many small nonprofit volunteers and staff members. In the mix of executing your mission, internal controls may get overlooked. And who can blame you? When faced with working on programs or doing mundane tasks related to risk management, it can be far more gratifying to serve food to the homeless rather than evaluate policies and procedures.
Here’s the harsh reality though, it will eventually catch up with you and affect your ability to do the gratifying mission based work.
Nonprofits are held to a different standard than for profit businesses because they are stewards of gifts. The occurrence of fraud or even the appearance of fraud can cripple the ability to fundraise and significantly affect your relationship with donors.
Risk management can be approached in many ways. It’s important to consider your organization’s unique environment and risk tolerance.
Here are five low cost ways to get your organization started:
Set a strong internal tone. It should start with your leadership and trickle through every person in the organization. The actions and attitudes by people in your organization will set the tone for how others think and act in their day to day tasks.
Leadership needs to be engaged. Staff and board members should be aware of tensions, pressures or incentives that could compromise decision making and the authenticity of your organization’s financial records. Board members should be asking questions, reviewing board documents thoroughly and avoid ‘rubber stamping’ decisions.
Establish a whistle-blower policy. Have a formal process by which people can report concerns in a discreet and safe manner. This policy should be documented and incorporated into new employee or board member orientations.
Build a culture of open communication. Trust can be established among individuals in your organization when you take the time to explain the ‘how’ and the ‘why’ in your processes. This can be especially important when establishing controls and processes that are new to the organization. Employees or volunteers may question motives or feel they are being the target of distrust when there is a shift in policy or procedures. Explain the business rationale and have an open conversation to avoid an internal power struggle.
Enforce policies consistently. This helps ensure fairness and diligence across the organization. Being consistent also set expectations and supports that strong internal tone that should resonate throughout the organization. In the nonprofit world this can be challenging when working with volunteers or interacting with donors. Being mindful that favoritism, cutting corners or looking the other way in an effort to appease those supporters can increase your risks.
Interested in learning more about what your organization can do to increase internal controls?
Email me now for your free Controller Tool Kit for Nonprofit Entities!