Best practice for handling money in a small non-profit

September 6, 2022 1:27 PM

I'm the treasurer for a small non-profit. I look after reimbursing expenses for staff and the Board. I use e-transfer for reimbursements. It'd be nice to have two people authorize those transfers rather than just having me do it, but our bank account does not provide the capability. The banking account package that does is too expensive for us. What would be the fallback best practice to keep the Treasurer function open and accountable?

I am asking not just for myself but for whoever succeeds me. I'd like to put in a practice that hopefully will become the norm for the future.

posted by storybored to Work & Money (11 answers total)

The most basic separation of function here should be that the person who receives the money should not be the person who disburses the money. Do you have that?
posted by praemunire at 1:34 PM on September 6, 2022

Since you'll probably get a lot of answers assuming a US context, it's worth clarifying that e-transfer is a country-wide money-sending system that exists in Canada.

I don't have any experience with using e-transfer in a nonprofit context, sorry.
posted by mekily at 1:36 PM on September 6, 2022 [1 favorite]

I don't think it's necessary for the two-person authorisation to exist within the banking system you use. You could use pretty much whatever you have available to record a request for payment by you to someone else and record their approval. This could be as simple as an exchange of e-mail. This would be a bit clunky if you have lots of transactions and does rely on someone being available in a timely fashion to approve payments, but ensures not only that there is a second person reviewing the payments are being made correctly (double-checking for errors), but that the payment is in line with the organisation's policies for reimbursement (double-checking for appropriateness of the payment itself).

Depending on the number of payments, you may want to keep a register of approvals or, if you use an on-line account ting system, this could be incorporated into your payments by adding a note to each payment of who it was authorised by and when, making it easier to find the email approval or whatever.
posted by dg at 1:54 PM on September 6, 2022 [3 favorites]

If switching banks to one that does offer approvals for payments without charging extra (perhaps a credit union) or using a separate payments solution (e.g. Plooto) isn't an option, then you need to have a separate person, someone who does not and ideally cannot authorize transfers at your bank, reconcile the bank statement to your accounts at the end of the month. Then you'll at least catch anything suspicious afterwards.

Additionally, you can set up an approval process outside of your bank process for transfers (e.g. by email) and then you can reconcile the approved transactions to the actual transactions at the end of the month as well. Obviously, this won't directly stop someone from doing something bad, but it will make it clear that they will be caught in short order, which is hopefully enough deterrent.
posted by ssg at 2:00 PM on September 6, 2022 [1 favorite]

as someone who is audited by the govt, i agree your first separation would be who receives the money should not be the person who disburses the money. Since you are small, I assume the expense reimbursement begins and ends with you. If you can't get two signatures or approvals on the transfer, can you get two on the request itself? Employee submits an expense report, you and another review and approve it. then you pay it. So that you arent the only one approving that disbursement to another individual.

Do you run your expenses through your board? Having board approval for those reimbursements would back you up.
posted by domino at 2:03 PM on September 6, 2022

I'm a board member and treasurer for a very small nonprofit in the US, and we use this Emburse Abacus service to manage expense reimbursement approvals. We have some sort of free account for nonprofits. This gives us an easy way to ensure every expense request is approved by somebody on the board who didn't incur the expense, including for expenses I incur. I think the approval policies are configurable.
posted by dreamyshade at 2:07 PM on September 6, 2022

ssg makes a good point about having another person reconcile the bank. We not only have a third party reconcile, but someone here then checks that reconciliation after words.
posted by domino at 2:07 PM on September 6, 2022 [1 favorite]

Price services from a credit union.
posted by Oyéah at 4:59 PM on September 6, 2022

We know from the recent related discussion that you are in Canada, not the United States.

Are you an official nonprofit in Canada? The process to become one is quite similar to the processes in many states in the United States.

Will you just let us know if you have jumped through all the hoops and you're a real nonprofit? Because if you're not, that affects responses a lot.
posted by Scarf Joint at 5:47 PM on September 6, 2022

Seconding Plooto.

Depending on the transaction volume you process, you might find this is more cost effective than e-transfers sent directly from your bank. Most critically, it can handle the approval process you’re looking for.
posted by bkpiano at 5:57 PM on September 6, 2022

Response by poster: @Scarf Joint: Yes! We are officially a non-profit.
posted by storybored at 5:38 PM on September 10, 2022