Where do tiny nonprofits get reliable accountancy help?
April 15, 2016 8:32 PM   Subscribe

Who minds the money of tiny nonprofits who can't afford bad actors?

[Posting anonymously because there will likely be legal action in connection with the situation I am describing.]

I am a volunteer with a small, geographically dispersed, virtual network of volunteers. The organization is registered as a nonprofit in the US. Recently, there was a really gutting situation where someone entrusted with access to a bank account essentially absconded with felony-level amounts of donated funds. The legal wheels will turn as they will. That's not my question.

Surely someone out there has set up some mechanism by which tiny groups of do-gooders can have a bank account (or more than one) that both allows access by trusted staff but also prevents said persons from embezzling funds and leaving the organization flat-footed, hemming and hawing before their donors, trying to explain why they're unable to function. And surely there's a pro-bono or ultra-low-cost flavor of this that deals with orgs that are largely virtual and consequently geographically dispersed, irrespective of the jurisdiction of legal establishment.

Who are those someones?
posted by anonymous to Work & Money (6 answers total) 1 user marked this as a favorite
Well, one major thing is simply following good fiscal control practices. Most of the places I've been at had some variation of "two different people have to sign the check" in place, and had a third party come in and do audits at least annually. This stuff is covered in most introductory finance textbooks.
posted by SMPA at 8:51 PM on April 15, 2016 [1 favorite]

If you want rigorous oversight of spending, you could consider engaging a fiscal sponsor to manage your $. It might be worth the admin cost. Depending on where/what, you could probably find one to handle your stuff for 6% of revenue.

I run an org that does fiscal sponsorship and we document the fuck out of all spending requests from clients. You'd want to make sure your fiscal sponsor wasn't half assed/fly by night. Here is the national registry.

Otherwise I'm not sure how you would do this given that this person requires access to the bank account. Like apart from paper checks, there are so many ways now to get money out of a bank account.
posted by mandymanwasregistered at 9:37 PM on April 15, 2016

Two signers is what is used at my NGO. Financial i stitutions can handle dual signatory via online login now, so being dispersed across the country should be no barrier.
posted by chapps at 11:23 PM on April 15, 2016

The key concept for preventing fraud is segregation of duties: no financial process should be entirely completed by one person.
posted by chapps at 11:44 PM on April 15, 2016 [3 favorites]

Check and balances. Or have a fractional (as-needed) CFO who signs off on checks over X amount. Continual oversight of all withdrawals by the top execs via shared documentation (we use Google Sheets)-- at least the ED and the treasurer, or the treasurer and the president.

Most fiscal sponsors don't do a lot of oversight (mine certainly doesn't), so make sure yours will if you go that route.
posted by ananci at 12:31 AM on April 16, 2016

Unfortunately this is too common a situation. Good practices would have two signatories for each check and a third party (perhaps a board member or other outsider) reconcile the bank accounts. The other ways fraud can occur is setting up phony vendors to pay or bypassing regular accounts for incoming funds. This is where having an involved board is key. Understanding the entire cash flow including funding sources would allow the person reconciling to see where something was amiss.

I'm the board member that handles this at the non-profit I'm on the board of. If you don't current have anyone in that role, either ask a local volunteer bank or a local CPA professional group if there's an available volunteer. Have this in place before news of this gets out, this is the undoing of many a agency/arts group.
posted by readery at 4:57 AM on April 16, 2016 [1 favorite]

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