Author: Price Waterhouse, Nonprofit Industry Services Group

Publication Year: 1981

Media Type: Report

Summary:

Internal accounting control is an integral component of sound financial management. It affords directors and senior management greater assurance that resources are used exclusively for intended purposes - a key ingredient of maintaining public trust and goodwill. Internal accounting control usually presents special problems for nonprofit organizations. Nonprofit staffs are often skeleton, reducing the likelihood of achieving control through traditional techniques.

Abstract:

Internal accounting control is an integral component of sound financial management. It affords directors and senior management greater assurance that resources are used exclusively for intended purposes - a key ingredient of maintaining public trust and goodwill. Internal accounting control usually presents special problems for nonprofit organizations. Nonprofit staffs are often skeleton, reducing the likelihood of achieving control through traditional techniques. In addition, the nature of many nonprofit transactions often precludes certain desirable checks and balances. Internal accounting control in nonprofit organizations is, however, often achievable within the constraints of current levels of staff, regardless of control challenges.

This Guide was prepared expressly for directors and management of nonprofit organizations. It presents a nontechnical overview of the essential elements of an internal accounting control system, and describes the framework of a basic control system for an organization with limited accounting and financial personnel. In addition, the Guide presents a discussion of specific controls applicable to many non-profit organizations. (Preface).

CONTENTS
Preface.

Introduction to internal accounting control:
     Definition.
     Benefits to nonprofit organizations.
     Internal accounting controls are not static.
     Role of the board of directors and senior management.

Elements of an effective internal accounting control system:
     Control environment.
     Director and management involvement.
     Control objectives.
     Organization structure and management controls.
     Key policies and procedures manuals.
     Segregation of duties.
     Recordkeeping and information systems.
     Financial reporting system.
     Budgets.
     Periodic review of the control system.
     Cost-benefit analysis.

Basic internal accounting control system:
     Receipt of cash.
     Disbursement of cash.
     Payroll.
     Billing and receivables.
     Accounts payable.
     Inventory.
     Fixed assets.
     Petty cash and other working funds.

Specific nonprofit internal accounting controls:
     Tuition.
     Membership dues.
     Contributions.
     Grants, gifts, and bequests received.
     Grants awarded to others.
     Loans.
     Endowments and investment income.
     Pledges.
     Noncash contributions.
     Agency funds.
     Ticket revenue.

Arts & Intersections:

Categories: Financial Management