Internal Financial Controls: Reducing Risk and Strengthening Accountability

Even well-meaning nonprofits can fall victim to financial mismanagement or fraud if they lack strong internal controls. Proper financial oversight ensures funds are used correctly, fraud risks are minimized, and donors and grantors maintain confidence in your organization’s operations.

Key Internal Controls Every Nonprofit Should Have

1. Segregation of Duties

No single person should have complete control over receiving, approving, and disbursing funds.

Best practice: Separate financial tasks between at least two individuals to reduce risk and increase transparency.

2. Regular Financial Reviews

Nonprofits should conduct monthly reconciliations and periodic internal audits to identify potential errors or risks early.

Best practice: Schedule regular financial oversight meetings with board members or an external accountant (hi, it’s us!). 👋🏽

3. Expense & Approval Policies

Clear spending policies ensure funds are used for mission-driven purposes and prevent unauthorized transactions.

Best practice: Set spending thresholds, require dual approvals for large expenses, and document financial decisions.

Internal controls protect your nonprofit’s resources, prevent fraud, and ensure long-term financial sustainability.

Stronger internal controls mean greater financial security and funder confidence. If your nonprofit wants to refine its financial oversight, let’s talk.

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