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Invoice text example for non-profit organizations

this tutorial is a project of nonprofit accounting basics org a free resource developed by the Greater Washington Society of CPAs Educational Foundation hello and welcome to this webinar as part of the nonprofit accountability task force project of the Greater Washington to see PA it's educational foundation my name is Sean Miller partner with caliber CPA group in Washington DC today we're going to have the first part of a multi-part series on internal controls for medium and large size nonprofit organizations we'll start today's part by discussing what are internal controls how internal controls are created and what the objectives are of internal controls in general and then continue with future webinars discussing internal controls for specific areas of operations so first of all what are internal controls internal control is broadly defined as a process effected by the image Board of Directors management and other personnel designed to provide reasonable assurance regarding the objectives in the following categories effectiveness and efficiency of operations reliability of financial reporting and compliance with applicable laws and regulations you'll notice that controls are designed to provide reasonable assurance not absolute assurance an internal control system is intended to provide reasonable rather than absolute assurance there is a chance that errors or mistakes bad judgments limited resources management override or even fraud involving collusion will not be prevented even by the best internal control system there are thousands of possible controls to select from for any internal control system now internal control environment is a product of three factors the internal control system as we've just discussed the control environment and what is the control environment so control environment sets the tone of an organization influencing the control conscious of its people foundation for all other components internal control some factors of in the internal control environment include the integrity ethical values and competence of entities people and when we say entities people that includes the board of directors senior management entry level staff the vendors you do business with and so on management's philosophy and operating style the way management assigns authority responsibilities and organizes and develop its people and lastly the attention and direction provided by the Board of Directors it is key to any strong internal control environment that the board of directors be on board with the controls and be actively involved in the control environment the third factor related to your term controls or the control activities so we have the control system the control environment and now we have the control activities control activities for the policies and procedures that help ensure management directives are carried out they ensure that necessary actions are taken to address risk to achievement of the objectives they occurred throughout the organization and all levels and functions they include a range of activities at diverse as approvals authorizations verifications and reconciliations as well as reviews of operating performances security of assets and segregation of duties so control activities I believe are what most people think of when they talk about internal controls who is approving a disbursement who is authorizing the pay rate for this person and so on those are control activities so how is this done then now most effective procedures are those that have the greatest segregation of duties the more people involved in a process the less likely it is that an error defalcation will occur for example the person who writes the checks should not be the person signing the check first new orders of service should not approve the invoice the person with budget responsibilities should also approve the invoice and code the expenditure and we will get in in future webinars more detail regarding disbursement controls and segregation of duties but if you take away one thing from this webinar I believe the most important internal control feature is segregation of duties the more people you have involved in a process the more oversight you have the more checks and balances you have from a error standpoint and from a fraud standpoint the more likely it is that you'll detect the fraud or you put the fear of detection in someone who is considering committing fraud and hopefully will deter them from doing so how are internal controls established generally management establishes the system of controls with input from the Board of Directors perhaps outside vendors whether it be legal you're outside CPA you're outside accountant and it is very helpful to have an accounting manual detail on these procedures there is also important that while management establishes these procedures that they have buy-in from the Board of Directors and that they're approved by the Board of Directors everyone within the organization needs to be on the same page regarding the internal control environment and what internal controls have been established general control system needs to be documented the expected results are outcomes of the system and what everyone does needs to be put into writing and evaluated one important thing to remember is that internal controls and the internal control document is not something you write and then put on the shelf and never look at again the internal control environment is a constantly changing dynamic especially in today's day and age where technology evolves at such a rapid rate your internal controls and the internal control system needs to follow suit you need to make sure that your internal controls keep up with the technological advancements and any changes you have in operations in addition not just from a technology standpoint but from an operational standpoint your organization may be growing you may be expanding into new markets new geographic regions your internal control structure and internal control activities needs to be updated to reflect any changes in the organization it's a constantly evolving system your staff must receive training about the internal control system and their responsibilities in the system this accomplishes two things one it gets everyone up to speed on what the controls are and what the objectives are and two it helps establish what's referred to as tone at the top whereas the staff realized how important this is to senior management and the board of directors if they're willing to take time train everyone on pull people out of their regular duties to understand the internal control and the importance of it there was a tional chart accounting procedures record retention and so on must be maintained and updated on a timely basis to eliminate outdated information one problem that comes in is especially in medium sized organizations you may have a size and a volume of activities that need internal controls in excess of your resources and we've all seen this situation where if you want to have another person involved in the control activities from a review standpoint or an approval standpoint but your budget just doesn't allow for additional personnel so what do you do in that standpoint now it doesn't justify not having adequate controls but what it may require is never there to be creative in implementing adequate controls involving board members involving outside parties and again these are things that we will discuss in future webinars so a successful internal control system needs to address a number of issues and just a few of them in general are reducing the likelihood of losing assets by fraud or error increasing the effectiveness and efficiency of an operating procedure enhancing the reliability of financial reporting and thus possibly reducing the cost of your audits and then lastly ensuring the compliance with applicable laws and regulations this is especially true if you receive federal or state funding and you have additional laws and regulations to comply with because of all these choices there's no one system of internal controls that's a perfect fit for everybody you have diversity of missions and business models various staffing levels various levels of involvement by your board of directors in addition to various levels of financial and accounting expertise and sophistication among your board your management and your staff however there are a number of common factors to be considered by any medium-sized or large sized nonprofit and again in future webinars we'll discuss those now just to wrap up let's let's review a couple things what can internal controls do they can't help an entity achieve its performance and profitability targets and prevent lack of resources help ensure reliable financial reporting and that the enterprise complies with laws regulations hopefully avoids damage to its representation so it's summation it can help in any get to where it wants to go and hopefully avoid pitfalls and surprises along the way now again internal controls are not the panacea and the be-all end-all they are system to help achieve a reasonable assurance that you're meeting these goals so what kind of internal controls not do so again some people have greater and unrealistic expectations look for absolutes believe that internal controls can ensure an ende success but as it will ensure achievement a basic business objective or at least ensure survival even the best of internal controls can only help an entity achieve these objectives it can provide management information about the entity's progress or lack of it toward their goals but cannot change an inherently poor manager into a good one I mean shifts in government policy or programs competitors actions or economic conditions can be beyond management's control internal control cannot achieve success or even survival what it can do is ensure that you have accurate information that is coming from your financial systems and your financial department to management and your Board of Directors to help you run the organization and achieve those goals that is a summary of internal controls what they are what they can do and what unfortunately they cannot do in future webinars we will dive deeper in internal controls in specific areas such as cash disbursements payroll i'm cash receipts and so on thank you for joining us for this webinar sponsored by the Greater Washington Society of CPAs Educational Foundation