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Sandra Weaver, Author at Ketel Thorstenson, LLP

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June 7, 20180

Imagine trying to find buried treasure, but you do not have a map where “x” marks the spot. You could wander aimlessly in circles trying to figure out where to start. This is what happens when nonprofits do not have strong fiscal procedures in place to support staff and board members. Such procedures act as a “treasure” map to managing the organization and takes the guesswork out of responsibilities. Perhaps the most important roles of the procedures are establishing the internal control framework for an organization and also ensuring compliance with legal, donor, and grant requirements. If every new employee and/or volunteer is trained using the procedures established, everyone has the same knowledge of the organization and can more easily step in to assume duties in cases of unexpected absences. Now that we know the importance of fiscal policies and procedures, let’s discuss how to get started.

The basic framework of the fiscal procedures should include accounting processes. When compiling the procedures, the organization should determine whether there are proper monitoring processes in place. The procedures should also address proper segregation of duties (segregation of custody of assets, ability to authorize use of assets, and recordkeeping). Having separate employees perform these three duties ensures proper oversight and helps to prevent fraud or theft by decreasing the ability of one person to hide a transaction. Some examples of accounting processes include: budgeting and reporting, revenue and accounts receivable, expense and accounts payable, and asset management. This list is not all inclusive, but includes the basic processes present in most organizations. Organizations who receive grant or contract revenue would have a more robust revenue and accounts receivable procedures and could also include compliance requirements.

This task may seem daunting and time consuming and it can be. One of the best approaches is to take the time to interview finance staff, the executive director, and Board members involved in fiscal procedures and document what is currently being performed. Once this is documented, go through your procedures to determine if your organization has proper segregation of duties or if there are any areas that are weak in oversight. Starting with what you already have is less exhausting than starting from scratch, both for the person creating the procedures and for those who will need to implement any new ones. Let’s walk through a sample for bank reconciliation procedures.

“The bank statement is reviewed by the executive director, who delivers it to the finance manager to prepare the bank reconciliation. The executive director reviews the bank reconciliations and approves.”

Here are some questions to consider regarding the bank reconciliation procedures as they are written above:

1) How is the bank statement delivered to the executive director? Is it downloaded online by the director him/herself? If it is mailed, is it delivered still sealed to the reviewer?

2) What exactly is the executive director reviewing when they look at the bank statement? Does the review include electronic transactions and cancelled checks?

3) How is this review documented? Does the executive director initial and date?

4) What does the executive director look at during the bank reconciliation review? Are they looking for stale checks or unusual journal entries?

This is also the perfect time to consider segregation of duties. If, in our example, the finance manager had rights to sign checks and there was no other review of the bank reconciliation, it would be time to implement oversight. As you can see, the procedures can get detailed but this is necessary to ensure internal controls are easy to follow, no matter if the executive director has been with the organization for years or for a matter of weeks.

Once the fiscal procedures have been drafted, each key employee and the board of directors should review. The board should approve the procedures. These procedures should be reviewed regularly and new procedures should be drafted and approved as the organization has new circumstances arise, such as a capital campaign or new grant sources.

If your organization has any specific questions regarding fiscal procedures, please contact one of our non-profit specialists.


September 10, 20130

Sandra-Weaver-headshotAs described in Part I through V of our previous articles, 14 different compliance requirements could have a direct and material effect on federal grants received by governmental or nonprofit organizations. Organizations that utilize Federal programs to purchase capital assets must comply with two requirements, Equipment and Real Property Management and Real Property Acquisition and Relocation Assistance. Click here to learn more.

Equipment and Real Property Management: The Equipment and Real Property Management requirement focuses on the purchase and sale/disposal of capital assets purchased with federal funds. The requirement also establishes the documentation and procedures necessary to manage these assets. Detailed information of these requirements can be found in Office of Management and Budget Circular A-102 Common Rule, program legislation and/or regulations, and the grant award agreement terms and conditions.

For equipment with an acquisition cost over $5,000 and a useful life of more than one year and for all real property, adequate records must be maintained to track the assets. Adequate records for each asset should include the funding source used to purchase the equipment, purchase cost, and the date of purchase. These records should be updated as purchases and disposals occur. Assets should be used only for the Federal program they are purchased for. All equipment and real property must be safeguarded and maintained to ensure usability. At least biannually, a physical inventory should be performed and reconciled to the equipment records.

Organizations that dispose of real property and equipment having a fair market value of more than $5,000 must forward any proceeds to the Federal program (allocable based on the percent of Federal participation in the original purchase). When selling federal assets, organizations should attempt to obtain the highest possible return. For real property, any disposal must have the prior consent of the awarding agency. If equipment or real property is no longer necessary for federal purposes, but will be retained by the organization, the fair market value of the property should be paid to the Federal program.

Proper internal control procedures within the organization should ensure these compliance requirements have been met. Controls should include identifying those within the organization who will maintain equipment and real property records. Management should review records to determine completeness and accuracy. Organizations should further ensure the safeguarding of assets through the use of inventory tracking tags that are permanently affixed to assets, as practical, and securing assets using locked gates and doors.

Real Property Acquisition and Relocation Assistance: The Real Property Acquisition and Relocation Assistance requirement focuses on the uniform and equitable treatment of persons displaced by federally assisted programs from their homes, businesses, or farms. Further documentation of requirements can be found in the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, as amended.

This requirement outlines what is required of the organization to ensure compensation offered to those displaced by a Federal program is equitable. The use of qualified independent appraisers, followed by a third-party review of appraisals, are used to calculate the compensation offer. Further allowances are also available to the displaced parties.

This requirement is uncommon for organizations, so read the detailed requirements carefully to ensure the proper procedures are followed when acquiring property in which individuals or organizations are displaced.

The 14 federal grant compliance requirements are not independent of one another. The purchase of equipment and real property is affected by the above two requirements, as well as the following related requirements: Activities Allowable or Unallowable, Allowable Costs, Procurement and Suspension and Debarment, Davis-Bacon Act, and Reporting. Each of these compliance requirements is described in more detail within other parts of our series on Grant Compliance.

Look for upcoming newsletter articles providing specific details on each of the 14 compliance requirements. Please contact Traci Hanson, Shelley Goodrich, or Sandra Weaver with specific questions.