Any questions and concerns should be resolved promptly. Assign different people the responsibilities of authorizing transactions, recording transactions and maintaining custody of assets. In the area of disbursements, for example, make different employees responsible for ordering the goods and services, recording the transactions in the accounting records, signing the checks and reconciling the monthly bank statements. Conflict of Interest and Ethics Statements Many nonprofits experience fraud or improper management because they fail to procure contracts for goods and services on an arm's-length basis. For example, a nonprofit could run into trouble by obtaining consulting services from a board member or board member's relative on less attractive terms than could have been obtained on the open market.
Many nonprofits have a conflict of interest policy or ethics statement in place.
These policies or statements call for employees and officers to disclose any interests they may have in companies doing business with the organization. Any contracts entered into with the related parties must be reviewed and approved by board members and officers not involved in the transactions. A typical control in this area is using a bank lock box service to process receipts. If a lock box is not used, assign someone unrelated to the accounting process to open the mail, restrictively endorse all incoming checks and prepare a list of the checks received, which is then compared with deposits made. This will highlight any unusual cash disbursements or evidence of check fraud.