Discussion 10

Internal controls are policies and procedures that protect the assets of an organization, create reliable financial reporting, promote compliance with laws and regulations, and facilitate effective and efficient operations. They relate to accounting, to reporting, and to the organization's communication processes. Internal controls typically include procedures for • Handling funds received and expended by the organization, • Preparing appropriate and timely financial reporting, • Conducting the annual audit of the organization's financial statements, • Evaluating staff and programs, • Maintaining inventory records of real and personal property, and • Implementing personnel and conflicts of interest policies. Example of a basic internal control: A policy that requires two signatures on a check is a basic internal contol. This business practice is designed to prevent one person from having sole authority for writing checks on the nonprofit's behalf.