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Guide to Conducting an Internal Financial Review

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School support organizations (booster clubs) should conduct a financial review of the organization’s financial practices each year. This review is intended to ensure that appropriate financial policies are in place, and that each organization is following these policies.

Step #1: Gather financial documents including:
  • Copies of all written financial policies
  • Copies of treasurer’s reports for the year (or other period) to be reviewed
  • List of all bank and investment accounts, including names of persons authorized to sign on each account
  • Copies of all bank and other financial statements for the period to be reviewed
  • Copies of all bank and investment account reconciliations for the period to be reviewed
  • Cash tally sheets / Cash receipts journal
  • Invoices, receipts and other documents
  • Documentation of any restrictions on the use of any particular funds or donor gifts
  • IRS letter documents including most recent Form 990, IRS letter recognizing tax-exempt status, and IRS letter assigning an EIN (employer identification number) to the organization.
Step #2: Review financial documents and processes.
  • Check the organization’s EIN (employer identification number) as assigned by the IRS against the EIN used on the organization’s bank and other financial accounts. Make sure the school’s EIN is not being used.
  • Check names of persons authorized to (a) approve transactions and (b) sign checks, against:
    • persons authorized to conduct these activities in the organization’s minutes; and,
    • bank records indicating who is authorized as a signatory.
  • Check to ensure that the same person(s) who sign checks are not the same/or only persons reviewing monthly bank statements.
  • Check all bank reconciliations to determine that the beginning balance of one month is the same as the ending balance of the previous month. Also note whether the balance listed on financial statements is the same as the balance listed on the treasurer’s reports presented to the organization.
  • Pick one month and perform a bank reconciliation using the original records. If you find a discrepancy between your reconciliation and the reconciliation provided by the person who performed the original reconciliation, research the discrepancy to find the error or explanation for the discrepancy.
  • Count all cash in petty cash accounts to ensure that the count agrees with the books.
  • Check to see if the organization carries fidelity bond coverage on people handling the organization’s funds; if insurance is not held, propose that the organization consider obtaining bonding coverage.
Step #3: Review income and receipts.
  • Determine if the deposits listed on the financial reports provided to the organization match deposits listed on bank statements.
  • Check to see if cash tally sheets match the amount of cash reported as received from an event on financial reports, and also match the deposit indicated on bank statements.
Step #4: Review disbursements.

Test to be sure that payments made were properly authorized – by a line item in the approved budget, an approved amendment to the budget, or an appropriate vote authorizing the expenditure. Test purchase orders to be sure that they were properly approved and match the actual disbursement or invoice. Review records to ensure that there is an invoice, receipt or other appropriate written documentation for each disbursement, and that the amounts match.

Step #5: Review Tax/information returns.

Review financial records to ensure that appropriate federal (IRS Form 990) and state income tax/information returns have been timely filed.

Step #6: Review financial control systems.
  • Check to evaluate whether financial duties have been appropriately separated. Although it can be difficult for small organizations to separate financial duties, certain separations are essential for appropriate financial controls. These separations protect both the organization, and the individuals handling the finances. Specifically:
    • Individuals with signature authority should NEVER approve the transactions/disbursements for which they sign. All expenditures should be approved in an annual budget, as originally approved or amended, or by a vote of the board or membership as appropriate. All disbursements should be documented by an invoice, receipt or other appropriate written documentation.
    • The individual(s) with signature authority may reconcile bank statements. However, at least one additional officer or director should review monthly bank statements, or bank statements may be included with the treasurer’s report to the board/membership.
    • Finances should be reviewed annually by an audit committee that consists of two or more individuals who do not routinely handle the organization’s finances, such as by being a signatory on the accounts.
    • Cash should always be counted by at least 2 persons at/near the time received, and then recounted by the treasurer or other individual prior to deposit.
Step #7: Review reporting systems to ensure adequate information is provided for the organization and its officers/directors to make reasonable decisions.
  • Are reports from the treasurer timely and complete?
  • Are financial policies, including separation of financial controls, being followed?
  • Are all records being gathered (invoices, receipts, cash records, checks and disbursement records, bank records, treasurer’s reports) so that they can be reviewed as needed, and only discarded in accordance with the organization’s record retention guidelines?
Step #8: Write a report.

The financial review/audit report should document at a minimum:

  • Steps taken in the financial review
  • Current fund(s) balance and balance sheet
  • Comments, if any, on any concerns or discrepancies found and the audit committee’s recommendations to correct these concerns or discrepancies.
FEATURED BLOG

Women in Philanthropy (5 Easy Tips to Do It Smartly)

Sandra Pfau Englund

Oct 11, 2019

An excellent opportunity exists for nonprofit leaders to attract women in philanthropy to their cause. Recently, Boston Consulting Group reported the money controlled by women will reach $72 trillion in 2020. That's 32 percent of total wealth! And, the reporting also said that most wealth will go to women. Thus, as the nonprofit sector changes, one of the reasons is because of women. But, as with any donor group, you have to attract them smartly.

On female donors, Fidelity Charitable published an excellent report. The Women and Giving: The impact of generation and gender on philanthropy reported.

  • 72 percent of Boomer and 55 percent of Millennial women report giving satisfaction.
  • Female donors have a "social approach" for giving. In other words, three-quarters of women give with their hearts.
  • Female donors promote giving with friends, partners, and families.
  • Boomers prefer traditional ways of giving. And, Millennials are open to trying crowdfunding, for example.
  • Women who give to charity are more "engaged and empathetic."
  • Female donors seek expert advice when deciding on charity.
  • Women have a higher likelihood to question finances in giving than men. Meaning, they want advice on taxes or how giving will impact their finances.

All this points to an excellent chance for nonprofit leaders to build relationships with women. And, with a consistent effort, charities or people that seek to start a nonprofit can increase female involvement. In turn, it will help your group grow.

How nonprofits can include women in leadership

The first place that nonprofits can look to add women in philanthropy is in their teams. So, ensure you promote gender equality in your group. By doing so, you'll make it clear to female donors that you care about them. If women and men equally represent your team, then keep going and doing what you're doing. But, don't forget to also look at your management team. You want to make sure that there is gender equality there as well.

Also, when you recruit people into your team, do it blindly. Meaning, in today's world, smart groups practice blind recruiting. As well, make it a point to have written harassment and discrimination policies. Doing these things will help you ensure that your group is walking the walk. In sum, a gender-equal team will encourage female donors to give to you.

5 Tips to Get Women Involved In Your Cause

Once you've got your house in order, focus on female donors and getting them engaged with your cause. We have several ideas to share with you. 

1) Recruit female donors onto your board

If you seek to increase giving by women, then you have to begin with leadership positions. As you did with your team, look at the number of women on your board. Take the time to work with the nominating committee to ensure gender diversity. Also, get equal representation of race, religion, sexual orientation, etc. Diversity is an excellent thing for any group. Simply, diversity and inclusiveness expand your base of support.

2) Show women in philanthropy what you do

Typically, when men give to charity, they seek performance and metrics. But, female donors bring a more heart-based approach to giving. Thus, remember that women want to know about the good that their donations will do. It's common in nonprofits to tour major donors and provide them an understanding of the work. This is something that can also happen with any donor who gives whatever amount. So, use digital (e.g., live streaming) and real-world techniques to show your programs, especially to female donors.

3) Remember that women care about their finances

When you're dealing with female donors, remember they care about their finances. As a result, when they give major gifts, they will likely speak to their legal or financial advisor. Many charitable vehicles exist that could benefit the donor and your charity. If you don't have someone with technical expertise on charitable giving (e.g., gift planning), hire a consultant. Doing so will ensure that you can get high-level gifts for your nonprofit.

4) Create social opportunities for women

Since female donors are more social, create ways for them to get involved in your cause socially. As reported by Fidelity Charitable, women want more engagement. There are several ways you can get women engaged with your group. First, make sure that women represent your board equally. Also, develop volunteer opportunities where women will experience the work. Finally, create social events where women will share their experiences. For instance, consider donor receptions, live streams, or community service events.

5) Women are not all the same

Don't treat all women in the same manner. Just as you personalize your message to different groups, remember that women are different from each other. As noted above, Boomers tend to use traditional methods for giving. Millennials have a higher chance to give to a crowdfunding fundraiser..... Women involved in religious groups give differently than non-religious ones. So, take the time to understand how women give to charity.

Finally, as a nonprofit leader don't only focus on major gift female donors. Most women are not millionaires or billionaires. But, that doesn't mean that they can't support your group. For instance, when you review your data to pick up giving patterns, take a look at lifetime giving. You will find female donors who support your cause with many small gifts. That's a clue to you that you should increase your engagement with them. In sum, take a thoughtful approach toward getting more women involved. When you do so, you'll see higher results in your nonprofit.


The easiest way to get and keep tax-exempt status

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