Resources For Accountability and Financial Management in the Voluntary Sector
Financial Control Systems
Although the public places a great deal of trust in voluntary sector organizations and the way in which they use their funds, it is important to put systems in place that ensure this trust level remains high. Unfortunately, the rare instances in which voluntary sector organizations appear to be misusing their funds (whether or not they actually are) have a chilling effect on donations to, and trust in, other organizations. Taking precautions to control finances will always heighten trust in your organization. This section provides an overview of the financial control systems that can be employed by voluntary sector organizations to ensure financial accountability.
Financial Controls
At a minimum, certain financial controls should be in place as part of every voluntary sector organization's management system. Some basic financial control activities include:
- different people authorizing, accessing, and keeping records of expenditures;
- bank statements reviewed and reconciled regularly by more than one person;
- petty cash kept locked up, and not exceeding certain levels before being deposited.
These financial controls are important, but they are just a minimum. By monitoring the key financial accountability indicators (see text box)14, voluntary sector managers and board members will have a better understanding of the financial situation.
Key Financial Accountability Indicators
- Bank statements are reconciled;
- Treasurer's report is presented to the board;
- Audit by an external person, possibly an accountant;
- Performance measures are compared to the strategic plan;
- Financial performance measures are calculated:
- Actual revenues and expenses as a percentage of budgeted revenues and expenses
- Program expenses as a percentage of total expenses
- Contributions raised as a percentage of fundraising expenses
- Aging of accounts receivable
- Financial performance measures are reported to the board.
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