At a small nonprofit, the person answering donor questions may also enter bills, prepare deposits, and help organize the next fundraiser. That flexibility keeps the mission moving. It can also leave important financial steps dependent on one person's memory and availability.
Nonprofit internal controls give your team a repeatable way to handle money, document decisions, and catch problems. You do not need a large accounting department to begin. You need clear responsibilities, useful records, and a second set of eyes at the right points.
Use this checklist to identify one or two improvements your organization can put into practice this month.
What are nonprofit internal controls?
Internal controls are the policies, routines, and reviews that help protect an organization's resources and support reliable financial information. The National Council of Nonprofits describes them as checks and balances over access to assets and spending authority.
A useful control answers four questions: Who does the task? Who reviews it? What evidence is kept? What happens when something does not match?
For example, “the treasurer reviews spending” is vague. “The treasurer reviews the monthly bank statement and reconciliation, records questions, and dates the completed review” gives someone a task they can actually carry out.
1. Map who handles each financial step
Start with a recent donation and a recent expense. Trace each from beginning to end. List who receives or requests the money, who approves the activity, who records it, and who checks the result.
The Nonprofit Association of Washington recommends separating responsibilities so one person does not control an entire transaction. For a small team, board members or qualified volunteers may provide part of that oversight.
Make the assignments specific:
Identify the primary person and a backup for each task.
Separate approval from the person requesting a reimbursement.
Assign an independent reviewer wherever one person handles several steps.
Write down any remaining overlap and how it will be monitored.
A two-person office will have limitations. Make those limitations visible so the board can address them instead of assuming that every responsibility is already covered.
2. Make payment approval easy to follow
Create a short written approval process covering invoices, reimbursements, payment cards, and electronic payments. State who may approve each type of expense and when a higher level of approval is needed. Choose approval limits that fit your budget and governing policies.
For each payment, keep the invoice or receipt, the business purpose, the approval, and a record of payment together. Check whether the invoice was already paid before releasing money. The National Council of Nonprofits identifies written reimbursement procedures and review of vendors as useful safeguards.
Try a simple handoff: the requester supplies documentation, an authorized person approves it, and the person processing payment marks it complete. A shared form or organized folder can make this manageable without adding a complicated system.
3. Reconcile accounts and review the evidence
A bank reconciliation compares your accounting records with the bank statement and explains differences. The Oregon Department of Justice's small-nonprofit guidance recommends monthly reconciliations and independent examination of bank activity. These are useful practices to consider beyond Oregon; applicable requirements depend on your organization.
Give the reviewer access to the original statements, completed reconciliations, and supporting records. Have them ask about unfamiliar payees, unexplained transfers, old outstanding checks, and differences that continue from month to month. Record the questions and their resolution.
For example, a reviewer might notice a recurring payment for software nobody uses. Resolving it improves the budget as well as the records. Controls can uncover ordinary errors and waste, not just deliberate misuse.
4. Follow donations from receipt to deposit
For a fundraiser that accepts cash, document how money is counted, secured, deposited, and matched back to the event records. Oregon's guidance recommends involving multiple people in cash handling and verifying that deposits match collections.
Build a short event closeout sheet with the event name, date, total collected, people involved, deposit reference, and explanation of any difference. Assign someone to resolve discrepancies while the event is still fresh in everyone's mind.
Online donations need a trail too. Keep the payment processor report and connect it to the amount deposited and the entries in your books. If your underlying records need attention, our guide to nonprofit bookkeeping explains the foundation.
5. Keep records usable when people change roles
The IRS explains that exempt organizations must retain records supporting their activities, income, and expenses, including organizations filing Form 990-N. A bank balance alone does not provide that documentation.
Organize records so an authorized backup can find an invoice, approval, or reconciliation without searching someone's personal inbox. Write brief instructions for recurring tasks and record where the supporting files belong.
Include access review in your handoff process when staff, volunteers, or board members change roles. Identify who is responsible for updating access and confirming that the replacement person has what they need. Test the handoff before the next deadline.
6. Give the board a focused review routine
Put financial review on a regular agenda. Pair the financial statements with a short list of unresolved questions: incomplete reconciliations, missing documentation, unusual transactions, or upcoming cash needs. Assign each follow-up an owner and due date.
Board members do not need to investigate every receipt at every meeting. They do need a process for asking informed questions and following them through. Our article on what nonprofit boards should know about financial statements can help frame that conversation.
Your first 30 days
Choose a manageable starting sequence:
Week 1: Map responsibilities and identify the biggest gap.
Week 2: Document one payment or donation workflow.
Week 3: Complete one independent review and resolve its questions.
Week 4: Discuss what worked, adjust the process, and assign the next improvement.
Keep the instructions short enough that people will use them. Review the process again when your staffing, programs, or payment tools change.
Frequently asked questions
Can a volunteer-run nonprofit use internal controls?
Yes. Assign distinct tasks to available volunteers or board members and document who reviews the work. Where duties overlap, add independent oversight that fits the organization's risks and resources.
Does accounting software replace financial oversight?
No. Software helps organize records, but people still need to decide who may approve spending, review unusual activity, and follow up on missing information.
Build a financial process your team can maintain
Accountability Plus offers nonprofit accounting support, financial organization, system setup, and workflow improvement. Explore our small business and nonprofit accounting services to start a conversation about making your financial routines clearer and easier to maintain.