As a Board Member of a not for profit organisation, if someone asked you what internal controls do you have in your organisation what would your answer be?  In a lot of cases reference may be made to the fact there are policies and procedures in place and that you receive financial reports.  While that is actually a good response how have you assessed how effective the policies and procedures are and even the accuracy of the financial reports.

Internal controls in any organisation are a necessity but more importantly you need to ensure they are both effective and being adhered to.  Internal controls help to avoid unexpected events from occurring in the first place but they can also assist with identifying a small problem before it escalates to become a major problem.

 

 

 

Therefore when developing your internal controls the main elements of the framework can be categorised as follows:

  • Strategic:  They allow your organisation to achieve its strategic goals and objectives.
  • Operational:  The operations of your organisation occur as intended.
  • Assets:  The assets of the organisation are secure, safe and maintained at the required standards.
  • Financial:  Financial information and reports accurately reflect the operations of the organisation.
  • Risk:  There is a risk management system to identify, assess and manage risks.  

The overriding objective of having proper and effective internal controls framework in place is that it allows the organisation to operate and achieve the intended objectives with minimal disruption.

Whether you are a Board Member or employed by an organisation, the need to constantly monitor, review and manage the internal controls must become a key function of your role.  Furthermore, as a not for profit organisation you are in effect managing the organisation on behalf of the community which adds even greater importance on the need to have effective internal controls in place.

The next series of posts will elaborate in more detail on key areas relating to internal controls.