Practical Financial Oversight for Nonprofit Boards and Volunteers

Five oversight procedures nonprofits can implement to improve internal controls 

Boards, finance committees, or designated volunteers can play an important role in helping to safeguard an organization’s finances and promote accountability.

Nonprofits of any size, from large, established organizations to smaller nonprofits with limited staff and resources, can benefit from practical financial oversight procedures that strengthen accountability and reduce risk. While formal audits and financial reviews are valuable tools, strong internal controls can also be supported through simple, consistent monitoring practices carried out by board members, finance committees, or trusted volunteers. By implementing a few key oversight procedures, organizations can help safeguard assets, improve financial transparency, and build confidence among donors, grantors, and stakeholders. Following are five practical financial oversight tips nonprofits can implement to improve internal controls and support sound financial management.

Practical actions to implement for financial oversight

1. Review bank reconciliations regularly  

A periodic review of bank reconciliations can help confirm that cash records are accurate and complete and can be done at any time during the year, typically at month-end. The reviewer should: 

• Compare the bank balance per the reconciliation report from the accounting system (such as QuickBooks) to the actual bank statement  
• Verify that the reconciled balance agrees to the organization’s general ledger or trial balance. 
• A qualified reviewer can also look for unusual or outdated reconciling items, such as:  
  • Deposits in transit that remain uncleared for an extended period  
  • Old outstanding checks 
  • Other unexplained differences.

2. Review disbursements and supporting documentation 

Organizations should periodically review a sample of payments made during the month or year.  

• Run a disbursement or payment report directly from the accounting system  
• Select a sample of transactions for review, paying special attention to unusual vendors or larger-than-normal payments. A good sample size will depend on the volume of transactions, however for most small organizations, two to three per month or 10 to 20 per year is sufficient. 

 The reviewer should confirm:  

• Appropriate documentation exists to support the expense  
• The transaction was properly approved
• The expense was recorded to the correct general ledger account based on the applicable expense code

3. Monitor new vendors

A periodic review of newly added vendors can help reduce the risk of unauthorized or fraudulent payments. The reviewer should:  

• Confirm that all new vendors were added for a legitimate business purpose
• Ensure required tax documentation, such as a W-9 or I-9, is maintained on file when applicable

4. Review manual journal entries

Manual journal entries should generally be limited in organizations that use accounting software. Reviewers should pay particular attention to:  

• Entries posted directly to cash accounts  
• Unusual or unsupported adjustments  
• Frequent use of general journal (“GJ”) entries instead of standard cash receipt or disbursement processes  

 In many small organizations, manual entries should be limited to items such as interest income or correcting entries.  

5. Compare actual results to budget  

A regular review of budget-to-actual comparisons can identify anomalies due to fraud or error. 

• Review financial results against the approved budget.  
• Identify significant variances  
• Request explanations or supporting information for unexpected differences 
• Ensure spending for any large variances was approved via established expenditure policies 

This process helps organizations stay informed about financial performance and identify potential issues early.  

An important key is to ensure that oversight responsibilities are handled by an individual independent of the day-to-day accounting and cash handling functions. Effective financial oversight involves consistent review procedures, segregation of duties, and active board involvement. Following these practices can provide meaningful protection and improve confidence in an organization’s financial operations. 

Questions about financial oversight best practices for your organization? Contact your Keiter Not-for-Profit Opportunity Advisor.