Protecting Nonprofit Donations – Part Two

Last week, I shared cost-efficient approaches to protect nonprofit donations. This week — best practices for nonprofits to fulfill their fiduciary responsibility for donor funds. All this is based on my Nonprofit Finance Series, sponsored by the Arlington Chamber of Commerce – see for future sessions.

Four best practices to protect donations you work so hard to raise:

1. Document Donation Processes

Document the steps for each donation method. Include the steps, roles, and responsibilities. Make sure the procedures are up-to-date and available for everyone involved. Execute written agreements with any third party fund raisers or processors to clarify roles and establish accountability.

2. Segregate Duties

Separate tasks to ensure that funds are protected at all times. For example, separate receiving funds from depositing funds. Reconciliations and other verification procedures should be performed by someone who is not involved in receiving or depositing funds.

3. Standardize and Automate

Establish a routine process for each donation method. Define non-routine activity and how to address it. Investing in automation generally reduces overall cost through efficiency and cost-effective controls. Automation facilitates reporting to track activity and detect/address issues.

4. Verify and Reconcile

Independent and regular donation verification is one of the most important protections. Automated tools are available for bank account and credit card reconciliations. Up-front investments generally pay for themselves quickly. Donations that are restricted for a specific purpose should be verified separately.

Following these best practices is not everything nonprofits need to know, but they’re a start.

What is your nonprofit doing to make sure that your donations are protected?