Many nonprofits and businesses rely on dual signatures to control and verify the accuracy of their bookkeeping. While dual signatures are a strategic method to ensure that your organization’s funds are being used appropriately, banks are not required to verify both signatures. However, there are other internal controls – strategies to keep accurate and verified accounting of how and by whom funds are being used – to maintain your organization’s financial integrity.
Internal control best practices include:
Regularly conducting audits. Prepare a thorough expense sheet and budget for each quarter. Each quarter, audit your books against these materials to verify that funds are being used appropriately. If possible, your organization should audit monthly.
- Ensuring that parties whose responsibilities are independent from those responsible for your organization’s daily funds movement have appropriate access via online banking to view statements or transactions within online banking, for example, may be an efficient way to maintain checks and balances and facilitate convenient access for such audits.
Assigning different roles. Different employees should be responsible for recordkeeping, authorization, and custody. The individual signing checks should be different from the employee who maintains transaction records.
Requiring dual signatures internally. While banks are not required to verify both signatures, making this a mandatory practice at your organization is still a best practice. You may consider adding verification steps to any financial policies or procedures your organization may have. Horizon Bank offers a web-based tool, Positive Pay, which allows your organization to monitor for signatures on checks, verify legitimacy of payments and direct the bank.
Establishing anonymous reporting mechanisms. All nonprofits and businesses should create and maintain a system for employees to anonymously and safely report concerns regarding financial management at the organization.
For questions on additional internal controls for your organization, please consult with your Horizon Bank team.