Not-for-Profit Enews Update: Implementing Electronic Restrictions on Cash and Investment Accounts

by Annmarie Novotney, CPA - Senior Accountant

February 27, 2014

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Financial controls and oversight provide a critical tool that enables those charged with governance of nonprofit organizations to adequately perform their duties. Lack of appropriate controls can do exactly the opposite, and can lead to misdirected funds or unauthorized transactions. In today’s business atmosphere where an organization’s cash and investment transactions are often processed electronically, it becomes even more important to ensure proper controls are in place to restrict electronic access to cash and investment accounts.

Consider the following when implementing restrictions on cash and investment accounts:

- Restrict online transaction abilities to authorized users only. Keep access to online cash and investment accounts restricted to those authorized check signers or users approved by those charged with governance. For those decision makers that are not authorized signers but sometimes need access to online statements (i.e. Executive Directors), consider setting up limited access to online accounts for this purpose to ensure segregation of duties remains intact.

- Restrict the ability to transfer funds electronically. Oftentimes there are no restrictions in place to prevent transfers from being made out of an organization’s accounts. Authorized users can initiate transfers of any dollar amount to any other outside account. Typically, banks and investment companies offer restrictions that can be placed on an organization’s cash or investment accounts so that funds can only be transferred over to other accounts in the organization’s name. Implementing these limitations safeguards against unauthorized misdirection of assets outside of the organization.

- Set approval limits on transaction amounts. Many banks and investment companies can create approval limits on transaction activity initiated by authorized users that require first and second approvals, depending on the amount initiated. Consider utilizing these limits to create additional oversight of transactions and improve transparency of online activity.

- Review online bill pay access and limits. Consider the overall online controls in place related to online bill pay options. Oftentimes organizations can place restrictions on transfer activity (limitations on the amount of transfers as well as where funds can be transferred to), however these restrictions do not always carry over to online bill payments. Many times users can initiate payments of any dollar amount to any vendors without requiring additional approvals. Consider reviewing your bank’s policies related to online bill pay and discuss with those charged with governance any options available to improve controls and maintain oversight.

- Monitor cash and investment activity on a monthly basis. While implementing the above recommendations provide preventative controls surrounding cash and investment transactions, proper monitoring of actual activity by those charged with governance is also essential. Reviewing activity within cash and investment accounts in a timely manner is necessary in quickly identifying any unapproved transactions. Consider having monthly statements sent directly to those charged with governance, or setting up read-only access to online accounts for those individuals to access at any time.

If you have any questions regarding the article above or any other issue affecting your not-for-profit organization please contact your Blue & Co. advisor or e-mail us at or call us at 800-717-BLUE.