Nonprofit Internal Control

Importance of Internal Controls in Nonprofit Organizations and audit committee

Abstract: With the developing of the society, the Nonprofit Organizations has play a more and more important role in the current economy. However, problems like fraud, inefficient and opaque are all around. So, internal control plays a vital role in the Nonprofit Organizations. This paper explains how the internal controls improve the nonprofit organization. It’s important to have the internal control within the organization to prevent the loss and improve the performance to the public.

1. Introduction

The Nonprofit Organization has a significant impact on US economy. In 2013, nonprofit sector contributed an estimated $905.9 billion to the US economy and reported

This Act enhanced standards for corporate accountability, responsibility, and financial reporting transparency. SOX greatly emphasizes an organization’s internal controls, requiring an internal control report in the annual report. The new requirements placed greater demands on internal control. The COSO internal control framework passed in 1994 outlines three objectives of internal control as: effectiveness and efficiency of operations; reliability of financial information; and compliance with applicable laws and regulations. Hence, the internal control function becomes the key to assess the effectiveness of utilizing financial resources by identifying waste, inefficiencies and fraud in budget items and make the organization

internal (control environment/ / evaluating performance, staff, Program/)

The governing body sets the tone, communicates the importance of internal controls, reviews and approves internal control policies and procedures, and provides funding to implement the controls.

5. Conclusion

In the long run, NPOs that have a strong system of internal controls will prove to be winners in their respective marketplaces and industries. Strong internal controls can help push a organization beyond its current limits and insure the organization not wasting valuable resources. Strong internal controls can also help the organization ensure it serves the public better.

The results from the paper have demonstrated that internal controls make a significant contribution to NPO, not only in financial performance but also the financial management processes. But organizations are different and will have varying requirements, so, a best internal control is match each different organization with the objectives and resources. The suitable internal controls will help to make the organization safe and efficiency, thus make the good to the people in whole.

References:

Chris Jeffrey, “Internal Control at Private Companies and Nonprofits.”, Sep 1, 2008, CPA