Page 288 - Washington Nonprofit Handbook 2018 Edition

A. Practical considerations when designing the information and
communication system:

• Are financial reports internally distributed regularly and on a timely
basis?

• Are financial reports provided regularly and on a timely basis to the
Board? The Board of Directors has the responsibility of financial
oversight to ensure transparency, integrity of the financials, and to
ensure that the organization is financially sound. It is critical that the
Board of Directors receive and have adequate time to review financial
reports.

• Are financial reporting due dates monitored to ensure compliance?
Nonprofit organizations have financial reporting requirements to both
the IRS and the Secretary of State, as well as employment tax agencies.
If nonprofits do not meet their reporting requirements they may be
subject to fines, interest and other penalties.

• Does the Board (or Finance/Audit Committee) meet with the external
auditor and hold management accountable to address control
deficiencies reported? The ability for the Board or Finance Committee
to meet with an external auditor, separate from management is a
common internal control that functions as a check and balance on the
control of the organization’s finances.

• Does the organization have a clear and well-communicated
whistleblower policy and reporting mechanism that encourages the
reporting of wrongdoing without fear of retaliation?

4. Monitoring: Ongoing evaluations, separate evaluations, or some
combination of the two are used to ascertain whether each of these five
components of internal control is present and functioning.

A. Practical Considerations when designing the monitoring system

• Who would notice if control activities stopped being performed?
Board and staff must be engaged in the internal control system, or it
will not be effective.

WASHINGTON NONPROFIT HANDBOOK -277- 2018