How do you manage non-profit accounting risks and contingencies in a complex and dynamic environment?

1 Identify and assess accounting risks

The first step to manage accounting risks is to identify and assess them. Accounting risks are the potential threats or uncertainties that may affect the accuracy, completeness, reliability, or timeliness of your financial reporting and compliance. Some common accounting risks for non-profits include fraud, errors, misstatements, non-compliance, litigation, donor restrictions, budget variances, cash flow problems, and reputational damage. To identify and assess these risks, you need to conduct a regular and comprehensive risk assessment that covers all aspects of your accounting processes, systems, policies, and controls. You also need to monitor the internal and external environment for any changes or events that may create new or increased risks.

2 Implement and update accounting policies and procedures

The second step to manage accounting risks is to implement and update your accounting policies and procedures. Accounting policies and procedures are the rules and guidelines that govern how you record, report, and disclose your financial information and transactions. They help you ensure consistency, accuracy, transparency, and compliance with accounting standards and regulations. To implement and update your accounting policies and procedures, you need to document them clearly and communicate them effectively to your staff, board, auditors, and other stakeholders. You also need to review them periodically and revise them as needed to reflect any changes in your accounting practices, requirements, or objectives.

3 Establish and maintain internal controls

The third step to manage accounting risks is to establish and maintain internal controls. Internal controls are the measures and activities that you put in place to prevent, detect, and correct accounting errors, fraud, or irregularities. They help you safeguard your assets, ensure the reliability of your financial statements, and comply with laws and regulations. To establish and maintain internal controls, you need to design and implement a control framework that covers the key areas of your accounting operations, such as authorization, segregation of duties, reconciliation, verification, documentation, and supervision. You also need to evaluate and test the effectiveness of your controls regularly and address any weaknesses or gaps.

4 Develop and monitor accounting contingency plans

The fourth step to manage accounting risks is to develop and monitor your accounting contingency plans. Accounting contingency plans are the backup plans that you prepare in advance to deal with potential accounting risks or emergencies that may disrupt or impair your normal accounting operations or functions. They help you minimize the impact and ensure the continuity of your financial reporting and compliance. To develop and monitor your accounting contingency plans, you need to identify the scenarios and events that may trigger them, such as natural disasters, cyberattacks, staff turnover, or funding cuts. You also need to define the roles and responsibilities, actions and steps, resources and tools, and communication and coordination strategies for each contingency plan.

5 Train and support accounting staff

The fifth step to manage accounting risks is to train and support your accounting staff. Accounting staff are the people who perform, oversee, or review your accounting tasks and activities. They are the key assets and resources that enable you to achieve your accounting goals and objectives. To train and support your accounting staff, you need to provide them with the necessary skills, knowledge, and tools to perform their duties effectively and efficiently. You also need to create a culture of accountability, integrity, and learning that encourages them to follow the accounting policies and procedures, adhere to the internal controls, report any issues or concerns, and seek feedback and improvement.

6 Engage and collaborate with stakeholders

The sixth step to manage accounting risks is to engage and collaborate with your stakeholders. Stakeholders are the individuals or groups that have an interest or stake in your non-profit's financial performance and reporting, such as donors, funders, regulators, auditors, board members, beneficiaries, partners, and the public. They are the sources and users of your financial information and the influencers and supporters of your non-profit's mission and vision. To engage and collaborate with your stakeholders, you need to understand their expectations, needs, and preferences regarding your accounting practices and disclosures. You also need to communicate with them clearly, timely, and respectfully, and solicit their feedback and input on your accounting risk management efforts.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?