52 Tips in 52 Weeks: Ensure That You Do Not Fall Victim to Paying Invoices that should NOT be Paid…

There are few things that upset me more than people who steal from nonprofits or scam them out of valuable resources. Every time I read a story about a nonprofit that has fallen victim to a scam or impropriety, I am incensed. Two times in the last week, when I looked at the mail that arrived at my nonprofit’s office, I found documents that appeared to be invoices from official government agencies, but upon closer inspection, it became clear that these invoices were actually “solicitations” from companies that we had never done business with before and not invoices for continued service or coverage.

I was able to verify the problem with the invoices and dispose of them before they were submitted for payment through our chief financial officer. But, in the midst of this review, I couldn’t help but think that there are probably many nonprofits right now that have received similar “look-alike” invoices that went ahead and paid the invoices — thus, remitting funds to organizations that are not government agencies or are not providing services to their nonprofit. In the midst of the pandemic, some nonprofits may have less staff on site to review such documents and these things may fall under the radar screen and may be paid in error.

The Standards for Excellence: An Ethics and Accountability Code for the Nonprofit Sector provides guidance here, stating: “Nonprofits should have written financial policies that are adequate for the size and complexity of the organization.  These policies should address investment of the assets of the organization, internal controls, purchasing, and unrestricted current net assets.”

As we’ve discussed before on this blog, nonprofits should have internal controls policies and processes in place that are carefully followed and implemented. During these pandemic times, our internal controls may be temporarily adjusted — due to staffing changes, inability to work in the physical office, or other challenges experienced in the midst of the crisis.  Any modifications you are instituting in your practices should be carefully documented.  The Standards for Excellence Code recommends that internal controls policies should be in writing and should be approved by the board.

A few good internal control practices that would be helpful in the above situation include:

• Nonprofits should segregate duties so that steps in recording transactions are not all assigned to a single person.
• Nonprofits should have a regular process for archiving transactions regularly and starting out fresh with new financial records.
• Nonprofits should have clearly written procedures for handling transactions (checklists that can be initialed after steps are completed can be helpful).
• Nonprofits should use sequentially numbered forms and documents, and accounting for all numbers.
• Nonprofits should take care to review procedures regularly and update them from time to time.

The Standards for Excellence educational packet on Internal Controls and Finance Policies includes helpful resources on what your Internal Control Policies should address, common misconceptions about why they are in place, and guidelines on what you should do.

This educational resource packet and the full series of all packets – including sample policies, tools and model procedures to help nonprofits achieve best practices in their governance and management – can be accessed by contacting a licensed Standards for Excellence replication partner,– one of the over 150 Standards for Excellence  Licensed Consultants, or by becoming a member of the Standards for Excellence Institute.