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Whether it’s a nonprofit organization, corporation, partnership or other business entity, they all have one thing in common: CASH

Cash is the asset most susceptible to theft or fraud. As it is commonly handled on a daily basis, cash is easy to steal or misappropriate.

Adequate safeguards can be established or revised to aid in protecting cash against fraudulent activity on a timely basis. Below is a list of key controls that should be considered when looking at new oversight practices to implement in the New Year:

Segregation of Duties:

Control procedures to consider:

  • For cash receipts and disbursements assign different employees to:
  • Open mail or check copies received.
  • Prepare checks and deposits
  • Mail checks and deposit cash receipts.
  • Post cash receipts to the accounting software.
  • Authorize write-offs of specific accounts.
  • Reconcile bank accounts and investigate discrepancies.
  • Post journal entries to the general ledger.
  • Initiate check requests.
  • Review, authorize, or sign checks.

Importance behind segregation of duties: Separating tasks creates difficulty for an employee to commit theft or fraud alone. This control also acts as a check and balance to detect fraud or errors.

Authorization and Approval:

Control procedures to consider:

  • Require dual signatures and authorization for cash disbursements.
  • Record cash receipts when received. Document transfers and obtain proper approvals.
  • Supervisors verify cash deposits and approve all voided refund transactions.
  • Match purchase orders, the receiving report, and invoices prior to payment.
  • Require the check signer to review all supporting documentation and verify appropriateness prior to signing the check.

Importance behind authorization and approval: Accountability and review of cash receipts and disbursements will help to limit the ability of employees to commit fraud.

Security of assets:

Controls to consider:

  • Keep checks in a locked drawer or lockbox.
  • Do not sign blank checks.
  • Change combinations and passwords to online bank accounts and accounting software annually or when an employee with this access leaves or is terminated.
  • Conduct proper background checks on prospective cash handlers.

Importance behind securing assets: Eliminating areas of access to cash reduces the possibility of theft.

Review and Reconciliation:

Controls to consider:

  • Review bank statements and general ledger activity on a timely basis.
  • Research uncleared checks for significant or unusual items.
  • Review the bank reconciliations performed.
  • Inspect canceled checks for proper authorizations and verify appropriateness.
  • Verify the cash is being sent to the proper vendor.
  • Compare receipts to deposit records.

Importance behind review and reconciliations: Ultimately everything culminates in cash, so performing bank reconciliations and researching reconciling items will uncover unknown issues or problems.

Although the inherent risk of fraud related to cash is substantial, as referenced above, there are safety measures that can be implemented to limit the likelihood of theft or fraud from your entity. If you would like more information related to internal controls and how to implement them, feel free to contact Kristi Yanover, Audit Partner, at

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