Whether you’re leading a non-profit, charity, First Nation government, Indigenous community, or social purpose organization, strong internal controls are not just about compliance: they’re about protecting your mission, building trust, and unlocking your potential. You don’t need to be a CPA to understand the basics of internal controls: you just need the right guidance.

Read on to learn more about internal controls and how you can implement them in your organization.

by Kaitlyn Ho

What Are Internal Controls, and Why Do They Matter?

Internal controls are the policies and practices that help your organization:

• Safeguard assets
• Prevent fraud and errors
• Ensure accurate financial reporting
• Comply with funding agreements and legal requirements

Think of them as the guardrails that keep your organization financially healthy and mission-focused.

Here are 10 controls every purpose-driven organization should have in place: 

1. Segregation of Duties

No one person should control all parts of a financial transaction. Separating approval, processing, and reconciliation responsibilities between different individuals helps to reduce risk and increase transparency. For example, it is recommended to establish separate roles for receiving donations, recording them, and depositing them.

2. Authorization and Approval Processes

Establish clear approval workflows for expenses, contracts, and financial decisions. This ensures accountability and protects your resources. For example, we recommend requiring pre-approval of budgets and expenditures, along with requiring dual signatures for payments that exceed a certain threshold.

3. Bank Reconciliations

Reconcile your bank accounts monthly. This simple step helps catch errors or unauthorized transactions early. Ideally, the person responsible for preparing bank reconciliations should not be involved in cash handling.

4. Documented Financial Policies and Related Financial Procedures

Use a risk-based apporach to develop your financial policies. Some basic policies include those that establish cotnrols, financial accountability & limits of authority as well borrowing, insurance coverage (including Board liability)  and fundraising practices.    

On the process front, be sure to capture and document your financial processes in an accessible handbook, manual or other format (e.g a recording)  so that if your finance person is away, someone is able to keep things moving forward.  By doing so, there is continuity around how your organization handles money, from expense claims to cash handling. On top of maintaining continuity, clear documentation builds consistency and trust among the team. 

5. Budgeting and Financial Monitoring

Regularly compare actual spending to your budget. Reviewing the budget versus actuals on a regular basis helps you stay on track, make informed decisions, ensure funds are used as intended and identify variances early. Share these reports with your board or council to foster shared accountability.

6. Audit Trails and Recordkeeping

Maintain detailed records of all financial transactions. We recommend maintaining  detailed records of all transactions and using accounting software that tracks changes and user activity. This supports transparency and makes audits smoother.

7. Independent Oversight

Independent eyes build trust with funders, members, and the community. Best practices include engaging external auditors or reviewers annually and establishing a finance committee to oversee financial reports.

8. Avoid Potential Conflict of Interest 

 Require board members and staff to disclose potential conflicts and recuse themselves from related decisions. This protects your organization’s integrity.

9. Physical and IT Security

Secure cash, checks, and sensitive data. Use password-protected systems with role-based access. Safeguarding your organization’s data protects your employees, members, and community from harm.

1o. Compliance with Funding Agreements

Track restricted funds separately and report on them accurately. This ensures you meet grant requirements and maintain eligibility for future funding.