Who Should Sign Checks for a Nonprofit?

Nonprofit organizations operate on public trust, relying on donations and grants to fulfill their missions. Proper financial management, especially for disbursements, is vital for maintaining this trust and safeguarding assets. Clear check signing procedures prevent fraud, promote transparency, and ensure accountability to donors and stakeholders.

Foundational Principles of Check Signing Authority

Sound check signing practices are built upon the principle of segregation of duties. No single individual should have complete control over a financial transaction from its initiation to its final disbursement. Dividing responsibilities among different people helps to create checks and balances, making it more difficult for errors or fraudulent activities to occur undetected. This enhances accountability and transparency, providing a clearer audit trail. These principles protect the nonprofit’s financial resources and public reputation.

Identifying Appropriate Signatories

Individuals holding positions of trust and financial oversight within a nonprofit are appropriate for check signing authority. Common roles include the Treasurer, the Executive Director, the Board Chair, or other designated officers. These individuals are selected due to their inherent responsibilities in ensuring the organization’s financial health and compliance.

The Treasurer, for example, often has direct oversight of financial records and reporting, making them a natural choice for signatory duties. The Executive Director, as the operational leader, also frequently holds signing authority to facilitate day-to-day operations. Board members, particularly those on the finance committee, may also be designated signatories, especially for larger transactions. The specific individuals chosen should be independent from the processing of transactions, ensuring an objective review before funds are disbursed.

Establishing Check Signing Policies and Internal Controls

A nonprofit should establish a formal, written check signing policy approved by its board of directors. This policy provides clear guidelines for all financial disbursements. A common requirement is for two signatures on checks, particularly for amounts above a certain threshold, such as $500 or $1,000.

For smaller amounts, one signature might be acceptable, but dual signatures add a significant layer of security against fraud. All checks must be supported by proper documentation, such as invoices, expense reports, or contracts, and authorized by an appropriate person before being signed. The policy should strictly prohibit signing blank checks under any circumstances, as this practice creates a significant risk of unauthorized disbursements. Banks can be instructed to require multiple signatures based on the organization’s formal policy, although they may not always enforce this for every transaction.

Practical Safeguards for Financial Security

Beyond the act of signing, several practical measures enhance the security of a nonprofit’s financial disbursements. Signatories should meticulously review all supporting documentation, including invoices and receipts, before signing a check to confirm legitimacy and accuracy. Marking invoices as “paid” after a check is signed prevents accidental duplicate payments.

Independent bank reconciliations, performed by someone not involved in check writing or signing, are an important control for detecting discrepancies or unauthorized transactions. Blank check stock should be stored securely in a locked cabinet or safe, limiting access to authorized personnel. Additionally, maintaining accurate vendor lists and periodically reviewing them helps prevent fraudulent payments to fictitious entities. These safeguards reinforce the principle of segregation of duties, providing multiple layers of oversight and accountability throughout the entire disbursement process.