At a recent Finance Committee meeting of one of my clients, a question was raised about appropriate check signing levels. While every organization is different, the following three part signing resolution can be considered a guide for medium-sized organizations:

  1. Up to $10,000, any one officer or director.
  2. Up to $50,000, any two officers or directors.
  3. Over $50,000, any two officers or directors, but one of them must be a director. In other words, for 1 or 2, it can be just employee-officers. For 3, however, one of the signers must be a director (i.e. Board member). For the director category, some organizations limit this to just Executive Committee members.

And while we’re on the topic of cash disbursements, a reminder that the following are the top 5 areas to consider when evaluating internal controls over cash going out of an organization:

  1. Segregation of duties. This is the most important control, which requires financial tasks to be performed by different personnel, making fraud difficult because it requires collusion of two or more persons, and making innocent errors easier to find.
  2. Authorized signors. Select appropriate check signors. A best practice (although not always practical) is not to have anyone involved in the accounting and finance functions be a check signor. The use of a signature stamp, although efficient, can pose problems, so controls must be put in place to ensure that the stamp is not readily available for inappropriate use.
  3. Bank reconciliations. These should be performed on a monthly basis and reviewed by someone other than the preparer. Unusual reconciling items should be investigated and resolved on a timely basis.
  4. Dual signatures (as described above). While a bank may still honor a check with only one signature, this protocol sets the right tone within an organization. However, because organizations cannot rely on banks to monitor checks for them, other internal controls must be in place, and bank accounts must be monitored for unusual activity.
  5. Wire transfers. Make sure the responsibility for initiating a wire transfer is segregated from the responsibility of releasing the wire transfer.
Donella Wilson
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Donella Wilson

CATEGORIES Nonprofit, , #BeMore,

Donella Wilson, CPA, leads the Firm’s Nonprofit Practice. Donella is a member of the California Society of CPAs and the American Institute of Certified Public Accountants. She has more than 20 years of public accounting experience providing audit, accounting and special project services and works…Learn More