Accounting Personnel Transitions: Ensuring Control Integrity

Planning for change at your organization may often be met with trepidation and uncertainty. While much attention is paid to executive-level leadership transitions, an area frequently overlooked involves personnel overseeing critical accounting and finance processes. A lapse in this control environment can result in significant organizational risks if these roles go unfilled for a sustained period. Having a plan in place to ensure the continued functioning of strong internal controls during a transition is crucial for nonprofits to safeguard their financial health and uphold donor trust. A well-executed transition plan, coupled with clear documentation and ongoing monitoring, can minimize risks associated with personnel changes.

Document and Test Your Internal Controls

The first step in this process is documenting an accurate depiction of the internal control procedures that accounting teams follow to ensure proper controls over financial reporting. This includes identifying transaction processing steps and the controls in place over each significant financial reporting area. For most organizations, this includes revenue and expense recognition, as well as the monthly close process over significant account balances and financial statement preparation. The easiest way to evaluate the sufficiency of this documentation is to follow a financial transaction from the time it originates within the organization, through the various processes and approvals, to its recognition in the accounting software, and ultimately its presentation in the financial statements. While this may seem like a daunting task, much of this information is typically already provided each year to the organization’s auditors.

Recruit, Onboard, and Secure Access Without Delay

Once an accounting department employee is known to be leaving, the organization should begin recruiting and onboarding a new team member as quickly as possible. In an ideal world, there would be some overlap between the departing and onboarding employees to share direct insight and observations, but this is often not feasible. To account for a lack of transition, well-documented processes and access to supervising and subordinate staff are critical for bringing any new accounting employee up to speed. In any event, someone must always perform the internal controls as designed. In most cases, the departing employee’s supervisor can temporarily step in to perform the review function. If a subordinate employee is stepping up to review schedules, senior management must ensure the employee is capable of recognizing errors and taking proper action to correct them in a timely manner.

Understanding access rights to banking, payroll, investment, and accounting software is essential for a smooth transition of responsibilities. Nearly as important as proper onboarding is properly offboarding the departing employee. Since the departing employee had access to sensitive accounts and information, removing this access will mitigate risks arising during the transition.  Documenting this process will help ensure resources are directed appropriately during such changes.

Leverage Remote Talent and Consultants for Control Integrity

One of the positive outcomes from the COVID business disruption was the expansion of the pool of qualified candidates willing to work in the nonprofit space. Since there are myriad nonprofit-specific accounting nuances, finding the right person with appropriate qualifications and experience can be challenging when constrained by geography. If an organization has cloud- or electronically-based accounting information systems with secure electronic access to relevant financial accounts, a remote hire may be an excellent solution. Even if the new hire will be working locally, the benefits of electronic systems allow organizations to operate more efficiently in an ever-evolving world.

Another option that is available to either permanently or temporarily fill open accounting positions is the use of a reputable outsourced accounting firm. Generally, a skilled consulting firm can draw on a pool of resources and be available to assist with ensuring control continuity during a transition. For example, CBIZ offers a complete suite of outsourced accounting solutions tailored to nonprofit organizations. The CBIZ team can design services to supplement existing accounting staff, perform as a bridge until an in-house employee is found, or function as a permanent part of the accounting team. 

Monitor Performance

The final point to ensure a meaningful accounting personnel transition is proper monitoring of the new employee. Organizations should establish clear performance expectations and conduct regular check-ins and progress reviews to provide feedback and address any challenges early on. Encouraging open communication and offering ongoing support or targeted training further helps to integrate the new team member and align their performance with organizational standards.

By implementing these strategies, nonprofits can effectively maintain strong control integrity during unexpected turnover, mitigating risks and ensuring the responsible management of their financial resources.

Need help safeguarding your accounting function during staff transitions? Connect with a CBIZ nonprofit specialist today.