Internal controls are methods put in place by a company to ensure the integrity of financial and accounting information meet operational targets, and transmit management policies throughout the organization. Internal controls work best when they are applied to multiple divisions and deal with the interactions between the various business departments.

Internal control guidelines:

  • President and Treasurer should have administrative access to OmegaFi Vault
  • No one individual should have complete and total access to chapter funds at any given time
  • Finance committee conducts reconciliation biweekly
  • Expense verification process
    • A simple process of checking receipts after chapter funds have been spent
    • Process for Committee Chairman/Executive Member
      • Purchaser (Chairman) > Assistant Treasurer A/P > Treasurer
    • Process for Treasurer
      • Purchaser (Treasurer) > Assistant Treasurer A/P > President

If the Chapter uses an OmegaFi Purchasing Card or a Debit Card, these should remain controlled and not passed around from member to member. After each usage, it should be returned to the Treasurer.

Person-to-Person Payments

Person-to-person payments have become one of the most popular ways for individuals to transfer funds. Millennials are the main demographic driving the popularity of these mobile application based payment methods. This practice may make interpersonal fund transfers easier, but it creates a large amount of risk for chapters.

Financial Risks

  • Creating Account
    • Individual chapter members create account using personal information
  • Tax Liability
    • Account owner and operator may be liable for taxes on all revenue received via person-to-person application

Security Risks

  • Lack of oversight
    • The use of a person-to-person payment application violates all internal control best practices
      • At any given time, one member of the chapter has complete access and control of chapter funds
    • Tracking members who have/have not paid dues becomes a manual task which leads to faulty reporting
    • Too much availability for an individual to manipulate finances
      • Opportunity, Access & Desire
        • When all three keys are present, theft is a likely and real possibility

Alternative Options

MyOmegaFi App

  • Ease of Payment
    • The MyOmegaFi App operates the same was as a person-to-person payment solution
    • Users are able to transfer funds from their account directly to chapter Vault account
  • Financial Risks
    • An individual does not need to create an account
  • Oversight
    • Because payments go directly into the Vault account, the OmegaFi Vault internal controls are in place
    • Account owner and operator may be liable for taxes on all revenue received via person-to-person application

FAQs

We set up our person-to-person payment solution to have all of the funds go to the chapter bank account, why is that a problem?

While it is smart to have the funds go directly to the chapter account, the person-to-person solution requires an individual to use their personal information to initially setup the account, which then places the financial responsibility of the account on that individual.

We want to increase our collections rate and members already use Venmo for personal use, why shouldn’t we use it for chapter fees?

It all comes down to liability and control. Venmo for personal use works because one person owes another money, it is a transaction between two people. Paying chapter fees is a business transaction that should have certain control protocols that Venmo simply does not provide.

Our chapter officers are very trustworthy, we do not have to worry about possible theft situations, why can’t we use a person-to-person payment solution?

Throughout 2016-17, there were more chapter theft cases reported than the last five years combined, all of which involved some kind of person-to-person payment solution. We don’t like to think that our brothers are capable of committing theft against the chapter, but it is possible. This best practice is not necessarily meant to address current concerns, but meant to set up a process to protect against the unknown future.

If you have any questions or if you need any help assessing personal liability in your chapter, contact our director of finance at finance@pikes.org. For more general treasurer information, take a look at the treasurer handbook.

Jarrett M. Way

Director of Educational Content & Strategy