How to Build Donor Trust with Strong Internal Controls

Donors give where they trust. It’s not just about the mission. For many nonprofits, the critical issue isn’t the passion behind your cause – it’s the confidence donors have in how their money is handled.

Unfortunately, many small to mid-sized nonprofits struggle here. It's not due to malice or even negligence. It's often the result of outdated systems, blurred roles, or the heroic (but overwhelmed) staffer who “just handles” everything. That can be risky.

Let’s break down what internal controls actually are, why they matter, and how to build trust through better financial stewardship.

What Are Internal Controls?

Internal controls are the checks and systems you put in place to make sure money is handled properly. That includes:

• Separation of duties: No one person (not even your full-time bookkeeper) should control every part of a transaction. For example, the person who writes the checks shouldn’t be the one reconciling the bank statements.
• Reasonable oversight: Financial reports should be reviewed by the board, executive director, or finance committee on a consistent schedule.
• Proper technology setup: Many nonprofits are running on personal email accounts, shared logins, paper workflows, and outdated systems. It’s not just inefficient – it opens the door to error or fraud.
• Accountability to stakeholders: From your board to your major donors, you should be able to report how funds were used – clearly, completely, and on time.

Why It Matters

1. Preventing Theft: The worst-case scenario isn’t just embarrassing… It can be devastating. Donors flee, reputations collapse, and leadership may be held liable. Controls exist to prevent this, not because you expect fraud, but because you respect your donors’ trust.
2. Ensuring Transparency: Transparency is about more than publishing a Form 990. Donors want to know their contributions are being used wisely. If your organization can’t produce timely and accurate financial reports, that’s a red flag.
3. Strengthening Governance: Volunteer board members (especially at small nonprofits) often don’t realize the legal responsibilities they’ve taken on. Internal controls are one way to protect both them and the organization. Done well, they can also help retain great board talent.

Real Talk: Who’s Holding the Checkbook?

In a lot of organizations, it’s a familiar story. The one staffer who “handles the books” is also the only one with online banking access, the only one with check-signing authority, and the only one entering donations into QuickBooks.

And because she’s been around forever, no one wants to question her.

That’s not transparency – that’s a liability.

A lack of financial clarity often drives away your best board members, scares off your biggest donors, and makes your nonprofit vulnerable to reputational damage. It’s not about being paranoid. It’s about being a responsible steward of the resources entrusted to you.

What You Can Do Today

• Review your finance workflows: Who handles each part of a transaction? Where is there too much power concentrated in one person’s hands?
• Implement basic financial policies: Start with check signing, bank reconciliation, and donation handling.
• Use the right tools: Technology can make controls easier to manage. Look into solutions that fit your size and budget, but also be honest about where a part-time bookkeeper may not be enough.
• Bring in help if needed: Outsourced nonprofit accounting doesn’t just reduce costs – it can also introduce much-needed discipline and oversight into your finance function.

Final Thought

Donor trust is fragile. But it’s also completely within your control.

Internal controls might not be flashy – but they are foundational. And in a world where reputation matters more than ever, your financial integrity could be your greatest fundraising asset.

Start building trust with a free nonprofit financial readiness assessment – no pressure, no pitch. Just a straightforward look at where you stand and what to fix to build and maintain strong donor trust.

Schedule your free assessment