Ouch.
Basically, those same rules that affect individual bank accounts ... cover nonprofit organizations, too.
And for organizations that have multiple bank accounts - such as separate accounts for payroll, programming expenses, and what-have-you, THIS IS A CONCERN!
Those accounts may be considered as one account for the purposes of the F.D.I.C. insured coverage. In other words, you may be at risk, if your accounts total more than $100,000.
Over the years, many nonprofits (and individuals, too) have chased high interest rates. Now, some of those banks that offered high rates are teetering on the edge of financial insolvency.
What to Do?
First, know where your funds are deposited. Surprisingly, many Executive Directors don't have this information readily available! While your Finance Manager knows, why shouldn't you? The director who leads your Finance Committee should have the same information.
Second, talk with your banker. Not the nice person at the teller window - go see the branch manager or your account representative, depending on how your bank is structured. Ask them to review your accounts with you, so that you confirm how your accounts would be viewed by the F.D.I.C.
This is a good time to review the legal signatories to your account(s) and make sure all names are current employees, officers, or directors. If not, correct the errors while you are in the bank's office, if at all possible. At minimum, remove employees who no longer work with the organization.
Third - if your money is in a institution that is considered at risk, move your funds as soon as possible to a more stable bank. Lists of banks considered "risky" can be found online.
For the record, one nonprofit organization dealt with this issue in the past week. Without naming the organization nor the bank, I'll just say that the account paperwork had not been submitted by the account manager (although signed by all appropriate parties several months earlier!); thus, the Exec. Director couldn't remove the amounts in excess of $100,000 to a "safer" bank. Once the paperwork matters were resolved, the lack of attention to detail led the nonprofit to move ALL funds from that bank.
Lesson learned for all concerned.
