What would a 5% decrease in funds mean for your nonprofit? For many it means the difference between opening and closing your doors.
Many nonprofit organizations have several locations nationwide, and within each of these locations work any number of employees. Employees within nonprofits not only distribute money that is brought into the organization, but also oversee a variety of other funds. If your nonprofit has a high turnover rate, you likely have an organization being run by inexperienced employees, increasing an organization’s risk for exposure.
According to a report from the Association of Certified Fraud Examiners, the world’s largest anti-fraud organization, nonprofits lose five percent of their revenue each year due to fraud. With nonprofits scratching and clawing for additional funds, the reported five percent could cripple an organization.
It was also reported that 63% of nonprofits attending an occupational fraud webinar hosted by Armanino, said they had experienced some form of fraud within their organization.
The most popular type of fraud throughout nonprofits is employee theft. Prominent examples of employee theft include everything from using funds and company credit cards for fraudulent purposes, to not reporting the precise number of donations.
Mayer Hoffman McCann PC, an independent CPA firm, suggests looking out for the following four types of people in order to prevent fraud within your organization:
- Employees who go above and beyond for their co-workers
- Employees who put in a lot of hours, while also refusing help
- Employees who do not show full financial receipts and
- Supervisors who tend to have a more dominant personality regarding leave-time or having someone else in charge
In order to ensure you do not fall victim to fraudulent activity within your organization, the firm also gives a few recommendations on preliminary measures you can take:
- Background checks for employees are a must!
- Bank statements should be received directly from the bank and not through a third party
- Be sure to maintain current and accurate accounting records. Check their accuracy periodically
- Perform frequent audits
- Develop strong employee policies and procedures and make sure all employees are routinely trained, especially those who deal with money
By taking these precautionary measures, you can alleviate the possibility of fraud being a part of your organization. Employees can be your biggest advocates, but in cases where employees lack morals, they can become costly.
