In a recent study by the Association of Certified Fraud Examiners found that 10.1% of fraud victim organizations were non-profits that reported a median loss of $100,000. The following
combination of “events” could be contributing to the drastic aggravation of a situation at your non-profit.
Any and every non-profit competing in the modern world relies on the power of information technology to get the job done. Unfortunately, with the proliferation of connectivity comes an ever-expanding world of digital criminals waiting to take advantage of weaknesses in cybersecurity. Here we will take a look at some of the main contributors to fraud within non-profits.
Your team members are wearing too many hats.
Non-profits often find themselves having to do more with less. The three top finance/accounting trends are: 1) small, lean finance teams; 2) cross-functional expertise for all staff; and 3) key decision makers for technology, software, and services reside inside finance. Conflicting responsibilities on top of interruptions often make an otherwise attentive, detail-oriented professional very unfocused and aware.
Your non-profit experiences high employee turnover.
Employee turnover was identified as a top organization trend with a whopping 87% of those responding saying it was problematic. When people walk out the door, most commonly for higher paying jobs, so does critical knowledge and control and oversight of key accounting processes.
Training is a luxury.
Who in the non-profit sector has time (or budget) for professional development? The logic is pretty simple here: less training, equals less competence, equals less awareness, equals more risk.
You have limited or ineffective controls in place.
Internal controls are the financial processes and procedures that enable an organization to safeguard its assets. The goal of internal controls is to create business practices that serve as “checks and balances” on staff or outside vendors to reduce the risk of misappropriation of funds/assets.
There are volunteers working at your non-profit who are privy to confidential information.
Because volunteers are such a vital component of non-profit operations, they should be given appropriate training and oversight when they’re layered into your internal control systems and processes.
Your volunteer board has little-to-no financial oversight expertise.
Members of your board of directors may be well-connected in your community and may even be good at fundraisers, but your financial infrastructure might be far too complex for most board members to fully understand.
What’s at Stake if Your Non-Profit Falls Victim to Fraud?
- Harm to your reputation
- Crisis Management
- Cost of Investigation and Litigation
- Deflated Employee Morale
How Do You Mitigate Fraud?
Step one is to ensure you have a mix of talent on your board, to include those who have a firm grasp of financial oversight. Next you should have internal controls in place that are well documented, well understood, widely distributed, and strongly enforced. Start simple with a few best practices from the experts at Greater Washington Society of CPAs who say, “The most effective procedures are those that have the greatest segregation of duties. For a comprehensive list of general internal controls visit the Greater Washington Society of CPAs site.
SYGNVS Integrated Solutions has over 40 years of experience providing non-profit sectors with cutting-edge IT services, including MIP Fund Accounting. We provide our clients with the peace of mind that their crucial business information is protected by setting up alerts to protect non-profits from fraud. Call (985) 892-7207 today to learn more about MIP Fund Accounting.