PREVENTING NONPROFIT FRAUDBondBeebe
Nonprofits, like other businesses, are vulnerable to all categories of fraud, but there is general reluctance among nonprofits to prosecute employees due to fear of notoriety, fear of legal action, concern about personal safety and compassion for the offender. While nonprofits often devote their greatest attention to protecting cash and checking accounts, other assets such as inventory and contracts for services can be at risk for employee fraud abuse. Some conditions that may increase incidents of insider theft include a lack of checks and balances or too-cozy relationships between staff and suppliers where above-market prices for goods and services are authorized.
Also, while financial statement fraud does not directly enrich the fraudster (its intent is to mislead the users of the financial statements, i.e., the Board of Directors or the bank), it can be committed by an employee under financial or social pressure to meet budgetary goals, secure bank loans, earn bonuses and salary increases, or obtain donor funding. The Board of Directors and management within nonprofit organizations should keep this in mind and focus on developing controls to prevent fraud.
A commitment to nonprofit fraud prevention is key. Since fraud risk, like other risks, cannot be eliminated altogether, effective risk management also requires a commitment to examining “what happened” if and when a fraud loss occurs. Bond Beebe Forensic Accounting professionals are expert at suggesting and implementing steps for fraud prevention including reviewing, revising and/or creating accounting procedures and controls; advising best hiring and monitoring practices; and performing and/or suggesting auditing procedures and schedules. We can also help you identify and confirm fraud, determine the extent of any fraudulent activity, assist with damage claims and educate your organization about any procedural gaps to get you to a more secure position.