Monday, March 16, 2009

Protecting Small Non-Profits from Fraud: An Ounce of Prevention

Small nonprofits are very vulnerable to fraud.When say small I mean small: organizations that raise less than $ 100,000 per year and only one person had paid or not paid staff people.
2.Many small organizations raise most of their cash. Cash is more easily misappropriated checks.
3.Small nonprofits are run by people you trust and commitment.

Here are some typical scenarios sadly fraud:

1.Cash in fundraising events is diverted by the treasurer of the organization or any other person with access to cash collections.
2.The treasurer wrote checks to themselves for the organization of the checking account. Onandon is a nonprofit organization dedicated to helping children of parents who talk too much. Most of the donations in these auctions are conducted in cash and deposited into the checking account organizations. The former Treasurer, Mal Feasance was skimming cash from these events to the tune of about $ 300 at auction. Mal has complete control over the checking account and prepares all financial statements.

Ounces of Prevention

Three relatively cheap and effective to prevent and detect fraud common;

1.Proper control of bank statements
2.Requiring two signatures on each check
3.Preparation Budget

Bank statements

If an organization has a treasurer, who collects and disburses funds to control and / or savings account, monthly bank statements be sent directly to another member of the board of the organization before it is transmitted to the treasurer.

Check two Signature Policy

Require that each check has two signatures.

Budgets

Each organization must have an annual budget approved by the board.

If the organization has cash fundraising as dinners, car washes, bingo, etc. should have the budget for each event. Any person other than the person responsible for handling and depositing cash should be to perform a washing cars, selling bingo cards and apply this number to the unit price to calculate the amount of cash raised. Suppose Onandon has a bingo game where the cards sell for $ 15 each. If 200 cards are sold, the net cash deposit should be $ 3000.

A matter of trust

There is a trade-off involved in the implementation of controls over fraud in small organizations. When people work closely together in small organizations it is natural to build trust over time. But diligent observation of controls against fraud requires people to maintain a degree of mistrust.

The responsibility of the Board of Directors

It is the responsibility of the board to ensure that adequate controls are in place to protect the assets of the organization. In small organizations will require that board members actually participate in the implementation of the controls discussed here. It is also important that board members understand why these checks are necessary.

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