We are happy to share a grant management post titled “Fraud Prevention Strategies for Non-Profit Organizations” from Dr. Janell Harvey, Senior Grant Writer at the School City of East Chicago.
Is it OK to Lie?
During a 1999 survey of the American population, 65 percent did not consider lying to be a serious offense (Schrock, p. 14). It is therefore apparent that new principles need to be taught within organizations in order to change the mindset of individuals as it relates to integrity and fraud prevention.
The High Cost of Fraud
The Association of Certified Fraud Examiners develops an annual report that sheds light upon the impact of fraud globally. In 2010, the organization evaluated a total of 1,843 organizations and the following statistics were gathered:
1. Five percent of annual revenue was lost to fraud (ACFE, 2010).
2. The median loss of revenue among the organizations evaluated was $160,000 (ACFE, 2010).
3. ¼ of the organizations evaluated lost $1 million (ACFE, 2010).
4. The fraud typically lasted 18 months (ACFE, 2010).
5. Asset misappropriation accounted for 90 percent of the organizations evaluated (ACFE, 2010).
6. 80 percent of the fraudulent acts were committed by individuals from one of the following departments: accounting, sales, operations, upper management, customer service or purchasing, (ACFE, 2010) and
7. 36 percent of those who committed fraud were experiencing financial difficulties (ACFE, 2010).
Why Transparency Matters
Furthermore, according to The Giving USA Foundation, an organization that provides council in the area of ethics for non-profit organizations, reported that in 2011, giving towards religion was down by -0.7 percent (Giving USA, 2011).
Now more than ever, donors request a copy of an organization’s annual report and other financial records in order to obtain a glimpse of their financial health. It is therefore imperative for organizations to maintain accurate financial records if they anticipate securing funds from corporations, foundations and federal entities.
3 Strategies to Protect Your Organization From Fraud
High levels of good governance can lead to greater transparency so that stakeholders are aware of the state of their investments. Ultimately, stakeholders will remain vested while ensuring the institution’s sustainability. But, just how does a non-profit organization protect itself from fraud?
Here are three tips.
1. Make sure there is a separation of duties. If an individual has one accounting function such as business office manager, establish a team for him or her and divvy additional tasks. This creates a “checks and balances” system while holding staff accountable to one another.
2. Hire a CPA to coordinate an annual audit. Non-profits must make available to the public Form 990 and it is imperative that the information is accurate.
3. Make sure that the organization has a conflict of interest policy that key staff sign and are held accountable for.
Guest Post by: Dr. Janell N. Harvey
Dr. Janell Harvey is an adjunct professor and author of Historicity, Incorporation and Fund Development: A Broad Look at the Christian Faith-Based Sector. She is a seasoned fundraising professional who founded a 501c3 consulting firm for faith-based organizations (VOICE Inc. Visionaries Operating to Improve Christian Entrepreneurship). To date, she has raised more than $13 million in funds for organizations throughout the Midwest
Or Contact her directly at firstname.lastname@example.org
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