CONTAINING NONPROFIT FRAUD: Protecting Hard Won Assets

by Gary Snyder

The cost of fraud can be damaging to an organization both financially and to its reputation.

Upon its publication Nonprofit Imperative highlights the 2012 Report to the Nations from the Association of Certified Fraud Examiners. Although the survey basically applies to the outcomes of the for-profit sector, there are many lessons that can be learned from its key findings and highlights for the charity sector

There are some flags for the nonprofit sector. While the median loss has gone down significantly in private and public companies as well as government, the nonprofit sector has seen a increase. The nonprofit sector increased by 10% while private companies saw a 13.4% drop off, public companies a huge 36.5% decline and government showed a 19% decrease    

Here are some suggestions on how to alleviate such misdeeds:

·       Make sure that there are strong anti-fraud controls in place

·      Provide anti-fraud training to all employees of the organization

·      Institute an effective reporting mechanism

·      Encourage proactive measures and publicize them

·      Since the climate/tone is set from the top of the organization, make sure it is one

    of honesty and truth

·      If there is internal audit department, have the resources and authority to operate  

    effectively

In the hiring policies and practices include the following (as law permits)

❑ Past employment verification

❑ Criminal and civil background checks

❑ Credit checks

❑ Drug screening

❑ Education verification

❑ References check

·      To the degree possible, utilize employee support programs for those with addictions, mental/emotional health, family or financial problems

·      Maintain an open-door practice to address pressures

·      Gain feedback by surveys or assessments

Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics, Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more Nonprofits: On the Brink (2006) Silence: The Impending Threat to the Charitable Sector (2011)