October 31, 2013
An unfortunate side effect of the good will of nonprofits is that they are often the targets of fraud and theft. Their business operations may even invite it, according to Nonprofit Quarterly. Relying heavily on volunteers and built on foundations of trust, many organizations lack the departments and expertise that could prevent illegal behavior. Some do not recognize the problem exists, and others lack the staff to monitor it.
Nonprofits are easy targets for fraud
A nonprofit desperately in need of assistance and short on full-time staff may fail to properly vet potential volunteers. Likewise, under-skilled employees in financial departments may not recognize signs of fraud or theft, allowing crimes to continue long after many businesses would have noticed. NPQ cites a 2005 report by the Association of Certified Fraud Examiners that found payroll and check tampering were more common in the nonprofit sector than the business sector.
Fraud against nonprofits can come in many forms and inflict various amounts of damage. NPQ reported a scam in August in which nonprofits and small businesses in Michigan received bogus bills for $125 to prepare corporate records for the state. To a savvy accountant, such a request may raise suspicion immediately. However, at an organization where the employee cutting checks may just be a hard worker wearing many hats, the bill could be paid with no questions asked. A single scam phishing $125 may not damage an organization irreparably, but after succeeding once, the perpetrators will come back for more.
Financial services are available to prevent fraud
For some organizations, fraud prevention is another tool that may be available under a larger financial services plan. First Nonprofit Companies offers financial operations consulting services that help organizations in a number of ways, including building fraud-deterrence strategies. First Nonprofit can also help employ fraud prevention audits and to help establish potential risks.
Nonprofits can avoid other financial pitfalls with the help of experts by advancing financial capability, preparing a comprehensive plan and evaluating fundraising sources. By saving money and improving operations in these other areas, organizations will have more resources to prevent fraud or theft. While it is impossible to protect against forms of fraud or risk, securing the services of financial experts can go a long way toward defending an organization that is viewed by fraudsters as a vulnerable target.
Content presented by First Nonprofit Group, a leading provider of financial consulting services for 501(c)(3) nonprofit employers.
In addition to their money-saving purpose on behalf of nonprofit organizations like AHS, First Nonprofit’s Nonprofit Unemployment Fund streamlines the information we need to efficiently manage unemployment claims. Our relationship with NU Fund gave us access to such things as advice on planning for what’s ahead and how to analyze cost scenarios when unexpected events occurred. Both experiences were very helpful.
The Ensight Skills Center has enjoyed working with First Nonprofit for several years. We are enrolled in their Unemployment Savings Program and although we have not required a lot of intervention, there have been a few times. I know others have dealt with the same problem of unemployment fraud over the last year and in our case, a call to First Nonprofit (they actually answer their phones) cleared up the issue. They also sent us a letter to send to all our employees telling them what they needed to do to prevent this in the future and protect themselves. What a relief! Over the years if I have questions or concerns, they are happy to listen, advise and help if they can. Another BIG advantage of using First Nonprofit is that all the money that is paid into the Unemployment Savings Program lives on my balance sheet as an asset. The money continues to be Ensight’s not the governments. First Nonprofit has certainly given me peace of mind.
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Because INCS advocates for the operating conditions that allow charter public schools to provide high quality public education, partnering with First Nonprofit was an easy decision. First Nonprofit’s unemployment programs provide our member schools two operating elements crucial to their ability to provide high quality public education: savings and budget certainty. Capable, committed teachers are the key to student success. By participating in the unemployment insurance savings plan, charter public schools gain peace of mind and are able to invest more money in their teachers.
Throughout our membership in the Unemployment Savings Program, First Nonprofit understood our demands, community dynamics, and the importance of seamless services; that allowed us to serve our constituents better.