November 7, 2013
Nonprofit organizations large and small have been the victims of fraud that duped the organizations out of hundreds of millions of dollars, according to The Washington Post. The paper reviewed tax filings from 2008 to 2012 and found that more than 1,000 nonprofits reported a significant diversion of assets.
The diversions were related to fraud, scams, misappropriations by employees and embezzlement. The discovery further highlights the staggering losses that a lack of due diligence can lead to. Nonprofits are inherently targets for fraud and theft and in many cases do not have the resources and employees to prevent loss.
Instances of fraud hurt organizations both by the direct loss of assets as a result of the scam and by decreases in future contributions from donors that lose confidence in the nonprofit. The diversion question was added to tax filings in 2008. It is an addition to a form filed by larger nonprofits that details certain aspects of the organization's mission and finances for the federal government, according to The Post.
All employees should be on lookout for fraud
The National Council of Nonprofits recommends nonprofits raise awareness about fraud among all staff and board members. Citing a 2012 report by The Association of Certified Examiners, fraud is most often uncovered by tips from other employees. The NCN recommends instituting a whistleblower policy, communicating zero tolerance for fraud and identifying an employee who investigates claims of financial mismanagement, among other suggestions.
Professional financial help
For organizations that have experienced fraud in the past or feel overwhelmed by current financial issues, professional help is available. First Nonprofit Companies can provide organizations with services that specifically help manage loss from potential fraud, as well as organize and manage other aspects of a nonprofits financials.
Content presented by First Nonprofit Group, a leading provider of financial consulting services for 501(c)(3) nonprofit employers.
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