Fraud is not just a problem plaguing businesses in the for-profit sector. In fact, it’s not uncommon to discover that the cash that oftentimes goes missing takes the form of a $25 check here and a $50 cash donation there – the lifeblood of countless community-minded organizations whose sole purpose is to help those individuals and families in need while improving targeted neighborhood resources.
The sobering fact is that fraud has become a serious problem for nonprofit organizations nationwide.
Read Also: 5 Tips To Help Your Nonprofit Build A Strong, Dependable Team Of Volunteers
Combat Donation Fraud With Nonprofit Governance
Share duties. While it may appear to be more efficient to have the same person open the organization’s mail, process the donations and thank the donors, this type of workflow actually puts your nonprofit at risk for fraud. Think about it, if the person in charge of all of these job duties is the one who is pocketing the donations, the workflow is really only works in their favor. Consider having at least two people involved in donation processing. In doing so you effectively add oversight to your nonprofit’s donation collection process while reducing your risk of fraud.
Talk to you donors. Expression appreciation to your donors for their contribution with a form letter is just best practice. But, in addition to a nice thank-you card, it may be good practice to give them a call or meet with them directly to personally thank them for their support while using the opportunity to verify how much they donated. You can also talk to them about how their donation will be used to further the organization’s mission. Not only will this call help enhance your organization’s donor relations; it’s a great way to help identify and/or prevent fraud in you nonprofit. Imagine calling a donor to thank him for his $75 donation, only to learn that it was really $150 – you can take immediate action to prevent future fraud from occurring.
Get high tech. Data analysis can help you to see patterns in your donor’s contributions while alerting you to any meaningful deviations from the patterns. Sometimes, a drastic change in your organization’s donor data can be an indication of fraud. For example, if you know that a specific donor has given $50 a month for the past three years, and those checks suddenly stop, it could either mean that they no longer have the means to donate or no longer supports the organization. Or, it could mean that the donation isn’t hitting your accounts. Deviations from donation patterns may warrant a call to a donor.
Go online. More and more, donors are engaging with charities online. From visiting their sites to liking them on Facebook, nonprofits and their supporters are already interacting in the digital realm. Your nonprofit can solicit and collect donations online, too by using services like PayPal. This option makes it easy for you collect donations that can deposit directly to your account without the need for employee processing. The option of automated online processing removes human error and potential fraud.
Nonprofit Fraud Prevention Programs
While you may believe that an anti-fraud program is too costly, promotes distrust among your volunteers or requires too much additional work to manage, there are significant benefits. Rather than falling into the trap of thinking that you would be spending $1,000 to prevent fraud in your $5,000 checking account, remember that you would really be protecting the $200,000 that clears your account every year – not the $5,000 that’s sitting in the account at any given time. The best way to determine your nonprofit’s return on investment is to compare the expense of the fraud prevention program to the total amount of donations you receive each year.
If you are worried about fraud in your nonprofit organization and would like more fraud prevention tips and insight, email Rea’s nonprofit team today and get the help you need to take your organization to new heights.
By Maribeth Wright, CPA (Retired)
Check out these articles for more nonprofit governance and management tips for your Ohio-based organization:
Unlock Your Nonprofit’s Potential With Donor Data
Five Tips To Help You Protect Your Nonprofit’s Investments
Hip To Tech? Four Areas Made Easier By Embracing Technology In Your Nonprofit