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Protect your non-profit from fraud: Four practical tips

Whether your business is a for-profit corporation or a non-profit entity, you're always at risk for fraud. Sometimes people skim cash off the surface of transactions, alter records and financial statements, and create false vendors to make it look like the stolen money went to purchasing services.
Your organisation might collect cash in registers, or it might go straight into the pockets of employees – this flow of cash can be too easy (and tempting) to steal. It’s hard to control these situations, especially if multiple people are working together to commit the fraud.

According to a 2014 ACFE report, 46% of fraud is perpetrated with other people. When multiple people cover for each other, fraud is harder to detect. However, there are safeguards you can take to mitigate your risk. Some of these safeguards are often overlooked by non-profits, but if you’re committed to the security of your organisation, here are four practical tips you can use to lock it down:

1. Always perform background checks on prospects

Whoever said it’s better to be safe than sorry was onto something. While it’s true that not every criminal has a history, many do. The only way to find out if your potential staff members have a criminal history is by performing background checks.

You’d be surprised to learn how much information is available for free online. You might be able to find information just by using Google or other search engines. This alone isn’t enough because it won’t give you all of the information you need to determine whether or not your candidate is a risk to your organisation.

As a non-profit, you want to trust potential employees, and there’s nothing wrong with that. At the same time, you should also verify their criminal history.

It’s hard to think that someone would want to defraud a church, but according to SurgentCPE, in 2013, a church employee was caught writing checks to herself and it took them a while to discover the fraud. When they discovered the fraud, the $50,000 loss forced them to close their doors. Unfortunately, it was later discovered the employee had a criminal background and had been arrested multiple times for check theft.

When you perform a full background check, you’ll find information like:
  • Criminal arrests
  • Sex-offender statuses
  • Aliases
  • Employment verifications
  • Professional license verifications
  • Credit history information
  • Motor vehicle records including traffic tickets
  • Address histories
  • Military records verifications
Background check services are affordable, usually costing between $50-$100 per check (or less if you purchase in bulk).

Don’t use online background check companies

A search on Google for background check companies will bring up hundreds of results, but using online background check websites for screening potential employees could be illegal. When performing a background check for employment, online companies might provide instant results but they don’t always follow the law. To help with this, BusinessNewsDaily has created a comprehensive guide to background checks to help you choose the right company, getting the information you need, legally.

In addition to performing a background check prior to hiring anyone, it’s a good idea to let applicants know you’re going to do a background check in your job postings. This will deter most criminals from applying, and save you unnecessary time and money.

2. Look up applicants on social media

Check out your prospects on social media to see what kind of things they post. You may not always be able to tell what kind of person they are, but it will help you weed out people who are obvious mismatches. For example, if your prospect posts endless selfies with guns and money, they’re probably not a good match for your organisation.

3. Put trusted people in the right positions

The most common type of fraud committed within non-profit organisations is financial statement fraud. Sometimes people misclassify expenses, inflate the value of donated goods they’ve received, and log fundraising activities at gross value rather than net.

This is good reason to hire the right people for certain key positions, even if it means paying them a higher salary. If you can’t verify an accountant’s reputation with their former companies, you shouldn’t hire them. If there’s one position you should carefully guard, it’s your accountant. When your accountant has integrity, they will be able to spot fraud before it becomes an issue.

You can never be absolutely certain that your non-profit is free from fraudulent activity, but by following the tips outlined in this article, you can safeguard your organisation from some of the most common types of fraud.

Keep your eyes open, and don’t hesitate to investigate if you suspect something is off.

2 Jun 2017 12:44

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About Boris Dzhingarov

Boris Dzhingarov graduated UNWE with a major in marketing. He is the CEO of ESBO ltd brand mentioning agency. He writes for several online sites such as Tech.co, Semrush.com, Tweakyourbiz.com, Socialnomics.net. Boris is the founder of MonetaryLibrary.com and cryptoext.com.




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