Our most recent webinar “Positioning for growth by preventing fraud in your nonprofit” features superb insights from our panelists on the power of setting internal controls within your organization to detect fraud, and key processes nonprofits can put into place to reduce fraud.
Tyler Mosely, of Atchley and Associates provides pro-active ways nonprofits can reduce the risk of fraud including internal controls nonprofits can implement to curb fraudulent activity before it even starts!
As Mosely discusses in this webinar one of the most important controls you can implement is segregation of transactions. Fraud is more difficult to pull off if you need to get multiple people involved. Typically, fraud is only perpetrated by one person alone, so if you have more people involved, the more you can deter fraud.
A good example of this is in transactions that require handling and processing of cash; nonprofits might have this type of processing at live events. It is not recommended for nonprofits to have a single employee handling the entire cash processing cycle. By assigning more than one staff member or employee to handle the processing and accounting for the cash from beginning to end, nonprofit organizations can lessen the opportunity for fraud. These multiple staff processing systems provide a benefit not only in fraud reduction, but also in the security of the cash received and proper reconciliation for the donations.
Nonprofits should also avoid a single employee having sole access to any asset in recording or reconciling activities. As in the example above, fraudulent activities can be easier to cover up if only one person has access to the accounting system. It is much easier to cover up fraudulent activities if the person committing the fraud is also the only person with access to the full accounting system.
Additionally, if there is one employee responsible internally for generating paper checks, the same employee should not have the rights to sign those checks. For more information on prevention of fraud through check tampering see this resource as well.
MIP’s Fund Accounting solution offers intuitive and powerful internal controls for nonprofits to deter fraud. For more on reconciliation of accounts and best steps for creating a fraud policy, as well as a process for anonymous tips from employees when suspecting fraud – you can watch our on-demand webinar here.