All of us want to trust those we work with and that they share our beliefs about ethical practices. Unfortunately, this is not the case all the time. Fraud is a real risk for nonprofit organizations. Fraud can have a serious impact on your organization’s reputation, future receipt of donations, stakeholder trust, and more. It is essential that you safeguard your organization from fraudulent activity. One more important area impacted by fraud are the financial facets of your organization. This can truly be costly. We will take a closer look at financial safeguards and actions you can take to reduce the risk of fraud at your nonprofit in the area of finances. For other actions you can take to safeguard your nonprofit in the area of the board of directors from possible fraud, visit here. Those tips will help you be aware of four conditions that promote fraud and tips for avoiding it as a board.
Beck and Company’s Certified Public Accountants and Business Advisors can help with important aspects of safeguarding finances and financial transactions within your nonprofit and take the importance of this very seriously. Fraudulent activity can be costly, damaging, and ultimately destructive to organizations and their important work. That’s why we offer nonprofit financial audits to help you help your organization be very knowledgeable about the financial practices that are occurring within your nonprofit. This knowledge can be used to help you be more actively involved in upholding and maintaining effective financial reporting to prevent fraud. We can conduct internal financial audits and provide you with the facts you need to stay current on financial dealings and not allow fraud to creep into areas that are not being monitored but should be. Learn more about our auditing services here.
Financial Facets that need to be Safeguarded and Tips to Prevent Fraud
- Checking and Banking accounts
- Keep blank checks locked in a secure location and restrict access to them
- On a monthly basis, have staff outside of the disbursement initiation, approval, and check-signing functions that are at the senior level obtain unopened bank statements and review cancelled checks and statements
- Implement an independent review (here at Beck and Company CPAs, we can do this for you) of monthly bank reconciliations and related journal entries
- Record all new accounts and closed accounts in finance committee minutes
- Learn what fraud prevention services may be offered through your banking institution
- Revenue and receipting
- Use dual control where more than one person is receiving and counting receipts in addition to check and cash contributions
- Require all grant notifications to be reported to the finance department
- Reconcile earned revenue (such as student enrollment numbers or tickets sold) with statistics outside of the finance department
- Disbursements
- Compare vendor addresses and employee addresses periodically to ensure there is no crossover
- Detect kickback schemes by performing independent price checks of payroll taxes withheld against amounts actually paid
- Require two live signatures for every check and wire transfer that is of significant value (determine that amount as a group)
- Reporting
- Set reasonable spending limits on company credit cards and purchasing cards
- Require finance department reviews of periodic reporting on all grants to ensure effective financial reporting is in place
- Require reporting on monthly balance sheets and income statements
- Expense reporting
- Formulate and strictly enforce credit card expenditure documentation
- Have a nonprofit financial audit committee member review CFO and CEO expense reports for true financial transparency in the organization from top to bottom
Financial transparency is so important to reducing the risk of fraud. Beck and Company CPAs are here to assist you with any area within the financial realm that you may need expert help in for everything from establishing more effective financial reporting systems to conducting nonprofit financial audits that can reveal anything that needs a closer look in order to be safeguarded from fraud. Please contact us for information and help in these areas.