Five Ways to Prevent Fraud at Your Nonprofit

nonprofit accounting software

It can be painful to think that someone on your staff, someone you work with every day, is stealing from you. Yet nonprofit fraud exists. We’ve all heard horror stories about someone caught embezzling funds or cooking the books to their advantage.  Nonprofit accounting software can help you spot fraud, and the following five tips can help you prevent it. An ounce of prevention is worth a pound of cure, and these five tips may just be what you need-although we hope you never have to use them.

Preventing and Detecting Nonprofit Fraud

People steal for a variety of reasons. Some people just like the thrill of it. Others may have unexpected bills or problems like a drug or alcohol habit that drain their money away. The key to preventing fraud is to deter it first, and detect it quickly if it occurs. These tips can help you do both.

  1. Use fraud alerts on nonprofit accounting software: Some nonprofit accounting software can be programmed to alert you if fraudulent activity may be taking place. If your software comes with such alerts, activate them. Investigate any potential problems immediately.
  2. Create systems and processes to monitor funds: Monitor your accounting system daily or weekly and be sure to keep a close eye on all bank accounts. Put in place a procedure for requesting funds, and make sure you require specific documentation such as receipts and invoices before paying bills. Verify the accuracy of invoices through random checks as well as scheduled reviews to ensure everyone knows their budgets are monitored.
  3. Delegate financial tasks to several people: Fund are often stolen in small amounts over several years. By delegating financial tasks such as credit card payments, checkbook monitoring, and petty cash funds to different employees, it’s easier to spot potential fraud when it occurs. You’ll also be able to trace it back easily to the employee who had access to the money.
  4. Set up security when you implement nonprofit accounting software: Use the checks and balances inherent in your nonprofit accounting software to ensure the proper levels of security are in place over funds. Not everyone needs access to the general fund, nor does everyone need a business credit card. Monitor who has what type of privilege or access and how it is being used.
  5. Allow anonymous fraud reports: Set up a hotline, such as a dedicated voice mail address, where people can leave tips about fraudulent behavior. By keeping it anonymous, staff members may be more likely to leave information than if they have to report it in person.

Creating a Culture of Honesty

Financial honesty and integrity flows from the top down in an organization. You’ve got to create a culture of honesty by making sure that all of the top level executives and directors know the importance of handling funds properly.

Review processes, procedures, and requirements with your senior team on a regular basis. Make sure that everyone understands the reasons behind financial decisions. Monitor credit card use by checking invoices and receipts. Ask your accounting and finance teams to report fraud quickly if they even suspect it, and investigate it just as quickly.

Nobody likes to think of someone at work as stealing, but it happens. Detecting fraud and taking steps to investigate it promptly can go a long way to safeguarding your organization’s reputation and future.

RBP Methods: Nonprofit Accounting Software and More

RBP Methods offers nonprofit accounting software such as Abila Nonprofit Online and AccuFund Accounting Suite.  We are dedicated to helping nonprofit organizations manage their businesses better through smart technology investments. Our work with nonprofits spans two decades, and most of our staff have worked at nonprofit organizations. We know and love nonprofit work and are here to support you every step of the way. Contact us today for more information about nonprofit accounting software or call 503-648-9051.