Many of us mistakenly think that those who work in non profit organisations (NPO’s) are above temptation or can withstand personal financial pressures; sadly, the demise, or near-demise, of several valuable NPO’s shows this is clearly not the case!
The Association of Certified Fraud Examiners’ 2014 Report to the Nations on Occupational Fraud and Abuse (copyright 2014), which is available on http://www.acfe.com/rttn.aspx, confirms that “religious, charitable or social service” organisations continue to experience the same types of fraud common in all other sectors. Most common are payment fraud, followed closely by fraudulent expensereimbursements and fraudulent billings by employees. The report also points out that smaller organisations experience more instances of fraud and have less anti-fraud controls, increasing their exposure compared to larger organisations; this certainly rings true in our experience of many smaller non-profit organisations.
To safeguard the hard-won resources of your organisation, we strongly recommend that you put in place strong anti-fraud protection, using measures such as:
- The building of a culture of openness, integrity and accountability, which starts at the top with the board members and the CEO.
- Documented and well-communicated anti-fraud and corruption policies and procedures, such as confidential whistle-blowing procedures and conflict of interest and graft regulations.
- Clear, well documented authorisation procedures to be followed before financial commitments are entered into on behalf of the organisation.
- Segregation of duties – such as always ensuring that the person responsible for recordkeeping is not also controlling payments (which would open the door for the covering up of misappropriation of funds).
- Regular independent checking – either through internal audit or some other review of financial reports and controls (either resourced in-house or outsourced).
Many organisations value Ziyo’ reviews or internal audits, whether on a once-off or regular basis, and have purchased our generic financial policy and procedures manual or requested us to develop a customised version. Please let us know if we can help you in any of these ways.