Fraud

The not-for-profit sector’s high susceptibility to fraud is frequently due to its reliance on volunteers and community members. In many instances, charities also give a vast amount of power to their founder and Executive Director. ​

In addition to the immediate financial loss, other long-term costs of fraud include negative publicity and damage to the organization’s reputation. This results in a loss of trust among donors and grantors, and disrupts the NPO’s business operations and ability to perform its mission.

Detecting Fraud

• Reconciliations are not being performed or reviewed on a timely basis and cash is not being deposited in the bank in a timely manner​
• Employees, particularly those with access to assets and/or financial accounting records, appear to be living beyond their means​
• Key records go missing when you are looking for them​
• Financial results suggest that the NPO is doing well but the organization is suffering from a lack of cash flow, or the cash flow is not commensurate with what one would expect​
• Costs are escalating at a rate that is unexpected and inconsistent with the budget​
• Employees perpetuating fraud tend to work longer hours when others are not around to observe their activities