Many non-profits face the very real risk of internal fraud and embezzlement whether or not you realize it.  Unfortunately, this risk is magnified during times of economic uncertainty, when employees may be facing extreme financial pressure.  Jeff Schmitt, a senior manager at Barnes Dennig and the leader of the firm’s non-profit client service team, published a white paper detailing fraud in non-profits and how they don’t have to be a victim.  Non-profits are no different from for-profit businesses when it comes to fraud; however, the impact on a non-profit’s reputation can be destructive.

Jeff writes:

Nonprofit boards often have trouble accepting the idea that someone would steal from a charitable organization.  But no matter what the industry, employees do steal.  Fraud expert John J. Hall estimates that 95 percent of employees will commit fraud given the right circumstances.

 According to the Association of Certified Fraud Examiners, typical businesses – including nonprofits – lose from 5 percent to 6 percent of annual revenue to occupational fraud.  To prevent fraud, industries have adopted their own controls.  The financial services industry, for example, uses security codes and photos on credit cards.  Why should nonprofits be any different?  In fact, the relative impact of fraud on a nonprofit can be substantially higher than on a for-profit business. Why?  Reputation.  Successful nonprofit create a bond of trust with their supporters – a bond that can be quickly broken by the slightest sign of fraud.

Jeff provides practical steps to protect non-profits including the golden rule of fraud prevention: internal controls.  Click here  to read the full article or contact your Barnes Dennig representative for more information on not being a victim.