Protecting Your Nonprofit from Crime Losses

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Protecting Your Nonprofit from Crime Losses

For a nonprofit, the damaged reputation that can accompany an insider theft can take years to overcome so protecting your nonprofit from crime losses like computer fraud and credit card forgery is critical. It can also affect the morale of other employees and volunteers within the organization, who can feel a sense of violation and betrayal by a colleague.Theft can happen in any business, of any size, in any industry, even at a nonprofit or charity so protecting your nonprofit from crime losses regardless of it’s size is important. If your organization isn’t prepared to protect itself from employee or volunteer theft and forgery, the losses can be devastating, not just financially, but to your reputation as well. It’s estimated that the typical organization loses approximately 5 percent in revenue to fraud each year, and 10- 20 percent of occupational fraud cases result in a loss of at least $500,000 or more. Examples include losses due to employee or staff member dishonesty, credit card forgery, computer fraud and theft, and disappearance and destruction of property.

Even the best internal controls, background checks and audit practices can fail to stop a trusted employee or outsider from engaging in criminal activities, including crimes such as credit card forgery, computer fraud and property theft. It can take months or longer for fraud to be discovered, sometimes by accident.

Steps Towards Protecting Your Nonprofit From Crime Losses

Following are some steps to protect your nonprofit organization:

  • Maintain Strong, Enforceable Internal Controls
    Strong internal controls can include recording cash receipts immediately and depositing them daily, reconciling bank accounts monthly by someone other than the person who signs the checks and entrusting a petty cash fund to a single custodian to use for all payments other than those made by check. The National Council of Nonprofits offers some additional resources on internal controls for nonprofits.
  • Encourage Employees and Volunteers to Report Suspicious Behavior
    More than 40 percent of fraud is discovered by someone reporting it, according to the Association of Certified Fraud Examiners.2 Educate staff members to detect fraud and encourage them to report suspected fraudulent behavior. Define for your board of directors their role in detecting and reporting fraud.
  • Adopt a Whistleblower Policy
    Adopt a Whistleblower Policy and let employees, volunteers and board members know about it.
  • Consider Crime & Fidelity Insurance Coverage
    Crime insurance addresses the most common fidelity threats, including losses due to employee or staff member dishonesty, credit card forgery, computer fraud and theft, and disappearance and destruction of property.

Nonprofit organizations of all sizes and types can be a victim of crime from employees or volunteers, but the combination of a proactive plan to prevent and detect crime and the proper coverage for your organization can help you protect your nonprofit’s true mission.

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