Preventing Fraud through Best Practices
Fraud in the nonprofit world can have staggering impacts to your mission. As a nonprofit, you experience an increased financial risk. Due to budget size and restraints, nonprofit organizations will feel the impact of a negative incident (such as fraud) on a far larger scale than a for-profit organization. As such, instances of fraud, misstated financials, and stolen or damaged assets can have severe consequences in this sector.
The best way to avoid such consequences is to establish and maintain a risk management procedure. Initiating a segregation of duties, and involving an objective third party routinely are just some of the steps your nonprofit can take to improve fraud prevention. For example, under a proper risk management system, incoming money, outgoing money, and bank reconciliations are processed and controlled by three separate individuals. Such best practices are necessary to prevent fraud and other consequences, which is why proper checks and balances must be utilized by nonprofit organizations.
Oftentimes, simply knowing that they will be caught is enough to deter a person from committing fraud. Proper controls give everyone peace of mind, guaranteeing fraud will be swiftly discovered while removing the temptation to commit it.
Trust is an important quality, but when it comes to money and financial matters, checks and balances rule the day.
Find out how Jitasa can establish financial best practices for your organization.
Renata Poe Massie, Content Writer, Jitasa