4 Ways To Protect Your Nonprofit Funds From Internal Abuse

Posted on: 29 August 2018

Nonprofit organizations are committed to using their funds to help their causes and beneficiaries. But because so many nonprofits are underfunded and understaffed, they can also be targets of fraud and misuse of assets. How can you protect your nonprofit from this kind of abuse? Here are a few easy tips.

Avoid Multitasking. The more functions you ask a single employee to handle, the more tempting and easier it will be to skim money off the top. Separate functions that involve cash or accounting so that different people see different aspects of transactions. You may have one person handle cash at an event, for instance, while having another count the cash later and having a third person deposit that money. This may take some additional training and workers, but it protects your transactions. 

Keep the Board Separate. Your board should function as one of the "checks and balances" in the organization. The board should be independent of the actual operation — not employed by it or having family and friend employed by it — and should be able to voice its concerns and input at any time. This helps them oversee your operation as well as avoiding the temptation to make decisions that aren't in its best interests. 

Avoid Dissatisfaction. Good employees help combat misuse of the nonprofit and make it easier to trust others with funds. Foster good relationships with your employees, doing what you can to keep them satisfied and fulfilled. Be friendly and respectful, giving them less reason to be disgruntled. While this won't deter all potential abuse, it will help prevent some. And having invested employees and volunteers raises the likelihood that they will speak up when they suspect misbehavior as well. 

Use the Buddy System. The buddy system is a habit of placing two or more people together in dangerous situations so they can help and monitor one another. Use this idea throughout your nonprofit organization any time people must deal with cash, checks, accounting, and reporting. Having people around and interested makes it harder to commit fraud and will deter it even when you don't know it's an issue. 

For more help keeping the funds for your nonprofit safe from donation to utilization, contact an accounting services firm with experience in the nonprofit world. The investment will surely be worth it when you and your supporters know their money is being used in the best way possible.