Thursday, 30 September 2010

Fraud in Not-for-Profit Organisations

Fraud in not-for-profit organisations is, sadly, not a rare event.  If you do an internet search you will find lots of reports of court cases where a committee member has stolen funds from a community group.  Often the group is something small like a volunteer fire brigade or kinder committee and they are the ones who can least afford the loss.

The problem with smaller not-for-profit groups is that they are often from small communities where it is hard to find someone who is willing to take on one of the roles.  Sometimes members hold roles on a couple of different committees so they tend to do their own jobs and not worry about the rest.   I'm sure you know people just like this.

This leaves the organisation open to misuse of funds.  Reading reports of some of the court cases will show you that people accept the roles in good faith but that, through unfortunate circumstances or a gambling addiction, they begin dipping into funds which they can never pay back.  It's sad for the organisation and the individual that usually this goes on for a long time before it is discovered.

What can you do to help reduce the risk of this happening in your organisation? 

1.  Identify the areas of potential risk. 

2.  Develop a plan to monitor the situation.

3.  Take action.

For smaller groups this means actively working with the treasurer to help record and monitor your invoices and payments.  It means not leaving the control to one person.  An accounting system like Admin Bandit can bring some control to your bookkeeping because it is harder to 'fudge' than manual accounts.

If you are the treasurer for your organisation you need to protect yourself from risk by having at least two signatures on each cheque and regularly having the cash tin counted and balanced against your books.  It means asking for help when risky or difficult work comes in.

The risk of fraud is always present but if you can minimise the opportunity you will be protecting your organisation's future.

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