The state of nonprofit fraud

Fraud is one of the biggest issues plaguing nonprofit organizations today. From people with bad intentions who pose as charities to payment processors that undergo data breaches, donors have many concerns to address. Here is our comprehensive guide to fraud trends, things to look for and tech that may help your nonprofit avoid fraud issues:

Fraud trends 
The Association of Certified Fraud Examiners recently released its 2016 Global Fraud Study. The organization examined 2,410 occupational fraud cases among 114 countries. Of these cases, fraud schemes were most likely to occur involving billing, check tampering, corruption and expense reimbursements among nonprofits, charitable organizations, religious groups and social services. Skimming, and issues with cash on hand, payroll or noncash financial schemes were also trending for the year. Corruption and billing fraud were high among all industries, but expense reimbursement and check tampering were especially prevalent in nonprofit organizations. It's important to understand these trends so you can look for ways to reduce their occurrences in your own nonprofit.

Ways to protect your nonprofit
Work with a payment processor that knows and follows all personal and financial information compliance laws. This can change the ways donors provide their names, addresses and credit card or bank account information, as well as how such data is transferred and where it goes. To prevent fraud, your organization needs the right resources. Here are a few ways to keep an eye out for fraud involving your nonprofit:

Manage your personnel carefully. Ensure only those you trust are on your staff, and always limit who has access to personal and financial information about donors, partners, sponsors and your organization in general. Call every reference on a job applicant's resume. Make sure they are who they say they are and that their credentials are real. These steps will help you avoid bribery and corruption, asset misappropriation and fraudulent statements.

Utilize systems of checks and balances. No matter how many people work in your organization, there should be a hierarchy in which everyone operates. No one should be able to make a financial change without your consent or the approval of another staff member. This prevents unnecessary personal spending and provides a way to reduce the chances of funding mishaps. 

Review your finances each quarter. How can you spot a spending error if you never look at your bank statement? Work with a bank and a payment processor that have your back and keep an eye out for oddities in your accounts. 

Partner with payment processors that offer fraud protection. iATS Payments offers various fraud protection services, from address and bank identification systems to card number tumbling and Internet Protocol Blocking. Let your processor do all the back-end protection for you so you can better spend your time at furthering your organizations cause.

Enforce a code of conduct. The ACFE Global Fraud Study found that 81.1 percent of the organizations and businesses they reviewed had codes of conduct in place. Consider creating such rules for your nonprofit. They can cover everything from handling sensitive data to how long your business keeps credit card information. Make sure all your staff understands payment compliance rules before going over this code of conduct. The two should match up.

Undergo external audits. Nearly 82 percent of the businesses surveyed in the study received yearly external audits of their organizations' financial statements. A third party underwent the task to ensure fairness and accuracy. Such organizations were a major factor in finding cases of fraud. 

Understanding the ways your organization may be liable for fraud is the first step in preventing it from happening to you. Losing your donors trust is one of the biggest causes of loss of support and donations, so make sure you're taking the necessary steps to reduce this potential issue.

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