It seems like every day we read in the headlines, volunteer organizations have fallen victim to fraud and embezzlement. It can cause irreparable damage to the organization’s reputation, support base and its very existence.
Fraud and embezzlement not only damages an organization but it also negatively impacts the people it serves and the community that supports it.
There are many misnomers such as:
- It won’t happen to our organization.
- Everyone that works for our organization is dedicated, honest, trustworthy and inherently a good person.
- Our organization is not large enough for us to need effective internal controls.
- Our audits should discover any fraud.
We need to recognize that fraud isn’t just an operational or financial risk, there’s a human risk.
Volunteer organizations often operate without the resources, knowledge or staff to establish strong accounting policies and internal control procedures.
Some contributing factors include Lack of financial expertise, Lack of transparency, Lack of Board Involvement and oversight, Lack of internal controls, and Lack of segregation of responsibilities.
Many volunteer organizations place too much control in the hands of longtime directors, treasurers and volunteers who operate independently with little or no financial oversite.
Fraud and embezzlement committed by volunteers and employees is especially distressing. Not only is real damage done but we also feel that our cause has been betrayed by someone we trusted. There is concerns that donors and grantors will no longer contribute.
Regardless of the size of your organization, there are procedures that can be implemented to mitigate the threat of internal fraud. It is essential that the executive director and board of directors be consistently involved in monitoring, reviewing and approving procedures. A strong and well-considered system of internal controls is the best way to ensure that an organization’s funds and operations are being properly administered.
Fraud and embezzlement occurs when there is opportunity. Limit the opportunity and you will limit your organization’s risk.
Organizations need to create an atmosphere and climate of accountability.
One of the most important deterrents is knowing that the organization has no tolerance and will act accordingly to detect fraud and embezzlement and take appropriate action if discovered. Don’t allow your organization to be next headline by falling victim to fraud and embezzlement. Take steps now to ensure that your organization is doing all that it can to prevent fraud.