What Are The Risks For Fraud In Nonprofits?

The median loss in a nonprofit due to fraud is $75,000. The average loss is $639,000!!! Costing even more in the loss of trust!  Nonprofits are more susceptible to fraud because they typically have fewer resources (staff) to prevent that fraud. They're more vulnerable because they have less oversight and often lack internal controls. *This is according to the Association of Fraud Examiner’s 2020 Global Study on Fraud.

Each week I receive a google news summary of headlines about fraud cases involving nonprofits!  And it’s not just been something I’ve read about in the news, I’ve experienced it firsthand in organizations I’ve worked with.  This fuels my driving passion to help nonprofits strengthen their oversight procedures and to create checks and balances.  Every nonprofit can create safeguards! 

To better understand fraud risk, let’s look at the Fraud Triangle - developed by criminologist, Donald Cressy.  It has 3 elements (points) to the triangle.

1. Motivation – employee says “I need…”  Their need for money may come from a  legitimate need such as a spouse losing a job or a sick family member.  The starting point for fraud is an employee’s motivation to steal something. 
2. Rationalization – employee says “I deserve….”  The logic they use to rationalize the theft is that they deserve it.  It can sound like “I do more than they see, I should be paid more.” “They don’t see what I do.”  “If it weren’t for me…” The rationalization gives them the excuse for executing the theft.
3. Opportunity – the only factor that the organization can control.  You must set in place the best checks and balances with strong review and oversight procedures to protect the organization. 

I have created a FREE fraud assessment to help you assess the risks in your organization. 

Invest 10 minutes right now to learn more about how you can reduce the opportunity for fraud in your nonprofit. 

Go to https://www.terisaclark.com/fraud-factor-assessment