Nonprofits are supposed to be filled with people looking to do good, but sadly, this isn’t always the case. In fact, fraud is a major problem in this sector.

Often times, nonprofits are afraid to even disclose or report fraud for fear of donors losing trust in them. However, the right fraud prevention strategies for nonprofits could prevent this from even being a problem.

1. Learn To Recognize Fraud

One of the best fraud prevention strategies is education and training. Train employees to recognize the various types of fraud in nonprofits. The three most common types include:

· Skimming – It’s the most difficult to detect as it usually happens before funds are officially on the books.

· Purchasing – Purchasing schemes are all too common and sometimes difficult to detect.

· Financial reporting – This is often used to inflate numbers to boost a nonprofits reputation or to hide expenses under other categories.

Each type can take thousands away from a nonprofit. Since budgets are already tight, every little bit counts. Plus, if it goes on too long, it can completely ruin a nonprofit. Nonprofits tend to be more trusting as they believe the people working for them and donating are honest. This means it may be years before they realize anything’s happening. Educating employees helps them to spot issues sooner.

2. Screen And Monitor All Employees

This is especially true when it comes to anyone who will be handling finances. Uncovering potential red flags could help you eliminate risky employees. While this isn’t a foolproof method, it can help. However, most fraud perpetrators keep a low profile.

This is why it’s important to not only screen employees, but pay close attention to any employees working in accounting, sales, purchasing and customer service. Perform audits on work they’ve done. Also, rotate employees and ensure no one person handles all the finances. Having others to help provide accountability helps reduce fraud.

3. Implement A Hotline

While audits can help, one of the most effective fraud prevention strategies is implementing a whistleblower hotline. In fact, nonprofits with a hotline detected fraud 50% sooner than those without one.

Once employees are trained, they’re better able to recognize fraud. Then, they can report it anonymously so you know to investigate. Employees and volunteers feel far more comfortable using a hotline. They get to help without any type of confrontation.

4. Put A Whistleblower Policy In Place

A hotline alone isn’t enough to prevent fraud. You should also have a clear whistleblower policy. Outline how the hotline works, what to report, what information to provide and how the investigation process goes. Also detail whether reports are anonymous, which they should be. The more people know about how your whistleblower hotline and process work, the more likely they are to use it.

5. Segregate Duties

A major fraud red flag is when someone doesn’t want to share their duties, especially those in high risk positions such as accounting. A common fraud prevention strategy is to segregate duties. All this means is ensuring no one employee or volunteer has access to positions that allow them to first initiate fraud and then cover it up. Rotating positions also helps reduce the risk of fraudsters working as a team throughout positions.

Save your nonprofit and support your cause more by using a hotline to prevent fraud today.