No corporation or organization wants exposure to fraud. Yet many daily accounting practices make it easy to cover up a misappropriation of funds. In the broadest sense, fraud gets the welcome mat when the books aren’t watched closely. Here are five things you can do to win the battle against fraud in a nonprofit organization:
- Reconcile bank accounts as soon as they are available, using original bank statements and supporting documents, not just check numbers.
- Prepare and review financial statements on a regular basis.
- Review accounting records frequently. Don’t just rely on a single employee or external bookkeeper to keep the books.
- Use a cloud-based accounting system that:
- Establishes levels of permission to restrict certain types of data
- Sets up automatic reports
- Centralizes control yet distributes responsibilities
Centralizing control works even when your chart of accounts is set up to meet the individual needs of your large donors and funding organizations. Use your accounting system to mirror the chart of accounts with rolling budgets and forecasts that management reviews and refreshes periodically, such as quarterly. Tracking budgets vs. actuals by program or funder is another way to closely monitor for fraud.
- Outsource business process accounting. Hiring a virtual accounting partner gives your organization access to a high level of competency and accountability without the on-staff labor burden.