Fraud Prevention For Your Nonprofit: Four Simple Steps To Follow


Nonprofits rely on their reputations to attract members and donors to further their noble missions of giving back to their specific cause. Although the risk of fraud is a situation that should be taken seriously by any organization, due to their strong dependence on their overall reputability, nonprofit fraud prevention is even more significant. 

Luckily there are nonprofit data management systems that help protect the most sensitive data. This allows many organizations to build and maintain trust within the communities where they operate. 

We will provide you with four simple processes, which can be applied to reduce the risks of fraud and maintain data privacy for nonprofits

Here’s what we will go over in today’s article:


Why Is It So Important For Nonprofits to Prevent Fraud?

As with any other organization, nonprofits are exposed to the dangers of deception by bad actors who seek sensitive data to use for exploitative purposes. 

NPOs have revenue through memberships and donations paid by dedicated and trusting members and stakeholders who share a common commitment to help others. Unfortunately, scammers often view individuals with these cherished characteristics as prime targets for their schemes. 

Although nonprofits may not have a robust budget, smaller organizations can employ internal controls to counteract hackers and others looking to defraud their organizations and members.  

The trait of trust in your members is a personal asset for them and an organizational one for you, as nonprofit revenue is based on keeping their trust. Thus it is imperative to find means to reduce risk and exposure to fraudulent activities in order to protect contributors and their personal data. 

The more you know about data protection and the legal requirements in place to protect your members, the better you can defend against fraudulent activity. The first step is to be aware of the risks you face.


Step One: Identify the Risks For Your Nonprofit

Here is a list of common fraud attempts that charitable organizations and other nonprofit agencies frequently face: 

  • Billing fraud

  • Skimming (bank card hacking, particularly at ATMs)

  • Expense reimbursement fraud

  • Check tampering

  • Payroll manipulation or corruption (bribes, embezzlement, conflicts of interest)

I know these all sound scary, and they are! Let's work together to relieve some of the pressure and make sure you are protecting your organization that is doing so much good in your local community. 

nonprofit-fraud-prevention-security-risksRyan is looking diligently to identify security risks!

Now, dependent upon your organization’s structure, activities, and financial model, you may be more or less at risk than other agencies. 

Take a careful analysis of different risks that you and your team face and make a prioritized list, with the most significant risks at the top. These are the areas that you need to remedy first as they can cause the most damage. 


Step Two: Minimize Risk With Simple Processes

Consider each item on your list carefully and evaluate methods that could significantly reduce the threat. This is a great activity to engage in as a team because it not only gives you an opportunity to work with some pretty great people, but it lets you tap into the creative potential of several minds

When considering methods, make sure you form a realistic assessment, finding a balance between maximum security and your organization’s means and capabilities. 

Simplicity is key for two major reasons:

  • You don’t just want these guidelines to exist, you need your members to understand them so that you can all apply them as a cohesive unit.

  • Your members are there because they believe in your cause and they are taking the time to be proactive. You want to simplify the process because you don’t want to overtax these valuable resources with unnecessary complications. 

Here are some examples of simple solutions: 

  • Include several people in the independent audits of your accounting records. The stakes here can be high, particularly in medium to large nonprofits, so don’t be afraid to ask an outside resource to evaluate your financial information with an independent audit.

  • All those involved with sensitive data and responsibilities should have criminal background checks performed upon them for enhanced verification of their integrity and trustworthiness. This can severely cut down on the risk of providing repeat offenders with an opportunity. This may sound harsh at first, but it is better to air on the side of caution. Explain this change to your existing employees. Put the value first and ensure they understand it is not a reflection of them but a new overall policy based upon the environment in which we all live.


Step Three: Use Reliable Tools to Facilitate Your Fraud Prevention

Using digital tools for your organization management can be a great way to improve nonprofit fraud prevention and create greater transparency for your donors and the community at large. 

  • For example, collaborative software and technology can easily facilitate multiple-member involvement in your accounting functions, a plan we suggested earlier as a simple security precaution. In addition, software can be tailored to provide different access levels to different users so that even managers and administrators have access only to the portions they need to function in their role e.g., the treasurer may only be able to access accounting features.

  • As fraud in nonprofit organizations is typically an ongoing activity that may not be detected for months or even years, technological tools can improve monitoring on all systems, allowing your association’s executives to spot any unusual activity using online tools. This can serve as a great preventative measure, or at the very least, detect and resolve an issue before it becomes worse.

nonprofit-fraud-prevention-SadieSadie knows having reliable tools is critical for her organization's security!

  • Offering an online payment portal for a member’s dues payment or a donor’s donation will offer increased transaction security for all fields on their site and offer diverse payment options. It’s a win-win for many reasons: 

  • It saves you time that you can spend on other activities

  • It reduces much of the passing of currency hand-to-hand, which cuts down opportunities for most frauds

  • More people tend to carry cards than tangible cash in the digital age

  • People recognize the added security benefits and feel more comfortable with these methods

Pro Tip: The more that tasks are automated, the less chance that you will become a victim of fraud. When choosing your tools, the more unified the features are, the more secure your data and transactions will be. Software that can provide "all-in-one" functionality, such as Springly, a club management software, association management software, or even a simple hoa database, provide enhanced security by limiting opportunities for fraud to occur. This is because all features, such as sending invoices and linking memberships to your CRM, are in one central hub. 


Step Four: Make Your Members Aware Of These Fraud Risks

Knowledge is power. Empower your members with training in this area. Whether the course is provided by a qualified professional from a company like the Association of Fraud Examiners or something developed in-house, you can provide them information around which activities involve fraudulent risks and what they can do to minimize them. Furthermore, they need to understand your organization’s policies, and their specific duties, in regard to risk prevention.

Provide regular reminders about this policy to ensure that it is always inhabiting the front of their minds. At the very least, annually, but visuals of the policy that incur daily notice are most effective. 

Keeping this policy prevalent serves several purposes because it:

  • dissuades occupational fraud from members who may be tempted to commit fraudulent activities

  • increases the potential for members to detect fraud

  • demonstrates structure and discipline, which enhances the image of your nonprofit organization

Remember, your reputation depends on keeping sensitive information out of the hands of the wrong individuals. Keep your member data safe and secure to build an atmosphere of trust which is so integral to success for nonprofit organizations. 

Don’t let failure to stop nonprofit fraud prevention keep your organization from benefiting those who need your services the most. 


Springly is trusted by over 15,000 nonprofits to help them run their organizations on a daily basis. Try it, test it, love it with a 14-day free trial!


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