Daily Law Group
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Fraud can financially ruin a company - nonprofits are no exception

Being a nonprofit doesn't mean that you don't manage a significant number of assets or have a lot at stake. In fact, given certain financial limitations in how you govern your operation you may be more at risk for fraud from within your organization. 

Take the recent case of an IT executive who managed to bilk nearly $800,000 from a health care nonprofit offering services to low-income individuals. His behavior was appalling and - not surprisingly - the money he stole went toward funding a lavish lifestyle that his $200,000 paycheck couldn't maintain.

 

Hector Ramos was caught after a suspicious employee questioned some of his behavior and eventually contacted the organization's management. Employees questioned about this loss felt a real sense of betrayal by one of their own. Indeed, in many cases involving fraud, fellow employees experience shock and disgust that someone they know could put their livelihood and the success of the enterprise at risk for their own selfish lifestyle needs.

If the loss due to the fraud is large enough, it can cripple smaller businesses or nonprofits that operate with a smaller margin for error.

Put protections in place before fraud occurs

There are ways to protect your business or nonprofit from fraud and many of these protections are relatively easy to implement. Here are some options to consider to better protect your organization against fraud:

  • Implement internal controls and allow for external audits
  • Careful tracking of staff time and tasks
  • Appropriate oversight of all employees
  • Allow a safe avenue or employees to report suspicious behavior
  • Develop strong internal policies and procedures and adhere to them
  • Follow strict procedures for disbursement of funds
  • Procure adequate insurance in case of fraud
  • Get counsel from an attorney and other financial professionals experienced in fraud prevention techniques

Often with fraud there are many warning signs and red flags that go unreported or unnoticed until it is too late. Funds once stolen are challenging, if not impossible, to recover. Protect your company or nonprofit with adequate safeguards to make sure that you remain viable for many years to come.

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