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Nonprofits must take steps to remove fraud temptation

High-tech, low tech; by either measure, nonprofit organizations need to have safeguards in place to prevent the temptation of fraud.

A recent example of fraud involved the former treasurer of the Winfield Township Volunteer Fire Department, arrested after she was alleged to have skimmed nearly $68,000 from the organization to pay for bills at home.

“It was so easy to get away with,” she confessed after her arrest on felony charges of forgery and theft.

It’s a disturbing confession — an implication that the crime might not have happened with better safeguards in place. Someone might even conclude that there are two victims involved, only one victim now has a criminal record.

And we’re likely to see more such crimes in the future, driven by a digital world that keeps impeccable track of the dollars, and who handles them. In a previous age, if a nonprofit volunteer was caught taking money, he or she would return the cash and avoid prosecution, in part because the organization decides a criminal investigation might be more trouble than it’s worth; or, worse yet, the nonprofit might not want to expose an embarrassing record of shoddy bookkeeping or other improprieties.

Nowadays there are digital programs that make it easy to keep accurate books — and to investigate discrepancies when they occur.

But computerization alone isn’t an adequate safeguard. Many nonprofits have other safeguards in place.

The best is to have more than one person in charge of the finances. Many nonprofits require two signatures on the check for every expenditure. If and when possible, the person who opens the mail should not be the same person who deposits the checks.

And perhaps most important, each nonprofit’s board of directors should make prompt, regular reviews of the financial statements. Directors of any nonprofit board have an obligation to understand the financial workings of the organization — and to ask questions when they don’t.

Financial responsibility has to have built-in redundancies, and the repetition might be seen as a burden. But the redundancy provides safety not only for the nonprofit but for the officials and employees who serve it faithfully, sometimes for years or even decades.

There’s safety in numbers. There’s also far less temptation to commit fraud against a nonprofit organization when it’s not so easy to do.

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