Embezzlement and fraud have negative effects on all businesses, but they hit nonprofits especially hard given the nature of their finances.
You never want to believe it can happen to you, but these financial crimes happen all the time. If an embezzler or fraudster is able to get away with the crimes, it can set a mission-driven organization back years. That’s why nonprofits must do everything in their power to protect themselves.
Yet even nonprofits that do their best can still fall victim to these unfortunate cases. Hiding incidents of embezzlement or fraud from auditors, board members, or outside authorities can only bring bad press to an already difficult situation. In her book “Good Counsel,” Lesley Rosenthal outlines six steps to help nonprofits recover from financial crimes:
- Make sure that the full facts are known.
- Punish the offender.
- Report the fraud or embezzlement and cooperate with law enforcement authorities and other concerned parties.
- Reclaim stolen property as quickly as possible.
- Conduct an internal investigation to determine what went wrong. Were fiscal controls or audit processes lacking? Were there weak checks-and-balances? Make sure any problem that is discovered is highlighted in detail.
- To protect against future issues, incorporate new safeguards to your existing measures.