8 ways to avoid waste, fraud and abuse

September 9, 2015       The NonProfit Times      

Eliminating waste and abuse in a means of both running an organization efficiently and preserving public trust. In “Ethics in Nonprofit Organizations,” Gary M. Grobman reviews eight methods of being proactive in preventing waste, fraud and abuse in an organization.

Review your independent auditor’s annual management letter and quickly address any internal control issues. Any corrective actions should be reviewed and accepted by both the board and auditor before implementation.

Checks and balances should be in place to assure that no individual has control of assets without appropriate accountability. Purchases should be pre-authorized by a responsible official in accordance with predetermined organizational policies.

Organizations should have policies requiring that large orders of goods and services be put out for bid. This does not mean that formal RFPs must be prepared for every large purchase, but quotes should be obtained from several qualified vendors for large purchases. Policies should also prevent large orders from being split up into smaller ones as a means of circumventing organizational regulations.

Ethics policies should also be in place for everything from organization credit cards to email accounts to the receiving of gifts from vendors or clients. “De minimus gifts” such as calendars may be accepted. A thank-you trip to Las Vegas should be declined.

To prevent abuse through ignorance of regulations, employees should be trained in how to handle waste and fraud, including procedures for staff to report potential unethical or illegal behavior.

Written policies should be in place detailing penalties for those who have violated the organization’s ethical standards. These penalties might include reprimands, suspensions and, when appropriate, the contacting of criminal authorities.

Keeping track of assets and conducting periodic inventories is a means of enabling quick investigations when items such as laptops go missing. Organizations sometimes place bar-coded tags on assets to help facilitate inventories.

Protecting records electronically is a means of ensuring that paper files are backed up in the event of a flood or fire.