On fraud mitigation in non-profit organizations

It is important to examine the nature and negative effects of fraud to stakeholders who have placed their trust on the activities of the non-profit organizations but are unable to obtain justification of their activities because funds are not judiciously utilized for the purpose they were raised.  While more attention of fraud cases is reported in the profit-making sector, few cases of fraud have been reported of not-for-profit making organisations in view of their importance and contribution to the overall development of our environment. 

Fraudulent financial reporting practices have had dire consequences on organizations. This has resulted in financial loss and this has dented the reputation of organizations. Incidences of fraud in whatsoever way ultimately lead to loss in the organization and continue to reduce the financial ability of organizations thereby leading to loss of public confidence. The impact of loss due to fraudulent practice on the employees in the organization adversely affects the right to benefits as these might be denied or may not be fully met such as access to health insurance, retirement plan benefits and paid family leave.

It is also important to note that many of the not-for profit organizations do not directly address or disclose fraud practices like Inflated, duplicate, or fictitious invoices for goods and services procured for a project, “ghost” employees, participants or beneficiaries, Kickback arrangements in procurement of goods or services or in hiring, “Double-dipping”, or seeking or accepting funds from more than one donor for parts of the same project, deceptive double earning as employees and at the same time as consultants with in the same organization much against policy stipulation and even creation of fictitious NGOs.

Therefore organisations and in particular not-for profit organizations need to strengthen timely financial reporting for activities undertaken, conduct and publish annual Audited financial statements to provide a snapshot of the organisations financial health while giving insight into its performance, operations and cash flow, conduct organization overall performance assessment which is a vital aspect of strategic management, carryout individual employee appraisals and programs as this is essential for both individual and organizational growth. It is important for organizations to maintain good proper inventory records of properties to provide better knowledge of your business, improve efficiency, productivity and save time and money.

 Organisations also need to put in place and implement personnel and conflict of interest policies and know her employees because fraud perpetrators often display behavioural traits that can indicate the intention to commit fraud.

Mandatory vacation policies and surprise audits are important to help detect when employees are involved in malicious activities. The creation of a strong internal audit department can help improve efficiency. Management needs to review internal controls and processes as often as the need arises as well as accounts and transactions and put in place a robust code of conduct to enable employees handle ethical dilemmas that they encounter in everyday work.

Organizations need to tackle it strategically and thus benefit from being proactive rather than reactive by mitigating fraud before it can succeed. Awareness, prevention, detection, and investigation are integral elements of an effective anti-fraud strategy leading to great benefit to any organisation.

Dr. Caroline Sekiwano is a  human resource and organizational development advisor.