Key Takeaways:
- Supervise cash-related activities, minimize risks at events by encouraging credit card payments, and assign cash duties to trusted personnel.
- Ensure segregation of financial duties, involve multiple individuals in processing transactions, and maintain oversight even during staff absences.
- Purchase gift cards from secure retailers, inspect for tampering, and encourage prompt use to avoid fraud schemes like “draining.
The hustle and bustle of year-end giving, coupled with holiday absences, can leave your non-profit organization susceptible to fraud. This vulnerability increases if you rely heavily on volunteers during the season, host special fundraising events, or plan to distribute gift cards to employees and clients. Here’s how to protect your organization.
Handle Cash with Care
Non-profits are often built on a foundation of trust, as they attract people deeply committed to their mission. While this trust fosters a positive culture, it can also make non-profits prone to fraud. For instance, volunteers or staff may be trusted to handle cash, which dishonest individuals can easily misappropriate. To safeguard your funds, ensure that a manager supervises all cash-handling activities and keeps detailed records of all incoming cash.
If your non-profit is hosting a special event, reduce the risk of cash theft by preselling tickets or preregistering attendees. Equip your team to accept credit card payments and actively encourage their use. If you do allow cash payments at the door, assign these tasks to employees who have undergone background checks or to trusted board members instead of unsupervised volunteers.
Maintain Internal Controls
Even during the hectic year-end period, it’s essential to uphold robust internal controls like segregation of duties. To minimize the chances of fraud, involve multiple individuals in managing financial transactions. For example, ensure that incoming invoices are reviewed by the staff member who placed the order to confirm accuracy and receipt of goods or services. A different person should process payments, and a third party — such as an external financial advisor — should routinely review financial records for discrepancies.
If some staff members are on holiday leave, consider enlisting executives or board members to fill in temporarily. Avoid cutting corners or bypassing controls due to a reduced workforce. Instead, prioritize tasks and defer non-urgent duties until the full team returns after the holidays.
Protect Against Gift Card Fraud
Gift cards can also present a risk during the holiday season. If your organization plans to distribute gift cards to staff or clients, exercise caution when purchasing them. One common scam, known as “draining,” occurs when fraudsters tamper with gift cards on display racks to obtain barcodes, PINs, and activation codes. They reseal the cards, and once consumers purchase and load funds onto them, the thieves deplete the balance before the intended recipients can use them.
To avoid this, purchase gift cards from reputable retailers with strong security measures, such as surveillance cameras monitoring the gift card displays. Inspect the cards for signs of tampering and distribute them to recipients promptly, encouraging immediate use.
Preserve the Holiday Spirit
The holiday season, from Thanksgiving through New Year’s Day, is a vital fundraising period for non-profits. Don’t let fraud jeopardize your hard work, diminish your revenues, or dampen the festive spirit. Reach out to us for assistance in developing or enhancing your organization’s internal controls to safeguard your mission and protect your resources.
