This document summarizes a presentation about financial accountability and risk management for nonprofits. The presentation covers compliance with government regulations, accountability through financial policies and oversight, identifying and managing risks, and crisis management strategies. It provides tips and checklists for preventing fraud, responding to financial crises, and maintaining public trust through transparency and ethical practices.
9. Updated slide
Compliance – IRS
Is your nonprofit “on the list?”
IRS Publication 78– no longer published
Search-able database:
http://www.irs.gov/Charities-&-Non-
Profits/Exempt-Organizations-Select-Check
Search: IRS select check
NOTE - Incorporation as a State (Indiana)
nonprofit does not equal IRS §501(c)(3) status
23. Consequences of Abuse of Status
IRS Consequences – $$
Fines to Nonprofit
Fines to Board of Directors
Fines to Staff
PERSONAL LIABILITY FOR ALL!
IRS Consequences – Revocation of
Nonprofit Status
25. Nonprofit Ethical Issues - Examples
Improper donor acknowledgements
Donations of time are not tax-deductible
Donor “influence-buying”
Improper arrangements with donors
Failing to include both spouses in joint gift paperwork
Staff/ED/Board/Volunteer accepting gifts from
donors
Failing to take responsibility (“Not My Fault”)
32. Handout – Risk Management Policy
Risk Management Plan
Types of Risk to Manage
33. Risk Management - People
Poor economy has resulted in an increase in
criminal conduct against nonprofits
Embezzlement by employees
Embezzlement by officers
Fraud from “outsiders”
Phrase of the Day – “Trust But Verify”
39. Handout -- Asset Misappropriations
What are the most common types of fraud?
2012 Global Fraud Study, Association of Certified Fraud Examiners
40. Who Commits Fraud? How Much?
2012 Global Fraud Study, Association of Certified Fraud Examiners
41. How is Fraud Punished?
Termination of employment = 72%
No punishment = 7%
Quit/disappeared = 8%
Referral to law enforcement = 65%
Prosecutor declines to prosecute =25%
(Note – numbers total greater than 100% because more
than one action is taken)
“An Investigation of Fraud in Nonprofit Organizations: Occurrences and Deterrents,”
Greenlee, Fischer, Gordon and Keating, 2006, Hauser Center for Nonprofit Organizations
42. What is the likelihood of recovering funds? (1)
Nothing recovered = 48%
Complete recovery = 16%
Partial recovery = 36%
WHO IS MORE LIKELY TO BE
VICTIMIZED? (2)
Small organizations are much more likely to be a victim of
occupational fraud
Lack of anti-fraud controls in smaller organizations
contributes to vulnerability
1. “An Investigation of Fraud in Nonprofit Organizations: Occurrences and Deterrents,”
Greenlee, Fischer, Gordon and Keating, 2006, Hauser Center for Nonprofit Organizations
2. 2010 Global Fraud Study, Association of Certified Fraud Examiners
43. Who Commits Fraud? Handout – Fraud Prevention Checklist
Handout – Sample Board Anti-Fraud Policy
High-level fraudsters (Officers/Directors) cause greatest
damage – more than 3x more costly, and take longer to
detect.
More than 85% have never been previously charged or
convicted.
Behavior warning signs: Living beyond means and
DO ANTI-FRAUD difficulty
experiencing financial MEASURES HELP
PREVENT FRAUD?
YES – The 2010 Global Fraud Study found that organizations
that had common controls in place had
Significantly fewer losses (in # and $)
Shorter time-to-detection
2012 Global Fraud Study, Association of Certified Fraud Examiners
44. Handouts – 10 Ways to Catch Fraud and Mistakes from
Outside
Handout – 15 Ways to Minimize Employee Fraud
Primary Control Weaknesses for Victim Orgs.
45. Handout – Someone Stole the Cashbox!
Nonprofits and Fraud Handout – Preventing and Responding to Fraud
What to do when it happens to you!
46. PR for Nonprofits Handout – Public Relations During Nonprofit Crisis
Public Relations During Fraud Crisis
48. Crisis Management - The Good News
Nonprofits showed growth in contributions in 2011 compared with 2010
Source: Guidestar 2011 Nonprofit Fundraising Survey
49. Crisis Management 101
Surviving Financial Downturn
Step 1 – Review the Organization
How well do you meet your budget
(typical)?
What shortfall do you anticipate?
How long can you survive at reduced
budget levels?
How are you affected by each funding
source?
50. Crisis Management 101
Surviving Financial Downturn
Step 2 – Make a Plan
Risk Management Plan
What can you reduce and maintain current
levels of service?
What can you reduce and maintain minimum
service?
Where can you increase funding
Lapsed donors, new donors, alternate funding sources
51. Crisis Management 101
Surviving Financial Downturn
Step 3 – Creative Options
New Fund Raising Opportunities
Social media, networking, micro-fundraising
Collaborations with similar or complementary
nonprofits
Spin-off/Re-Master current activities
52. Crisis Management 101
Surviving Financial Downturn
Step 4 – Acute Crisis Management
Reduction in programs
Prioritize – what MUST you retain?
Reduce scope/ Increase fees
Reduction in Staff
Reduction in Staff ≠ previous service levels
Reduction in Staff = do it right
What is your “limit”?
Minimum financial - resource - program - mission
PR in times of Crisis – Preserving public image
54. Any Questions?
Thank you for your attention!
Miriam Robeson, Attorney
Today’s materials are available on
Miriam’s Website:
http://blog.lawlatte.com/index.php/
2012-workshops/