Best Practices: Internal Controls at Not-for-Profit Organizations

In Pennsylvania alone, there are 63,345 not-for-profit organizations that employ over 15% of the state’s workforce.  These organizations generate almost $132 billion in annual revenues. 

However, many not-for-profit organizations do not have the budgets -- or staff -- to allow for appropriate segregation of duties to prevent and deter fraud.  As a result, not-for-profit organizations may be vulnerable to fraud from employees or vendors.  There are various internal controls that organizations can implement, even with limited resources, including:

  • Being vigilant and proactive – Management needs to be involved and simply pay attention
  • Keeping records – Track all transactions, donations, grants, expenses, etc.
  • Using sound hiring practices – Check references and conduct criminal history background checks for new employees
  • Stressing transparency with all stakeholders – Organizations need to communicate the cash inflows and outflows with all members, donors, board members
  • Focusing on proper tone at the top – Ethical culture should be established by leadership of the organization
  • Dividing the work – Rotate job duties, so that one person does not have control of all aspects of revenue collection, purchasing or spending

Nonprofits should realize that, despite being organizations that may serve the broad public interest, they are not exempt from fraud, and they can even be targets.  A small, upfront investment in appropriate internal controls can prevent larger fraud costs in the end.

For more information on fraud prevention or detection, contact Brian Webster at [email protected], or any member of the Schneider Downs client service team.

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at [email protected].

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2021 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

our thoughts on
ASC 842, Leases – ASU 2021-09 Provides Additional Guidance on Use of Risk-Free Rate and Required Disclosures for Non-Public Entities
IRS Joins Forces to Combat Fraud Against Charitable Organizations
Soccer Kickbacks - Red Cards and Red Flags
Flag on the Play - Football and Health Care Fraud
International Fraud Awareness Week 2021
Foul Ball - John Ruffo Attends a Baseball Game
Register to receive our weekly newsletter with our most recent columns and insights.
Have a question? Ask us!

We’d love to hear from you. Drop us a note, and we’ll respond to you as quickly as possible.

Ask us
contact us

This site uses cookies to ensure that we give you the best user experience. Cookies assist in navigation, analyzing traffic and in our marketing efforts as described in our Privacy Policy.

×