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Blog > The Canadian charity sector loses at least $12 MILLION a year to fraud. Are you sure you’re not exposing yourself to risk?

The Canadian charity sector loses at least $12 MILLION a year to fraud. Are you sure you’re not exposing yourself to risk?

affiché le 17 mai 2017

by Maria Lahiffe

Consider this:

  • 5-7% of gross annual revenue in all non-profits gets lost to fraud [1]
  • If an organization cannot pay its debt, the members of the Board of Directors can be held personally responsible for paying off those debts.
  • That second point is worth repeating. Members of the Board of Directors can he held PERSONALLY RESPONSIBLE for paying off organizational debts.

Are you feeling lucky?

The good news is, there are key controls and financial policies you can put in place to limit your exposure. Read on for a summary of a recent blog post on this topic by Procope ConsultingClick here for the full post, or better yet, click here to register for their upcoming workshop at Volunteer Ottawa, to hear it from the source.

Key controls

1.      Segregation of duties

There are three main financial functions, which should be spread among separate people. These are

  1. Managing, using, and handling goods and services (i.e. custody of assets)
  2. Authorizing the use or purchase of goods and services
  3. Tracking and reporting on goods and services (i.e. recordkeeping)

Spreading this out among multiple people can seem overly bureaucratic, especially for a small organization, but it is important to spread it out to prevent both human error and potential fraud.

2.      Spending only happens with an approved budget

Expenditures should be budgeted and approved before they are incurred. Make sure it is something you can afford, that it is aligned with your organizational priorities, and that the expenditure is supported by a clear quote or contract.

3.      All payments should be approved

Make sure you have a clear payment approval control in place. The procedure should include verifications such as making sure the goods and services have been delivered as per contract terms and conditions, rates and dates match the contract, and that the payment matches the amount and name of the vendor on the invoice. These may seem obvious, but details like this can get lost when you are extremely busy.

4.      No electronic access to bank accounts

You can allow read-only access to the bank account to people such as the Treasurer, Executive Director, and Bookkeeper, but all transactions should be controlled through cheques, credit card, wire transfers, and electronic fund transfers – i.e. payment types which require some form of approval, signature, or traceable transaction involving more than one person.

To get these in more detail, as well as read about key policy recommendations, click here to get Procope’s full blog post on this topic.

Michelle Nadeau and Brad Brookman of Procope Consulting will be at Volunteer Ottawa to teach about reading financial statements and mitigating financial risk for your organization.

Want to learn more? Come to an upcoming workshop.

Click here for more information, and to register.

Volunteer Ottawa offers a comprehensive suite of courses related to governance in the social sector. Click here for more information, and to register. Subscribe to our Event RSS Feed to be among the first to know when a new workshop is added to the schedule.

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Related post: 

[1] Chen, Qiu, Steven Salterio, and Pamela Murphy. “Fraud in Canadian Non-profit Organizations as seen through the eyes of Canadian Newspapers 1998-2008.” Philanthropist 05 May 2009: Print.
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