Fifty billion dollars. It’s a staggering sum of money that most people can only fantasize about, and when asked, what you would do with such an outrageous amount of money, there is a struggle to translate into everyday terms.
To provide some perspective, here’s a fun shopping list of things you could buy if you had $50 billion: 33 Yankee Stadiums, 25 percent of the Microsoft Corporation, 520 Neverland Ranches, or 120 Airbus 380s (these are the cool double-deckers that Saudi princes buy.)
What is even more unfathomable than owning just one Yankee Stadium, is the fact that $50 billion is the estimated amount that is lost each year to fraud in nonprofit organizations (according to the New York Times). One might assume that most fraud takes place in large global charities with deep pockets similar to the Red Cross or UNICEF. In reality, most embezzlement takes place in smaller organizations with fewer than 100 employees due to the fact that these organizations are less likely to have adequate internal controls in place.
When it comes to embezzlement, it is a sad irony that nonprofits are founded on the noble intention of improving the state of mankind, and unfortunately can become the easiest targets for fraud. Small nonprofits are even more vulnerable because their environments are very personal, more intimate, and nurture a false sense of security that “it could never happen here.” But it isn’t too hard to imagine how an employee, facing their own financial pressures and temptations, might begin to skim a little cash here or there. If you are watching the news headlines, there have been multiple reports on how cash skimming soon evolves into falsified time sheets, expense reports, and more, until the nonprofit is losing huge amounts of money – one Airbus seat cushion at a time.
What to do: to protect the mission and the reputation of a nonprofit? Leaders can implement best practices that will go a long way toward preventing “fraud,” “embezzlement,” “larceny,” “and other charges” that are often described in the news. Conducting surprise audits, requiring regular job rotations, enforcing cross-checking and review processes for all financial transactions, and providing hotlines for anonymous whistleblowers are just a few of the precautions that can be taken. These policies are not meant to be a burden to your operations, but a way to preserve both your financial resources and the public’s trust in your good name.
If you are not sure whether or not you have enough checks and balances in place to protect against fraud, external auditors, industry experienced consultants can offer some important insight into where you may be at risk. With so much at stake, you want to ensure that the donations that are generously made to your organization are used for their intended purpose and not for an employee’s personal gain.