3 Ways Fraud Occurs in Nonprofits

Almost everyone at some point has felt the feeling of disappointment when listening to the news and hearing about yet another nonprofit scandal. The good news is that this does not have to be your story. Here are the three primary ways fraud occurs in nonprofits.

  1. Embezzlement. Someone within the nonprofit will go to a new bank and open an entirely new bank account in the nonprofit’s name. They will then deposit checks that are sent to the nonprofit in that account, withdraw the funds, and use the money for their own purposes. 
  2. Fraud. Someone will create a fake company that pretends to be a legitimate vendor of the nonprofit. They will provide fake invoices to the nonprofit and pay for fake services to the fake company.
  3. Misappropriation of funds. Someone with access will use the nonprofit’s debit card for personal purchases. 

These types of fraud are all illegal and could cause a scandal with your nonprofit. It’s important to avoid all of these, and to put safeguards in place to make sure that these crimes are not committed in the name of your nonprofit.

By conducting background checks, checking references, limiting cash, and segregating duties, you can help avoid these types of crimes. This will also keep your nonprofit in good standing with the government and the public. 

If you would like more guidance on avoiding fraud in your nonprofit, we are here to help. We can provide you with a plan to help grow and maintain your nonprofit. At Chisholm Law Firm, you can rest assured that your nonprofit is in the best hands and that we’ll do everything we can to help you with structuring your nonprofit. 

We are here for you, because it shouldn’t be this hard to be a superhero.



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