The Center for Nonprofit Excellence and the Thomas Jefferson Chapter of the Virginia Society of CPAs put on a great conference for the central Virginia nonprofit community on September 16 at The Omni in Charlottesville. Discussion topics covered financial, governance, and compliance issues as well as nice overview of donor-advised funds. I was invited to speak on the demoralizing topic of fraud and what nonprofit organizations can do to reduce the risk and impact of fraud. While starting off with some depressing statistics and a harrowing tale of discovering fraud in the workplace, I shifted to a discussion of the important role nonprofit officers and directors play–and the fiduciary duty of care they owe to the organization–when it comes to managing the organization and protecting its assets. Attendees left with a checklist of 28 things an organization can do to reduce the risk of being victimized by fraud and minimizing its impact when it does happen. Copies are available upon request. A few take away points:
- Fraud happens. Nothing will eliminate the risk of fraud (other than shutting your doors and dissolving), but there are a variety of strategies that can reduce risk.
- A nonprofit officer or director should focus on two issues: (i) protecting its organization from being victimized, and (ii) protecting himself or herself from liability risk.
- When it comes to corporate governance and management, process counts as much as outcomes in many respects when considering whether a board of directors has acted reasonably in managing the affairs of the organization. A governing board needs to take a holistic approach and develop practical processes, procedures, and protocols to reduce risk, identify and address problems effectively when they inevitably arise.