Nonprofit Check FraudNonprofits are easily susceptible to fraud, being the third most frequently victimized industry sector, behind financial institutions and government entities. According to Harvard University’s Houser Center for Nonprofit Organizations, it is estimated that U.S. nonprofits lose approximately $40 billion a year due to fraud.

And check fraud and embezzlement are the most common occurrences.

Because billions of checks are processed every year, it is often difficult for each check to be reviewed for fraud. And with the constantly changing technology, criminals are developing new and clever ways to increase their chances of success.

6 Tips for Preventing Nonprofit Check Fraud

Reduce your nonprofits exposure to check fraud by implementing these procedures:

  1. Treat Your Checkbook Like Cash: You wouldn’t leave a stack of cash lying around, so don’t do the same with your checkbook. Checks have your account number, routing number, bank and bank address on them, leaving you open for fraud.
  2. Balance Your Checkbook Each Month: Read your bank statements and make sure it matches what you previously calculated. It’s hard to dispute fraudulent charges if you aren’t sure what you actually have in the account.
  3. Securely Store Your Check Stock, Bank Slips, and Cancelled Checks: Keep checks, deposit slips and void checks securely stored, with access given to only a select few people.
  4. Use Another Form of Payment: While checks may seem easier, they can end up causing more trouble should they get into the wrong hands. Try using a credit card or online banking to make payments instead. And if you must write checks, require two signatures in order for the check to be valid.
  5. Create a Written Fraud Policy: Create a written fraud policy that is reviewed with all your employees. Let employees know that internal theft and fraud will not be tolerated and will be reported.
  6. Positive Pay: Positive Pay is a cash-management service employed to deter check fraud. Banks use positive pay to match the checks a company issues with those it presents for payment. Any check considered to be potentially fraudulent is sent back to the issuer for examination.

If you think your nonprofit has been hit by check fraud, call the police and file an official report.

Take proactive steps to ensure your nonprofit’s mission, donors, and financial statements are safe. If you need help managing your accounting, think about using  fund accounting software to keep you on track and enable a Positive Pay solution.  Call 919-821-1244 or send us a message to learn how Abila MIP Fund Accounting and Checkpoint can help your nonprofit today!