Spot Non-Profit Financial Fraud

Non-Profit - Complete Controller

non-profit organization is a non-business entity in many countries. The Internal Revenue System in America grants non-profit organizations a status of the business that is exempt from tax.

Non-profits are established for a cause. If a non-profit generates revenue, it is further used for the exact cause. Non-profits pay no income tax on the donations they receive or any money they make through fundraising movements.

We generally believe and hope that only honest volunteers work in non-profits to raise funds for a cause. We want to believe that there are always hardworking, genuine people managing the tasks in non-profits. It is disheartening to think that dishonest people tend to do bookkeeping tasks in non-profits because such organizations are made to serve human causes. The reality is different. Many non-profit organizations drive funds and donations to benefit the causes for which they have been made. If left unchecked, a considerable portion of the funds raised in a non-profit organization is susceptible to theft, investment fraud, embezzlement, and other unauthorized use. CorpNet. Start A New Business Now

Financial Data is Not Up to Date

A non-profit should be audit-ready at all times. Suppose the financial data is not current, and the organization is not audit-ready. In that case, this is an indication of possible discrepancies going on in the organization’s bookkeeping. Accounting statements must match. Financial statements must be related to the balance sheet and cash flow statements. You can easily spot a financial fraud if the accounting statements do not match or others are not balanced.

Cash Not Shown on Income Statement

Cash is present but not shown on the income sheet. If money is present for funding a non-profit, it must be present on the income statement and balance sheets. There should be a monthly check of all bookkeeping and accounting statements. This is a warning sign of fraud in a non-profit.

Bullying Behavior of Management

The management is corrupt if a manager is bullying and not responding to queries raised. Managers involved in fraud often have an intimidating attitude to mask the scams happening in non-profits. Dishonest people can somehow reach the top of management in a non-profit, and they usually avoid others by showing intimidation. Bullying conduct includes shouting, offensiveness, and denial to reply to genuine questions.

Budget Cutbacks

If the same non-profit with the same funding cuts the budget by decreasing its paid workforce and relying more on volunteer work, unhappy workers may get involved in fraud to meet their expenses. This seems far-fetched; however, it happens more than we’d like to admit. Cubicle to Cloud virtual business

High Turnover among Staff

If employees of the non-profit resign frequently, then the reason behind this can be fraud going on in the non-profit. This could be a sign that they are unhappy with the current practices in the non-profit, including fraud.

Too Much Emphasis on Short-Term Fundraising Goals 

If a non-profit that receives huge donations focused on short-term fundraising goals between fundraising events, this may indicate fraud. Management may be raising small funds to cover up their fraudulent behavior.

Non-Profit is Working in Poorly Controlled Areas

There are more chances of fraud if a non-profit works in remote areas or has less control of bookkeeping and financial information.

Change in Lifestyle of an Employee

If a staff member, especially one dealing with bookkeeping or a managerial position, shows a sudden change in their behavior, it may indicate fraudulent practices. A lavish lifestyle without the means to afford it or offensive conduct must be checked closely. Complete Controller. America’s Bookkeeping Experts

Checks Bounce Back Frequently

The directors know there is cash present in the account of a non-profit, but checks frequently bounce back. This may very well indicate fraud. An audit must be conducted to ensure transparency.

No Frequent Audits

If audits are not done frequently, this may mean that someone is trying to hide fraud, theft, or embezzlement.


A non-profit organization is a fraud and theft source if the accounting and bookkeeping data is not up to date and is left unchecked. It’s hard to believe, but criminals come and join the non-profit for their gains. Any non-profit should have a clear and transparent system to minimize fraud. The above warning signs help spot financial fraud in a non-profit.

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