Non-Profit Fraud Signs

Fraud In A 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 used for the same cause the organization was made for. Non-profits pay no income tax on the donations they receive or any money they make through fundraising movements.ADP. Payroll – HR – Benefits

We generally believe and hope that only honest volunteers work in non-profits to raise funds for a cause. We want to think that there are always hardworking, genuine people managing the tasks in non-profits. It is disheartening to believe that dishonest people tend to do bookkeeping tasks in non-profits because such organizations are made to serve humane causes. The reality is different. Many non-profit organizations drive huge funds and donations to serve 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.

The Warning Signs Of Fraud In A Non-Profit

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 a clear 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 financial fraud if the accounting statements do not match or other statements are improperly balanced.

Cash Not Shown on Income Statement

Cash is present but not shown on the income sheet. If money is current for non-profit funding, it must be on the income statement and balance sheets. There should be a monthly check of all bookkeeping and accounting statements. It 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 who are involved in fraud have an intimidating attitude to mask the frauds happening in non-profits. Dishonest people can somehow reach the top of management in a non-profit. They avoid others by showing intimidation. Bullying conduct includes shouting, offensiveness, and denial to reply to genuine questions.LastPass – Family or Org Password Vault

Budget Cutbacks

If the same non-profit with the same funding starts cutting back the budget by decreasing its paid workforce and relying more on volunteer work, unhappy workers may get involved in fraud to meet their expenses. It seems far-fetched. However, it happens more than we’d like to admit.

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. It could signify 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 receiving huge donations focuses on short-term fundraising goals between substantial fundraising events, this may indicate fraud. Management may be raising small funds to cover up their fraudulent behavior. 

The 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.Cubicle to Cloud virtual business

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 offending behavior must be checked closely.

Checks Bounce Back Frequently

The directors know there is enormous cash present in the account of a non-profit, but checks frequently bounce back. It 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 join the non-profit for their gains. Any non-profit should have a clear and transparent system to minimize fraud. The above warning signs are helpful to spot financial fraud in a non-profit.

Complete Controller. America’s Bookkeeping ExpertsAbout Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.CorpNet. Start A New Business Now