Nonprofits depend on trust. Donors trust their contributions are going to the cause they want to support. Executives trust their board members and employees believe in the cause enough to do their jobs well—sometimes with minimal or no pay. Employees trust their executives are making the best decisions in support of the cause, not in support of themselves.
In an environment so dependent on trust and the good nature of volunteers, fraud can hurt even more when it happens at a nonprofit.
With today’s increased emphasis on transparency and the rise of charity watchdog groups, nonprofit fraud can be particularly damaging. Avoiding it, however, can be especially hard for nonprofits, where trust, dedication to a cause, and the volunteering of time and resources are so central. In a trusting environment, solid internal controls are critical to protect the nonprofit’s assets, employees, and reputation.