Lack of Staff Could Render Nonprofits Vulnerable to Fraud and Scams

August 18, 2015

New Nonprofit Financial Management Survey Reveals Lack of Prevention Measures Typical Orgs

WINCHESTER, Va., Aug. 18, 2015 —While most well-intentioned nonprofits make efforts to prevent financial fraud, each year many of these organizations lose millions of dollars due to inadequate safeguards against scams and crime. A newly released Nonprofit Financial Management Survey, by the Evangelical Council for Financial Accountability (ECFA), found that nearly 40 percent of financial management teams lack annual fraud prevention procedures, checklists and similar reviews.

The survey suggests that the lack of adequate attention to fraud prevention may correlate with inadequate staffing. Of the 383 organizations represented in the survey, only 10 percent of chief financial officers devote 100 percent of their time to their specific role and 34 percent of respondents said their staff is stretched too thin when asked about the officer’s single greatest need. Infographic

“Sixty-five percent of those surveyed agreed that because of the recession (and other factors) they are definitely learning to do more with less. But exemplar organizations—only 7 percent of those surveyed—are the ones that keep annual fraud prevention, financial reporting and impact measurement as high priorities,” said ECFA President Dan Busby.

An executive summary of the survey, the first edition conducted by ECFA, provides nonprofits with information to better equip their boards and senior teams for growth. The executive summary includes the top 10 findings and can be viewed here. Top Ten Highlights

The survey also provides insight on other distinguishing characteristics found in the most effective nonprofits, such as:

  • They are fanatical about process. The survey found there are three clear indicators of effective process: strong controls, clear separation of duties and an annual fraud prevention audit.
     
  • They have financially literate leaders. The survey found that three key groups were much more likely to be able to understand financial reports. Exceptional organizations have directors, finance committees and senior teams with an in-depth understanding of financial reports.
     
  • They offer competitive compensation. The survey indicated that effective ministries offer compensation and benefits competitive with the market—in line with other local nonprofit ministries.

“It is clear the specific financial management practices of ‘exemplar’ organizations give them an edge on ‘typical’ organizations,” said Busby. “Through the survey analysis, we hope to provide all nonprofits with best practices that will increase effectiveness and help them further their missions.”

ECFA, founded in 1979, provides accreditation to leading Christian nonprofit organizations that faithfully demonstrate compliance with the ECFA standards pertaining to financial accountability, fundraising and board governance. For more information about ECFA, including information about accreditation and a listing of ECFA-accredited members, visit ECFA.org or call 800.323.9473.


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