Each year, Canadian not-for-profit, charitable and social enterprises lose money in ways that are preventable and in ways they might not even be aware of. In some cases, the damage is so deep that the organization cannot recover.
Employee Fraud, Theft and Embezzlement
Every year, over 50% of not-for-profit organizations and charities in Canada lose money as a result of employee fraud. On average, this represents 5-7% of annual sector revenue.
- Median losses exceed $150,000 and occur over a period of 18 months.
- More than half of the fraud will be committed by trusted staff members who have been with the organization for more than 6 years. They are managers, officers and directors. Typically, they are also well educated and without a history of criminal behaviour. Most have never been punished or terminated.
- While external audits find only 5% of fraud overall in smaller organizations, they suffer disproportionately large losses due to occupational fraud.
This is preventable.
The Association of Certified Fraud Examiners (“ACFE”) found two striking similarities in organizations affected by employee fraud, theft and embezzlement:
1) their directors lack financial management expertise to govern effectively; and
2) the organization has poor financial management controls at the operational level.
Negative effects are personal and public.
We’ve all read headlines and reports about financial mismanagement in non-profit organizations.
In extreme cases, directors are sued and suffer serious reputational damage. Operational costs increase as public trust diminishes. Talented employees are skeptical of joining the organization. Funders revisit agreements. Suppliers demand secure payments that affect cash flow. Criminal charges could affect the organization’s ability to continue operations.
Are you concerned?
Don’t be a statistic. You can choose to do something to protect your reputation and that of the cause you care about. Contact us today to discuss how we can help