Nonprofit Alert: International Fraud Awareness Week and 10 Signs of Nonprofit Fraud

By Michael McNee |  John D'Amico  |  November 16, 2017

It's International Fraud Awareness Week and Marks Paneth is doing its part to drive awareness!

Fraud deeply affects all industries, but can be especially damaging to nonprofits. Most nonprofit organizations operate under tight budgets and need to utilize all resources available to them to fulfill their missions. While fraud committed against for-profits results in less net income for owners, fraud against a nonprofit affects the ability to provide goods and services for the benefit of the community it serves. Additionally, nonprofits rely on donor contributions to fulfill their mission. Any fraud-related press has the potential to damage donors’ perceptions and may result in decreased future contributions.

Per the Association of Certified Fraud Examiner’s 2016 report, expense reimbursement, corruption, billing and check tampering were the most common types of fraud committed against nonprofits in 2016. The median amount lost by nonprofits per fraud case that year was $82,000.

At our recently held 2017 Annual Nonprofit Industry Update Seminar, Michael McNee, Partner-in-Charge of Attest Services and Co-Partner in-Charge of our Nonprofit, Government & Healthcare Group and Yael Fuchs, Co-Section Chief of the Charities Bureau of the Office of the New York State Attorney General, presented a session on fraud which touched upon Mark’s Paneth’s list of ten indicators that an organization may be a victim of fraud. These include:

10. Documents are missing or copied;

9. Your agency has no policy toward fraud and has let some previous transgressions “slide”;

8. Computer access controls poor;

7. Duplicate payments are made to vendors;

6. Transaction amounts below an approved level are not considered important enough to periodically review and internal financial statements are not scrutinized timely by “Line Managers” with emphasis on budget to actual variances;

5. Vendor invoices are on plain paper or don’t look like real company letterhead;

4. Someone in your accounting department is having their wages garnished, or other obvious difficulties;

3. Bank reconciliations are not done in a timely or proper manner;

2. Internal controls are not periodically reviewed as to their viability in a changing world; and,

1. You have very little or no segregation of duties and approvals of adjusting entries and other oversight is sporadic, at best.

For more information:

If you suspect that your organization has fallen victim to fraud or would like to discuss ways to strengthen your internal controls and help prevent fraud in the future, please contact your Marks Paneth partner; Michael McNee, Partner-in-Charge of Attest Services and Co-Partner in-Charge of our Nonprofit, Government & Healthcare Group; or John D’Amico, Director with our Professional Standards Group.

To learn more about our Nonprofit Practice, click here.


About Michael McNee

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Michael McNee, CPA, is the Partner-in-Charge of Attest Services and Co-Partner-in-Charge the Nonprofit, Government & Healthcare Group at Marks Paneth LLP. He is also a member of the firm’s Executive and Management Committees. In these roles, Mr. McNee is responsible for overseeing the execution of the firm’s audit and attest services and directing the operations of the Nonprofit, Government & Healthcare Group. He develops strategy, sets policy and acquires and develops talent. In addition to his managerial... READ MORE +


About John D'Amico

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John D'Amico, CPA, is a Partner within the Professional Standards Group at Marks Paneth LLP, which is responsible for monitoring quality control in the firm as mandated by professional standards. He specializes in pre-issuance reviews and inspections of nonprofit organizations, governments and Single Audits. Mr. D’Amico also provides consultation on accounting and attestation matters and tests and monitors the firm's quality review policies and procedures. He teaches continuing education classes for the firm and on... READ MORE +


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