December 10, 2024 •HoganTaylor
The holiday season often brings an outpouring of generosity—and, unfortunately, an uptick in fraud risks for nonprofits. Year-end giving, holiday absences, and increased reliance on volunteers create an environment where fraudsters can strike. Whether you’re hosting special events, handling cash donations, or distributing gift cards, it’s essential to stay alert and safeguard your organization. Here's how to protect your nonprofit from common holiday fraud threats.
Keep a Close Eye on Cash
Nonprofits thrive on trust, but that culture can also make them vulnerable to certain types of fraud. For example, staff members or volunteers handling cash donations may find it tempting—or all too easy—to skim funds. To mitigate this risk:
- Supervise cash handling. Assign trusted managers to oversee anyone accepting cash and ensure meticulous recordkeeping.
- Limit cash transactions. If you’re hosting a holiday event, consider preselling tickets or preregistering participants to reduce cash exchange.
- Encourage digital payments. Set up secure credit card payment options and promote their use. If cash is necessary, involve employees who have undergone background checks or trusted board members.
Maintain Strong Internal Controls
Amid the hustle of year-end tasks, it’s tempting to relax internal controls. However, this can open the door to fraud. Adhering to accounting safeguards, such as segregation of duties, is critical:
- Divide responsibilities. For example, one person should verify incoming invoices, another should process payments, and a third (or an external financial advisor) should review records for anomalies.
- Involve leadership. If key staff members are on vacation, enlist executives or board members to maintain control processes.
- Delay non-urgent tasks. Avoid cutting corners by putting off certain activities until your full team is back in place.
Watch for Gift Card Fraud
Gift cards can be a convenient way to thank staff or clients, but they’re also a target for scammers. In a scam known as “draining,” fraudsters obtain bar codes, PINs and activation codes by opening gift cards on store display racks. After the crooks reseal the cards, consumers buy and add money to them and the thieves spend the funds before gift recipients get a chance to.
Protect your nonprofit by:
- Buying securely. Purchase gift cards only from reputable stores with strong security measures, like cameras monitoring gift card displays.
- Inspecting cards. Check for signs of tampering before buying.
- Encouraging quick use. Prompt recipients to use their gift cards soon after receiving them to minimize risk.
Preserve the Holiday Spirit
The period between Thanksgiving and New Year’s Day is critical for fundraising—and for fraud prevention. By implementing robust safeguards, you can protect your nonprofit’s finances and reputation while maintaining the trust of your donors and beneficiaries.
Let us help you strengthen your internal controls and prepare your nonprofit for a fraud-free holiday season. Contact us today to get started.
How HoganTaylor Can Help
The HoganTaylor Nonprofit team of business advisors and CPAs is comprised of former CFOs, controllers, and industry experts with extensive experience providing the guidance organizations need to lean forward again in their leadership. If you have any questions about this content, or if you would like more information about HoganTaylor’s Nonprofit practice, please contact Jack Murray, CPA, Nonprofit Practice Lead.
INFORMATIONAL PURPOSE ONLY. This content is for informational purposes only. This content does not constitute professional advice and should not be relied upon by you or any third party, including to operate or promote your business, secure financing or capital in any form, obtain any regulatory or governmental approvals, or otherwise be used in connection with procuring services or other benefits from any entity. Before making any decision or taking any action, you should consult with professional advisors.
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