The Center for Association Resources

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Is an association management firm focused on helping Non-Profit associations succeed in their mission.

Being on guard for association fraud

Another in a series of articles related to association management selected from our reading list by:
Robert O. Patterson, JD
CEO/ Principal
The Center for Association Resources, Inc.

Non-profit organizations have a special need to prevent and detect fraud. While for profit organizations also must watch for fraud, the non-profit sector has some unique considerations.  To keep donations flowing, the need to maintain the public’s trust and protect the organization’s reputation is paramount.

Fraudulent acts which impact an organization can occur either outside or inside the organization. Some estimates put the total percentage of fraud for the non-profit sector as high as 13% of annual donations. While fraud is more often committed by lower level employees, the higher the employees position in the organization, the larger the total fraud losses tend to be.  CEOs commit the lowest percentage of fraudulent acts, but their fraud tends to involve larger monetary amounts.

Common types of internal fraud involve cash theft and erroneous expense reports. Physical assets can also be stolen from the organization. Frequent periodic audit of asset inventories can prevent and detect this type of fraud.

Outright theft of cash donations needs to be prevented.  Controls such as having two people observe and count cash donations, segregation of duties for the receiving and accounting for donations and other routine cash controls can be beneficial in reducing the risk of cash theft.

Expense reports are also often a conduit for fraud . A system for verifying expense reports should be implemented and expense reports and receipts should be examined prior to payment.

Externally, fraud by vendors, either with collusion from an employee, or committed totally by the vendor is also a concern. Some scenarios include a manager authorizing payment for goods never received or authorizing payment to a nonexistent company where the funds are ultimately received by the authorizing employee.  Segregation of duties for payment and purchasing, effective computerized payment system controls, and dual signature requirements for checks can reduce risk of this type of fraud. Periodic checks of vendor records to ensure that vendors actually exist are also a deterrent.

Top management at non-profits can set the tone for fraud prevention by establishing effective internal control policies. One of these controls that may seem surprising is mandating employees take vacation time accrued. Fraud is more difficult to cover up when the employee committing it is absent.

The average amount of time a fraudulent activity occurs prior to catching it is 18 months. Occasionally these schemes have gone on for years without being identified. Sometimes fraud is identified by audits or internal controls. Sadly, fraud is often not caught until an organization fails due to the impact from fraud. Even if an organization is financially able to weather an episode of fraud, the loss of good reputation can often hamper the organization’s future fundraising efforts.

The potential negative effects of fraud on the non-profit organization compel everyone in a non-profit to be aware of the need for fraud prevention. The success and reputation of the organization depends on it.

Filed under: Association Resources, Center for Association Resources, Marketing, Non-Profit, The Center for Assocation Resources info, , , ,

Marketing for success

Another in a series of articles related to association management selected from our reading list by:
Robert O. Patterson, JD
CEO/ Principal
The Center for Association Resources, Inc.

Successful marketing is a discipline with an importance that is often underestimated in the management of non-profit organizations. Traditional marketing for for-profit firms involves a number of complex disciplines working together to find potential customers and put the company’s product in their hands. This is done with the goal of making a reasonable profit on the sale of the product. Non-profit firms often don’t have customers or products in the traditional sense, so the value of strong marketing is sometimes overlooked. However, by understanding the worth of marketing and knowing how to avoid some common mistakes, a non-profit organization can enjoy thriving success.

The first step in developing a successful marketing strategy for a non-profit organization is to understand the goal of the marketing efforts. One chief goal of marketing is to build and maintain a visible, credible company image. While a non-profit firm is not generally looking to sell a product to customers, they are always looking to sell their vision and mission to potential donors and volunteers. Marketing efforts should be geared towards creating a consistent identity for the company and making sure the community of potential donors is aware of that identity. There are several important steps which can be taken in order to achieve this.

One crucial step is to build a website. A strong internet presence can allow people unfamiliar with your organization to stumble upon it; in addition, potential donors and volunteers will often search for your organization’s website as the first step to finding out more information. A well-maintained website is crucial when trying to establish a strong, visually-communicated identity. The website can also be very helpful in disseminating information such as newsletters, event calendars, donation methods, and benefits of your organization.

Another important aspect of marketing which is especially important for non-profit firms is relationship management. Traditional for-profit firms know the advantage of maintaining customer information and being able to retrieve it quickly; this helps returning customers to feel as if they are truly appreciated. This process is even more critical when building relationships with donors. You should never find yourself asking major donors, “What did you say your name was again?” Get to know your donors and make them feel that their donations are well worth it. Whenever possible, explain to them where their money is going and how it is being used to benefit the surrounding community.

An additional marketing effort which should not be overlooked by non-profit organizations is the active search for alliances with local organizations, governments, and businesses. These alliances can bring extra visibility to the organization, as well as bring in extra money. For example, non-profits will sometimes engage private companies for donation-matching agreements for a particular fundraiser. This increases the visibility and rapport of both the non-profit organization and the private firm.

Above all, the biggest pitfall to avoid is thinking that the inherent goodness of your non-profit firm will bring in the money you need. Even though your organization may be doing work for a good cause, you will still need to create visibility and credibility to locate and attract potential donors. A successful marketing strategy can help to accomplish these goals and keep your organization thriving.

Filed under: Association Resources, Center for Association Resources, Marketing, Non-Profit, The Center for Assocation Resources info, , , ,

March 2011
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