Unlocking Fraud Prevention: 5 Tips for Nonprofits

At a glance:

• The main takeaway: Fraud is rampant in the nonprofit sector, but preventing it starts internally.
• Impact on your nonprofit: Good fraud prevention doesn’t have to be expensive and time-consuming — making even a small investment in protecting your assets can pay off in a big way.
• Action steps: Remember to put both preventative and detective internal controls in place, and classify them as “upstream” and “downstream” activities.

The full story:

Nonprofits are rightly focused on furthering their mission and developing programs to serve their communities. But that also means organizations may overlook the less glamorous side of their operations, including fraud prevention.

With limited resources and tight budgets, nonprofits are prime targets for financial missteps, whether intentional or accidental. But here’s the good news: by taking a few smart and practical steps, you can lock down your nonprofit’s finances and keep your mission on track.

Let’s dive into some best practices that don’t just sound good — they work, too.

1. Segregate duties among your employees

It may be convenient for you to have one person who handles your entire financial and operational process, but it is an open door to fraud. All tasks shouldn’t rest on one person’s shoulders for multiple reasons. For instance, if one person handles donations, records them, and deposits the cash, then there is a greater chance of error, and it also adds unnecessary stress. Reduce the opportunities for fraud or error by splitting the tasks across your staff. It’s not about distrust; it’s about safeguarding your organization and your team.

2. Utilize technology

In 2025, fraud isn’t just a sneaky hand in the till — it’s a phishing email or a hacked donor database. Use technology to your advantage, such as creating strong passwords, enabling two-factor authentication, and restricting access to financial systems. Train your staff to spot suspicious emails, links, or urgent payment requests. Small investments in technology-driven fraud prevention can go a long way in keeping your organization safe.

3. Embrace audits

You may dread your annual audit, but you should think of it as an excellent opportunity to focus on vulnerabilities and gaps in your internal control processes. Use your relationship with your auditors to get some feedback and insight on best practices. Don’t forget: between your annual financial audits, you can do internal spot-checks on your own as well!

4. Prioritize both preventative and detective methods

When designing your internal controls or supplementing the controls you already have in place, define them using the terms “upstream” and “downstream.” Upstream internal controls are those that prevent fraud from occurring; conversely, downstream internal controls detect fraud that has already occurred. If you haven’t done so already, create  controls that address both situations.

5. Set the tone at the top

Fraud prevention starts with leadership. When your board and management model integrity — think clear expense policies or zero tolerance for “borrowing” funds — that behavior trickles down to the rest of the organization. Make it loud and clear: ethical behavior isn’t negotiable. A strong culture can deter would-be fraudsters before they even try to attack your organization.

Bonus: Consider getting a fraud tip hotline service

According to the Association of Fraud Examiners Report to the Nations, tips are the number-one method for discovering fraud. Remember that instituting a tip hotline, modeling ethical behavior, perfecting internal controls, and segregating duties are not big and expensive undertakings. Rather, these are practical steps you can implement in the near-term to reduce your organization’s fraud risk now and in the future.

Want to chat more about protecting your nonprofit organization? Schedule a consultation with Aprio’s Nonprofit Team today.

Related Resources

• Aprio’s Nonprofit Services
• Journal of Accountancy: Preventing fraud with internal controls
• Reducing Fraud in Nonprofits