Compliance - Federal Failure to file – automatic revocation of §501(c)(3) status
Updated slideCompliance – IRSIs your nonprofit “on the list?” IRS Publication 78– no longer published Search-able database: http://www.irs.gov/Charities-&-Non- Profits/Exempt-Organizations-Select-Check Search: IRS select check NOTE - Incorporation as a State (Indiana) nonprofit does not equal IRS §501(c)(3) status
Consequences of Abuse of Status IRS Consequences – $$ Fines to Nonprofit Fines to Board of Directors Fines to Staff PERSONAL LIABILITY FOR ALL! IRS Consequences – Revocation of Nonprofit Status
Nonprofit Ethical Issues - Examples Improper donor acknowledgements Donations of time are not tax-deductible Donor “influence-buying” Improper arrangements with donors Failing to include both spouses in joint gift paperwork Staff/ED/Board/Volunteer accepting gifts from donors Failing to take responsibility (“Not My Fault”)
Handout – Risk Management PolicyRisk Management PlanTypes of Risk to Manage
Risk Management - People Poor economy has resulted in an increase in criminal conduct against nonprofits Embezzlement by employees Embezzlement by officers Fraud from “outsiders” Phrase of the Day – “Trust But Verify”
Handout -- Asset MisappropriationsWhat are the most common types of fraud? 2012 Global Fraud Study, Association of Certified Fraud Examiners
Who Commits Fraud? How Much?2012 Global Fraud Study, Association of Certified Fraud Examiners
How is Fraud Punished? Termination of employment = 72% No punishment = 7% Quit/disappeared = 8% Referral to law enforcement = 65% Prosecutor declines to prosecute =25%(Note – numbers total greater than 100% because more than one action is taken) “An Investigation of Fraud in Nonprofit Organizations: Occurrences and Deterrents,”Greenlee, Fischer, Gordon and Keating, 2006, Hauser Center for Nonprofit Organizations
What is the likelihood of recovering funds? (1) Nothing recovered = 48% Complete recovery = 16% Partial recovery = 36% WHO IS MORE LIKELY TO BE VICTIMIZED? (2) Small organizations are much more likely to be a victim of occupational fraud Lack of anti-fraud controls in smaller organizations contributes to vulnerability1. “An Investigation of Fraud in Nonprofit Organizations: Occurrences and Deterrents,”Greenlee, Fischer, Gordon and Keating, 2006, Hauser Center for Nonprofit Organizations2. 2010 Global Fraud Study, Association of Certified Fraud Examiners
Who Commits Fraud? Handout – Fraud Prevention Checklist Handout – Sample Board Anti-Fraud Policy High-level fraudsters (Officers/Directors) cause greatest damage – more than 3x more costly, and take longer to detect. More than 85% have never been previously charged or convicted. Behavior warning signs: Living beyond means andDO ANTI-FRAUD difficulty experiencing financial MEASURES HELPPREVENT FRAUD? YES – The 2010 Global Fraud Study found that organizations that had common controls in place had Significantly fewer losses (in # and $) Shorter time-to-detection 2012 Global Fraud Study, Association of Certified Fraud Examiners
Handouts – 10 Ways to Catch Fraud and Mistakes from Outside Handout – 15 Ways to Minimize Employee FraudPrimary Control Weaknesses for Victim Orgs.
Handout – Someone Stole the Cashbox!Nonprofits and Fraud Handout – Preventing and Responding to FraudWhat to do when it happens to you!
PR for Nonprofits Handout – Public Relations During Nonprofit CrisisPublic Relations During Fraud Crisis
Crisis Management - The Good News Nonprofits showed growth in contributions in 2011 compared with 2010 Source: Guidestar 2011 Nonprofit Fundraising Survey
Crisis Management 101Surviving Financial Downturn Step 1 – Review the Organization How well do you meet your budget (typical)? What shortfall do you anticipate? How long can you survive at reduced budget levels? How are you affected by each funding source?
Crisis Management 101Surviving Financial Downturn Step 2 – Make a Plan Risk Management Plan What can you reduce and maintain current levels of service? What can you reduce and maintain minimum service? Where can you increase funding Lapsed donors, new donors, alternate funding sources
Crisis Management 101Surviving Financial Downturn Step 3 – Creative Options New Fund Raising Opportunities Social media, networking, micro-fundraising Collaborations with similar or complementary nonprofits Spin-off/Re-Master current activities
Crisis Management 101Surviving Financial Downturn Step 4 – Acute Crisis Management Reduction in programs Prioritize – what MUST you retain? Reduce scope/ Increase fees Reduction in Staff Reduction in Staff ≠ previous service levels Reduction in Staff = do it right What is your “limit”? Minimum financial - resource - program - mission PR in times of Crisis – Preserving public image