Steps To Prevent Cash Donations From Skimming

Written exclusively for My Community Workplace for Not-For-Profits Organizations

A Florida woman surrendered to police after authorities charged her with seven counts of wire fraud in connection with her scheme to embezzle funds from a nonprofit.

The woman worked as a volunteer executive director for a nonprofit pageant scholarship organization. According to authorities, the woman created a "dummy" corporation with a name similar to  the nonprofit's, but controlled solely by her. Over several years, she deposited a portion of incoming donations into this fraudulent corporate account.

Local authorities, who began their investigation when others within the nonprofit noticed missing funds, believe the woman stole close to $100,000 and used the funds for personal purchases and expenses. They also found evidence that she defrauded two other local nonprofits and a business with ties to the state pageant program. "Ex-Miss Florida Scholarship Director Accused of Stealing Program Donations" www.nbcmiami.com (Feb. 23, 2022).

Commentary and Checklist

The embezzlement scheme used in this case is a common form of asset misappropriation. The perpetrator purposefully set up a sham organization with a similar name to the nonprofit employer so that deposits into the account would appear legitimate. This type of theft is called skimming. It can be difficult to detect because the money is stolen before it is recorded on the books.

Skimming is typically associated with the theft of cash donations, and rightly so, as it can be the easiest. However, nonprofits cannot ignore the risk of theft of incoming checks, as the above case illustrates. You can mitigate this risk by requiring strict adherence to oversight and control measures.

Here are some suggestions that can help your nonprofit avoid skimming theft of cash in your organization:

  • Make sure your procedures for collection of cash donations involve multiple individuals.
  • Provide a safe storage location, and require the cash be deposited with a bank in a timely manner.
  • Assign someone not involved with collection to reconcile receipts of cash donations with bank deposit records.
  • Provide donors with receipts at the time of donation, as well as a "year-end" donation summary that communicates a method for reporting discrepancies.
  • Record all donations received and review donation totals on a monthly basis, looking for unusual drops in receipts.
  • Train employees and volunteers on embezzlement risk and what it can look like, and create a safe and easy method for them to report suspicious conduct or violations of your financial control measures.
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