Reports from the US Secret service estimate check fraud costs $5 billion a year in the United States. A survey by the Association of Financial Professionals indicates the typical loss from payment fraud is $19,200. Losing $19,000 is tough for any organization, but it hits nonprofits especially hard. What can you do now to protect your precious resources and show donors you are a good steward of the funds entrusted to you?
- Maintain strict check security. Store checks, cancelled checks, deposit tickets, old bank statements, and signature stamps in a secure location. Secure means under lock and key with limited employee access to the check stock. Don’t forget the cleaning crew—they have access to most rooms and the trash!
- Examine new checks when the order arrives. Check for beginning and ending check numbers. Be sure the entire sequence of check numbers is there. You do not want to discover that a section of check stock was removed from the middle of the order.
- Inventory unused and currently in-use check stock frequently.
- Destroy unused check stock from closed accounts immediately.
- Use check stock with secure features. Fluorescent fibers, artificial watermarks, toner grip, and non-negotiable markers are just a few of the features available.
- Require multiple signatures for checks.
- Implement controls for signatures printed on checks. Does your accounting application allow for restricting signatures for certain amounts? For example, Sage 100 Fund Accounting will allow users to determine not to print signatures on checks over a predetermined amount.
- Reconcile bank statements within 20 days of the statement date.
- Implement Positive Pay with your bank. With Positive Pay, you send a file of the checks written to the bank. As each check is presented for payment by the recipient, the bank compares the data on the check to the data in the file ensuring the check cashed is the same as the check written.
- Implement electronic payments. Some accounting applications, such as Sage 100 Fund Accounting, have features for paying vendors and employees electronically thus reducing the opportunity for check theft.
Payment fraud is a serious issue. These easy steps will help protect your cash from theft. Your auditor is also a good source to review your measures to protect your organization from payment fraud. Demonstrating good security is a way to bolster donors’ confidence and secure more funding!
What steps do you take to prevent check fraud and secure your organization’s cash?