Nonprofit Red Flags: Avoiding Crime

The unfortunate truth is that all businesses are susceptible to crime. While directors and officers are put in charge to manage the operation and uphold its best interest, there are people who have negative intentions with their actions. In this blog, we’ll cover the main questions and red flags that should raise concern for nonprofit administrators. In addition to sharing this information with your clients, protect their entire operation front to back with a customized Nonprofit Crime Insurance policy.

Board makeup.

The following questions should be asked when reviewing the organization for legitimacy:

  • Who is the board comprised of?
  • Do they have a good reputation?
  • Are there any conflicts of interest?
  • Is there enough diversity?
  • Are there enough members to adequately represent the nonprofit?

Financial concerns.

Nonprofit directors can weed out fraud and red flags by identifying illegitimate financial practices. According to Nonprofit Pro, are the appropriate financial reports sent in a timely fashion, and are they reviewed so that everyone understands them during board meetings? (Many community foundations offer classes on reading nonprofit financials, if there are members who could benefit from such education.) Are there any accounting processes that only the person in the finance department understands? Are any financial reports consistently missing, late or inaccurate? Is there an audit committee of the board of directors?

What’s more, another way to identify red flags is identifying budgets. For example, the budgets should be public and easily accessed. If not, or they are hard to get ahold of, this could indicate some level of crime within the organization.


This is a huge component to any nonprofit. The following should be implemented to avoid raising any concerns.

  • The organization should be current on its 501(c)(3) registration with the IRS, registered with the state in which the organization is based, and in compliance with appropriate regulation.
  • Register the funds that are solicited.
  • Report earnings to the IRS.
  • Implement a process of checks and balances so that one person is not responsible for handling, reporting, and budgeting money.

About Domenick & Associates

At Domenick & Associates, we have a unique understanding of the nonprofit sector and how to properly secure your clients’ operation. From personal and advertising protection to crime coverage, we offer a range of products that are necessary for their success and longevity. For more information about our products, contact our experts today at (215) 629-5701.

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