Sharing Your NFP's Values and Limit Fraud Losses

By: Nicole Riley

Every two years, the?Association of Certified Fraud Examiners?releases its Report to the Nations, an occupational fraud study of for-profit, not-for-profit and government organizations. As in previous editions,?the 2022 study?reports that most organizations require employees to read and sign a code of ethics or conduct. This relatively simple control can result in a median 40% reduction in fraud losses, should fraud?occur.

But codes of ethics are about more than limiting potential fraud losses. They also provide your not-for-profit with an opportunity to document and disseminate its core?values.

Putting Ideals into Practice

Your organization probably already has a mission statement that explains its values and goals. So why would you also need a code of ethics? Think of it as a statement about how you practice ideals. A code not only guides your organization’s day-to-day operations but also your employees’ and board members’ conduct.

The first step in creating a code is determining your values. To that end, review your strategic plan and mission statement to identify the ideals specific to your organization. Then look at peer not-for-profits to see which values you share, such as fairness, justice and commitment to the community.

Topics to Address

Now you’re ready to document your expectations and the related policies for your staff and board members. Most not-for-profits should address such general areas as mission, governance, legal compliance and avoiding conflicts of interest. Depending on the type and size of your organization, also consider addressing:

• Responsible stewardship of funds,
• Openness and disclosure,
• Diversity, equity and inclusion,
• Program evaluation, and
• Professional integrity.

When the code is final, your board must formally approve it. To implement and communicate it to staffers, present hypothetical examples of situations that they might encounter and address real-life scenarios and how your organization handled them. To help ensure accountability, ask staffers and board members to sign the code of ethics. Instruct them to report any ethical concerns to a supervisor?or?HR.

Starting Point

Although your code of ethics can go a long way toward defining your organization’s values and raising staff awareness, it’s really only the first step in preventing fraud. Other controls, including mandatory vacation policies, confidential hotlines and surprise audits, are associated with even greater reductions in fraud losses. Contact us for more information.

To learn more about how PKF Texas serves not-for-profit organizations, visit?www.PKFTexas.com/NotForProfit.