Every nonprofit loves to say, “We trust our people.”
And that’s great. Trust matters. Mission matters. Community impact matters.
But here’s the uncomfortable truth: none of that stops fraud.
In fact, it often creates the perfect conditions for it.
Take the recent Minneapolis case. A well-known chamber CEO pleaded guilty after diverting organizational funds and having a check mailed directly to his own house. Yes — his house. He didn’t hack a system. He didn’t mastermind some convoluted scheme. He just exploited a simple gap no one bothered to lock down.
And that should stop every nonprofit leader in their tracks.
Why does this happen so often in nonprofits?
Let’s be real. Most nonprofits run lean. Everyone “pitches in.” Roles blur. And when the financial side is understaffed or left to one trusted person, you’ve unintentionally created the perfect playground for fraud.
Here’s the mindset I hear all the time:
- “We’re all here for the mission.”
- “She’s been with us forever.”
- “He handles everything — we’re lucky to have him.”
That loyalty is admirable. But it’s not internal control. And fraud doesn’t require an evil genius — it just requires access and opportunity.
What went wrong in Minneapolis?
According to prosecutors, the executive simply directed a check meant for the organization to his personal address. That move alone should have set off alarms, but there were no alarms. No verification steps. No second set of eyes. No review of disbursements or mail handling.
When one person can reroute funds without anyone asking, “Does this make sense?”, that’s not a trust issue. That’s a system issue.
Five guardrails every nonprofit needs — starting today
If you want to protect your mission, this is where you make it real. None of these require a big team. They require clarity and consistency.
1. Separate mail handling from accounting tasks
Checks should go to the organization’s address. One person opens mail. Another records deposits. No exceptions.
2. Require two approvals for payments
One person initiates, one person signs. Or one approves electronically and another releases. This one control alone blocks most small-scale fraud.
3. Monthly bank reconciliation — reviewed by someone else
If the same person moves money and checks the books, you’re flying blind. Have a board treasurer or outside bookkeeper review reconciliations.
4. Look for “I’ll just handle it all” behavior
Fraud needs secrecy. Anyone who refuses vacation, resists oversight, or insists on controlling every financial step deserves a second look.
5. Train your board to ask smarter questions
A board that doesn’t understand financial oversight can’t provide it. Give them the tools — even a simple checklist changes everything.
Here’s the bigger reality
Nonprofits get hit with fraud more than you think, because the culture of trust often replaces the structure of accountability. And the people who commit fraud? They’re rarely strangers. They’re leaders, long-time employees, or the person everyone calls the “heart of the organization.”
Mission alone won’t protect you. Systems will.
And the good news? Systems aren’t expensive. They aren’t complicated. They just require intention.
