Fraud is a crime, not a sector: A Q&A on protecting our nonprofits’ missions

Headlines have a way of blurring an important distinction: criminals exploit systems; nonprofits serve people. Minnesota’s nonprofit community—especially here in the Twin Cities—shows up every day for our neighbors, often under intense scrutiny and with limited resources.

In this Q&A, Abdo partners Darin Styles, CFE, and Joe Wallis share practical steps leaders can take to prevent fraud, strengthen trust, and keep the focus where it belongs: on mission and community. Abdo stands with the Twin Cities nonprofit community.

Abdo: What is the true cost of fraud for nonprofits?

 

Joe: Fraud doesn’t just drain dollars—it chills giving, diverts leaders, and slows mission work at the very moment communities need services most. What frustrates me is the double standard: one criminal act can paint an entire sector with suspicion, while a for-profit can miss its quarterly earnings target and no one assumes malfeasance. Let’s be clear: nonprofits don’t commit fraud; people do. These bad actors are not representative of the organizations that show up for Minnesota every single day.

Darin: The public nature of a nonprofit also means more people feel entitled to have an opinion on how it manages its funds. Any mismanagement is likely to result in additional public scrutiny.

 

“Let’s be clear: nonprofits don’t commit fraud; people do.”
– Joe Wallis

 

Abdo: What challenges do nonprofits encounter related to fraud prevention?

 

Darin: Fraud can happen to any organization, anywhere. If you give anyone too much authority or trust, it can create an opportunity for fraud. You want to believe everyone involved in your nonprofit is there for the right reasons, but it’s only as safe as its internal controls.

Joe: Two realities collide: lean teams and high trust. Those are strengths for service delivery, but they create openings if roles aren’t well segregated. Add volatile funding and evolving compliance, and leaders are forced to triage. My stance: treat internal controls as mission infrastructure, not “overhead.” It’s how you protect people, programs, and the public’s trust.

 

“Fraud can happen to any organization, anywhere.” – Darin Styles

 

Abdo: What are some fraud prevention best practices nonprofits should consider?

 

Darin: The most powerful way to prevent fraud is to remove the components of the fraud triangle: motivation, opportunity, rationalization. This could mean introducing as much segregation of duties into your workflows as possible. It could also involve limiting access to sensitive financial information or having a staff member who isn’t involved with bank reconciliations perform a monthly review of bank statements. You can find more tips in this article I wrote outlining specific fraud prevention measures.

Fraud prevention training is also critical; your security is only as good as your weakest link. You could pay a lot of money for the best firewall protection and spam filter, but if a fraudster succeeds in calling up a staff member to request a fraudulent payment, it won’t matter.

We advise our clients to trust but verify—to always practice professional skepticism.

Joe: Start by limiting opportunity. Build practical segregation of duties. Even in small organizations, pull in a board member for approvals and reconciliations or use a fractional reviewer for weekly check runs. Introduce simple but effective safeguards like requiring dual approval for payments, using read‑only access for anyone who doesn’t need to initiate transactions, and establishing a rotating spot‑check of vendor lists to ensure legitimacy. Document a clear escalation plan so everyone knows what to do when something feels off. And verify your insurance—many policies exclude losses tied to voluntary actions like replying to a phishing email.

 

“We advise our clients to trust but verify—to always practice professional skepticism.”– Darin Styles

 

Abdo: How could nonprofits better communicate with their donors about fraud?

 

Joe: Invite donors into the work. Explain, plainly, how general operating support powers strong controls, stable teams, and better outcomes. Share brief updates about the safeguards you use (without exposing sensitive details). Transparency builds trust, and trust fuels mission.

Darin: Nonprofits could consider including a brief discussion in their newsletters about their efforts to strengthen internal controls, policies, and procedures. This could be something like: No system of controls is ever going to be foolproof, but we’re doing the best with what we have. We take fraud prevention seriously; it’s part of our day-to-day operations.

 

“Transparency builds trust, and trust fuels mission.” – Joe Wallis

 

Abdo: How are you guiding nonprofits through fraud prevention?

 

Joe: We start with a candid risk assessment that maps where money moves, where approvals live, and where single points of failure exist. Then we design right-sized controls for your capacity today and your vision for tomorrow. If an incident occurs, we help you respond with urgency and clarity, remediate the gap, and communicate so confidence is restored. Bottom line: Abdo stands with the nonprofit community, especially here in the Twin Cities.

To learn how Abdo could empower your nonprofit, contact us today.