Expense Trimming Without Compromising Fraud Prevention

When tightening your nonprofit’s budget, it’s tempting to trim wherever possible. However, cutting too deep in the wrong areas, like internal controls or cybersecurity, may leave your organization vulnerable to fraud. The good news? Many effective fraud prevention strategies are low-cost and rely more on vigilance and smart planning rather than on big spending.

Now Is the Worst Time to Let Your Guard Down

Periods of financial strain often coincide with increased fraud risk. With fewer staff and more pressure on remaining employees and volunteers, the temptation and opportunity for misappropriation can rise—even among long-trusted individuals. That’s why internal controls should be strengthened, not weakened, during budget cuts.

Reinforce Internal Controls

Even with a lean team, it’s essential to maintain separation of duties. No single person should handle all aspects of financial transactions, such as receiving invoices, recording payments, and depositing funds. If your accounting team is short-staffed, consider temporary assignments from another department or a trusted board member to help maintain oversight.

If internal resources are stretched too thin, an external vendor may be a necessary investment to ensure proper checks and balances remain in place.

Tighten Financial Oversight

Review and revise your financial policies to reflect current staffing realities. For example:

• Lower the threshold for expenses that require managerial approval or dual signatures.
• Increase the frequency of random audits.
• Require two signatures on checks above a modest amount.

Small adjustments can significantly reduce the risk of fraud slipping through the cracks.

Train and Support Temporary Staff

If staff from other departments are stepping in to help with financial tasks, provide thorough training and supervision. Shadow them during the transition to ensure they follow procedures correctly and confidently.

This is also a great time to offer a refresher course on internal controls for managers, especially if they’re taking on new responsibilities like expense approval or activity monitoring. 

Don’t Skimp on Cybersecurity

Cyber threats remain one of the most common ways nonprofits are targeted. Protecting donor and employee data, including financial information, requires up-to-date cybersecurity tools. Maintain your software licenses to ensure access to critical updates and consider system upgrades to stay ahead of evolving threats.

Be cautious about accepting free IT help from volunteers. While well-intentioned, giving someone access to your network without proper vetting may expose your organization to serious risks.

Maximize External Support

Make the most of the the expertise of outside professionals. Have your staff work closely with consultants to gain knowledge and skills they can apply long after the engagement ends. This approach helps build internal capacity while addressing immediate needs.

Smart Savings, Strong Safeguards

Cutting costs doesn’t have to mean cutting corners. With thoughtful planning and a focus on maintaining essential safeguards, your nonprofit can weather financial challenges without increasing its exposure to fraud.

Need help balancing your budget while protecting your organization? Reach out—we’re here to help you do more with less.