The pervasive threat of fraud means organizations must be cautious when sending any payment, including when matching employee contributions to charitable organizations.
According to Forbes, there are increasing instances where employees are manipulating programs intended to benefit nonprofits and charities in order to funnel funds from their employers.
In some cases, employees have set up phony foundations and made contributions solely to exploit the charitable gift match. These bad actors have sometimes even recruited co-workers, friends, or family members to donate to these fake nonprofits to boost their company’s matching donation.
There have also been instances where employees made donations to legitimate entities to receive personal perks. This could include giving to a university to receive tickets to a sporting event or a parking pass, or contributing to a private school their child attends in return for discounted tuition.
Building Stronger Safeguards
These types of fraud attacks are often successful because many organizations are overly trusting. They assume their employees would not take advantage of programs intended for charities.
Because of this trust, many organizations have inadequate safeguards in place to prevent employee abuse. Some companies only require a printed receipt or a letter from the charitable organization as proof of donation—items that can be easily forged.
To protect against these types of internal attacks, experts suggest that companies conduct annual employee training on the proper use of the programs, require more stringent supporting documentation for donations, and perform regular audits of the program.
Making an Impact in the Community
For organizations, this emerging fraud trend might seem like just another fraud vector in a growing wave. Nearly 80% of companies reported experiencing some type of fraud attack or attempt in the past year, according to research from AFP. While there are plenty of attacks coming from outside, organizations also have to worry about threats from within—including employees, vendors, and customers.
One unfortunate repercussion of fraud is that it can cause organizations to overreact. For example, if an employee is found manipulating a gift matching program, the company might hamstring the program or eliminate it entirely.
This can adversely affect legitimate nonprofits and hinder a company from achieving what is often a core objective—to make an impact in the community. That why it’s essential for companies to put safeguards in place to protect against the misuse of charitable donations.
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