What every nonprofit must do to protect against misuse of grant funds.(NPT SPECIAL REPORT)

* Establish a clear policy and oversight mechanisms related to the following high-risk issues: payroll advances; payment of Internal Revenue Service (IRS) and state revenue withholding taxes; and, past due vendor invoices. These issues are very commonly used in embezzlement schemes as a way to free up cash or extract it from an organization. An independent board member should keep tabs on these types of transactions to help identify potential problem areas.

Finally, every nonprofit should regularly educate employees and board members regarding the risks of grant fraud and the consequences if such activities occur. By emphasizing the above prevention strategies, every organization can make great strides in reducing the impact of fraud and ensuring a focus on its primary mission.

If you become aware of fraud issues related to grant funded organizations or programs, report them to grantors and the appropriate federal, state, or local Office of the Inspector General (OIG).A list of federal OIG's can be found at www.ignet.gov

BY KENNETH R. DIEFFENBACH, CFE

Ken Dieffenbach is a senior special agent with the U.S. Department of Justice, office of the Inspector General, Fraud Detection Office. The Fraud Detection Office focuses on the prevention, detection, and investigation of fraud related to Department of Justice grants and contracts and related employee misconduct matters. The views in this article are that of the author and not necessarily those of the Department of Justice or the Department of Justice OIG. His email is kenneth.rdieffenbach@usdoj.gov The DOJ OIG Web site is www.usdoj.gov/oig

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