The Nonprofit:
An environmental focused nonprofit provided age-appropriate educational presentations to classrooms throughout the community.
The Incident:
An employee was issued a credit card in the nonprofit’s name to make mission related purchases as needed.
Over time, though, the employee used the card for unauthorized spending, accumulating nearly $25,000 in charges before the activity was detected.
The Legal Action:
After noticing suspicious charges, the nonprofit conducted a financial audit that pointed to the employee’s misuse of the credit card. A police report was filed, and the employee was arrested.
The Coverage:
The nonprofit had purchased optional coverage for Employee Dishonesty as part of its insurance program with Nonprofits Insurance Alliance (NIA). That coverage was activated by the nonprofit’s broker after the loss was identified and reported.
The Result:
Through the claims process under the Employee Dishonesty coverage, NIA confirmed the facts of the loss (and coverage), then obtained financial records to support the value of the claim and then paid the nonprofit (minus their deductible).
Once that happened, the claim was transferred to NIA’s Subrogation Department to pursue recovery from the liable employee.
Things the Nonprofit Did Well:
The nonprofit had elected to carry coverage for employee dishonesty before the incident occurred.
Once irregularities were identified, the organization initiated an audit promptly, notified its insurance broker, and involved law enforcement.
How Can Your Nonprofit Protect Itself?
Nonprofits that manage financial accounts and credit instruments sometimes consider how spending authority is assigned, how transactions are reviewed, how account access is controlled, and how irregularities are investigated.
Clear documentation, periodic review, defined approval processes, and established response procedures can help organizations identify issues early and respond effectively when concerns arise.
From the Claims Files stories are for general information only. They are simplified examples and do not guarantee coverage, a defense, or any specific outcome. Some losses described in this series may not be covered.
Coverage depends on the specific facts and on the terms, conditions, and exclusions in your policy. Contact your insurance broker or agent for guidance, and follow your policy’s claims reporting procedures if an incident may involve a claim.
This story is not legal, medical, financial, or professional advice. In an emergency, contact local emergency services first. Any risk management practices mentioned are general suggestions and may not apply to every nonprofit. Follow all applicable laws, licensing rules, and reporting requirements.
