Nonprofits operate under intense scrutiny from many sources, including donors, regulators, watchdog groups, and the communities they serve. A single instance of fraud can damage an organization’s reputation, erode donor confidence, and divert precious resources away from critical missions. Anonymous fraud reporting hotlines are, therefore, essential.

Discreet — and effective — option

According to the Association of Certified Fraud Examiners (ACFE), nonprofits lose an average of 5% of their annual revenue to fraud. In the 2024 ACFE Report to the Nations, the median loss when a not-for-profit experiences fraud is $76,000. Implementing proactive measures to prevent and address fraudulent behavior is paramount. The ACFE report says that adding a confidential hotline cuts the median loss of a fraud scheme in half and reduces its duration by about half.

Hotlines are effective because they provide a discreet way for employees, volunteers, donors, and stakeholders to report suspected unethical or fraudulent activities. Unlike traditional reporting channels that may be hindered by fear of retaliation or organizational hierarchy, hotlines encourage whistleblowers to come forward without fear of retribution.

Possible benefits include:

Privacy and secrecy. Hotlines may reduce the fear of speaking up by offering tipsters the chance to report issues anonymously.

Early detection. Organizations that provide hotlines can minimize damages to their finances and reputation by halting schemes early on.

Demonstrating a commitment to responsible operation. A hotline represents a commitment to fraud prevention and ethical conduct.

In addition to a phone-based hotline, you may consider offering email and web-based reporting tools.

5 implementation tips

To maximize your fraud hotline’s effectiveness, be sure to:

1. Use a reputable service provider. Third-party hotline services are available and offer neutrality and confidentiality of reports.
2. Train employees and volunteers. Staff, volunteers, and others should learn how to use the hotline and the types of incidents or suspicions to report. Also, post signs in break rooms and other high-traffic areas publicizing your hotline.
3. Set clear policies. Procedures for investigating reports, protecting whistleblowers, and addressing confirmed instances of fraud should be communicated.
4. Get the word out. Promote your hotline to other stakeholders, such as donors and vendors, by including information on your website and in newsletters.
5. Review any reports and act swiftly. Regularly review hotline reports, investigate them thoroughly, and take appropriate corrective actions.

You may want to engage a forensic accountant to conduct interviews and collect evidence of fraud.

Real-world success

Several nonprofits have successfully leveraged hotlines to detect and deter fraud. For instance, a large international humanitarian organization uncovered misappropriation of funds in a remote regional office after a tip was submitted via hotline. Swift action resolved the issue and reinforced the organization’s commitment to accountability.

In another case, a hotline report led a small nonprofit to identify fraudulent expense reimbursements by a staff member. Timely intervention saved the organization thousands of dollars and prompted a review of internal controls.

Bottom line

Fraud hotlines are invaluable for nonprofits seeking ways to protect their assets and uphold public trust. By providing a safe, anonymous channel for reporting, you can enhance your organization’s fraud prevention strategies, strengthen stakeholder confidence, and help ensure staffers remain focused on your mission.

© 2025