16 anti-fraud controls

December 15, 2014       The NonProfit Times      

It never lets up, nor should you. In nonprofit operations, that’s usually true no matter what “it” is.

One “it” requires never-ending caution is the area of fraud and fraud prevention. Nonprofits do a lot of fundraising, and they do a lot of work with those funds that were raised, which means the opportunity for fraud exists, all of the time, in a lot of ways, in a lot of places.

During the Summit for New Risk Champions in St. Petersburg, Fla., Melanie Lockwood Herman of the Nonprofit Risk Management Center emphasized the importance of anti-risk controls. She added that the presence of such controls correlates with significant decreases in cost and duration of occupational fraud schemes.

Herman offered 16 anti-fraud measures and said that organizations that implemented any of them experienced considerably lower losses and time-to-detection spans. The measures are:

  • Rewards for whistleblowers;
  • Job rotation/mandatory vacation;
  • Surprise audits;
  • Formal fraud risk assessments;
  • An anti-fraud policy;
  • Fraud training for employees;
  • Fraud training for managers and executives;
  • A hotline;
  • Employee support programs;
  • An independent audit committee;
  • Management review;
  • An external audit of internal controls over financial reporting (ICOFR);
  • Internal audits;
  • Management of certification of financial statements;
  • Code of conduct; and,
  • External audit of financial statements.