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Taking steps to limit potential fraud

by The NonProfit Times - August 19, 2013

Until nonprofit leaders can find a way to eliminate the gene that makes humans want to keep sticking their hands in the cookie jar, they’ll have to be on the alert for fraud. It must be something about having all that money around that brings out the worst in people.

During the AICPA Not-for-Profit Industry Conference, Mitchell Lewis, David McRoberts and William Mellon offered several facts about fraud, taken from the Association of Fraud Examiners 2012 Global Fraud Survey (which includes for-profits). They said that too much trust and lack of oversight are breeding grounds for fraud.

With all that in mind, what can be done to limit fraud? Lewis, McRoberts and Mellon offered the following suggestions:

  • Fraud governance structure, including tone at the top, a zero tolerance policy, documented fraud policy statement and a code of ethical behavior.
  • Regular education and training.
  • A fraud tip line.
  • Completion of a fraud assessment to identify fraud exposures and related events that require mitigation.
  • An investigation and response reporting process.

Specific anti-fraud controls:

  • Vendor bidding process.
  • Completion of background and reference checks.
  • Dual signatures and levels of approval.
  • Segregation of duties.
  • Mandatory vacations.
  • Internal audits and use of Computer Assisted Audit Techniques (CAATs).


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