Fraud – How to Prevent, Detect, and Correct
We hear about fraud in the news, but we don’t want to consider it as a possibility in our ministry.
While this short summary is not meant to be all-inclusive, it will help you assess your current situation and determine if additional precautions or considerations may be necessary to protect your organization.
Remember! Most fraud is committed by a faithful, long-serving volunteer or staff member.
Basic fraud prevention steps:
____ Ethical “tone at the top”
____ Adequate segregation of duties
____ Involvement of independent CPA or internal audit
____ Proper review of financial information by ministry leaders and board members
____ Conflict of interest policy and annual disclosure
____ Whistleblower reporting policy
____ Cross training of financial duties and mandatory vacations
____ Communication and enforcement of a zero-tolerance fraud policy
Basic checklist of behaviors and actions on the part of a member of the finance team that may serve as warnings of a possible fraud environment:
____ Never takes a vacation
____ Is controlling or does not allow others to help with his or her tasks
____ Has unusual mood swings
____ Has known financial pressures such as spouse job loss
____ Has known personal problems such as divorce or serious medical issue for self or family member
____ Appears to be living beyond his or her means
____ Displays a defensive attitude
____ Vocalizes dissatisfaction with job or pay
____ Is messy/disorganized
____ Does not prepare timely reconciliations or has unusual reconciling items
____ Has insufficient or missing documentation
____ Is delayed in preparing financial statements or other information
____ Reports inaccurate financial information
Basic follow-up steps if fraud is suspected:
____ Don’t overreact or make accusations prematurely
____ Notify the board, legal counsel, and the insurance company
____ Hire an expert to investigate
____ Based on recommendations from experts and legal counsel, determine a course of action
____ Determine how the fraud occurred
____ Update policies and procedures to prevent a similar occurrence in the future