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