Fraud and Embezzlement - non-profit organizations

Preventing Fraud in Nonprofit Organizations -
How It Happens and How You Can Prevent It

Description

Table of Contents

Book Excerpts
- Chapter 1
- Chapter 6
- Chapter 18

About the Author

$50.00 each

Ed McMillan, CPA, is a member of the Society of Certified Fraud Examiners and has uncovered hundreds of embezzlements. This practical guide to fraud avoidance is a must-have book for the organization that is serious about protecting its assets against employee dishonesty.

Written in easy-to-understand language, this valuable resource not only includes guidance on implementing effective internal control policies to avoid fraud, it also explains, through fascinating stories based on actual scams Ed has uncovered, profiles of embezzlers, warning signs to look for,
valuable check lists and tips, and what could happen if the controls included in the book are not implemented.

THE POINT IS SIMPLE -
You only think your employees are honest

Table of Contents

CONTENTS
About the Author
Preface
Chapter One - Embezzlers, When They Embezzle, and Who They Are (Excerpt)
Chapter Two - Bank Statements
Chapter Three - Bank Account Reconciliation's
Chapter Four - Organization Credit Cards
Chapter Five - CPA Management Letters
Chapter Six - The "Window of Opportunity for Embezzlement (Excerpt)
Chapter Seven - Internal Control Evaluations by CPA Firms
Chapter Eight - Payroll Tax Deposits
Chapter Nine - Hand Written and Typed Check Protection
Chapter Ten - Check Stock
Chapter Eleven - Cash Transactions
Chapter Twelve - Signers on Bank Accounts
Chapter Thirteen - Check and Wire Transfer Signatures
Chapter Fourteen - Vacations and Mandatory Time Off
Chapter Fifteen - Lock Boxes
Chapter Sixteen - Pre-Approved Loans and Credit Cards
Chapter Seventeen - Deposit Security and Endorsements
Chapter Eighteen - Bonding Issues (Excerpt)
Chapter Nineteen - Numbered Check Request Forms
Chapter Twenty - Two Signatures on Checks
Chapter Forty Five - Questionnaire

Chapter Twenty One - Positive Pay
Chapter Twenty Two - Computer File Back-Ups
Chapter Twenty Three - The Danger With Acronyms
Chapter Twenty Four - Wire Transfers
Chapter Twenty Five - Background Checks
Chapter Twenty Six - Nepotism
Chapter Twenty Seven - Insurance Committee
Chapter Twenty Eight - Internal Audit
Chapter Twenty Nine - Bad Debts
Chapter Thirty - Exit Interviews
Chapter Thirty One - Lines of Credit
Chapter Thirty Two - Non-Compete Agreements
Chapter Thirty Three - Confidentiality of Information
Chapter Thirty Four - Conflicts of Interest
Chapter Thirty Five - Expense Accounts
Chapter Thirty Six - Whistle Blowers
Chapter Thirty Seven - Audit of Receipts
Chapter Thirty Eight - Kiting
Chapter Thirty Nine - Inventory Issues
Chapter Forty - The Post Office
Chapter Forty One - Ghost Vendors and Endorsement Comparisons
Chapter Forty Two - Random Disbursement Checks
Chapter Forty Three - What to Do if You Find Yourself the Victim
Chapter Forty Four - Personal Exposure Protection

Chapter One - **Embezzlers, When They Embezzle, and Who They Are**
T	THE EMBEZZLERS After investigating hundreds of fraud scenarios, I realized they all had one thing in common: The embezzler was ALWAYS the person the organization would LEAST expect to be a thief! That's right, the perpetrators were trusted employees and above suspicion. They were always the nice young man with the pretty girlfriend and they sang in the choir together! Or it was the woman who had been around for years and she was the one who could be counted on to bring in the birthday cakes and cookies! And this is not tongue-in-cheek, I'm serious. After all, what is the alternative? Consider the following - you advertise for a new Chief Financial Officer, and you interview someone with just the right education and experience. Fact #1: You can't get an honest reference! Forget it, about all you will get is a statement on position title and longevity. In our litigious society, you don't know who you are hiring. (Note: See the BACKGROUND CHECKS chapter of this manual) So, you hire the person and everything is fine until you find out that he lied about his education and fabricated his work experience. Additionally, several pieces of expensive office equipment are found to be missing and people have seen him putting suspicious packages in the trunk of his car at unusual hours. You have a real sleaze on your hands, so what are you going to do with him around your organization, keep him in charge of your money? I don't think so! In every organization I've consulted with the individuals handling the money at least had the appearance of honesty - anything else of course would be foolish. Fact #2: You don't know what is going on in a person's private life, and they will hide it from you.

Chapter Six - **The "Window of Opportunity for Embezzlement**
T	THE "WINDOW OF OPPORTUNITY" FOR EMBEZZLEMENT Do you arrange for the independent CPA firm to test the system of internal controls during the "Window of Opportunity" for embezzlement? Yes ( ) No ( ) FRAUD CONSISTENCIES When I am involved in uncovering fraud, I always take notes and compare the details of the current situation with past situations to determine if there are any similarities. Two consistencies are very important: 1. The perpetrators were always people who were trusted and above suspicion 2. Most of the situations occurred during the "Window of Opportunity" for embezzlement The issue of who embezzlers are was discussed in the first chapter of this manual, but it is very important to discuss the other consistency of when fraud occurs. THE "WINDOW OF OPPORTUNITY" The "Window of Opportunity" for an embezzlement is between the time the independent CPA leaves the office after auditing the current year and returns to start the audit for the subsequent year! Obviously, an embezzler would realize it would be foolish and too risky to perpetrate an embezzlement while the auditors are physically in the office! The reality is, however, that an organization can typically have this window open for as long as ten months of the year! WHAT ACTION TO TAKE? It is suggested that you meet with your auditing CPA to discuss the issue. I think it is wise to arrange for the auditor to come into the office unannounced during this window of opportunity for fraud. In fact, a self-confident CEO should not even

Chapter Eighteen - **Bonding Issues**
T	BONDING ISSUES Does your organization have a Fidelity Bond? Yes( ) No ( ) Is the amount of the bond adequate? Yes ( ) No ( ) Do you know who is not covered on the bond? Yes ( )No ( ) Do you have a predetermined plan of action steps to take in the event of a claim? Yes ( ) No ( ) It is extremely important for all organizations to have a Fidelity Bond, also known as Employee Dishonesty Insurance. The purpose of bonding employees is to make the organization whole in the event of an, internal embezzlement. Important Issues: Covered employees Amount of the bond Claims Excluded individuals COVERED EMPLOYEES Every employee who literally touches money coming in and/or money going out of the organization should be included on the Fidelity Bond, including, if possible, the person who opens the mail, accounting personnel in accounts receivable and