Learn what types of fraud your organization might be susceptible to while improving awareness and learning what things can be done to protect from fraud and abuse.

2. Presented By:
W. Andrew Powell, CPA
Principal
Halt, Buzas & Powell, Ltd.

3.  Increase understanding of the types of fraud
an organization may be most susceptible to
 Improve awareness of the importance and
application of an organization wide approach
to protecting against fraud and abuse
 What things your organization can
implement to protect against fraud and
abuse

4.  Webster’s dictionary
 The Association of Internal Auditors

5.  Occupational
◦ Definition – use of one’s occupation for personal enrichment
through the deliberate misuse or misapplication of the
employing organization’s resources or assets
◦ Categories of occupational fraud
 Asset misappropriations
 Corruption
 Fraudulent statements

6.  Association of Certified Fraud Examiners
(ACFE)
 Every two years issues a “Report to the
Nation” dealing with Occupational Fraud
 The 2006 results are from a study of data
from 1,134 cases of fraud

7.  147 Cases involving NFPs, schemes included:
Scheme Cases Percentage
Corruption 43 29.3%
Billing 42 28.6%
Expense reimbursements 42 28.6%
Check tampering 36 24.5%
Skimming 33 22.4%
Cash larceny 26 17.7%
Non-cash 21 14.3%
Payroll 19 12.9%
Fraud statement 8 5.4%
Wire transfers 8 5.4%
Register disbursements 1 0.7%

8.  How fraud was detected

9.  What type of anti-fraud measures existed
in the organizations

10. Of all the 1,134 cases in the 2006 study:
 23.4% resulted in 25% or less in recovery
amount
 18.1% resulted in 26% to 75% of recovery
amount
 16.4% resulted in 100% of recovery amount
 42.1% resulted in no recovery

11.  Opportunity
 Intent
 Motive
 Concealment
 Rationalization

12.  Financial condition of the organization
 Pressure to present results for funders and
general public
 Internal accounting controls
 Integrity level of corporate leaders and
employees
 Commitment to organizations value system
 Reward systems for ethical behavior

13.  Personal traits and characteristics of
executives and employees
 Organizational culture and dynamics
 Peer pressure
 Perception of detection
 Swiftness, certainty, and severity of
punishment

14.  Types:
◦ Investment scams
◦ Vendor
◦ Customer
 Forms:
◦ Theft of intellectual property
◦ Check and credit card fraud
◦ Money laundering
◦ Computer and internet
◦ Contract and procurement
◦ Identity theft

15.  Environment of trust
 Excessive control by founder, exec director,
major contributor
 Board of Directors lacking financial expertise
 Existence of nonreciprocal transactions
 Lack of resources for financial management
 Job security linked to program and financial
reporting (especially an org with gov’t grants)

16.  Ghost employees
 Sub recipient fraud
 Expense reimbursements
 Skimming of charitable contributions
 Financial assistance
 Founder/leader syndrome
 Fundraising

17.  Reputation impact
◦ Program management
◦ Personnel recruitment
◦ Fundraising
◦ Overall image
 Employee morale
 Actual loss of assets or resources
 Insurance coverage
 Investigative and prosecution costs
 Corrective action

18.  Acknowledge that fraud and abuse is an
organization issue
 Establish a practice of periodic risk
management as it relates to fraud and abuse
 Develop an organizational model for
controlling fraud and abuse

19.  Organizational facts:
◦ Everyone in the organization has a role in detection and
prevention
◦ Traditional internal accounting controls play a role
◦ Primary reliance on the external audit is not enough

20.  Organizational facts (cont.):
◦ People and circumstance change over time, which may
increase the risk
◦ The real cost, once discovered, can not be measured in
terms of dollars
◦ A probability exists that some level of fraud or abuse may
already exist or could happen in the near future

21.  Risk management activities:
◦ Assessment
◦ Reduction
◦ Transfer
◦ Acceptance

22.  Organizational model for controlling fraud
◦ Establish appropriate financial controls as related to
opportunities to commit fraud
◦ Establish non-financial systems to deal with fraud risk
factors
◦ Establish a tone at the top relating to fraud

23.  Experiences to share
 Additional comments

24. W. Andrew Powell, CPA
Principal
Halt, Buzas & Powell, Ltd.
(703) 836-1350
apowell@cpas4you.com