Tag: Financial Transparency

All of us want to trust those we work with and that they share our beliefs about ethical practices. Unfortunately, this is not the case all the time. Fraud is a real risk for nonprofit organizations. Fraud can have a serious impact on your organization’s reputation, future receipt of donations, stakeholder trust, and more. It is essential that you safeguard your organization from fraudulent activity. One more important area impacted by fraud are the financial facets of your organization. This can truly be costly. We will take a closer look at financial safeguards and actions you can take to reduce the risk of fraud at your nonprofit in the area of finances. For other actions you can take to safeguard your nonprofit in the area of the board of directors from possible fraud, visit here. Those tips will help you be aware of four conditions that promote fraud and tips for avoiding it as a board.

Beck and Company’s Certified Public Accountants and Business Advisors can help with important aspects of safeguarding finances and financial transactions within your nonprofit and take the importance of this very seriously. Fraudulent activity can be costly, damaging, and ultimately destructive to organizations and their important work. That’s why we offer nonprofit financial audits to help you help your organization be very knowledgeable about the financial practices that are occurring within your nonprofit. This knowledge can be used to help you be more actively involved in upholding and maintaining effective financial reporting to prevent fraud. We can conduct internal financial audits and provide you with the facts you need to stay current on financial dealings and not allow fraud to creep into areas that are not being monitored but should be. Learn more about our auditing services here.

Financial Facets that need to be Safeguarded and Tips to Prevent Fraud

• Checking and Banking accounts
• Keep blank checks locked in a secure location and restrict access to them
• On a monthly basis, have staff outside of the disbursement initiation, approval, and check-signing functions that are at the senior level obtain unopened bank statements and review cancelled checks and statements
• Implement an independent review (here at Beck and Company CPAs, we can do this for you) of monthly bank reconciliations and related journal entries
• Record all new accounts and closed accounts in finance committee minutes
• Learn what fraud prevention services may be offered through your banking institution
• Revenue and receipting
• Use dual control where more than one person is receiving and counting receipts in addition to check and cash contributions
• Require all grant notifications to be reported to the finance department
• Reconcile earned revenue (such as student enrollment numbers or tickets sold) with statistics outside of the finance department
• Disbursements
• Compare vendor addresses and employee addresses periodically to ensure there is no crossover
• Detect kickback schemes by performing independent price checks of payroll taxes withheld against amounts actually paid
• Require two live signatures for every check and wire transfer that is of significant value (determine that amount as a group)
• Reporting
• Set reasonable spending limits on company credit cards and purchasing cards
• Require finance department reviews of periodic reporting on all grants to ensure effective financial reporting is in place
• Require reporting on monthly balance sheets and income statements
• Expense reporting
• Formulate and strictly enforce credit card expenditure documentation
• Have a nonprofit financial audit committee member review CFO and CEO expense reports for true financial transparency in the organization from top to bottom

Financial transparency is so important to reducing the risk of fraud. Beck and Company CPAs are here to assist you with any area within the financial realm that you may need expert help in for everything from establishing more effective financial reporting systems to conducting nonprofit financial audits that can reveal anything that needs a closer look in order to be safeguarded from fraud. Please contact us for information and help in these areas.

Implementing systems and actions meant to help your nonprofit organization prevent and eliminate fraud are essential to its ongoing financial and organizational health. Last week, we took a look at six important facts you should know about fraud that will help you take actions against it and implement effective financial reporting in the process. Click here to learn more. Beck and Company’s Certified Public Accountants and Business Advisors have also shared some tips and steps for preventing fraud in the past that are an important starting point in fraud prevention. Today, we will look at some additional actions you can take to further reduce fraud risks to your organization through actions needed within the board of directors. View the other prevention tips as a starting point, and then keep reading for additional tips and help.

Beck and Company CPAs offer auditing services to carry out nonprofit financial audits at your organization that can provide you with an extensive examination of financial information. These audits will give you a closer look at possible areas of fraud within your organization so that you can be intentional in dealing with them. We would be more than happy to help your organization in this way so you can help your organization maintain its wellbeing and prevent abuse.

Four Conditions that Promote Fraud:

Before we look at additional tips for preventing fraud, it is important to note the four factors or conditions that, when present in your organization, lead to fraud occurring. Be sure you are aware of the existence of these conditions so you can stop them both within the organization and the board of directors. They are:

• Incentive (personal, professional, and financial gains)
• Opportunity (ineffective financial reporting or lack of reports that allow for easy access and actions with little or no knowledge being able to be tracked by others)
• Rationalization (justification of need or ability to commit abusive or fraudulent act)
• Capability (in a position of trust and access to funds that make it easy to commit fraud)

Tips for Preventing Fraud within the Board of Directors at Nonprofits

Board members are not exempt from having the potential to commit fraud. In fact, they often have more access to information and funds in addition to being the most trusted within an organization. They can use this power and the above four conditions that are often most true of the board in order to take advantage of the nonprofit organization. Here are some tips to help ensure the board, too, is upholding financial transparency and acting with integrity even with more power and access available to them.

• Institute a board member code of conduct and ethics policy
• Create and use a conflict of interest policy and require all board members and senior staff alike to sign this disclosure statement on an annual basis
• Require staff and board member background checks including for those in existing roles (especially finance staff and those in the most sensitive positions)
• Establish a formal audit committee with a charter laying out specific duties and tasks. Beck and Company CPAs would be pleased to help you in this process and as the auditors.
• Enforce a formulated gift acceptance policy for all gifts
• Monitor performance throughout the year of internal control policies and procedures by requiring finance staff to report results of reviews of internal control processes and use effective financial reporting
• Engage an independent accounting firm (such as Beck and Company CPAs) to evaluate controls as an agreed-upon procedure that occurs regularly

These board fraud prevention tips are only one area that needs fraud prevention. Stay tuned next week for tips that span across the financial domain of the organization. Beck and Company CPAs can help with nonprofit financial audits that will give you the financial transparency you need as an organization to prevent abuse within the board and nonprofit. Please contact us for assistance.

Fraud is, in essence, criminal deception or wrongful action intentionally intended to result in personal and most often financial gain. Unfortunately, even nonprofit organizations are susceptible to fraudulent activity, and this can even occur within the organization internally through staff actions of finances that manipulate the truth of the financial reality or use it for personal instead of organizational use. Last week, we took a look at ways to prevent fraud, the many types of financial fraud that exist, and how financial transparency can help. To learn more about all of these important facets to understand in terms of fraud, visit here.

Beck and Company’s Certified Public Accountants and Business Advisors know how important it is for your organization to truly thrive and accomplish its mission. Fraudulent activity can be both damaging and ultimately destructive to organizations and their important work. That’s why we offer nonprofit financial audits to help you help your organization be very knowledgeable about the financial practices that are occurring within your nonprofit and so you can be educated and actively involved in upholding and maintaining effective financial reporting to prevent fraud. We can conduct internal financial audits and provide you with the facts you need to keep up on financial dealings and not allow fraud to creep into areas that are not being monitored but should be. Learn more about our auditing services here.

Facts about Fraud that Your Nonprofit Organization Needs to Keep in Mind:

Let’s take a closer look at some important facts about fraud that you need to know.

1. It likely already exists. Like it or not, there is a very high probability that fraud or financial abuse already exists somewhere within your organization. Accepting this but being active in not letting it spread farther is essential.
2. The cost of fraud goes far beyond dollars lost. The true and real cost of reported instances of organizational fraud or abuse cannot be measured in terms of just dollars lost. They must also be measured in terms of lost public and internal trust in the organization.
3. Changes to personnel and circumstances increase fraud risk. No organization is completely stagnant. As situations change and staff turnover or expansion takes place, new people and systems are involved all the time. These changes can increase the risk of internal fraud and abuse.
4. Internal controls alone are not enough to prevent fraud. Certainly internal controls play a key role in deterring fraud and abuse, but they only represent one facet of the many, including effective financial reporting and financial transparency, that are needed for fraud prevention and detection.
5. Everyone involved in the nonprofit must also be involved in fraud prevention. All constituents, staff, and board members have a role to play in preventing and detecting fraud and abuse. Everyone within an organization has a responsibility and duty to be active in noticing, reporting, and responding to fraud. No one should think they are exempt from this role.
6. Fraud’s intensity increases with the level of the organization. Typically, fraud from the top of the organization is much more major and far more costly. Even still, minor fraud can still occur and impact an organization at the lower levels of an organization even if they are less severe.

Keep these facts about fraud in mind, and share them with those in your organization. Use them as a starting point through which you create your action steps in preventing fraud. Beck and Company CPAs are here to help you by carrying out nonprofit financial audits and taking other steps needed to help your nonprofit increase financial transparency and decrease fraud. Please contact us for assistance.

Is your nonprofit at risk? Do you know if fraudulent activity is taking place within your organization? None of us want to become a statistic, but with the rampant and varied means by which fraud occurs, it can be easier than you realize to be susceptible to fraud. In today’s society, fraud is like a mask that covers up the truth and takes on many different forms and identities which makes it harder to identify and eliminate. No matter what, fraud is a destruction of trust, and it is so important to be aware of what is truly going on within your organization in order to prevent it. Because nonprofits are considered trustworthy by nature of the public good they intend to do, the damage in violating trust is even more severe for not-for-profit organizations.

Reducing Fraud’s Risk:

We all know and understand that abusing trust can be costly for nonprofits. Ultimately, it could be more than just costly for fraudulent activities to take place at an organization. It can actually completely destroy and terminate organizations that are not careful and vigilant in protecting their organization and doing all of the necessary steps to prevent fraud. Fraud can be prevented by using internal controls and internal audits in order to be detecting it quickly. It can also be stopped by educating the organization’s staff on the forms of fraud and actions that would constitute it in addition to its impact and how to report it if it is being noticed. Finally, fraud can be prevented through the board of director’s vigilance, policies, and financial supervision. To learn more about these three ways to prevent fraud, visit here.

Beck and Company’s Certified Public Accountants and Business Advisors offer auditing services that can provide you with an extensive examination of financial statements to give you a closer look at possible areas of fraud within your organization through a nonprofit financial audit so that you can be intentional in establishing and maintaining trust in those areas instead of harming it. These nonprofit financial audits are truly essential to maintaining the organization’s health, but they are not the sole means through which fraudulent activity can be discovered. Ongoing effective financial reporting and the use of these reports to continuously be sharing this information with constituents and board members to ensure financial transparency is essential.

The Types of Fraud and How Financial Transparency can Help:

Let’s take a closer look at the forms and faces fraud can take and how to unmask these fraudulent activities and prevent them with financial transparency and effective financial reporting. Nonprofit organizational fraud can take the form of:

• Payroll or billing schemes
• Check tampering
• Unrecorded or understated funds
• Mischaracterized or fictitious expenses
• Undisclosed conflict of interest transactions
• And many other forms as well

Clearly, many of the types of fraud stem directly to finances and financial practices within a nonprofit organization. Both intentional errors in use of funds and intentional errors in recording funds lead to fraud and trouble for nonprofits. Falsifying funds and financial records is so costly and damaging to organizations that it is important to be consistent, vigilant, responsible, and in tune to financial actions and transactions on an ongoing basis in order to uphold financial transparency. Effective financial reporting is key, and active involvement in financial dealings is essential to knowing what is going on within the financial side of the organization to prevent dishonest activities from having a chance to even occur let alone expand.

Beck and Company CPAs are passionate about helping nonprofits get their financial reporting in order so they reduce the risk of fraud. Learn more about all of the nonprofit services we offer in addition to the auditing services mentioned earlier. Contact us to let us know how we can help your organization with the financial services, internal audits, and other services to keep your finances in check and your organization “unmasked” to prevent fraud.