Here is Mango (Management Accounting for Non-governmental Organisations) Top Tips on the Warning Signs of Fraud in Charities - MANGO is a UK organization that provides valuable training and resources in financial management.
Top Tips on the Warning Signs of Fraud
Remember: “Prevention is better than cure!”
The following ideas may be an early indication of fraud or abuse. Use with care!
From the accounting records:
Lots of corrections to the manual cashbook – this may include extensive use of white-out or blocked out figures
Pristine records – ie a manual cashbook that look as if they have all been written on the same day in the same hand. Could be an indication of rewritten/duplicate books
Delayed banking of cash received – shown up by bank reconciliation. Could be ‘teeming and lading’?
Records not being kept up to date – ie deliberately delayed so managers cannot detect false accounting going on.
Missing supporting documents – eg certain bank statements destroyed to cover someone’s tracks, or a project officer who regularly claims to have ‘lost’ receipts.
Debtors rising unexpectedly – eg if debtors have paid but the cash is being pocketed. This may occur if there are poor controls in issuing receipt books as someone could take an unused book and issue valid receipts without them ever being entered into the accounting records.
Hand written supporting documents with errors and corrections on them. Indicates possible changes made after the goods or services were purchased.
Cash counts not reconciling to the accounts but reconciling at the next cash count – possible borrowing of funds by the safe key holder.
Budget monitoring reports showing inconsistent behaviour between line items - eg project-related expenditure is under-spent due to delays – except for fuel which his over-spent. This could indicate abuse of the vehicle.
Vehicle log books not maintained in an appropriate level of detail. This could indicate abuse of the vehicle.
Budget monitoring reports delayed – to cover up something?
Working very long hours – first in last out of the office? Could mean that they are having to do extra work to cover tracks?
Never taking holidays – can’t afford for someone else to see what they are doing!
Change of lifestyle – spending patterns don’t match their income (eg designer clothes, social habits, expensive car…)
Creating ‘smoke screens’ – where someone is making a false accusation about another team member to give them time to cover their tracks or make a getaway!
And some Ideas on fraud prevention:
Make sure you have robust internal control systems in place.
Visit projects, and see if the activities carried out roughly match the expenditure.
Share financial reports with beneficiaries, and ask if they think they have had value for money (find out how: http://www.whocounts.org).
Hold regular meetings with other staff at all levels (eg project and administrative staff, board members, etc) to discuss financial reports, making budgets and reports openly available.
Help non-finance staff and managers improve their financial skills, for instance by reading Mango’s Guide to Financial Management (available on the CD-Rom in your training pack.)
Do you require legal advice with respect to Canadian or Ontario non-profits or charities?
Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.