control, and governance
Not-for-Profits Are No Stranger to Occupational Fraud
A fraud risk management process can be a strong deterrent to unscrupulous behavior.
Not-for-profit organizations are no more immune to occupational fraud than any other type of organization. In fact, according to the 2008 Report to the Nation on Occupational Fraud and Abuse, published by the Association of Certified Fraud Examiners (ACFE), 14.3 percent of not-for-profit organizations fell victim to fraud during the time leading up to the report's publication.
Not-for-profit groups, as well as other types of organizations, could benefit from a fraud risk management program. Managing the Business Risk of Fraud: A Practical Guide, published by The Institute of Internal Auditors, The American Institute of Certified Public Accountants, and ACFE, suggests that while most organizations have written policies and procedures to manage fraud risks (e.g., codes of conduct and expense account procedures), few have developed a concise summary of these documents and activities to help them communicate their processes. According to the guide, an ongoing awareness program is a key enabler to convey fraud risk management expectations, as well as an effective preventive control.
The 2008 Report shows that while median losses at not-for-profit organizations were significantly lower (US $109,000) than those at private organizations (U.S. $278,000), both organization types endured fraud schemes that had a median length of two years. ACFE's report further examines victim organizations and shows that of 905 cases studied, religious, charitable, and social services not-for-profits had 39 cases of fraud (4.3 percent) with a median loss of US $106,000.
"The Audacious Pastor," featured in the February 2008 issue of Internal Auditor, demonstrates an occupational fraud in a not-for-profit organization where a trusted church leader embezzled more than US $700,000 from his congregation.
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