24
FINaNCe
FINaNCe
Hello everyone
As the year draws to a close, there is still a vast
array of issues that not-for-profit entities can
consider at this time of the year.
Key thought leadership issues arise from the
release of the Productivity Commission's Draft
research report Contribution of the Not-For-
Profit-Sector. The release of the International
Financial reporting Standard for use by small
and medium enterprises and potential changes
to reporting arising from the Senate Inquiry of
2008 on not-for-profit reporting are just a few of
the matters to contemplate in the weeks ahead.
The hope of many in the sector is that there will
be sensible relief provided for reporting by small
not-for-profit entities.
I think you will find Andrew Howard's article
very interesting as it deals with the sensitive
issues associated with the implementation of a
Whistleblower policy. The matter is particularly
relevant at the moment as we study the
feedback coming in from the responses to the
bDo Not-for-profit Fraud Survey.
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my take on the article is the importance of a
sound Whistleblower policy that:
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Demonstrates an organisation's
commitment to an ethical culture
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enshrines the critical criteria that any
reports are kept confidential and secure
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Details the protection to be provided to a
whistleblower, and
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Describes the investigation process so that
the expectations of the person reporting are
well catered for.
I trust you will find the article helpful.
Regards, Chris
Chris Skelton is Lead Partner, Not-for-profit at BDO
Kendalls in Brisbane. If you have any accounting questions
you would like to see discussed in an article, please
contact Chris on 07 3237 5999 or chris.skelton@bdo.com.
au.discussed in an article, please contact Chris on 07 3237
5999 or chris.skelton@bdo.com.au.
How secure is your
organisation?
When considering fraud within an organisation,
it is interesting to note the underlying
motivations of why people commit fraud.
The BDO Not-for-profit Survey released in 2008 indicated that
the two most common motivations of fraud were due to financial
problems and pressure (28% of reported cases) and the desire to
maintain a lifestyle (16% of reported cases).
Similarly, the results of the Association of Certified Fraud
Examiners `2008 Report to the Nation
1
' found that the two most
common motivations and behavioural patterns of fraud were
individuals living beyond their means (38.6% of reported cases)
and individuals facing financial difficulties (34.1% of reported
cases). See figure opposite, top
Regardless of the size of an organisation, being proactive against
fraud, misconduct, or other breaches of trust is imperative.
It's important to note, that those most likely to discover fraud,
misconduct, or other breaches of trust, are employees. The
downside to this is that employees often feel uncomfortable or
intimidated reporting these suspicions. See table, left
If someone in your organisation knows or suspects some form of
misconduct or fraudulent behaviour, does your organisation have
the appropriate procedures or resources in place to report it?
The implementation of a formal Whistleblower policy (together
with clear reporting channels), can encourage employees to report
any suspected fraud in an organisation.
This is supported by the results of the 2008 BDO Not-for-profit
Survey, which found that 33% of fraud was discovered by tip
offs.
How Fraud was discovered
Strong internal controls
36%
Tip offs
33%
Internal audits
13%
External audits
5%
Chart 5.6 Methods to reduce risk and detect fraud
Similarly, the results of the Association of Certified Fraud
Examiners `2008 Report to the Nation
2
' found that between
38.4% and 54.1% of fraud cases were discovered by tips. See
figure opposite, bottom
Implementation of a whistleblower policy
By implementing a formal Whistleblower policy, with clear
reporting channels, organisations encourage employees to report
any suspected fraud, misconduct, or other breaches of trust.
T
y
p
e
o
f
D
e
t
e
c
t
i
o
n
Chart 4.23: Comparative: Motivation behind fraud committed
(p. 51, 2008 Report to the Nation)
(p. 183, 2008 Report to the Nation)
When implementing a Whistleblower
policy, it is important to ensure that all
employees are comfortable reporting
any potential concerns.
Additionally, it is equally essential
to develop and implement a clear
reporting process to capture the
employee reports.
The capturing of reports (or reporting
process) can include a number of
channels such as a specially designed
confidential telephone hotline, email or
postal services.
Moving forward
Whistleblower policies act as both a
detection and prevention measure in
the fight against fraud. The importance
of implementing a formalised
Whistleblower Policy (with defined
reporting channels) should not be under
estimated. n
For professional advice in relation
to establishing (or reviewing)
Whistleblower policy contact Andrew
Howard. Andrew is a Senior Manager in
the Forensic Services division of BDO
and can be contacted on 07 3237 5634
or by email at andrew.howard@bdo.
com.au.
1 & 2 "2008 Report to the Nation. Copyright 2008 by the
Association of Certified Fraud Examiners, Inc."