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Chart 4.23(Motivations) from the 2008 BDO Not-for-Profit
Fraud survey
hello everyone
It is an interesting environment we currently find ourselves in and
as we can see from Andrew's article fraud can be a problem for
all organisations in this environment.
We have seen recently two major cases of fraud with the madoff
Ponzi scheme in the united states and the billion dollar satyam
fraud in India. While we are still waiting for better details on both
cases, from the outset neither fraud was complicated. Ponzi
schemes have been around since the early 1900's and financial
statement fraud has been in the media for many years after
cases such as Enron and Worldcom.
Fraudsters don't need to weave a complex web to defraud an
organisation. The old favourites of ghost employees or simply
paying themselves more than they are entitled to, falsely
adjusting financial statements and false expense claims are
just as popular now as ever.
i know that it is easy for me to say to make sure not to allow gaps
in controls but that can be difficult if there are less employees or
volunteers. What organisations do need to do is be fully aware
that they are at greater risk now than they would have been
when the economy was booming.
regards, lisa
lisa bundesen is a partner in Forensic accounting at bDo
kendalls. If you have any accounting questions you would
like to see discussed in an article, please contact lisa on
07 3237 5731 or lisa.bundesen@bdo.com.au.
key areas such as financial operations.
As segregation of duties diminishes, especially when responsible
for financial operations, there is an increased risk of fraud
occurring. Segregation of financial duties will prevent an individual
having complete control and therefore the potential for fraud
diminishes.
Take for example an organisation that has one employee, who
authorises all expenditure, prepares and makes all payments and
finally completes the bank reconciliations. This organisation is
susceptible to an increased risk of fraud occurring (due to a lack of
segregated duties), as opposed to an organisation that segregates
these duties between a mixture of employees.
The effect of fraud on an organisation can be devastating. When
considering the cost of a fraud on an organisation, most of us would
generally only consider the initial cash that has been stolen.
However, organisations should also be aware of the additional
costs of fraud. While there are a number of additional costs to a
fraud, two issues that are often overlooked are the constraints a
fraud can have on debt covenants and the potential to lose grants if
the grant giver becomes aware that fraud has occurred within the
organisation.
At present, many organisations are faced with increased pressure to
meet their debt and meet the requirements of grants. Potentially, as
a result of a fraud, an organisation may be faced with the situation
that they are no longer able to meet their required debt covenants
or have lost substantial amounts of grant money as a result of the
fraud and therefore may be at risk of losing the grant.
Moving forward
As the two major motivations for fraud are financial pressures and
individuals living beyond their means, and businesses tightening
their belts through consolidating employee roles, it only stands
FiNaNce
to reason that organisations need to be vigilant during the current
economic climate.
We would however suggest, regardless of the economic
environment, that organisations should be aware of fraud and do
everything in their control to implement both fraud detection and
prevention measures. n
To find out more about how you can implement fraud detection
and prevention measures in your organisation please contact Lisa
Bundesen, Partner, Forensic services at lisa.bundesen@bdo.com.
au or Andrew Howard on 07 3237 5741 or email andrew.howard@
bdo.com.au