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Not-For-Profit News
August, 2012

 Common Fraud Schemes within

Not- for-Profit Organizations

Part 2

By Ashley Lamberton, CPA

 

Fraud in the workplace continues to be a great concern for many organizations. Not-for-profit organizations can be particularly vulnerable to tfraud 1his problem, so it's important to know what to look for and have checks and balaces in place.

 

Fraud schemes can generally be grouped into two main categories: internal and external. Internal schemes are more common within not-for-profit organizations for a variety of reasons including the types on transactions (donations), financial expertise of organization and volume of volunteers.

 

The two primary ways that fraud schemes are perpetrated within not-for-profit organizations are asset misappropriation and fraudulent financial reporting.

 

One common type of asset misappropriations is known as skimming. Skimming occurs when a person takes cash or checks received by the organization and uses the money for personal use. They will take a small portion of cash or a few checks at a time while leaving the remainder in order to go unnoticed. Not-for-profit organizations are particularly susceptible to skimming schemes since fundraising events often include cash transactions. Not-for-profits are also susceptible to skimming in the form of checks because they often operate under acronyms. Checks payable to the organization's initials can be easily altered and deposited to a personal account. For example, NPO can be easily altered to reflect N. P. O'Neil.

 

Other schemes commonly perpetrated by employees of not-for-profit organizations involve the creation of fictitious vendors and fraudulent invoices that result in disbursements to these fictitious vendors. Employees with access to the organization's checkbook may issue checks made out to these vendors they've created to pay their personal expenses. They might also make out checks payable to themselves to be used for their personal gains or sometimes to finance addictions. The organization's credit cards or the credit card numbers of donors may also be used to purchase personal goods or for personal gain.

 

Since not-for-profit organizations are sensitive to negative publicity, fraudulent financial reporting is another common fraud scheme. A couple of examples of fraudulent financial reporting include failing to disclose significant related party transactions or non-compliance with debt covenants. The books may also be held open past the year end to inflate revenues or misclassify donations or expenses to mislead both donors and the board of directors.

 

The best way to prevent fraud and to protect your organization's assets is to have strong internal controls in place.The staff at Winter, Kloman, Moter & Repp, S.C. would love to discuss possible internal controls that your organization could implement to prevent fraud from occurring.

 

 

Contact us:

www.wkmr.com 

 

                Brookfield                                Oconomowoc

235 N. Executive Drive,        1040 Oconomowoc Parkway

             Suite 160                        Oconomowoc, WI  53066

  Brookfield, WI  53005                         262.567.6540      

          262.797.9050            

                               

 Watertown

138 Hospital Drive, Suite 100

Watertown, WI  53098

920.261.6767

 

 

 

 

 

WKMR Not-For-Profit Services

 

At Winter, Kloman, Moter & Repp S.C., our not-for-profit team provides quality audit, accounting, tax, and consulting services to a variety of not-for-profit agencies, government funded businesses, private foundations, and assorted charitable organizations. Our experienced team has helped many not-for-profit organizations throughout Southeastern Wisconsin grow and thrive including:

  • Human Service Agencies
  • Cultural & Arts Organizations
  • Charitable & Religious Organizations
  • Educational & Day Care Institutions
  • Professional & Trade Associations
  • Assisted Living Facilities
  • HUD/WHEDA Housing Projects
  • Government-funded For-Profit Businesses

We concentrate on helping you best manage public or donated funds, analyzing how to get the most from your resources and helping you implement your plans to stretch every dollar. Our team of professionals understands your complex financial reporting needs, and will help you to accurately report your finances in an understandable way. We provide the independent audit and accounting services required by many of your funding sources by taking a value-added approach, implementing ever-changing tax reporting requirements, providing information technology consulting, and working with every aspect of your organization to support your success.

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Not-For-Profit News - The Archieves
 
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Volume: 2  Issue: 4
 
In This Issue
Common Fraud Schemes within Not-For-Profit Organizations
Contact Us
WKMR Not-For-Profit Services
Article Headline

WKMR

Not-For-Profit Team

Mark Potts - Color

Mark Potts

CPA, PFS Shareholder

Paul - Color

Paul Sehmer

CPA 

Shareholder

Larry - Color

Lawrence Gebhard 

CPA

Manager

Mitzi - Color

Mitzi Cass

CPA

Manager

Matt - Color

Matthew Los

CPA

Manager

Sandy - Color

Sandy Strelka

CPA

Supervisor

Kensie Color

Kensie Drinkwine

Senior

Adam - Color

Adam Schuett

CPA 

Senior

Ashley c - Color

Ashley Childers

CPA 

Senior

Ashley Lamberton - Color

Ashley Lamberton

CPA 

Associate

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