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Preventing Fraud in Nonprofit Organizations

ISBN: 978-0-471-73343-0
240 pages
April 2006
Preventing Fraud in Nonprofit Organizations (0471733431) cover image
IS YOUR NONPROFIT VULNERABLE TO FRAUD?



Fraud or embezzlement discovered within a major corporation ultimately leads to front-page scandals and a few raised eyebrows. But the mere suggestion or evidence of fraud within a nonprofit can cause irreversible damage to its reputation, its support base, and, eventually, its very existence. Preventing Fraud in Nonprofit Organizations is the proactive manual your organization needs to detect fraud and prevent it from affecting your organization's bottom line and name. Brimming with details of hundreds of actual fraud and embezzlement schemes, it provides specific, practical advice on strengthening the areas in which your nonprofit may be most vulnerable.

This hands-on guide shows nonprofit accountants, CFOs, financial consultants, board members, and managers how to:
* Know the four consistent areas of high risk
* Thoroughly evaluate their organization's system of internal controls
* Assemble a fraud examination team
* Document a fraud action plan
* Expose weaknesses that could lead to fraud
* Take corrective action to reduce the possibility of victimization


Fraud deterrence is not exclusive to large corporations. Recommended reading for nonprofit professionals, Preventing Fraud in Nonprofit Organizations will motivate executives to take a fresh and intensive look at their organization's practices and act to protect from financial dishonesty.
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About the Author.

Acknowledgments.

Preface.

Disclaimer.

About the Companion Website.

Section 1: Not-For-Profit Organizations: Four Consistent Areas of High Risk.

Embezzlement: Who Does It and When.

Not-For-Profit Specific Issues.

Summary.

The Perpetrators: Who They Are, Why They Do It, and How They Are Caught.

The Embezzler’s “Window of Opportunity”.

Section 2: Statement of Auditing Standard No. 99.

“Consideration of Fraud in a Financial Statement Audit”.

Statement of Auditing Standard No. 99.

“Consideration of Fraud in a Financial Statement Audit”.

Section 3: Essential Internal Control and Administrative Procedures to Avoid Embezzlement.

The Background Check.

Conditions of Employment Agreement.

Conflicts of Interest.

Nepotism.

Whistleblowers.

Noncompete Agreements.

Confidentiality of Information.

Bonding Issues.

Signers on Bank Accounts.

Two-Signature Checks.

Lockbox.

Positive Pay.

Deposit Security and Restrictive Endorsements.

Check Stock.

Cash Transactions.

Cash Register Issues.

Insurance Committees.

Computer File Backups.

Check and Wire Transfer Signatures.

Inventory Issues.

Company Credit Cards.

Lines of Credit.

Bad Debt Policy.

Internal Audits.

Stop Payment Orders.

Voiding Checks.

Numbered Check Request Forms.

Expense Accounts.

CPA Management Letters.

Random Disbursement Checks.

CHECK 21.

Section 4: Clever Examples of Embezzlement.

Payroll Tax Deposits.

Check Switching.

Ghosts on the Payroll and Ghost Vendors.

The Danger of Acronyms.

Bank Account Reconciliations.

Wire Transfers.

Postage Issues.

Kiting.

Manual Checks (Handwritten and Typed).

Auditing Receipts.

Section 5: Steps to Take If You Have Been Victimized by Fraud.

Documenting a Fraud Action Plan.

Fraud Examinations and Assembling the Fraud Team.

The Basics of Forensic Accounting.

Section 6: Internal Control Analysis, Documentation, and Recommendations for Improvement.

Internal Control Analysis, Documentation, and Recommendations for Improvement.

Fraud Glossary.

Index.

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Edward J. McMillan, CPA, CAE, is an experienced fraud examiner and teaches fraud prevention courses to organizations such as the American Institute of CPAs, the Maryland Association of CPAs, other state societies of CPAs, the U.S. Chamber of Commerce, and the American Bar Association, among others. Ed also speaks regularly on the subject of fraud prevention at business conventions of all types and can be reached at (410)893-2308 or contacted via email at emcmillan@sprintmail.com.
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  • Ed McMillan is a nationally recognized speaker on not-for-profit financial and management topics for more than a decade; more specifically, McMillan is a frequent lecturer on the subject of fraud and embezzlement.
  • Filled with hundreds of useful tips, practical advice, and real-world examples.
  • Includes invaluable forms and exhibits, such as Background Check Permission Slip, Stop Payment Request Form, Letter of Credit Activation Form, Confidentiality Agreement, and a Policy on Checks and Wire Transfer Signatures.
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Web Content

Welcome to the Preventing Fraud in Nonprofit Organizations Website!

We've included all the policies and procedures found in Section 6 of the book in Word format here on this website. If you do not have Microsoft Word, you can download Word Viewer

Once you open the file, you can search for the specific policy or procedure you are interested in--these policies can then be customized to reflect the specific needs of your organization. The policies and procedures fall under the following broad categories:

  • Accounting and financial management
  • Internal control
  • Risk reduction
  • Office administration

For further reference: Wiley's e-mail service is a convenient way to receive exclusive news about all of our nonprofit products and events, as well as special discount offers. Once you've signed up for the service, you'll hear from us once or twice a month. To join, please click on the link above and complete the form. And we will ALWAYS respect your e-mail privacy and NEVER sell, rent, or exchange your e-mail address to any outside company. For complete details, review our Privacy Policy.

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