Fraud Awareness

From Monaro Folk Society
Jump to: navigation, search

Introduction

Benevolence, trust and compassion traditionally form the cornerstone of not-for-profit organisations like the Monaro Folk Society and are attributes which facilitate their success. But, when fraud happens, these same characteristics can contribute to the vulnerability of a voluntary organisation.

Although it is difficult to imagine fellow volunteers perpetrating any sort of fraud, it is necessary that any organisation have the basic, formal controls in place that prevent, detect and deter fraud.

Formal prevention methods such as Codes of Conduct, internal controls, robust audit programs and reporting systems are not indicators of suspicion or doubt. Rather they are a necessity because a lack of anti-fraud controls may put the organisation’s finances, assets and reputation at risk.

Risks

There is no evidence of fraud in the MFS, but other voluntary organisations have experienced

  • skimming of cash,
  • stealing from cash-intensive fund-raising events (gambling, raffles, etc.),
  • creation of fictitious vendors and fraudulent invoices that resulted in disbursements to the fictitious vendors.

Volunteers with access to organisations' payments system have been known to issue cheques with forged signatures to pay their personal expenses, make cheques payable to themselves or counterfeit cheques to be used for their personal gain. The credit card numbers of payers have been used by perpetrators for fraudulent purposes.

In purchasing of any kind of goods or services, high standards of probity and fair dealing with suppliers are necessary to protect the society's finances and its public reputation. The reputational risks to the society go far beyond any monetary risks.

Prevention

The society seeks to deter fraud by creating an environment that has a zero tolerance for fraud, including:

Clear Code of Conduct in Concert with Awareness Information

One of the most important elements of fraud prevention is the communication and monitoring of the organisation’s Code of Conduct. The society's commitment to ethical behaviour needs to be and is clearly and concisely communicated to organisers, volunteers and third parties with whom we deal. Commitment to the code is integral to volunteering to help the society. All violations of the code are subject to disciplinary action that is consistent with the level of infraction in order to create a positive impact on the ethical atmosphere of the society.

Information about the society's values and its code of conduct are provided on the society's web site and in the membership form, as well as the inclusion of this "fraud awareness" information on the society web site.


Whistleblower Procedures

The MFS Committee has direct responsibility for the receipt, retention and treatment of complaints received regarding accounting, internal accounting controls, or auditing matters; and the confidential, anonymous submission by members of concerns. Any concerns should be directed in the first instance to the president, CC the secretary.

Tone at the Top - Setting a Good Example

The (American) Association of Certified Fraud Examiners (ACFE) reports that having an ethical “tone at the top” can be the most effective means of avoiding fraud. Leadership should avoid giving people the rationalisation to defraud. A positive tone at the top can be earned by treating people fairly and ensuring that management at all levels of the organisation follow the rules.

Audit and Reporting Procedures

According to references related to the above link, fraudulent schemes historically have been identified by internal audit at twice the rate of external audits through clear fraud risk-related audit steps. Proper and regular reporting activities have the bonus effect of helping to prevent, deter and detect fraud.

Segregation of Duties

Duties within any function should be separated so that one person does not perform processing from the beginning to the end of a process. We need to think of the results of our efforts as "society assets" not "private masterpieces".

Why Fraud Prevention and Detection is Important

Not-for-profit organisations have a responsibility to their members, volunteers and the community to ensure that the funds to which they are entrusted are used for their intended purpose. Even if an organisation has insurance or limited funds that can be stolen, damage to an organisation’s reputation can be far-reaching and lasting. Charity officials say that they are far more concerned about how donors will react than they are about the short-term money they lost.

It is worth noting that rule 5 of the Rules of Association of the society, "Income and Property of the Society" states:

"The income and property of the society, however derived, shall be applied solely towards the promotion of the objects and purposes of the society and no portion thereof shall be paid or transferred, directly or indirectly, by dividend, bonus, or otherwise, to any member of the society."

Organisations like the MFS thrive on their good reputation. A good reputation ensures member (and prospective member) confidence and induces continued participation. On the contrary, a reputation tarnished by instances of fraud can foster a loss of confidence and cause a decline in participation.

It is important that our organisation includes good governance and an anti-fraud environment in our many attributes to ensure our continued success. These enhancements can build public trust and confidence in the Monaro Folk Society and encourage continue support by organisers, volunteers, other MFS members, and the public.


Content Manager: MFS Committee; Status: Draft

Website Hosted by Ask Charly Leetham