Why You Should Care About Fraud
The true costs of fraud to an organization go well beyond any specific dollar losses. Consider:
- Intense public scrutiny. Public sentiment is one of zero tolerance.
- Loss of reputation. Internet and social media sites provide forums to quickly spread negative publicity.
- Severe damage to brand value. Value may be difficult to measure until diminished.
Who Should Care About Fraud Prevention?
Fraud prevention and detection is the responsibility of the entire management team of any association -- staff and volunteers alike. Although the creation and development of policies may fall to the staff, the understanding of the importance of this subject matter by volunteer leaders is critical as well.
The Types of Fraud
Fraud takes on many forms, including:
Skimming: Any scheme in which cash is stolen from an organization before it is recorded on the organization’s books and records. Employee accepts payment from a customer but does not record the sale.
Cash Larceny: Any scheme in which cash receipts are stolen from an organization after they have been recorded in the organization’s books and records. Employee steals cash and checks from daily receipts before they can be deposited in the bank.
Billing: Any scheme in which a person causes his or her employer to issue a payment by submitting an invoice for fictitious goods or services, inflated invoices, or invoices for personal purchases. Employee creates a shell company and bills employer for nonexistent services. Employee purchases personal items and submits invoice to employer for payment.
Check tampering: Any scheme in which a person steals his or her employer's funds by forging or altering a check on one of the organization’s bank accounts, or steals a check the organization has legitimately issued to another payee. Employee steals blank company checks, makes them payable out to himself or an accomplice. Employee steals outgoing check to a vendor, deposits into own bank account.
Expense reimbursement: Any scheme in which an employee makes a claim for reimbursement of fictitious or inflated business expense. Employee files fraudulent expense report claiming personal travel, nonexistent meals, etc.
Payroll: Any scheme in which an employee causes his or her employer to issue a payment by making false claims for compensation. Employee claims overtime for hours not worked. Employee adds ghost employee to the payroll.
Cash on hand misappropriation: Any scheme in which the perpetrator misappropriates cash kept on hand at the victim’s premises. Employee steals cash from petty cash or vault.
Non-cash misappropriations: Any scheme in which an employee steals or misuses non-cash assets of organization. Employee steals inventory. Employee steals or misuses confidential financial information.