Fraud is all too common
Fraud is all too common. Typically as non-profits we take an overly trusting stance. We like to believe the best about people and are generally a hopeful group. In the arena of fraud, we need to become a bit more cynical.
The best way to avoid fraud is to ensure you have proper controls to prevent fraud. Sometimes the best of people - when presented with an opportunity - will make bad decisions. Proper controls give everyone peace of mind that they won't be tempted, and if they are, they are guaranteed to get caught.
The Chronicle of Philanthropy ran an article on September 15th about a case of persistent and consistent fraud. The Dean of the St. John's Institute for Asian Studies in Queens is accused of systematically stealing over $1M. Her actions were caught during a routine internal audit. Internal audits and external audits are essential. Typically if people know they will get caught, this creates enough of a deterrent to prevent fraud. However in this case, the Dean thought she had found a loophole. In fact, she may have got away with it for a long time. Her actual downfall was an expense report that included personal charges. As they began to investigate this small issue, the larger picture emerged. Her greed ultimately was her downfall. St. John's is now reviewing their internal control structure in hopes to avoid this in the future.
Trust is an important quality, but when it comes to money and financial matters, checks and balances rule the day.