NONPROFIT FRAUD: WHAT
YOU NEED TO KNOW
PART III: THE PREVENTION
June 11, 2014
Lawrence J. Hoffman, CPA/CFF, CVA, CFE
Senio...
OBJECTIVES
NONPROFIT FRAUD: THREE-PART SERIES
PART I: THE FRAUD
• Why it is important that you are educated in fraud
• The...
AGENDA
• What are the best preventative measures and controls?
• Key internal controls
• Conducting a fraud risk assessmen...
WHAT ARE THE BEST PREVENTIVE
MEASURES AND CONTROLS?
THE COMMON ELEMENT IN EVERY
FRAUD!
4Part III: The Prevention* Page
WHAT ARE THE BEST PREVENTIVE
MEASURES AND CONTROLS?
THE BEST PREVENTIVE MEASURE!
HIRE ONLY HONEST, ETHICAL
AND MORAL PEOPL...
WHAT ARE THE BEST PREVENTIVE
MEASURES AND CONTROLS?
FRAUD IS A PEOPLE PROBLEM!
• Are you hiring fraudsters?
• Are you enab...
REVIEW OF COMMON PREVENTIVE
CONTROLS
PREVENTIVE CONTROLS
Preventive controls attempt to deter or prevent
undesirable event...
WHAT ARE THE BEST PREVENTIVE
MEASURES AND CONTROLS?
1. Internal Controls
•design your system and procedures so you do not ...
WHAT ARE THE BEST PREVENTIVE
MEASURES AND CONTROLS?
2. Tone from the Top!
•What is your “control environment”?
•Do you hav...
WHAT ARE THE BEST PREVENTIVE
MEASURES AND CONTROLS?
3. Know Your Employees!
•Background checks and investigations-know who...
WHAT ARE THE BEST PREVENTIVE
MEASURES AND CONTROLS?
TRUST BUT VERIFY EMPLOYEE BACKGROUNDS...
11Part III: The Prevention* P...
WHAT ARE THE BEST PREVENTIVE
MEASURES AND CONTROLS?
4. Fraud Prevention Program
• Fraud risk assessment
• Fraud awareness ...
WHAT ARE THE BEST PREVENTIVE
MEASURES AND CONTROLS?
5. Your Employees’ Eyes and Ears!
• tips are number one method for det...
KEY INTERNAL CONTROLS
SEGREGATION OF DUTIES
• Must segregate the recordkeeping and the custody of the
assets!
• Cash recei...
KEY INTERNAL CONTROLS
SEGREGATION OF DUTIES
15Part III: The Prevention* Page
KEY INTERNAL CONTROLS
SEGREGATION OF DUTIES
• Use a board member or volunteer if there is not enough
internal staff to ach...
KEY INTERNAL CONTROLS
ACCOUNTS RECEIVABLE/CASH RECEIPTS
• Restrictively endorse checks “for deposit only” immediately
• Ke...
KEY INTERNAL CONTROLS
ACCOUNTS PAYABLE/DISBURSEMENTS
• Have a formal purchase requisition system
• Understand procurement ...
KEY INTERNAL CONTROLS
REVIEWS AREN’T JUST RUBBER STAMPS
19Part III: The Prevention* Page
KEY INTERNAL CONTROLS
ACCOUNTS PAYABLE/DISBURSEMENTS
• Have preauthorized set limits on corporate credit cards and limit
o...
KEY INTERNAL CONTROLS
PAYROLL
• Independent approval of employees added to payroll including
pay rate
• Independent review...
KEY INTERNAL CONTROLS
GHOST EMPLOYEES GONE WILD
22Part III: The Prevention* Page
KEY INTERNAL CONTROLS
FINANICAL REPORTING
• Have a well defined and time lined financial reporting checklist
• Financial s...
KEY INTERNAL CONTROLS
OTHER CONTROLS
• Notification and alert services with your bank
– Wire notifications
– ACH Fraud Fil...
CONDUCTING A FRAUD RISK ASSESSMENT
THE FRAUD RISK ASSESSMENT PROCESS
• Purpose is to identify where fraud may occur and ho...
CONDUCTING A FRAUD RISK ASSESSMENT
THE FRAUD RISK ASSESSMENT PROCESS
• Are there serious weaknesses in internal controls?
...
CONDUCTING A FRAUD RISK ASSESSMENT
FACTORS THAT CREATE ENVIRONMENT AND
OPPORTUNITIES FOR FRAUD
• Lack of awareness of frau...
CONDUCTING A FRAUD RISK ASSESSMENT
Source: Association of Certified Fraud Examiners, Report to the Nations on Occupational...
CONDUCTING A FRAUD RISK ASSESSMENT
A PRACTICAL EXERCISE
29Part III: The Prevention* Page
FRAUD RISK ASSESSMENT
Part III: The Prevention* Page 30
CONDUCTING A FRAUD RISK ASSESSMENT
KEY ASSESSMENT QUESTIONS
(RATE YOUR ORGANIZATION FROM 1 (POOR) TO 10 (GREAT)
• What is ...
CONDUCTING A FRAUD RISK ASSESSMENT
KEY ASSESSMENT QUESTIONS
(RATE YOUR ORGANIZATION FROM 1 (POOR) TO 10 (GREAT)
• Is your ...
IMPLEMENTING A FRAUD PREVENTION
PROGRAM
KEY ELEMENTS AND OBJECTIVES
OBJECTIVES
• Opportunity – removing or lessening the o...
IMPLEMENTING A FRAUD PREVENTION
PROGRAM
KEY ELEMENTS AND OBJECTIVES
• Training – ethical conduct and fraud prevention trai...
IMPLEMENTING A FRAUD PREVENTION
PROGRAM
KEY ELEMENTS AND OBJECTIVES
• Enforcement-you must prosecute fraud. An organizatio...
THE FIVE TAKEAWAYS!
THE FIVE MOST IMPORTANT TAKEAWAYS – AGAIN!
1. Trust is not an internal control!
– Establish, to the ex...
MY BOOK!
EXPECTED RELEASE
THIS SUMMER!
STAY TUNED!
37Part III: The Prevention* Page
HOW CAN RAFFA ASSIST YOU IN
PREVENTING AND DETECTING FRAUD?
A resource for the nonprofit community to help
organizations e...
HOW CAN RAFFA ASSIST YOU IN
PREVENTING AND DETECTING FRAUD?
OUR WEEKLY NEWSLETTER
OU
Part III: The Prevention* Page 39
HOW CAN RAFFA ASSIST YOU IN
PREVENTING AND DETECTING FRAUD?
Are you threatened by fraud, litigation or
insolvency?
Are you...
HOW CAN RAFFA ASSIST YOU IN
PREVENTING AND DETECTING FRAUD?
How We Empower You
• We identify and mitigate fraud risk by pe...
HOW CAN RAFFA ASSIST YOU IN
PREVENTING AND DETECTING FRAUD?
Part III: The Prevention* Page 42
Fraud Investigations &
Preve...
HOW CAN RAFFA ASSIST YOU IN
PREVENTING AND DETECTING FRAUD?
Part III: The Prevention* Page 43
Business Valuation & Due
Dil...
WHAT WE LEARNED ABOUT FRAUD IN
OUR THREE-PART SERIES
PART I: THE FRAUD
• Why it is important that you are educated in frau...
RESOURCES AND SUGGESTED READING
• 2012 Report to the Nations on Occupational Fraud and Abuse,
Association of Certified Fra...
QUESTIONS AND ANSWERS
46Part III: The Prevention* Page
BIOGRAPHY
47
• 35 years of consulting, audit, accounting and tax experience in the public and private
sectors.
• Started c...
BIOGRAPHY
48
• Assisted companies and nonprofits with restructuring and turnaround situations, including
recapitalizations...
BIOGRAPHY
49
LAWRENCE J. HOFFMAN,
CPA/CFF, CVA, CFE
SENIOR PARTNER
EDUCATION & CERTIFICATIONS
• Bachelor of Science, Accou...
BIOGRAPHY
• 9 years of fraud investigation and financial audit experience
• Started career with U.S. Government Accountabi...
Upcoming SlideShare
Loading in...5
×

2014-06-11 Nonprofit Fraud - What You Need to Know Part III - The Prevention

251

Published on

Published in: Business, Economy & Finance
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
251
On Slideshare
0
From Embeds
0
Number of Embeds
3
Actions
Shares
0
Downloads
5
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide
  • From I Love You Phillip Morris, 2009

    Jim Carrey, playing con artist Steven Jay Russell, interviews for an accounting position that he is wholly unqualified for. This scene shows his employer’s “due diligence” effort prior to hiring.
  • From Arrested Development, Fox, 2005

    George Michael Bluth, manager of the Bluth family frozen banana stand, is convinced to go along with his cousin Maeby’s cash register theft scheme. George Michael’s father will be coming by later to independently verify inventory and daily sales figures, so Maeby comes up with a plan to circumvent the controls.
  • From ESPN’s Mayne Street, 2008

    Kenny Mayne reports in to Accounting when his expense reports are questioned.
  • NTV Uganda, audit finds 7,500 ghost employees
  • 2014-06-11 Nonprofit Fraud - What You Need to Know Part III - The Prevention

    1. 1. NONPROFIT FRAUD: WHAT YOU NEED TO KNOW PART III: THE PREVENTION June 11, 2014 Lawrence J. Hoffman, CPA/CFF, CVA, CFE Senior Partner and Director of Forensic Consulting Services Leslie C. Kirsch, CFE Manager, Forensic Accounting Services
    2. 2. OBJECTIVES NONPROFIT FRAUD: THREE-PART SERIES PART I: THE FRAUD • Why it is important that you are educated in fraud • The magnitude of fraud in nonprofits • The types of frauds in nonprofits • Why does fraud occur in nonprofits • Some important fraud prevention takeaways PART II: THE DETECTION • Who are the fraud perpetrators? • Why do people commit fraud? • How is fraud detected? • What are fraud red flags? • Fraud detection techniques • What do you do when you uncover fraud? PART III: THE PREVENTION • What are the primary factors contributing to fraud in nonprofits? • Detective versus preventative controls • What are the best preventative measures? • The five critical takeaways! Part III: The Prevention* Page 2
    3. 3. AGENDA • What are the best preventative measures and controls? • Key internal controls • Conducting a fraud risk assessment • Implementing a fraud prevention program • The five critical takeaways! 3Part III: The Prevention* Page
    4. 4. WHAT ARE THE BEST PREVENTIVE MEASURES AND CONTROLS? THE COMMON ELEMENT IN EVERY FRAUD! 4Part III: The Prevention* Page
    5. 5. WHAT ARE THE BEST PREVENTIVE MEASURES AND CONTROLS? THE BEST PREVENTIVE MEASURE! HIRE ONLY HONEST, ETHICAL AND MORAL PEOPLE! 5Part III: The Prevention* Page
    6. 6. WHAT ARE THE BEST PREVENTIVE MEASURES AND CONTROLS? FRAUD IS A PEOPLE PROBLEM! • Are you hiring fraudsters? • Are you enabling someone predisposed to commit fraud? • Is your organization’s environment promoting fraud? • Does your organization’s system of internal controls provide the opportunity to commit fraud? • Is your organization educated and aware of fraud schemes and red flags? • Do you have a process that provides your employees and others to report possible fraud and abuse? • Does your organization tolerate fraud? Do you have a zero tolerance policy for fraud? 6Part III: The Prevention* Page
    7. 7. REVIEW OF COMMON PREVENTIVE CONTROLS PREVENTIVE CONTROLS Preventive controls attempt to deter or prevent undesirable events from occurring. They are proactive controls that help prevent a loss. DETECTIVE CONTROLS Detective controls, on the other hand, attempt to detect undesirable acts. The provide evidence that a loss has occurred but do not prevent a loss from occurring. Detective techniques should be used to uncover fraud events when preventive measures fail or unmitigated risks are realized. Effective Preventive Measures Serve as Strong Deterrents Part III: The Prevention* Page 7
    8. 8. WHAT ARE THE BEST PREVENTIVE MEASURES AND CONTROLS? 1. Internal Controls •design your system and procedures so you do not have to rely on trust as a control! •remember any person is capable of committing fraud! •keep in mind the persons role and access to commit fraud! •you must segregate the recordkeeping and the custody of the assets! •do you have adequate oversight controls? REMEMBER TRUST IS NOT AN INTERNAL CONTROL! 8Part III: The Prevention* Page
    9. 9. WHAT ARE THE BEST PREVENTIVE MEASURES AND CONTROLS? 2. Tone from the Top! •What is your “control environment”? •Do you have a strong internal control system? •Directors and officers need to set the tone for ethical behavior •How effective is your Audit Committee? •If unethical behavior is tolerated at the top you can be assured it is happening in the rest of the organization! 9Part III: The Prevention* Page
    10. 10. WHAT ARE THE BEST PREVENTIVE MEASURES AND CONTROLS? 3. Know Your Employees! •Background checks and investigations-know who you are hiring! – how well do you know that person? – what due diligence are you doing? – do you believe their resume? – not just a one-time occurrence! •Know your employees and what they are doing – executives and managers need to pay attention and spend time with their employees-be engaged! – establish that baseline! •Perform exit interviews – what do employees leaving tell you? – what do you ask them? 10Part III: The Prevention* Page
    11. 11. WHAT ARE THE BEST PREVENTIVE MEASURES AND CONTROLS? TRUST BUT VERIFY EMPLOYEE BACKGROUNDS... 11Part III: The Prevention* Page
    12. 12. WHAT ARE THE BEST PREVENTIVE MEASURES AND CONTROLS? 4. Fraud Prevention Program • Fraud risk assessment • Fraud awareness and ongoing training for all levels of the organization • Reporting mechanisms and whistle-blower protections • Investigation / response process • Board and audit committee oversight • Conflict resolution • Communications • Continuous monitoring • Employer-provided employee assistance services (financial counselors etc.) • Evaluate performance and compensation programs – do they promote fraud and abuse? – are they fair and provide incentive for performers and hard work? 12Part III: The Prevention* Page
    13. 13. WHAT ARE THE BEST PREVENTIVE MEASURES AND CONTROLS? 5. Your Employees’ Eyes and Ears! • tips are number one method for detecting fraud! • establish a formal written whistleblower policy -procedures for receiving complaints -procedures for investigating complaints -policy for protecting whistleblowers -confidentiality polices for whistleblowers -role and responsibilities of audit committee -educating employees on the policy • establish independent hotline for tips! 13Part III: The Prevention* Page You must create the impression that someone is watching!
    14. 14. KEY INTERNAL CONTROLS SEGREGATION OF DUTIES • Must segregate the recordkeeping and the custody of the assets! • Cash receipts-no single person should −receive the money, −deposit the money, −record the receipts and −reconcile the receipts to the books and records • Cash disbursements-no single person should −authorize payments, −disburse funds (write checks, ACH, wires etc) and −reconcile the bank accounts. 14Part III: The Prevention* Page
    15. 15. KEY INTERNAL CONTROLS SEGREGATION OF DUTIES 15Part III: The Prevention* Page
    16. 16. KEY INTERNAL CONTROLS SEGREGATION OF DUTIES • Use a board member or volunteer if there is not enough internal staff to achieve the segregation of duties • Require accounting and finance personnel to take vacations and not to take work home 16Part III: The Prevention* Page
    17. 17. KEY INTERNAL CONTROLS ACCOUNTS RECEIVABLE/CASH RECEIPTS • Restrictively endorse checks “for deposit only” immediately • Keep a permanent cash receipts log • Make and reconcile deposits daily • Ask donors and others to write out full name of organization on checks • Use a bank lockbox service • Cash should be counted with two people present • Publish donor names • Review accounts receivable aging • Independent approval of all accounts receivable write-offs and refunds 17Part III: The Prevention* Page
    18. 18. KEY INTERNAL CONTROLS ACCOUNTS PAYABLE/DISBURSEMENTS • Have a formal purchase requisition system • Understand procurement process between goods and services (3 way match for goods!) • Only original invoices and documents-no photocopies • Require dual signatures for expenditures over a certain dollar amount (no signature stamps or electronic signatures!) • Mail all checks after approval and signature promptly • No pre-signed checks! • No checks made payable to “cash” • Keep blank check stock locked up • Have independent reviews of management expense reports (even if a board members must do this!) (check calendars!) 18Part III: The Prevention* Page
    19. 19. KEY INTERNAL CONTROLS REVIEWS AREN’T JUST RUBBER STAMPS 19Part III: The Prevention* Page
    20. 20. KEY INTERNAL CONTROLS ACCOUNTS PAYABLE/DISBURSEMENTS • Have preauthorized set limits on corporate credit cards and limit on who receives them • Have a written policy on use of corporate credit cards-no personal use! • Independent review credit card statements as soon as they arrive • Review vendor lists and have approval process for new vendors-know your vendors Identify any related-party transactions (watch for P.O. boxes!) (Google suspected names) • Contracts for services and goods should be competitive bid (at least 3) and approved by someone independent of person requisitioning • No hand delivery of checks by person requesting the check • Investigate vendor complaints promptly! 20Part III: The Prevention* Page
    21. 21. KEY INTERNAL CONTROLS PAYROLL • Independent approval of employees added to payroll including pay rate • Independent review of payroll register from payroll processing firm • Verify that payroll taxes and other withholdings are being deposited timely • Use a separate bank account for payroll • Timely reporting of time of effort by employees with proper supervisory approval • Use outside payroll processing service 21Part III: The Prevention* Page
    22. 22. KEY INTERNAL CONTROLS GHOST EMPLOYEES GONE WILD 22Part III: The Prevention* Page
    23. 23. KEY INTERNAL CONTROLS FINANICAL REPORTING • Have a well defined and time lined financial reporting checklist • Financial statements should be timely and complete • Have a detailed annual/monthly budget-zero based • Budget versus actual analysis with detailed explanations (are explanations in line with expectations?) • Review journal entries at the end of each reporting period • Reconciliations, including bank reconciliations, should be prepared promptly after reporting period and independently reviewed 23Part III: The Prevention* Page
    24. 24. KEY INTERNAL CONTROLS OTHER CONTROLS • Notification and alert services with your bank – Wire notifications – ACH Fraud Filters – Balance threshold – Positive Pay exceptions – Credit card transactions – Authorization limits • Conduct fixed asset inventories at least annually • Close inactive bank accounts immediately • Update bank authorized signatures promptly when changes in personnel • Job rotation and mandatory vacations • Fidelity bond coverage • Surveillance 24Part III: The Prevention* Page
    25. 25. CONDUCTING A FRAUD RISK ASSESSMENT THE FRAUD RISK ASSESSMENT PROCESS • Purpose is to identify where fraud may occur and how it may be perpetrated • The organization chart-the map of the people and processes presents a picture and starting point • Remember to overlay macro elements such as industry and organizational changes, economic climate, government regulations and climate, technology changes and advancements • Brainstorming the possible threats and schemes • Are there any current warning flags? • Where are you most vulnerable? 25Part III: The Prevention* Page
    26. 26. CONDUCTING A FRAUD RISK ASSESSMENT THE FRAUD RISK ASSESSMENT PROCESS • Are there serious weaknesses in internal controls? • Are there any mitigating controls? • Do you have physical security breach threats? • What do you need to do to secure significant threats? 26Part III: The Prevention* Page
    27. 27. CONDUCTING A FRAUD RISK ASSESSMENT FACTORS THAT CREATE ENVIRONMENT AND OPPORTUNITIES FOR FRAUD • Lack of awareness of fraud risk factors and warning signs • Inadequate control activities to mitigate identified fraud risk • Inadequate screening practices (for employees, vendors, customers, and / or business partners) • Insufficient understanding of ethical duties at all levels • Ineffective mechanisms for reporting and investigating fraud • Ineffective board and audit committee oversight • Situational (internal and external) pressures that encourage fraud 27Part III: The Prevention* Page
    28. 28. CONDUCTING A FRAUD RISK ASSESSMENT Source: Association of Certified Fraud Examiners, Report to the Nations on Occupational Fraud and Abuse: 2014 Global Fraud Study 28Part III: The Prevention* Page
    29. 29. CONDUCTING A FRAUD RISK ASSESSMENT A PRACTICAL EXERCISE 29Part III: The Prevention* Page
    30. 30. FRAUD RISK ASSESSMENT Part III: The Prevention* Page 30
    31. 31. CONDUCTING A FRAUD RISK ASSESSMENT KEY ASSESSMENT QUESTIONS (RATE YOUR ORGANIZATION FROM 1 (POOR) TO 10 (GREAT) • What is your “tone at the top”? ______ • What is the level of your certainty that people in your organization will do the right thing? ______ • Are people in your organization made to fell that they are part of a team and have a vested interest in the value of the organization? ______ • Do people in your organization act with good moral/ethical character without much force? ______ • How is your organization’s current financial health? ______ * How timely is your organization’s financial reporting? ______ 31Part III: The Prevention* Page
    32. 32. CONDUCTING A FRAUD RISK ASSESSMENT KEY ASSESSMENT QUESTIONS (RATE YOUR ORGANIZATION FROM 1 (POOR) TO 10 (GREAT) • Is your key management hands on and visible? ______ • Is key management “connected” with their staff/baseline? ______ • How effective is your board of directors? ______ • How effective is your audit committee? ______ • Do you effective internal controls? ______ • How do you view the importance of your independent audit and process? ______ 32Part III: The Prevention* Page
    33. 33. IMPLEMENTING A FRAUD PREVENTION PROGRAM KEY ELEMENTS AND OBJECTIVES OBJECTIVES • Opportunity – removing or lessening the opportunity to commit fraud • Detection – ensuring fraud and abuse can be timely detected ELEMENTS • Policies – implement clear and concise written polices for fraud, code of conduct, and conflict of interest and be affirmed by all employees in writing • Communicated-continually communicated and reinforced • Tone from Top – Board-appointed high-level executive responsible for coordinating fraud-risk management and directly reporting to the Board. Must lead by example. • Leadership – executives and managers must lead by example 33Part III: The Prevention* Page
    34. 34. IMPLEMENTING A FRAUD PREVENTION PROGRAM KEY ELEMENTS AND OBJECTIVES • Training – ethical conduct and fraud prevention training is needed on at least an annual basis for all employees • Accountability-must make all people accountable in detecting fraud • Reporting – must have a means for employees to report potential violations and issues, such as whistleblower process and hotlines • No Retaliation – employees need to be encouraged to report suspicious behavior and be reassured that any reports are made in strict confidence and that the organization prohibits retaliation of any type • Communicate the Risks – All employees should be told whenever any employee or others doing business with the organization are arrested or discharged for fraudulent activity 34Part III: The Prevention* Page
    35. 35. IMPLEMENTING A FRAUD PREVENTION PROGRAM KEY ELEMENTS AND OBJECTIVES • Enforcement-you must prosecute fraud. An organization that does not prosecute sends a message that encourages fraud. • Zero Tolerance – you must have a zero tolerance for fraud and must apply to ALL employees. As soon as a high-level executive who commits any kind of fraud is not held accountable, the entire program has lost credibility • Surprise Audits – conduct surprise audits in high risk areas. Put in policy that random tests may be performed to ensure that the organization’s controls are not being circumvented (keep fraudsters guessing!) • Monitoring – you should conduct a periodic assessment and ensure the process is working • Remediation-all weaknesses in controls must be fixed immediately. Always be strengthening controls. 35Part III: The Prevention* Page
    36. 36. THE FIVE TAKEAWAYS! THE FIVE MOST IMPORTANT TAKEAWAYS – AGAIN! 1. Trust is not an internal control! – Establish, to the extent possible, controls and procedures that eliminate the element of trust – Always segregate the custody of the asset with the recordkeeping for the asset 2. Set the tone from the top! – “If you are stealing, your employees are stealing!” – E.g., office supplies, expense reports, etc. 3. Know your employees! – Background investigations and public records checks before hiring – Meet and establish a baseline relationship 4. Institute a fraud policy – No tolerance –Will prosecute 5. Establish a hotline for tips – Number one method for detecting fraud! – Can outsource Part III: The Prevention* Page 36
    37. 37. MY BOOK! EXPECTED RELEASE THIS SUMMER! STAY TUNED! 37Part III: The Prevention* Page
    38. 38. HOW CAN RAFFA ASSIST YOU IN PREVENTING AND DETECTING FRAUD? A resource for the nonprofit community to help organizations effectively manage risk and better ensure the prevention and detection of fraud. VISIT US AT WWW.RAFFA.COM/FRAUD Part III: The Prevention* Page 38
    39. 39. HOW CAN RAFFA ASSIST YOU IN PREVENTING AND DETECTING FRAUD? OUR WEEKLY NEWSLETTER OU Part III: The Prevention* Page 39
    40. 40. HOW CAN RAFFA ASSIST YOU IN PREVENTING AND DETECTING FRAUD? Are you threatened by fraud, litigation or insolvency? Are you selling your business, transferring assets or structuring a new venture? Raffa forensic accounting experts will do more to assist you in these challenging circumstances. Part III: The Prevention* Page 40 Forensic Accounting Services Group Our Team’s Services: • Fraud Investigations & Prevention • Litigation Support & Expert Testimony • Business Valuation & Due Diligence • Insolvency & Reorganization
    41. 41. HOW CAN RAFFA ASSIST YOU IN PREVENTING AND DETECTING FRAUD? How We Empower You • We identify and mitigate fraud risk by performing a fraud risk assessment • We provide fraud investigations if you are, or suspect you are, a victim of fraud • We provide litigation support, expert testimony and forensic accounting services in business disputes, financial investigations, bankruptcies, arbitrations and mediations • We analyze, investigate and interpret complex transactions to provide an understandable, well-researched and unbiased valuation of your business or organization • We have expertise in restructuring and turnaround management for underperforming organizations Part III: The Prevention* Page 41 Forensic Accounting Services Group
    42. 42. HOW CAN RAFFA ASSIST YOU IN PREVENTING AND DETECTING FRAUD? Part III: The Prevention* Page 42 Fraud Investigations & Prevention • Fraud examinations and internal investigations • Fraud risk assessments • Review of internal controls and management practices • Financial statement misrepresentations • Background and workplace investigations • Computer forensic analysis, imaging, data mining and recovery • Reconstruction of accounting records • Continuous audit services • Anti-fraud consulting and training Forensic Accounting Services Group Litigation Support & Expert Testimony • Lost earnings and profits • Lost value • Breach of contract • Breach of fiduciary duty • Business interruption • Contract costs and claims • Tortious interference • Patent infringement • Professional malpractice • Shareholder disputes • Theft of intellectual property • Wrongful termination • Wrongful death
    43. 43. HOW CAN RAFFA ASSIST YOU IN PREVENTING AND DETECTING FRAUD? Part III: The Prevention* Page 43 Business Valuation & Due Diligence • Mergers, acquisitions and divestitures • Marital dissolution • Partner/shareholder disputes • Estate and gift tax planning • Financial reporting • Compensation related • Employee stock ownership plans • Benchmark studies • Financial modeling Forensic Accounting Services Group Insolvency & Reorganization • Viability analysis and survival assessment • Strategic restructuring • Cash flow analysis and forecasting • Liquidation analysis • Evaluating creditor and debtor positions • Restructuring debt • Interim management services, including Chief Restructuring Officer • Preparing plans of reorganization and disclosure statements • Pre-bankruptcy planning and post- filing compliance • Bankruptcy litigation consulting to trustees
    44. 44. WHAT WE LEARNED ABOUT FRAUD IN OUR THREE-PART SERIES PART I: THE FRAUD • Why it is important that you are educated in fraud • The magnitude of fraud in nonprofits • The types of frauds in nonprofits • Why does fraud occur in nonprofits • Some important fraud prevention takeaways PART II: THE DETECTION • Who are the fraud perpetrators? • Why do people commit fraud? • How is fraud detected? • What are fraud red flags? • Fraud detection techniques • What do you do when you uncover fraud? PART III: THE PREVENTION • What are the primary factors contributing to fraud in nonprofits? • Detective versus preventative controls • What are the best preventative measures? • The five critical takeaways! 44Part III: The Prevention* Page
    45. 45. RESOURCES AND SUGGESTED READING • 2012 Report to the Nations on Occupational Fraud and Abuse, Association of Certified Fraud Examiners, http://www.acfe.com/rttn.aspx • Managing the Business Risk of Fraud: A Practical Guide; AICPA, ITA, and ACFE; https://na.theiia.org/standards- guidance/Public%20Documents/fraud%20paper.pdf • The CPA’s Handbook of Fraud and Commercial Crime Prevention, AICPA • “The American Fraud Report,” www.jpsimsconsulting.com • “Fraud Talk” Blog, fraudtalk.blogspot.com • “American Greed” series, CNBC on Wednesdays at 9 p.m. Part I: The Fraud* Page 4545Part III: The Prevention* Page
    46. 46. QUESTIONS AND ANSWERS 46Part III: The Prevention* Page
    47. 47. BIOGRAPHY 47 • 35 years of consulting, audit, accounting and tax experience in the public and private sectors. • Started career with a Big-Four international accounting firm in Washington, DC. • Founded a regional certified public accounting and consulting firm in 1982 and grew it to on of the Washington, DC’s largest firms in seven years. Merged his practice with Raffa P.C. in 2008. • Managed and conducted audit and accounting engagements ranging from small privately held to large publicly held businesses in various industries, including multi-national businesses, nonprofit organizations, and governmental entities and agencies. • Performed economic and financial analysis, including projections and forecasts, in support of litigation and claims for lost earnings and profits, business interruption, shareholder disputes, patent and trademark infringements, bankruptcy and restructuring, and structural settlements; assistance with interrogatories, document requests and depositions; and serving as an expert and consulting witness. • Performed and supervised business valuations for both public and closely held companies in a variety of industries, individuals and estates, family limited partnerships and limited liability companies, including valuations for business combinations (SFAS 141R), mergers, acquisitions, and divestitures, estate and gift taxes, marital dissolution proceedings, buy- sell agreements, intangible assets and intellectual property, purchase price allocations, goodwill (SFAS 142) and long-lived asset (SFAS 144) impairment, fair value accounting (SFAS 157), cheap stock (IRC 409A), stock-based compensation (SFAS 123R), phantom stock and employee stock ownership plans. • Conducted and led teams of forensic accountants on fraud audits and investigations, including fraudulent financial statements, misappropriations of assets and embezzlements; money laundering, kickbacks, bribery and conflicts of interest; insurance claims; bankruptcy; financial institutions and loan fraud. Also has conducted fraud risk assessments, anti-fraud programs, and fraud training and education. LAWRENCE J. HOFFMAN, CPA/CFF, CVA, CFE SENIOR PARTNER RAFFA, P.C. 1899 L STREET, NW WASHINGTON, DC 20036 TEL. 202-822-5408 FAX 202-822-0669 LHOFFMAN@RAFFA.COM Part III: The Prevention* Page
    48. 48. BIOGRAPHY 48 • Assisted companies and nonprofits with restructuring and turnaround situations, including recapitalizations, reorganizations and liquidations. Advised entities on Chapters 11 and 7, bankruptcy filings and proceedings and non-judicial workouts. Developed and administered crisis management plans, cash flows, liquidation and turnaround analysis, debt restructuring and creditor negotiations, and turnaround plans. • Formulated strategic short- and long-term business and financial planning for various business organizations and served as interim “C” level positions, including for a major North American sports league, European and U.S. aircraft manufacturer, aviation charter airline and travel company, and a multi-chain quick service food chain. • Formulated syndication strategies and prepared business plans and private placement offerings, including financial forecasts, market research and analysis, due diligence, securities pricing and structuring for various public and private securities offerings, including SEC filing. • Founded and developed a regional NASD licensed broker dealer investment banking firm. Placed over $150 million in debt and equity and represented over $200 million in merger and acquisition transactions. • Founded and developed two private equity funds in excess of $10 million, including investments in early stage and mature emerging companies in the form of debt and equity. Portfolio investments included aviation, food and hospitality, software and technology, telecommunications, sports and entertainment, banking and financial institutions, healthcare, and wholesale and retail. • Co-founded and managed various real estate acquisition, ownership, and operating entities, including commercial office buildings, shopping centers, flex warehouses, residential housing and developed land. • Performed tax and financial consulting services for individuals and closely held businesses. • Instructor in audit, accounting, finance, and forensic accounting. LAWRENCE J. HOFFMAN, CPA/CFF, CVA, CFE SENIOR PARTNER Part III: The Prevention* Page
    49. 49. BIOGRAPHY 49 LAWRENCE J. HOFFMAN, CPA/CFF, CVA, CFE SENIOR PARTNER EDUCATION & CERTIFICATIONS • Bachelor of Science, Accounting – Mount St. Mary’s University • Certified Public Accountant (CPA) • Certified Fraud Examiner (CFE) • Certified in Financial Forensics (CFF) • Certified Valuation Analyst (CVA) • Private Investigator (PI), Virginia • Series 7 General Securities Representative (not active) • Series 24 General Securities Principal (not active) • Series 63 Uniform Securities Agent (not active) PROFESSIONAL ASSOCIATIONS & AFFILIATIONS • American Institute of Certified Public Accountants, Member • Virginia Society of Certified Public Accountants • Association of Certified Fraud Examiners • National Association of Certified Valuation Analysts • Institute of Business Appraisers PERSONAL INTERESTS • Private pilot with instrument, multi-engine, high performance complex and aircraft ratings • Golf and fishing • Reading and politics Part III: The Prevention* Page
    50. 50. BIOGRAPHY • 9 years of fraud investigation and financial audit experience • Started career with U.S. Government Accountability Office’s Forensic Audits and Special Investigations Unit • Led as many as 3 concurrent forensic audits and investigations on a variety of topics, including: Federal contractor/grantee eligibility fraud and integrity issues; federal tax collection program integrity; abuse of government purchase cards, travel cards, and premium class travel privileges; employment of sex offenders and child abusers at schools and child care facilities; passport application fraud; manufacture and marketing of herbal dietary supplements • Planned, developed, and completed audit and investigative objectives, scope, and methodology • Designed innovative analytical strategies and investigative techniques to identify fraud indicators in complex datasets, using software packages such as IDEA and SAS • Identified, investigated, and ultimately referred hundreds of cases of potential fraud, waste, and abuse to federal authorities for administrative action • Led multiple undercover operations of varying complexity and political sensitivity • Drafted numerous congressional testimonies and publicly available audit reports (see co- authorship experience below) • Designed and implemented internal quality assurance policies and procedures EDUCATION & CERTIFICATIONS • Bachelor of Science, Accounting – University of Maryland, College Park • Bachelor of Science, Finance – University of Maryland, College Park • Designated as a Certified Fraud Examiner (CFE) by the Association of Certified Fraud Examiners Leslie C Kirsch, CFE Manager RAFFA, P.C. 1899 L STREET, NW WASHINGTON, DC 20036 TEL. 202-955-7204 FAX 202-822-0669 LKIRSCH@RAFFA.COM 50Part III: The Prevention* Page
    1. A particular slide catching your eye?

      Clipping is a handy way to collect important slides you want to go back to later.

    ×