Hill Rogers - Avoiding fraud in the NFP sector_Vishal Modi
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Twilight Seminar Presentation: 040417 Vishal Modi, Director - Audit and Assurance, Hill Rogers: How NFP organisations can Avoid Fraud
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Hill Rogers - Avoiding fraud in the NFP sector_Vishal Modi
- 5. Fraud Triangle 5 Fraud Triangle Incentives/ Pressures Opportunities Attitudes/ Rationalisation Lack of segregation of duties Significant cash transactions Lack of controls Informal governance Personal financial problems Desire for status symbol Need to meet with budgets Gambling problems “I am only borrowing the money” “I am entitled to the money” Family pressures High turnover of staff “I am underpaid” Need to meet with fundraising targets “I have to steal to provide for my family”
- 6. How you can protect your organisation It is important that you consider these aspects of your organisation: • Ethical culture • Communication flow • Formal policies and procedures 6
- 7. Internal control weakness that contributed to fraud 7 2% 2% 4% 4% 6% 16% 17% 24% 26% Lack of clear lines of authority Lack of independent checks/audits Other Lack of employee fraud education Lack of competent personnel in oversight roles Lack of management review Poor tone at the top Override of existing internal controls Lack of internal controls Source: Report to the Nations: Asia-Pacific Edition, Association of Certified Fraud Examiners
- 8. Steps for fraud prevention • Be clear about the ethical values, e.g. honesty and accountability – set the “tone at the top” on fraudulent behaviour • Be open about the possibility (risk) of fraud, even if it is only a small risk – if you don’t acknowledge that fraud happens, you are not going to find it • Identify the types of fraud you may be at risk from – conduct a risk assessment • Understand the red flags that act as a warning of possible issues – e.g. behavioural or lifestyle symptoms, accounting & analytical anomalies 8
- 9. Prevent fraud with proper internal controls • Develop sound written policies and procedures – important they are clear about roles and responsibilities, and what steps must be taken, including: ü detailed and robust financial procedures, information technology & security ü fraud prevention policy ü human resources procedures • Promptly report any suspected fraud or other criminal activity that takes place, and take steps to minimise any loss and prevent it from reoccurring 9
- 10. Why effective internal controls are important • Implementing effective internal controls is critical to reducing your organisation’s exposure to fraud risk • Reviewing the effectiveness of internal control is an essential part of the Board’s responsibilities; whilst management is accountable to the Board for developing, operating and monitoring the system of internal control and for providing assurance to the Board that it has done so • The Board cannot rely solely on a process of internal control embedded within the organisation’s operations, but should regularly receive and review reports on internal control from management 10
- 11. Why effective internal controls are important • As well as a regular review, do undertake an annual assessment • Risk management and controls are not to be seen as a burden on business, rather the means by which business opportunities are maximised and potential losses associated with unwanted events reduced • Develop a successful system of internal control that is responsive to change 11
- 12. About me – Vishal Modi • Expertise in providing commercial entities and membership based organisations with expert advice and guidance with their assurance requirements • Focused on building strong partnerships with clients • Passionate about advising and implementing efficient risk management controls and affecting long term sustainable improvements in business outcomes • Joined Hill Rogers in 2005 and appointed Director in 2012 • Bachelor of Commerce • Member of Chartered Accountants Australia and New Zealand • Registered Company Auditor • Vishal.Modi@hillrogers.com.au │m: 0434 129 005 12
- 13. t +61 2 9232 5111 f +61 2 92337950 www.hillrogers.com.au | info@hillrogers.com.au Level 5, 1 Chifley Square, Sydney NSW 2000 Australia GPO Box 7066, Sydney NSW2001 H.R.P.H Pty Limited practising as Hill Rogers | ABN 12 003 718 518 Member of KS International, an association of global independent accounting firms. Liability limited by a scheme approved under Professional Standards Legislation. Disclaimer: Hill Rogers Advisory Pty Ltd The material contained in this publication is general commentary only for distribution to clients of Hill Roger s. None of the material is, or should be regarded as persona l or financial product advice. Accordingly , no per son should rely onany of the contents of thispublication without f irst obtaining specific advice from HillRogers. Every effort has been made t oensure that the content is accurate, however it is not intended to be a complete description of the matter s described. Hill Roger s, its Pr incipals and agents accept noresponsibility to any per son who actsor re lies in any way on any of the material without first obtaining suchspecific advice. H.R.P.H Pty Limited practising as Hill Rogers|ABN 12 003 718 518 Member of Morison KSi, an association of global independent accounting firms. Liability limited by a scheme approved under Professional Standards Legislation.