Preventing Fraud. Objectives. Participants will be able to: Karen Brodeur, Program Manager CHF Canada

Transcription

1 Preventing Fraud Karen Brodeur, Program Manager CHF Canada Objectives Explain to your co-op some of the common causes of fraud List the steps needed to be taken to prevent fraud from happening in your co-op Participants will be able to: 1

2 Agenda Preventing Fraud Definitions Common causes Internal Controls Cheque handling system Housing charge system Petty cash system Case study Wrap up and evaluation Fraud is. o criminal deception for unlawful gain o Intent to deceive, dishonest act, use of false representation to gain unjust financial advantage 2

3 Internal controls are: o a system of checks and balances designed to prevent or detect fraud or errors in financial systems Common causes of fraud lack of policy and procedures lack of enforcement of policies lack of knowledge of what to look for no double checking 3

4 Common causes of fraud continued o o o no accountability total control by one or few people no periodic review of systems Internal controls Approved annual budget of expenses Written policy regarding purchases Requirement for 3 quotes above a certain dollar amount Cheque signers to initial requisition to indicate they have reviewed the documentation Bank reconciliation 4

5 Internal controls 2 Requisition form to show whether it was a budgeted expense or the date the decision was made by the board Written spending policy Pay only invoices not statement Attach purchase orders, quotes to invoices RGI calculation matching inputs to the supporting documentation Internal controls 3 File paid invoices once they have been entered in the books Review suppliers statements and bank accounts and compare with the monthly accounts payable listing (cross checking) Process GST/HST receivable 5

6 Case Study What went wrong at your Case Study Co op? Your mission is to solve the case and prepare to report back on how this could have possible happened! Case Study #1 The case of the missing investment account 6

7 Analysis Put fail safe systems in place Don t allow one individual to control the co op s money Look into any investment opportunity carefully Don't sign cheques without proper confirmation especially large ones Require more than two signatures on cheques above a certain limit Directors must take their fiduciary duty seriously Ask your auditor s opinion on the financial controls in place Make sure you have fidelity insurance Case Study #2 The case of the laundered money 7

8 Analysis Review financial statements monthly Make sure that more than one person counts laundry cash Have a no-cash policy except for laundry Closely watch for changes in members arrears patterns Watch for receivables that are being written off. Policy for board approval is essential Analysis continued Review source documents: deposit book, bank statement and reconciliation monthly Make sure that more than one person counts laundry cash Have a no cash policy except for laundry money and small charges like keys, photocopying Watch changes in arrears patterns closely; do periodic arrears confirmations directly with the members concerned. Control director s arrears Watch for any written off receivables: policy for board approval is essential Watch for staff reluctance to take vacation time. 8

9 Case Study #3 The case of the mismanaged vacant unit repairs Analysis Create a spending policy Investigate vendors hired to work within the co op. Insure proper procedures and documentation are being followed. Have board approval to hire vendors and record those decisions in board minutes. Make sure your management company double checks source documents. Study the financial statements closely: look for unusual variations in expenses, ask questions until you re satisfied Spot check the returned cheques from the bank. Be aware of limitations of your bank or credit union liability and act accordingly Don t expect your auditor to look at every transaction or question individual purchases Make sure your co op carries adequate liability insurance 9

10 Sleeping well at night: putting financial controls in place Cheque handling system Establish a list of items a cheque signer must review before signing Train new cheque writers Require two signatures for all cheques Use pre-numbered cheques DO NOT pre-sign blank cheques DO NOT make cheques out to Cash REFUSE to sign the cheques if process not complete 10

11 Housing charge system Establish an arrears policy and procedures DO NOT accept cash payments Prepare and send out monthly letters for every household in arrears Board to review arrears report monthly, or more often if there is a problem Compare monthly budgeted housing charge revenue with the actual Petty cash system Limit access to the cash fund Maintain a file of purchases so that the cash fund can be replenished when it gets low Attach receipts and invoices to the cheque requisition to document the expenses Approval of cheque requisition and supporting documentation to be done by persons other than the person responsible for the petty cash fund Review bank statement 11

12 Other income system Restrict access to the keys that open laundry/vending machines Rotate collection duties among several people Have two or three people collect and count cash Review the bank statement to ensure the amount collected is the same amount deposited. Who is responsible for preventing fraud? Board Staff Members Auditor Regulator What do you think? 12

13 What do you do if you suspect or find fraud? Exercise caution, do not accuse anyone Notify board Notify lawyer and seek advice Notify auditor and seek advice Notify funding agency Notify insurance company What do you do if you suspect or find fraud? Notify police if necessary Listen to and follow professional advice Keep all parties updated Be prepared to make difficult and unpopular decisions Make sure that decisions are based on professional advice not rumour or politics of the co-op 13

14 Your evaluations, please! 14