Anti-Fraud Services

Several facts have become quite apparent in recent years:

1. Nonprofit organizations are clearly not immune from the rising incidence of occupational fraud and abuse

2. Audits by CPA firms, even those of the highest quality, provide very limited protection against fraud

3. Protecting an organization against fraud before it happens and active, ongoing monitoring for fraud and abuse have become of paramount importance in today's environment

Donors, members, funding sources, and others expect more of today's nonprofit organizations. Gone are the days when the public felt sorry for nonprofits that became the victims of fraudsters. Now, nonprofits are criticized for not taking appropriate steps to protect their valuable resources from fraud and abuse. Some nonprofits have been punished twice for failing to prevent fraud - once by the fraudster and once by the general public, through its termination of support for an organization that doesn't protect itself from such a common act of wrongdoing.

Don't wait for fraud to strike before you take action to protect your organization!

Some organizations have speculated whether or when provisions similar to those found in the Sarbanes-Oxley Act will trickle into the nonprofit sector. Rather than waiting to see whether this will occur, the more proactive nonprofit organizations are already implementing many of the internal controls and systems required of public companies under Sarbanes-Oxley today! This includes thorough reviews of fraud prevention controls, among many other measures.

What is your organization doing to protect itself from fraud and abuse?

Nonprofit Resource Center and Zack Accounting & Consulting, P.C., along with our network of CPA firms throughout the United States, offer some of the most important services available to your organization in its fight against fraud and abuse. We offer anti-fraud services in all three critical phases of fraud protection:

1. Fraud Protection Improvement - analyzing and improving all of your organization's systems as they related to preventing, detecting, and deterring fraud and abuse.

2. Monitoring - A specialized form of internal auditing devoted to periodic or ongoing evaluation of organizational compliance with anti-fraud policies and analysis of data for signs of fraudulent activity.

3. Investigation - If fraud or abuse is suspected or alleged, our team of specialists can perform all of the investigative services necessary to maximize your recovery of lost resources and litigate against the perpetrators.

See below for more details on each of these specialized services.

All of these services are performed by and under the immediate direction of Gerard M. Zack, CFE, CPA, author of the comprehensive 384-page book, Fraud and Abuse in Nonprofit Organizations: A Guide to Prevention and Detection (pub. June 2003 by John Wiley & Sons). Mr. Zack is one of only seven Fellows of the 28,000-member Association of Certified Fraud Examiners (Fellow status is conferred upon certified fraud examiners who have made significant contributions to the body of knowledge in the anti-fraud field, in addition to possessing substantial fraud examination and anti-fraud experience). Gerry has more than 22 years of fraud- and audit-related experience and has focused primarily on applying these skills in the nonprofit sector during this time.

Our Fraud Protection Improvement services involve three important and inter-related elements:

1. A detailed analysis of all anti-fraud practices, systems, and policies, resulting in recommendations for and/or development of, improved policies and other defenses against fraud

2. Training of board members, senior management, department heads and supervisors, and other personnel in anti-fraud skills appropriate for each person's position

3. Assistance in implementation of revised anti-fraud practices, systems, and polices, including documentation of enhancements to all policies and other implementation assistance

The detailed analysis of your organizations fraud defense systems will be based in part on the Organization-Wide Model of Fraud Protection explained by Gerard Zack in his book, Fraud and Abuse in Nonprofit Organizations: A Guide to Prevention and Detection, but will be customized to your organization's specific operating characteristics. This organization-wide model focuses on a top-to-bottom involvement of all personnel cross-cutting every department and function in your organization in the fight against fraud. Fraud protection is NOT exclusively an element of financial controls. It involves many other important functions, such as:

• Human resources
• Information technology
• Physical security
• Insurance
• Board oversight

Keep in mind –- an audit conducted by your external CPA firm provides very limited assurance regarding detection of fraud and NO assurance regarding the organization's protection against future frauds. The study of internal controls done as part of an audit is limited to gaining a limited understanding of a handful of internal controls in order to be able to plan the audit. Many audits involve no testing of whether internal controls are operating as planned, and those audits that do include testing of internal controls typically involve very limited quantities of transactions.

The bottom line is simple - auditing and protecting against fraud are two very different functions.

Our Fraud Protection Improvement service will culminate in a series of recommendations for improvements to all of your organization's systems involved in defending against fraud, along with appropriate training and implementation guidance.

Managing the risk of workplace fraud and abuse is an ongoing process - not a single step that can periodically be performed and updated. We offer a fraud risk-based monitoring service that will focus on compliance with all fraud-related policies, as well as ongoing re-assessments of your organization's self-defense systems.

A 2002 report on fraud issued by the Association of Certified fraud Examiners found that the average fraud scheme lasted 18 months before being detected. Our experience with nonprofit organizations indicates that many frauds in the nonprofit sector last even longer before they are detected. If that time period can be reduced, the total amount lost to fraud is reduced and the chances for recovery of any funds lost to fraud improves dramatically. The keys to reducing this time period are improving your defenses against fraud and improving your monitoring activities to detect fraud.

That's where we can help. Unlike traditional internal auditing, which is broader in focus, our monitoring services focus exclusively on occupational fraud and abuse.

The benefits your organization will receive from our monitoring services include:

Independence - We are independent from all employees and board members of your organization, so there will never be a conflict between our duties and any employment-related expectations. Ultimately, we are responsible to your audit committee and/or board of directors. The results of our work will be communicated to appropriate levels of management and to the audit committee. Further, since we are not also your external CPA firm, there will never be a conflict between the assessment and monitoring of your fraud defenses and the CPA firm's attestation function.

Technical Expertise - Under the direction of Gerard Zack, a Certified Fraud Examiner and Certified Public Accountant with more than 24 years of fraud- and audit-related experience, we have assembled, trained, and developed a team of professionals with a variety of pertinent skills and backgrounds to provide anti-fraud services.

Industry Experience - We have focused almost exclusively on the nonprofit sector for more than 20 years. Take one look at the resources, training, and professional services that we offer throughout this web site and you'll see that no other firm is as focused on serving the nonprofit sector as we are.

Monitoring services are typically provided on a periodic basis throughout the year - most commonly quarterly.

If your organization is not located where we are or where one of our affiliated firms is located - not a problem. Many of our monitoring services are done off-site. We use sophisticated electronic data extraction and data analysis software in conjunction with other procedures to provide some of the most important monitoring services - thereby minimizing the time needed for us to work on-site at your offices. Of course, some monitoring procedures necessitate our presence at your site - but these services are carefully planned to minimize disruption to your operations and maximize the value of our time and services, keeping your fees under control.

Even in the most secure environment, attempts at embezzlement or other fraud may occur. As expert fraud investigators, we can handle all aspects of the investigation into suspected acts of fraud and abuse in a manner that maximizes your likelihood of successful litigation and/or recovery of lost resources. In addition to assessing the total amount lost to fraud, we can build the case for your recovery of lost funds and even provide expert witness testimony and prepare expert witness reports designed to maximize your chances of recovery.

Call Gerry Zack today at (301) 987-0287 for further details about how we can help improve your organization's defenses against fraud and abuse.