Board training

Is the cost of reducing fraud risk greater than the loss from a fraud incident?

I recently had the opportunity to visit with Sam Antar, convicted felon and former CFO of Crazy Eddie.

During our interview, Mr. Antar suggested a reason why businesses don’t put enough effort into fraud prevention and detection. He said the cost of deterring fraud may be more expensive than the consequences of fraud. Before I refine the concept, look at some costs he mentioned:

  • In the corporate world, particularly companies that have grown for a while, there needs to be a lot of systems put in place to deter and mitigate fraud risk.
  • There needs to be an audit committee and they need to have resources available to them. Translate that to they have authority to hire legal and accounting experts. They need training personally. This is expensive.
  • The audit committee, consisting of skilled and knowledgeable people, must have a direct line of contact to the Board of Directors. That is expensive in terms of time.
  • The Board of Directors has to have a substantial amount of financial skills. That is expensive in terms of time and dollars for training and dollars for their access to expert resources.
  • At some point in the growth curve, there needs to be a robust, skilled internal audit department. That could get quite expensive, if you look at it only in terms of cash outflows.

I would add to that the time involved to implement quality controls, policies, and procedures. Those will take a lot of time for the finance & accounting team. In turn, those procedures will take time for operational staff to follow. All of that translates into more staff.

That can get costly fast.

What is the cost of a fraud incident

(more…)

Jim Ulvog

Nonprofits cannot *prevent* fraud but they can reduce the risk

Sam Antar is a convict and former CPA. He was the CFO of Crazy Eddie, which by his description was an intentionally fraudulent business.

I recently had opportunity to interview him by phone. Will have more of our conversation in future posts.

What I’m going to do in these discussions is combine his comments and ideas with my thoughts.

Advice for charities

I asked him what advice he would have for small charities to prevent fraud.

Wow, was that a mistake. I should not have used the word “prevent.”

You can’t prevent fraud. If someone is intending to steal or is completely determined to cook the books, they will find a way.

(more…)

Jim Ulvog

Tragedy of Fraud series now available in print as well as e-book formats

tragedy-cover   tragedy-cover

 

Both books in my Tragedy of Fraud series are now available in print format from Amazon.

The newest book:

tragedy-cover

Tragedy of Fraud – Insider Trading Edition describes – Scott London’s long fall from Big 4 audit partner to prison inmate.

Click the link for your reading preference:

First book in the series:

tragedy-cover

Tragedy of Fraud – The Ripple Effects from Fraud and the Wages Earned – Consequences of fraud spread far. There is a long list of well-earned wages from fraud that will be paid in full.

Available in your preferred format:

Jim Ulvog

Don’t compare your messy backstage to someone’s presentable front stage

Things behind the scene are invisible to others. That’s the backstage. The ready-to-go portion shown to the world is the only part others see. That’s the front stage.

The ol’ sage advice is don’t compare your backstage to the front stage you see of others.

This applies in so many areas.

You know how your children behave at home or on a long vacation or how much effort it takes to get homework done. What you see in other families is the on-your-best-behavior public face and the brag-ready list of accomplishments that were oh so easy to achieve.

Compare the backstage of your family to someone else’s front stage as if that was actually a valid comparison and you will be distressed with either your children or your parenting skills. The most likely outcome is wondering why you are a failure as a parent.

Jeff Walker has a great video about that idea. He uses a messily hand-tailored shirt as a great contrast of the slick front stage and the messy, sloppy, slap-dash back stage.

Check this out:

[youtube=https://www.youtube.com/watch?v=Herruzu4HYY&feature=player_embedded]

 

Literally the difference between (more…)

Jim Ulvog

Primer on fraud in local governments

If you work in a local government, are in leadership there, or provide audits in that sector, you really ought to check out Charles Hall’s book, The Little Book of Local Government Fraud Prevention.

I bought & read a copy a while back and really, really want to write a review of the book, but haven’t been able to pull together my thoughts.  (Sorry Charles!) It is a good read.

(cross-posted from my other blog, Attestation Update.)

Until I pull together my thoughts, just know that I believe you would benefit from reading the book.

(more…)

Jim Ulvog

1 fact and 2 stories explaining why you should set up a fraud hotline in your charity

What would you think is the most likely way that a fraud is detected?

Internal audit?

No.

External audit?

No.

One fact

Forty-two percent of frauds are discovered by a tip.

Internal audits are the means to catch 14% of frauds. External audits catch a mere 3% of frauds.

Frauds are ten times more likely to be discovered by a tip than by an external audit.

That single fact, 42% of frauds discovered by tips, is a strong argument to set up an anonymous fraud tip hotline.

That data is provided by The Association of Certified Fraud Examiners in their 2014 Report to the Nations on Occupational Fraud and Abuse based on their survey of over 1,400 frauds reported to the organization.

First story

(more…)

Jim Ulvog

Primer on reading a 990. Lessons learned from looking at a journalists’ presentation.

If you don’t know where to start when looking at a 990 to figure out what’s going on, two reporters have provided you a great intro.

Here is a slide deck for a presentation that highlights a few items to look at: Five Tip-offs to Trouble in the Form 990.

A 990 has been highlighted here so you can see where to look for key numbers that tell the story of what is happening in a charity. The sample is an actual 990 with an unflattering story to tell.

Board training opportunity

If you have board members who have a basic idea of how to find their way around a 990 and want them to learn more, show them the above links.

The presentation is from Kris Hundley of the Tampa Bay Times and Kendall Taggart of The Center for Investigative Reporting.

For finance staff in a charity, some things to learn

(more…)

Jim Ulvog

Introduction to reading an audited financial statement

Does it seem like the report you get from your auditors is an unorganized jumble of numbers and words?

If so, that’s because financial statements for a charity are presented in a very stylized way. A specific set of rules spell out the sequence and structure of the information.

Need someone to help you get oriented so you can figure out what that report is saying?

(more…)

Jim Ulvog

Consider carefully before you start an NPO to get grants – advice for arts organizations and other creative people

Is it a good idea for an artist to create an NPO to get grant money?

If you’ve been wondering, consider the advice from Corbett Barklie at KCET: Should I Become a Nonprofit?

In addition to the cost and time involved in forming an NPO, the article points out the cost and time to maintain the infrastructure.

(more…)

Jim Ulvog

Pastoral repentance and restoration

If you have been around the Christian world a while, you know the reality that pastors can commit serious sin that can require removal from the pastoral office. As an auditor providing service to the religious community, I’ve seen this play out at more than one client.

When should a pastor be removed? How wide should the confession be made known? Is restoration possible? How does church leadership walk through restoration?

Those are all questions to address if you are in leadership when your church is hit with a pastoral failure.

The best article I’ve read in a long time is currently at Christianity Today, written by Pastor Ed Stetzer: When Pastors Fall: Why Full and Public Repentance Matters – – Pastors are held to a higher standard and must repent of sin in accordance with that standard.

I’ll just summarize a few of the highlights. Please check out the full article.

(more…)

Jim Ulvog

Think carefully before you start a new NPO as your platform to change the world

Catalyst Center for Nonprofit Management provides a challenge for those of you thinking of forming an NPO to provide a structure to carry out your passion:  Should You Start a Nonprofit Organization?

The article surveys the costs and says think carefully before diving in to start a 501c3.

Why?

(more…)

Jim Ulvog

Is your church a life-saving station or a club house? A parable.

The parable of the Live-Saving Station

 

[youtube=http://www.youtube.com/watch?v=KjxgAbxaspg&feature=player_detailpage]

 

Text version can be found here. That site asserted in 1990 the text is used by permission and is copyrighted by Youth Specialties. Thus I won’t quote the text. You can check it out with one click.

(more…)

Jim Ulvog

What is success? Strategic planning, mission, vision, and outcome measures flow from one question.

Here’s a great question to drive your strategic planning:

What is success?

Follow-up questions could be:

  • What does success look like?
  • How will we know when we achieved it?
  • How can we measure it?

If you can answer that one key question, a host of other questions would be easy to answer.

(more…)

Jim Ulvog