Nonprofit finance, accounting, and tax news. Other tidbits of interest to the charity community.
As you can see from the previous posts, all three sides of the fraud triangle work together. A person has to have an opportunity to do something wrong combined with some sort of serious pressure along with a mindset to say that something that previously would have been wrong is now actually reasonable.
Lacking one side would stop the fraud. (more…)
When a person is rationalizing a situation to convince themselves that it is really okay to do something wrong, they are telling themselves “rational lies”. Okay, it’s an old joke. But “rational lies” tells the story in one phrase.
A theological description of rationalization can be found in Jeremiah 17:9, (more…)
Entertaining internet security and scam prevention story for you! Here is a fellow who made a mistake in everything he did all day long. Broke about every safety rule you can think of. Fun story of how to avoid getting scammed.
The series of posts on the concept of fraud triangle have been pulled together into one page. This will allow you to read the series in chronological order, which should make it easier to follow the topic. You can find that page below the title bar, at the “fruad triangle” spot which is to the right of “about Ulvog CPA”.
The final component needed to complete the fraud triangle is rationalization. This is the ability to persuade yourself that something you otherwise know is wrong is really OK. A lot of mental gymnastics are obviously needed to do so, but that is the point. If a person goes through those gymnastics, than what was wrong before is now acceptable. How can that happen? (more…)
Amongst the many dangers is that some motivations would be hidden from view in the workplace. Some of them, such as drinking or narcotics, would eventually show side effects in the workplace. Those factors could create visibility that would raise questions which in turn could in turn possibly result in discovery of the fraud. If that is the motivation, the plan could self-destruct fairly quickly.
It is very sad to read about the tragedies that take place. Immediately after posting the previous discussion of the motivation side of the fraud triangle, went to a blog I frequent. Have now added it to the blogroll on the right. Here is the article . It clearly illustrates the motivation factor. (more…)
Motivation is typically described as the pressure or incentive to commit fraud. When great pressure is brought to bear, people will do things you would have never thought possible. We used to illustrate this with someone who has a drinking problem or a gambling problem. Those illustrations of pressure don’t paint a good enough picture because you can’t drink enough (and still function) to create pressure to steal enough money to cause a severe problem. Let’s expand the picture. Long before someone with a drug problem deteriorates to the point of non-functioning, they can appear to function normally on the outside but have a need for so much money that the only way they could possibly feed their addiction is to steal from the ministry. (more…)
Having the door wide open is one way to describe the concept of opportunity to commit fraud – there is nothing stopping you from getting your hands on the money and getting it out of the organization.
How does a person realize there is opportunity to do something wrong? (more…)
Opportunity is the first side of the fraud triangle we will discuss. This is when there is a situation that would allow a person to do something wrong. These are the weaknesses and procedures to correct them that we usually talk about. Places where someone could get their hands on money and get it out the door. (more…)
This will be the first in a series of on what accountants call the fraud triangle.
Just a few comments before we begin. These posts will be written in a more casual style that you would usually see from an accountant. They will definitely be more casual than you have seen in my published resources, which you can find here. (more…)
Weeds in the Garden – the growing danger of fraud taking root in the Church
Verne Hargrave, CPA, CFE
ISBN 0-9705433-9-5
From the preface of the book: “The purpose of this short book is to help break {the logjam caused by the long list of reasons that prevent local churches from} taking anti-fraud steps. As you make your way through its pages, please keep three things in mind. First, it was {the author’s} intent to keep the book short. (more…)
A church in my area has been hit by an embezzlement scandal. It particularly grieves me because I have a number of friends who worship there.
Basic details are that the business administrator is accused of embezzling between $720,000 and $960,000. He has been arrested and formally charged with several felonies. He has denied all charges. Reports in on-line media do not provide any details of how the alleged scheme was supposedly carried out. We wait while the judicial system resolves the accusations. In the meantime, if you are so moved, please pray for the leadership (who are quite distracted from their ministry, I would guess), the membership (who are probably hurt and angry), the accused, and his family (they are victims too).
More details in this article at the Church and School Embezzlement blog. Articles from the Daily Bulletin, the local paper for my community, are no longer available on-line.
Full disclosure: It is important to explain that I know nothing about this tragedy beyond what I have read on-line.
You may think local churches are immune to scandals. In your ministry, perhaps you feel that since you are staffed by sold-out followers of Christ who are passionately committed to your mission, you won’t have any of those kinds of problems.
Allow me to share some of my experiences. (more…)