Damage organization’s reputation
Beyond financial accountability, however, a similar greater potential consequence of fraud to nonprofit organizations is the reputational damage that can occur. Because most nonprofits depend on support from donors, grantors, or other public sources, their reputations are among their most valued assets. In addition, fraud in nonprofit settings often garners unrelenting negative media attention. Therefore, once a fraud has been uncovered, the organization faces an ongoing problem of public outcry from the media. Lastly, a financial loss can affect the reputations of the people involved. Often, the board dismisses an executive director if a large theft occurs on his or her "watch." Members of the board are questioned
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Forming policies and procedures that support the fulfillment of fiduciary responsibilities exposes the possibility of fraud tendencies. Fulfilling this kind of fiduciary duties means that the board chair ought to set policies and standards that ensure adequate internal controls. Clear policies that will enable the board chair to measure the effectiveness of their activities, prevent fraud and designate financial responsibilities. These policies should be established in a way to facilitate the development of controls that will aid in the detection and prevention of fraud by the offender(s). In the policies, an investigative activity should be conducted without regard to the suspected wrongdoer’s length of service, position/title, or relationship to the organization. Once the organization has sufficient evidence that there has been a misappropriation of funds, the alleged offender must be confronted and given an opportunity to give his or her own side of the story. If the individual cannot fully explain the missing funds, the suspected employee(s) should immediately be removed by placing him or her on probation (if the organization is still unsure if a crime has been committed, a decision to place the employee on probation may be preferential) or by the termination of employment. If there is serious concern that the …show more content…
The standard of financial reporting will succeed or fail based on its capacity to communicate these activities clearly and completely. The organization’s financial statements and their related balance sheets are fundamental to its operation. The well-being of a nonprofit, and of the millions of investors who entrust their financial commitment and future to those organizations, depends directly on the information the financial statements and the balance sheets provides. Consequently, the quality of the information depends directly on the principles and standards board chairs apply when recognizing and measuring the activities and events affecting their organizations’ operations. As a board chair, I will recommend the CEO provides a consistent and timely report to the board of directors. The types of reports might include a balance sheet, revenues and expenses, pledged receivables, cash flow, and utilization. In order to carry out this, I recommend having a good software system that will enable the organization to quickly and easily customize
But the stakeholders play a very important role in preventing and deterring fraud. Stakeholders includes customers, suppliers, employees, the community and the government. Each play an important role since they have an interest in the integrity of financial reports of the publicly-traded company. Employees have a vested interest in the company’s success and they have a responsibility to protect their interest. Their roles may start from the bottom but they are key players in the company. To help deter or prevent financial statement fraud, the employee must report financial reporting fraud if it is detected. This can be done by way of a vigorous whistleblower program of some other tip line provided by the company. The community and its members, including the news media, can play a regulator role by confirming that the company is a good citizen with fair business practices. Shareholders should make sure that any company in which they’d like to invest is in compliance with standards of oversight and ethics. Investors need to play and active role also. They should be actively involved by monitoring the companies in which they invest. They should attend shareholder’s meeting regularly to discuss concerns and check the books of the company. This will allow them to stay current with what is going on within the company. Shareholders should always remain vigilant and make
Trustees are fiduciaries with a trust relationship and confidence towards another, Millet J in Bristol West Building v Mothew states that fiduciary duties would be imposed on a person who holds a position on trust, confidence and influence. While there are established categories of fiduciary e.g. trustee/beneficiary and solicitor/client, the categories are not closed. Thus, Fridman found that an agent is a fiduciary because whether he is paid or acts gratuitously, he has the power to alter the legal relation of the principal. This essay will discuss the duties of a fiduciary, examining case laws and academic arguments.
The nonprofit sector in America is a reflection some of the foundational values that brought our nation into existence. Fundamentals, such as the idea that people can govern themselves and the belief that people should have the opportunity to make a difference by joining a like-minded group, have made America and its nonprofit sector what it is today. The American "civil society" is one that has been produced through generations of experiments with government policy, nonprofit organizations, private partnerships, and individuals who have asserted ideas and values. The future of the nonprofit sector will continue to be experimental in many ways. However, the increase of professional studies in nonprofit management and the greater expectation of its role in society is causing executives to look to more scientific methods of management.
Mr. Rapfogel was charged with conspiring to inflate insurance payments and keeping one million dollars for himself, most of which was stashed in his Manhattan apartment that he shared with his wife. Some of the money was funneled to politician’s campaigns, who then kept his nonprofit flush with government funding. The twenty year scheme is alleged to have skimmed five million dollars from the venerable charity. (Hawkins, 2013). The case was brought to light by someone known as a whistle-blower. A whistle-blower is a person who reports illegal activity of their employers or of their organization to authorities (Colorado State University-Global Campus, 2014). Cases such as this raise questions about nonprofit organizations and their ability manage finances and the oversight that may or may not be present.
Nonprofits are dealing with many risks that seemed especially significant. For example, Nonprofits might encounter fiscal risk caused by the difficulty of finding enough resources and funds to subsidize their mission and objectives. Throughout history, fiscal distress has been a way of life for the nonprofit sector as many nonprofits are competing to access the needed resources and raising money to fund their activities. Nonprofits also might encounter the risk of losing market shares due to the uneven opportunity in accessing resources required to establish new facilities or new programs and services in response to the rapid surges in demand. Accordingly, nonprofits are required to maintain effectiveness
Over the last 20 years, there has been a significant increase in nonprofit and nongovernment organizations (NGOs) in the United States. With the increase in organizations, also came an increase in scandals and in the 1990’s multiple nonprofit and nongovernment organizations lost the public’s trust due to misuse of funds, lavish spending, and improper advances to protected populations. These charity scandals not only hurt direct organization’s reputation, but also led to the mistrust of nonprofit and nongovernmental organizations as a whole (Sidel, 2005). To combat these reputations, NGOs and nonprofit organizations began to self-regulate through employing morally obligated and altruistic employees, accountability practices, and lastly through
The oversight responsibilities of the board, the CAE lacking of expertise or broad understanding of financial controls and responsibilities, and the understaffed internal audit functions lacking of independence and direct access to the board of directors contributed to the absence of internal controls. To begin with, the board should be retrained to achieve financial literacy to review financial reporting. Other than attending formal meetings, the board of directors should be more involved with the management. For the Audit Committee, the two members who were recruited as acquaintances to Brennahan need be replaced with experts who are more sufficiently knowledgeable about accounting rules beyond merely “financially literate”. Furthermore, the internal audit functions need to expand with different expertise commensurate with the expanded activities of the organization, testing financial reporting rather than internal controls from an operational perspective. The CAE should be more independent and proactive to execute audit plans, instead of following orders from the CFO, and initiate a direct and efficient communication between internal audit and audit
This is discussion, I will explain a personal experience of a nonprofit organization’s board. Secondly, I will provide an analysis of what I foresee for the future of a nonprofit governing board of a nonprofit organization. I will explain if I anticipate greater demands for boards and the board members to be more accountable. Finally, I will explain my perspective and defend it with evidence from the field.
Worth, M. (2014). Nonprofit management: Principles and Practice. 3rd Ed. Thousand Oaks, CA: SAGE Publications, Inc.
This includes but is not limited to; check forgery, inventory theft, cash or check theft, payroll fraud or service theft. Another example of misappropriation of assets is when a company pays for goods or services that were not received or used. Embezzlement is a very common form of misappropriation where companies manipulate their accounts or create false invoices. An example of misappropriation of assets was discovered in 2008 and the victim organization was Fry’s Electronics. The Vice President of Merchandising and Operations, Ausaf Umar Siddiqui had set up a fake company that received illegal kickbacks. Siddiqui embezzled $65.6 million to pay off his gambling debts. Embezzlement of money from a company can understate cash and show a false picture to the creditors and investors. This can lead them to make decisions on misrepresented information. Another example of misappropriation of assets was of a hedge-fund manager, Philip A. Falcone who borrowed $113.2 million from investors from a hedge fund company (Harbinger Capital) and he used that money fraudulently to pay off his personal taxes. Instead of using the investor’s money for the intended purpose, which was to build a wireless phone network, he deceived them by using the money without their knowledge to pay off his taxes. The company had to file for bankruptcy as it had $23 billion in losses and withdrawals and it could not pay back
The economic downturn in the United States has been intensifying every month since September 2008, and it is having significant impacts on numerous nonprofit organizations (NPOs). It is clear that the economic downturn was more severe than anything ever experienced in over 50 years and it affected every sector of the economy. NPOs are facing numerous obstacles while at the same time facing an increase in vital services needed by the public population. The most critical issue lack of funding is forcing NPOs to rethink the current fundraising methodologies and to become more aggressively in their approach.
In the verge of making critical decisions business organization objectives must be put to consideration. Again the decision should be consistent with the vision and mission avowal of the organization. The secure harbors include a range of payments and regulation which clearly states that federal anti-kickback statute are unessential the offenses under the law. The SEC self regulatory oversight philosophy and PCAOB’s duty is auditing, creating inventory for civic accounting firms, discipline, control, ethics, and analysis. Stakeholders are shareholders, creditors, clients, workers, entrant, and legislative agencies.
Fraud in charitable organizations occurs when legitimate organizations or the individuals working for the organization misuse donations, or when illegitimate organizations or individuals collect donations on behalf of a sham organization. Perpetrators of charity fraud prey on the generosity of their donors through a variety of means. Some individuals may try to get the attention of a passerby on the street requesting cash for the hungry or disabled while others may use telemarketing scams in which the perpetrator tries to convince the potential donor of their legitimacy and the immediacy of financial need for a worthy cause. Yet, the most u...
The principle territory we are planning to address is accounting fraud and how it could impact an organization by answering, the who, what, when and how. Its goal is to increase the awareness of accounting fraud and fraud counteraction. The intriguing thing about accounting fraud is that little disclosure as a rule usually leads to an enormous increase in fraud. A number of categories and sub-categories can be divided up for fraud.
...e financial reports and statements are correct. This auditing will be conducted by auditing department of the organization, even may be done by an independent auditor who is not part of the organization, and sometimes public officials are elected. In case of unmatched consequences the organization need to give explanation on the misrepresentation of wrong statements. Auditors purpose is then to ensure that the misrepresentations are corrected, then maintain accurate, reliable financial documents and statements.