Preventing Fraud in Aeries: Understanding, Detecting, and Preventing Fraud

DETECT AND DETECT AND PREVENT PREVENT FRAUD FRAUD

The culture of most Aeries is based on trust, honesty, and a commitment to the memberships interest. Fraud can be defined as the use of one s position for personal enrichment through the deliberate misuse or misapplication of the Aeries resources or assets.

Fraud from Non-profits is estimated to cost organizations approximately 40 to 50 billion a year. 1 in 5 Non-profits have some sort of Fraud happening. One of the main reasons for fraud to happen within an Aerie is due to the fact that the layers of management are not very deep.

TYPES OF FRAUD TYPES OF FRAUD Asset misappropriation, although least costly, made up 90% of all fraud cases studied. Examples of asset misappropriation are stealing cash before or after it has been recorded, making false expense reimbursement claims, and/or taking non-cash assets of the Aerie. Financial statement fraud comprised less than 5% of cases but caused the most median loss.

TYPES OF FRAUD CONTD TYPES OF FRAUD CONT D These are schemes that involve omitting or intentionally misstating information in the Aeries financial reports. This can be in the form of fictitious revenues, hidden liabilities or inflated assets. Corruption schemes happen when employees use their influence in business transactions for their benefit while violating their duty to the employer. An example of corruption is over pouring to get better tips.

FRAUD AS DEFINED IN SECTION FRAUD AS DEFINED IN SECTION 63.2(F) OF THE CONSTITUTION 63.2(F) OF THE CONSTITUTION AND STATUTES AND STATUTES Fraud, which is the unlawful intentional taking of property, money or or funds for personal use or or gain or or some deceitful or or willful purpose, resorted to with intent to deprive another of their right, or or in some manner would cause harm. This pertains to any officer, committeeman or or member of any entity of the Fraternal Order of Eagles.

HELPFUL WAYS HELPFUL WAYS TO TO PREVENT FRAUD PREVENT FRAUD

HIRE THE RIGHT PEOPLE HIRE THE RIGHT PEOPLE Although the majority of fraud perpetrators are first-time offenders, weeding out the criminally inclined is not impossible. A great deal can be learned from a persons references, work history, credentials, and criminal background checks. If nothing else, background checks put job applicants on notice that the organization values integrity. If your doing background checks on employees you need to make sure you do it for everyone everyone.

DEVELOP A EMPLOYEE/VOLUNTEER DEVELOP A EMPLOYEE/VOLUNTEER POLICY MANUAL POLICY MANUAL Put policies in writing and have all employees/volunteers sign documents saying they will follow the rules. Section 89.2 of the Constitution and Statutes states in part, Section 89.2 of the Constitution and Statutes states in part, The Board shall have charge of the maintenance and operation of the home clubrooms and buffet belonging to the Aerie, and shall employ, discharge and control the conduct and duties of all the employees of the Aerie, except the Assistant(s) to the Secretary. Such Assistant(s) are under the direct supervision and responsibility of the Secretary. All employment positions must be provided for in the By-Laws before the Board is authorized to employ anyone in those positions or authorize payment of wages for those positions. The Board shall have no authority to enter into any contract involving the expenditure of any money or the payment of any manager s salaries until the membership has approved said manager s agreement.

ESTABLISHMENT OF INTERNAL CONTROLS ESTABLISHMENT OF INTERNAL CONTROLS WITHIN THE EMPLOYMENT/VOLUNTEER WITHIN THE EMPLOYMENT/VOLUNTEER POLICIES POLICIES Two examples of this are preventive or detective. Preventive examples: Make sure that there are three signatures on all checks Require at least two people when counting cash Trustees do all Z outs, counting of all register money bags and drawers Installation of Security Camera s Trustees need to have a key control system in place Inventory Controls in place

Detective examples: Have the Treasurer reconcile bank statements Have the Trustees do surprise inventory counts Trustees complete weekly checkout and turnover to the Secretary and receive his receipt Secretary receipts the Treasurer for turnover Auditor shall make a thorough and complete audit of the books of the Secretary, the Treasurer, the Board of Trustees, and any other officer, internal unit and committee by whom any of the financial transactions of the Aerie have been conducted Auditor to review membership payment history Auditor to review bank statements

PROSECUTE OFFENDERS PROSECUTE OFFENDERS Cost and fear of notoriety keep some Aeries from exposing fraud and taking legal action, but lax attitudes make it that much easier for the next person to commit fraud without fear of reprisal.

CREATE A WHISTLEBLOWERS CREATE A WHISTLEBLOWER S HOTLINE HOTLINE Studies show that most frauds are originally detected through tips from employees, clients, and outside vendors. The reporting system should be anonymous, managed by a third party, and available 24/7. This service doesn t have to break the bank, either. Some vendors charge as little as $500.00 a year for a hotline.