leveraging entity level controls in not for profit organizations september 24 2008 n.
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Leveraging Entity Level Controls in Not-for-Profit Organizations September 24, 2008. RSM McGladrey Inc. is a member firm of RSM International – an affiliation of separate and independent legal entities. Agenda. Overall Findings

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leveraging entity level controls in not for profit organizations september 24 2008

Leveraging Entity Level Controls in Not-for-Profit OrganizationsSeptember 24, 2008

RSM McGladrey Inc. is a member firm of RSM International – an affiliation of separate and independent legal entities.

agenda
Agenda
  • Overall Findings
  • Occupational Fraud & Abuse
  • Asset Misappropriation
  • Detection Methods – Not for Profits
  • Anti-Fraud Controls with the Highest Reduction in Median Losses
  • Leveraging Entity Level Controls
overall findings
Overall Findings
  • 7% of annual revenue lost to fraudulent activity which translates into an estimated $994 billion
  • $175,000 median loss
  • 2 years to detect fraud and typically from employee tips
  • Higher median losses for organizations with <100 employees of $200,000
  • Lack of adequate internal controls
  • Implemented anti-fraud controls lowered median losses
  • Perpetrators – Accounting dept or upper management and generally first-time offenders

Source: ACFE 2008 Report to the Nation on Occupational Fraud & Abuse

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The majority of tips came from employees.

Source: ACFE 2008 Report to the Nation on Occupational Fraud & Abuse

leveraging entity level controls
Leveraging Entity Level Controls
  • Entity Level controls can assist in preventing fraud in an organization and can help to better manage an organization’s total risk.
  • Promote Integrity and Ethical Behavior
    • Create an organization that values integrity and ethical behavior including removing incentives that promote unethical behavior
    • Publish a Code of Conduct or Ethics with consequences and Whistleblower Policy/Conflict of Interest Policy that is accessible to all employees
    • Reinforce the importance of your organizational values with annual review and sign-off
  • Commit to Hiring and Retaining Competent Employees
    • Write job descriptions that outline roles and responsibilities
    • Invest in educating and training and require specific job-related training
    • Perform background checks for new employees
leveraging entity level controls cont
Leveraging Entity Level Controls (cont.)
  • Enhance the Effectiveness of the Audit Committee
    • Write audit committee charter
    • Authorize audit committee to hire external audit with reporting lines to committee
    • Approve in advance by committee for non-audit services
    • Include a “financial expert” on audit committee
  • Structure Your Organization to Promote Effective Internal Controls
    • Identify the areas segregation of duties issues may exist
    • Determine potential alternatives to resolving issue
    • Determine whether reliable compensating or mitigating controls can be implemented
    • Address who will serve in a back-up capacity and develop a disaster recovery and business continuity plan

NOTE – All organizations (including NFP) who receive Federal funding must adhere to two aspects of SOX – 1) Adopt a Whistleblower Policy and 2) Adopt a Document Retention and Destruction Policy.

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End Goal: Enhanced control environment by leveraging Entity Level Controls

Sharon Griffin – 804-281-6886 sharon.griffin@rsmi.com

Michaelle Keiffer – 301-296-3717 michaelle.keiffer@rsmi.com