Behind the Mask

Joan M. Renner, CPA, CGMA, Director 501(c)(fit!)

Halloween just might be my favorite holiday.  I love to decorate the front porch with pumpkins and scarecrows to greet the trick-or-treaters.  Their costumes are so creative; sometimes I don’t even recognize them, especially if they’re wearing a mask.

While guessing who’s behind the mask is fun at Halloween, it’s serious business when it comes to fraud prevention.  Fraud perpetrators often masquerade as the “trusted employee” gaining the access and opportunity to commit fraud.    

So how do you tell if your “trusted employee” is really a fraud perpetrator behind a mask?  You can’t go around suspecting everyone of fraud, but you can tune up your fraud antennae by reminding yourself of the most common traits of fraud perpetrators.

According to the American Society of Fraud Examiners*, a fraud perpetrator is most likely to be:

  • a manager, age 31-50,
  • male or female, with
  • 1-10 years on the job, with a
  • college degree, working in
  • the accounting, operations or sales department, with
  • no criminal record, with
  • clean references.

Often an individual perpetrating a fraud is very conscientious at work, doesn’t delegate duties and never takes a vacation.  The individual may be arrive early, stay late and be on good terms with the vendors, even running out to get the mail.  In short, the average fraud perpetrator looks just like a model employee.

That’s pretty generic, but if the trusted employee also has a dire financial need, you may want to look further.  Fraud experts tell us that employees steal when three conditions are present:  opportunity, need and justification.  If the individual can justify “borrowing” from his employer, he or she can take advantage of the access provided by your trust, and commit fraud.  

Individuals in dire straits don’t raise their hand and volunteer that they’re on the brink.   They generally wear a mask that conceals their actions, and preserves their ability to continue to conceal them. 

What can we learn?

You can’t trust appearances.  While not every model employee is concealing a fraud, most fraud perpetrators look just like model employees.  If red flags, such as cash shortages or continuing excuses, raise your fraud antennae, dig a little further.  You’ll either find out that everything’s ok, or you’ll be glad you kept looking.

Implement fraud prevention controls.  Take away the opportunity and you’ll reduce fraud risk.  Learn more about fraud prevention controls in our in our 501(c)(fit!) PLUS webinar, You Just Lost $1 Million—fraud prevention for CEOs.

Learn about the most common types of nonprofit frauds in our 501(c)(fit!) PLUS webinar, You Just Lost $1 Million—fraud prevention for CEOs

One in five nonprofit frauds involves theft of incoming checks.* Find out how in our FIT! TIP from February 27, 2017.  

Learn more about nonprofit finance in our 501(c)(fit!) live seminar, 501(c)(fit!)—Financial Leadership Training for Emerging Nonprofit Professionals. This seminar prepares new nonprofit leaders to exercise their oversight responsibilities over the finance side of the organization.  Participants learn the key concepts of financial governance, financial reporting, accounting systems, controllership, budgeting, nonprofit tax and more.  You can register today to join us in Richmond or Alexandria

Get more FIT! TIPS.  Join our 501(c)(fit!) community. 

*yes, it’s true, per the Association of Certified Fraud Examiners Report to the Nations on Occupational Fraud and Abuse 2106 Global Fraud Study. 

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