Fraud Prevention And Detection Tips

Accounting Software and Files

Project X, W & Z should be treated like separate entities to avoid any co-mingling, overspending and reporting errors in the accounting software. Budgets should be entered in the accounting software to ensure accurate tracking of spending. You should be able to access each project’s file in which ever accounting software used.  All supporting documents should be filed as per budget heads. Supporting documents can be submitted in PDF format with the expense report. They can be scanned, saved and then attached to all expense reports and financial statement.

Purchase requisitions

All requisition forms related to the projects need to reviewed. This is needed to show the selection of possible vendors and help provide clarity as to why the final vendor was selected (most times the best price is selected). The requisition forms should state the project and budget head. It should list all vendor details and quotes. If there is no requisition form, then questions should be asked as to how the purchase was made and why the proper procedures were not followed for the purchase.If it is proven the proper procedure was not followed, the purchase should be scrutinized even more. Who is the vendor? Are there any conflict of interests? Who approved the purchase without proper documentation? On what basis was the vendor selected? Why was the proper procedure not followed for this purchase?

Purchase orders

The purchase order should confirm the approved vendor on the purchase requisition form. It should list the price and that price should match the amount listed on the purchase requisition. The selected vendor on the purchase requisition should be the same vendor on the purchase order. Ensure proper approvals signed on the purchase order also. If purchase order is missing for a purchase, try to confirm vendor via the purchase requisition. Unless the purchase was a petty cash expense, you should have both the purchase requisition and purchase order for every purchase. This is a requirement for most businesses and non-profits to ensure proper approvals.

Contracts & Agreements

All contracts for consultants and monthly expenses need to be verified and confirmed. Ensure contracts totals match the reported amounts spent for the reporting period and that due diligence was completed.

Invoices

Invoices need to be checked to ensure amounts, vendor and description matches the detail on the purchase order and purchase requisition. You need to ensure the description of the goods or services matches the approved details and is related to the budget head. When crosschecking invoices against expense reports, ensure the document date is within the reporting period specified.

Bank Statements

Bank statements should be checked to ensure checks cashed or wire transfers processed. You would want to confirm payment was sent to the correct vendor and all details match (amounts, correct bank account and dates). You would want to ensure that the check or wire was paid to the approved vendor. Conflict of interest payments should be investigated and questions should be asked.

Financial/expense reports

You would need to ensure that all the supporting documents add up to the stated amounts spent for each budget head/subhead. If you cannot account for the money stated spent, then this is a red flag. If you have missing documents, another red flag. I suggest quarterly expense reports be requested from executing agencies. Along with these reports should be supporting documentation of expenses. If this is completed monthly or quarterly, it would create an atmosphere of ethical behavior and ensure that issues are handled in a timely fashion. This will ensure that the amount stated spent for each budget head/subhead is supported by documentation. A common practice in fraud is to misclassify expenses. Invoices should be scrutinized hard. I would be checking the invoice date, the description, totals and ensure vendor actually exist. All these checks are to ensure that the vendor is a real vendor, services/goods relates to budget head, total reported matched invoice/s amount and invoice date matches the correct period reported. Every expense reported need to be proven and justified.

 

Miranda Spencer-Averhart

Accounting Consultant

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