Club Fraud Hotline


Stopping Club Fraud

Generally, there are 3 conditions that perpetuate fraud in Clubs.  These conditions are commonly referred to as the "Fraud Triangle" and include:

  • Outside pressures
  • Opportunity
  • Rationalization

It is written by Charlie Jones, CPA, an Atlanta-based CPA in an Accounting Today article titled "Stopping Nonprofit Fraud":

"Two legs of the Fraud Triangle, outside pressures and rationalizaiton, are not easily detected, and therefore not easily controlled.  However, opportunity can be controlled by simply implementing process enhancements that reduce the opportunity to steal.  Even better, these initiatives typically don't require a large commitment of time and money.  Consider the following improvements for nonprofit clients:

  1. Create a whistleblower system - Develop an internal online system where employees can anonymously report suspected fraud.  Tips should be monitored by human resources staff or top executives.
  2. Condust ramdon, susprise audits - Have an internal team and external auditors conduct surprise audits of specific departments or operations, and rotate audits through an annual cycle.
  3. Mandate a vacation policy - Make vacations mandatory by implementing a "use-it-or-lose-it" policy.  Regular vacations not only reduce employee burnout, but can also aid in uncovering fraud.  Oftentimes, once a non-vacation-taking employee takes time off, evidence of fraud surface.  Some individuals work non-stop for fear of being discovered.
  4. Initiate a task rotation routine - Crosstrain employees on jobs and have them rotate responsibilities.  This is an excellent way to accelerate fraud detection, because as employees with fresh eyes come into a new job, they are more likely to spot issues.
  5. Nuture a culture of ethical behavior - Set the tone for the organization's culture.  Executive management should lead by example and create an environment of trust, transparency, and ethical practice."

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