Given the nature of their organizations and missions, people would think that houses of worship, charities and other non-profit organizations would be free of financial fraud issues.

However, most people – says a noted Philadelphia forensic accountant and Certified Fraud Examiner – would be wrong.

According to David Anderson, principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation and fraud deterrence programs in the Delaware Valley, small- to medium-sized houses of worship, charities and other non-profit organizations (such as condominium or homeowners associations, volunteer fire companies, youth sports groups, etc.) often are at higher risk of fraud than most other organizations.

Why is this?  Most heads of these organizations (priests, ministers, rabbis, etc.), said Anderson, a forensic accounting expert in Philadelphia with experience in conducting fraud investigations and establishing comprehensive fraud deterrence programs in the Delaware Valley, tend to focus on the mission of their organization and leave the financial operations to staff or volunteers.

However, since many volunteers have other commitments, Certified Fraud Examiner Anderson said they generally are able to devote only a limited amount of time towards these duties. Furthermore, most organizations such as these are often unable to afford an audit or other external examination of their books and records.

As a result, the organizations, said Anderson, must rely upon a few trusted employees and volunteers to oversee their operations and to handle their finances. With such limited resources, explained Anderson, a Philadelphia forensic accountant and principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation and fraud deterrence programs in the Delaware Valley, most small to medium-sized non-profits are not able to effectively implement the necessary internal financial and accounting controls to adequately protect against fraud.

The result is that certain employees and volunteers can take advantage of these weaknesses and embezzle funds.  Here are just three examples:

• A 45-year non-paid member of a Chester County, Pennsylvania, volunteer fire company was convicted of embezzling more than $300,000 from the fire company.
• The bookkeeper for a Montgomery County, Pa., church was convicted of embezzling more than $150,000 from the church.
• The volunteer treasurer of a Little League organization in Montgomery County, Pennsylvania, who was a Certified Public Accountant, was convicted of stealing.

So, what can a small to medium-sized non-profit organization do in order to protect itself from fraud?  Here are a few suggestions:

• Solicit the assistance of volunteers who are attorneys or are from government or law enforcement, to conduct background checks for new and existing employees (in accordance with the law);
• Form an internal financial review committee of three or more knowledgeable people (with backgrounds in forensic accounting, accounting and/or business finance) to regularly review the finances of the organization (such as on a quarterly or semi-annual basis);
• Whenever significant amounts of cash are collected (for example, weekly offerings collection or concession stand sales), require two or more people to jointly oversee the counting of the cash and preparation of deposit slips;
• Arrange for at least two members of the internal financial review committee to receive copies of the organization’s bank statements directly from the bank (and prior to any bank reconciliation being performed);
• Make sure that all checks require two signatures;
• After they resign/leave their position, promptly remove employees and volunteers from computer system access and from bank signatory cards/credit cards/debit cards, etc.;
• If fraud is suspected, immediately engage outside counsel. Such counsel can best advise the organization as to the steps to take to protect itself from potential litigation and to properly investigate the suspected fraud, which may include retaining a forensic accountant to conduct the investigation.

If you require the services of a Certified Fraud Examiner in Philadelphia or any other forensic accounting services in Philadelphia and the Delaware Valley, please contact the Philadelphia forensic accounting firm of David Anderson & Associates by calling David Anderson at 267-207-3597 or emailing him at david@davidandersonassociates.com.

About David Anderson & Associates

David Anderson & Associates is a Philadelphia forensic accounting firm that provides a full range of forensic accounting services in Philadelphia and the Delaware Valley.  The experienced professionals at David Anderson & Associates provide forensic accounting, business valuation, fraud investigation, fraud deterrence, litigation support, economic damage analysis, business consulting and outsourced CFO services.  Company principal David Anderson is a forensic accounting expert in Philadelphia who has more than 30 years of experience in financial and operational leadership positions and is a Certified Public Accountant, a Certified Valuation Analyst and a Certified Fraud Examiner in Philadelphia.