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Nonprofit Radio for February 8, 2019: Financial Fraud

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Tiffany Couch: Financial Fraud
It can happen in your org. How do you prevent it? What are the red flags that reveal it? What do you do when you discover it? Who are the likely perps? Tiffany Couch is a forensic accountant and CEO of Acuity Forensics.




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Hello and welcome to Tony Martignetti non-profit Radio Big Non-profit ideas for the other ninety five percent. I’m your aptly named host. Oh, I’m glad you’re with me. I’d be thrown into Al just thesis if I had to endure the pain of knowing you missed today’s show. Financial fraud. It can happen in your organization. How do you prevent it? What are the red flags that reveal it? What do you do when you discover it? Who are the likely perps? Tiffany Couch is a forensic accountant and CEO of Acuity Forensics. Tony, Take two. Did you become an insider? We’re sponsored by pursuant Full Service fund-raising data driven and technology enabled Tony dahna slash pursuant by Wagner. CPS Guiding you Beyond the numbers regular cps dot com by Tell US Attorney credit card processing into your passive revenue stream. Tony dahna slash Tony Tell us and by text to give mobile donations made easy text. NPR to four four four nine nine nine It’s a privilege and a pleasure to welcome Tiffany Couch to the show. She is CEO and founder at Acuity Forensics, a forensic accounting firm in the Pacific Northwest. She has over twenty two years experience in accounting with the last fifteen years focused on forensic accounting. Her expertise is fraud, investigation, forensic accounting, internal control, risk assessment and complex litigation. She’s been a source to The New York Times, Forbes, CNBC, NPR and the Wall Street Journal. Tiffany’s company is at acuity forensics dot com, and she’s at the Tiffany couch. Welcome to the show, the Tiffany couch. Different couch Different, eh? Hello. Welcome to the show. Thank you. All right. You okay? There. Now I’m great. Okay. We got you Don’t know what happened. Okay. Okay. Um, forensic accounting. I said it like four times in your introduction. Esso. I guess this is what you do. This is what you know. Um well, not only I guess I know for a fact, because, uh uh, I know you’re Bonified. So tell me what what have forensic accountant does? We’re I’m a nontraditional of C. P A. So no taxes air audit here, one hundred percent of what I do is really, you know, prepare reports and prepare information for lawyers. Court for clients who are either in litigation are potentially preparing for litigation, much of which is related. Teo investigating white-collar crime. So forensic accounting, are you Are you looking at numbers like tracking dollars backwards to find sources and pathways? Oh, yes. How do you do? How do you do that? Well, we’ve got We’ve got a great case right now where we’re working on a case where this woman took money from a business and we can see in the banking account she clearly was spending all of my clients money on her personal items, so that part’s sort of the easy part. But my client’s telling me, well, my book’s reconcile everything in the My and my accounting records reconciled so well, I can trace the loss and the bank account. The next question is, Well, what the heck happened in the books to make it all reconciled to the bank? And what we figured out is that she was entering these transactions as other vendor names or, you know, dumping a bunch of stuff together and putting it in as an amount in the books. And so so, yes, my job is part treyz sing and part sort of sluicing through the books. Did these false transactions get entered in the books? If yes, how so? And communicating to our client, You know, here’s what happened. Here’s how much your losses are and, you know, let’s talk about what your options are going forward. So So at the end of that, you produce then a real set of books. A real set of Yeah, but no one called. Yeah, general ledgers and, you know, property profit loss statements like, do you? Do you have a real set to compare with the phony set. If that’s part of our engagement, that will be something that we do. Yes, sometimes we hand over our work and let the bookkeeper’s or, you know, somebody else who can do that at a lower rate than us. Put the books back together again, and we sort of blessed their work. But they take, you know, all of the things that we did to go back and re create the books. But sometimes the court Ah, and others the lawyers asked us to recreate the books so that there is a you know, like you said, it’s said a good book that the client can have not only for, you know, prior years, but in perpetuity. Onda lot of the work you do is with Non-profits regrettably, yes, that, sadly, ah, lot of our work is with non-profits what we I say non-profit from more vulnerable to this sort of thing, eyes that because we’re trusting people by nature, that’s one that’s probably one of the biggest one here. You’re trusting. But it’s really the idea that you’re there to do something really good in the world, right? That non-profit was started because of the goodness of somebody’s heart or a group of people who wanted to do something great in their community. And what we find is that we often when we have that mindset of our world or of, you know, the way that we operate, we cannot possibly imagine that somebody is not operating in that same way. You are, right? Why? Why would somebody steal from us? We’re we’re rescuing, um, stray cats. You know what? Why would somebody steal from that mission? Personal person? I don’t care for count, so that’s a bad example for me personally. But we’re rescuing stray dogs. You know, that’s a that’s a very that’s a very we are We’re the little League. Uh, we’re the local church. You know, we could just make the long list of all of the non-profits that you can just think of in your very small vicinity from where you’re sitting right now today and you can identify all of these non-profits and you can say, Well, that would never happen to me or that would never happen to them. They do such great work. And in fact, there’s multiple reasons why non-profits lose out. Unfortunately, the first one is that mind set. And so we often don’t. I actually understand that people are not operating, you know, out of the goodness of their heart, even though they’re acting like it. So there are. There are bad actors who are baseball coaches and P t a moms, and they’re the PGA mom there the board members with access to the money. They are the wonder most wonderful executive director, the up and coming executive director who was, you know, accomplished in under forty. And she was just making waves in the in the town that they were in and being ableto fund-raising money like nobody’s business. And she was taking that money and spending hundreds of thousands of it on, you know, Victoria’s secret and going to Las Vegas and having a really nice time on their dime. I see. Okay, way. Just have about a minute or so before our first break. Tiffany. Okay, what are what are just like thi’s this and we could spend more time on it after the break. What are some of the risks? Teo Non-profits if if they do suffer a loss? Well, there’s lots of weaken taught. Well, well taught us talk about reputational risk. Let’s talk about the risks that put them invulnerable. First in the first place. And then if that fraud does occur, let’s talk about the reputational risk to them, Um and and the pros and cons of not moving forward with the case. If this does happen because there are pros and cons of moving forward with the case, I think first we should talk about what puts them uniquely at risk. And then how do we handle it from there? Okay. Okay, we’ll do that. Now, sometimes, uh, we have to take a break. I forget where we were. So I’m counting on you to remember that. Okay. Oh, I’m no problem at all. Thank you. All right. Pursuant, their newest free E book, The Art of First Impressions. Do you need more donors? This is all about donor acquisition. It includes the six guiding principles of ineffective acquisition strategy. Also how to identify your unique value and use it to your advantage. And it includes creative tips as well. You’ll find this at Tony dahna slash pursuant. Remember the capital P for, please, to get that book now let’s go back to financial fraud and, uh, Tiffany. Uh, so where were we? Oh, the pros and cons of going forward. But you said there’s something we should talk about first before you wanted before that. What is that? Well, yeah, let’s talk really quickly about the risks, because it’s more than just the risk that were in the world in the space to do really good. Right. Non-profits air. Particularly a risk for a couple of other reasons. Andi, I would really love to point that out to your group. Killer standing. Yeah, let’s go. So number the second one, in addition to where we’ve got a great world view, is that we don’t have accounts receivable or we rarely have accounts receivable. We’re relying on those donations on those fund-raising dollars, and so we don’t always know what’s coming in. We don’t always know what shows up in the bank, or if somebody walks in and write a check out of the goodness of their heart or gets on our website and makes a donation. We don’t always have sort of a great tracking of those incoming dollars. In a typical business, you have accounts receivable, right or you have inventory that you’re selling and you can You can track you know what you think your business is doing. And so that lack of accounts receivable can make non-profits particularly vulnerable to cash or even, you know, check skimming schemes. Meaning I take your money before ever makes it to the bank. You never even see a red flag. Big risk. And but the next one or the last one we should really talk about is just this idea that we don’t have enough resource is right. Every non-profit is usually doing a great job of managing their money. And and they seem to think they have few Resource is. And as a result, they often have too few people having too much access to either money coming in or the money going out without a lot of oversight. And so that perceived lack of resource is can often mean we don’t have the right internal controls and and creates that bigger risk for non-profits. Okay, so you need to invest in. You need to invest in in controls and oversight. So So if you don’t have the expertise of Ah, are we talking about just something simple. A simple was a bookkeeper and bringing in a freelance bookkeeper. Is it that simple? It can’t be that septum. I teach non-profits that we don’t even have to pay for somebody extra. We need to hone in on the resources we have, maybe with the board. So it’s somebody in house is handling all the money coming in, You know. Do we have a simple system of tracking man and taking and separating? No. The money coming in from the person who takes it to the bank. Do we have somebody reviewing the bank statements and canceled check images Or or like the non-profit I just told you about? Everybody knew on the board. But the guys that the lady myth, gentlemen and men and ladies who signed the checks. They knew there was a credit card. They paid it. Every month they sign the check for it. Not one person ever asked to look at a credit card statement and had somebody asked to look at a credit card statement. Guess what would have happened? Her fraud would have been uncovered in this in the first month. Victoria’s secret Victoria’s Secret would have been apparent. Yes, because We’re not putting Victoria’s secret items in our fund-raising baskets at the gala. Right? So I don’t know. That could be again that actually have to be the best dealings. That really wonderful people who are in our non-profits who are our volunteer boardmember They just don’t realize some of the simple things they could be doing to minimize and reduce their risk. Okay, Although, you know, I was saying way of Tiffany, call back. Okay? Tiffany, would you please? We gotta Really It’s getting really scratchy. Is it better now? OK, wait. Hold on. Hold on. Is it better now? No. Okay. Would you, please? Yeah. Would you please hang up and call right back? In the meantime, we’ll take our second break. It’s not your fault. Don’t blame yourself. Wagner, CPS. They have a block post for you, which is differences between your nine ninety and your financial statements. Have you ever looked at these two things and seeing that the same description has two different numbers? Seems like they ought to match. Especially if the same firm there’s Tiffany, especially the same firm is doing both. Write your nine ninety and your financial statements. You would think they would match. There are very simple explanations. You can learn them by going to wagner cpas dot com. Quick. Resource is and then blogged. Okay, we have Tiffany Back-up. I’m here, don’t you? Are you sound? Sounds stronger and brighter. Okay. Yeah. Very good. Very sorry about that. I was just getting all crackly. Don’t blame yourself. You know, there’s a long distance between us. You’re down in, uh, down in Raleigh is not right in North Carolina. No, I’m actually in the Portland, Oregon, area. You’re Oh, that’s right. You Pacific know up in the Pacific Northwest with my saying that? Yes, Pacific Northwest. Well, there’s a lot of theirs. Even that much more territory. So please don’t blame yourself, eh? So what I was saying, I want to get this joke out. If it kills me, I’m going to say this that, you know, the gala where they give out Victoria’s secret items in the take home bag. That could be the most fun Gail I’ve been to ever. It could be. I mean, I wonder how much money people throw it. That non-profit so that’s not dismissed that idea out of hand. But it is a red flag. I’m certainly aboard. It would certainly be a random black. And that’s really the most heartbreaking part of my job is when I walk in, they think they’ve found something or they’re not quite sure. And I find it so quickly and they think, Oh, my gosh, you know what’s wrong with us? How stupid can we be or were so embarrassed? And I want everybody who’s experienced this or or maybe experiencing that just put that out of their minds. Because these folks use their ability to be a liking, to be trusted to perpetrate these crimes. And they’re always the last people we would expect. Yeah, Okay, let’s let’s let’s go to that. Who you say something else about the potential perps, aside from being most trusted they have to be in control so they don’t leave the office very much. They tend to be the first ones to work. The last ones to leave. They’re very well liked, usually by management. Or like if they’re the wonderful executive director bringing all the money in. They don’t take vacations, right? They don’t. They don’t take vacations so much. Oh, yeah. They won’t take vacations. They might. I have a lifestyle that doesn’t make sense as compared to what we know we’re paying them. And And they, uh, I had one non-profit here. Where was a volunteer who was feeling She was a volunteer treasurer. So it was a small non-profit. It was her job to take the money to the bank and write the checks for the non-profit. And she would never give anybody a basic financial report. And when they asked, she got mad and said, You’re bullying me. She sort of started using some code words like you’re bullying me. You’re pressuring me and I you know, And so all these nice boardmember told these other two guys Hey, you need to be nice to her. You’re We’ll just give her some more time and that time and extended to eighteen months, which she never gave him. A bank statement never gave him a financial report, and she ended up stealing nearly all of the small non-profits money. Like how much did she steal out of in comparison to their annual budget? So probably greater than sixty percent. Oh, my goodness. And they were asking all along for financials, and she got defensive and said, You’re bullying me and like, why are you pressuring me like that? Yep. And then all the nice people on the board said, Oh, well, we’re so sorry. We don’t want to offend you and then told these two guys that said Hates our fiduciary duty. Hey, we should be looking at this, told those two guys to back off my goodness, where they were vindicated in the end, Holy. But But, you know, I was just going to say, You know, it just takes too long sometimes, and then severs relationships, you know, in a non-profit. It can really I always call it this just really sad divorce of, you know, we’ve got all of these people, and we’ve got the people who were all for the accused and the other people saying, Hey, wait, we should take a look And I always say, you know what? It’s always better to work together to just figure it out so that we can make an informed decision. Yeah, that’s hard to do, though, when tempers are running high and one that one faction is afraid that this woman is going to leave. What was? Did you say she was the treasurer? Yep. Yeah. One fraction. One faction, not fraction. One faction is afraid that the trusted treasure is going to leave. And the other one is just, you know, just raising some questions and once wants to look deeper and, you know, they can’t come together. Sounds you know your matter, right? And hard to imagine polarization. And it’s that scarcity mode. We’re so lucky to have this wonderful person sarrantonio awesome. How could you say all those terrible things about Tony? He’s done all of this for us for this long. And And so all of those emotional connections with Toni or with that trusted bookkeeper are there. And people don’t want people want to rely on that instead of, you know, actual evidence and information. And that sort of thing. All right, So now so our suspect looks like beloved. I’m going to take it to the CEO level below that CEO brings in a lot of money, doesn’t take vacation, comes in early, stays late. You better have financial controls if you have a CEO like that, right? Oh, absolutely. Can have great connections in the community. Yes. Well liked in the community, too. Okay, so you’ve seen this? I mean, you’ve seen you’ve seen popular people in the community get dragged down in the in the local, the local yokel newspaper. Or like, the three yellow sheet that comes out once a month or something. Is that’s all the newspaper? All right, you’ve seen that. Uh, listen, here’s what I say. If you took every single one of my clients. But there was a publicly traded company to the smallest of small non-profits. Then you had asked them on the day before the fraud was uncovered. Hey, rank your employees from most trusted, least trusted just ranked them. You’re you’re fraudster and be in the top three every time without fail. And it doesn’t matter. The side of the organization, The nature of the organization there always the most liked and trusted person, the organiser nation. And they’re always the last one anyone would have ever expected. All right. Very interesting. Yeah, that’s really cool. Um, okay, so, uh, what are these? Um, what are these people doing? How did they How did they accomplish their their devilish means? That’s a really great question. If we really break it down to three simple things, your money is coming into your non-profit. It’s coming in, Really wire. It’s coming in via maybe papal. It’s coming in via check. It’s coming in B Akash. There’s all these methods that money comes in, and they just simply steal it or diverted before Never makes it to your bank account. It’s what we call a cash skimming skiing. So I urge everybody out there to make sure that they understand how all their money comes in and verified that there’s a way to track it. Um, it’s the most common scheme and non-profits e-giving so simple as, um, let’s say you’re using PayPal. Then someone has to look at the monthly monthly income statement, which monthly income report, which should be easy to get from papal, get it internally and compare that with what gets deposited into the bank. Is that it? Right? OK, we need to make sure that the person who’s managing the papal account doesn’t have access or the ability to change the bank accounts or anything else in papal to divert that money to a different. And they of course, they are not the one doing this reconciliation that I just described this already. There’s somebody else. OK, Very good. So the more fear track yet? All right, I’m a I’m a I’m a I’m a cf a was certified forensic cannot be seen E And I’ll tell you, this is not the one little the little league that I sort of mentioned earlier. They were so proud of themselves because they had a way for everybody. She was feeling the concession stand money, and they had to a way for my dahna popcorn money, popcorn, popcorn and juicy fruits. Money, That’s what’s and all of the money for the registration that just got better. But they were so proud of themselves because they had account sheet inside of the concession stand. So when you know when the volunteer parent would do the concession stand, those people at the end of the day would count the money and fill out the count sheet. It was beautiful, and then they put the money and the count sheet together in the safe and get one of Is the treasurer strong to take the money to the bank, which would have been great except for what they Yet they kept be count sheet with the money. So she took the count sheet through the count sheet away, and then she absconded with the money instead of going to the bank. So it’s very difficult to go back and figure out what the volunteer people had counted because nobody separated the count sheets from the money so that she didn’t they basically, she was able to remove the audit trail. I see right. She had access to both the money and the council. So we want to make sure we have a good count sheep, but that the person who’s taking the money to the bank is not also the same person filling out the count sheets. O R. You know has access or reckon reconcile ing that count sheet with correct the bank statement at the end of the week or the end of the month, right? Exactly, because they don’t want them to change it. Popcorn money that pisses me off like baseball popcorn money. Oh, it’s the worst. How much money? How much? What did she get away with? A couple thousand dollars? No, no. Twenty five. Twenty six thousand. Shit. That’s a lot of popcorn. It’s a lot of money. That’s a lot of popcorn and hot dogs. Maybe this Maybe there’s something to this. No, no, don’t say that. So that that’s the number one, right? So that way, we have really great control than our ends up in the bank exactly where it should go. Okay. One of the most common frauds in general is that that person now have access to write you air tanks or to pay your bills or, you know, process your payroll and they write checks to themselves. They pay their own personal bills. They paid for your credit card and their credit card, too. And so basically, they’re using the money in their bank account in your bank account for their own benefit. And the most heartbreaking thing about these schemes because they’re literally on the face of the of the bank statement. We just did a case for Ah, pretty large and prominent non-profit where the woman was giving the executive director said, Oh, I’m going to give you online access so you could pull the bank accounts. And so, you know, you have to do all the codes and we were on the phone together, and I’m doing the codes and getting in on online banking. And so as she was still sort of talking to me, I I pulled a September twenty seventeen bank statement. I’ll never forget it, and I go. Do you guys have a one thousand four hundred eighty five dollar mortgage? She said, Excuse me and she goes, All of our buildings, they’re donated. We don’t have renter, you know, mortgages on our buildings and I go So you don’t pay one thousand four hundred eighty five dollar market and she goes, we’ll know what what? What are you looking at me like I’m looking at the first very first page ofyour September bank statement. Then I went to the second page and I said, Well, do you shop it? You know why you have three utility payments that you’re paying Well, we only have one building. That doesn’t make sense. I said, Well, you know what about X y envy. And so literally on the first page of the bank statement was this woman’s not this woman. I was talking to you there. The trusted beloved bookkeepers fraud. Um, and it was it had been on every single bank statement going back six years and not one boardmember not one exit, not the executive director. Nobody had ever looked at the bank statement. Six six years of mortgage and utility payments. Oh, get it? Got better. I’m shopping. She paid her property taxes with their money. Um, yeah. Okay, so that’s what I really I am a broken record. I heard if you should be sending your bank statements and canceled check images, you can get those images. You use it to pay a few extra dollars a month, get those images and send them, for example, to a boardmember who has no, who’s not signing checks or has any access to the money. Those statement should absolutely be routed in paper to somebody else who has no access to the money so that we’re verifying our expenditures. And if we’re not and don’t rely on online banking to do it because it just takes too long to load. All of those Check image is very simple. Look through of a bank statement and canceled checks that are printed on paper and come from the bank. I realized it’s not green or, you know, iko friendly, but it’s the best. You know it’s the best investment of your time ten or fifteen minutes a month for most bank statements, and you’re going to catch the majority of Franz, go through and explain again why you prefer in paper instead of having the Boardmember go to the online well, the online banking will work, and I don’t want to discount that. But when you’re trying to look at an actual check image on online banking, it takes a long time to load the images. And you could be sitting there for a very long time. Loading image after image after image and most of us don’t have time for that and would get a little bit bored with it and might might not be as diligent. If those images come in paper, you’re going to be much more. You’re going to just quickly, much more efficient at their. It’s quicker to flip through pages then was to click, and then you gotta look at the bat. Well, I guess you would have to look at the back, but you gotta click through each one. Wait for too lo o thes. Online banking systems have that information. It just takes a long time to toe load the image. Are you ever on the phone with the perp? Oh, I I I have gotten confessions out of perfect perpetrators. Yes, that’s part of my job. But how about well, while you’re doing the investing, he’s like that one you were talking about where you were looking through and as you’re on the phone, wait on. The phone had already left, but yes, there have been more than when I was at a private school not too long ago, where they asked me. They said things aren’t quite right, and they had me looking and I started asking the woman questions about ten or ten thirty in the morning, and she literally got up, got red and ran out of the building. So I I it’s not uncommon for me to actually be investigating are looking into things when the perpetrator still there. Oh, wow. All right, That’s right. That’s exactly I was going to ask. Have you ever been on the phone with them as your uncovering it? Like what they sort of said they’re present in their office? What do they say? What they say? Oh, that deer in the headlights. I can explain it all. You don’t understand what you’re looking at, or I have to go the bathroom. Suddenly my kid’s sick in school, and they literally leave and don’t come back. Wow, you don’t understand. I don’t trust this woman. She’s a forensic accountant, right? You don’t underst took a book. Teo, I’ve been here twenty years ago. How dare you say something? You know me. I’m so loyal. I work here all the time. I’m I haven’t gotten paid the what I should should be getting paid. And I just let them keep talking to me because they’re just rationalizing what it turns into. A confession must leave. Okay. All right. Definitely. We got to take another break. This is Tony. Take too. Of course. What else would it be? Have you become a non-profit radio insider yet? Because I know you’re going to, um, have you gone to tony martignetti dot com and clicked the insider alerts button name and email. That’s all I’m asking for. You want to be an insider because that’s how you’re going to get access to the private playlist that I’m setting up. I’ve already got about five or six of these done there’s There’s more coming. Um oh, many more s o I’m going to do that private playlist, and this is exclusive to insiders. Okay, I want you to be an insider. So go to tony martignetti dot com. Click the insider alerts button very prominent on DH. You will get access to the extra content that I’m doing with lots of guests. When Wei go into a topic that we didn’t cover on the show did not cover, or we’ll go into something deeper. Okay. Twenty martignetti dot com and I rushed through that tony martignetti dot com and then you click insider alerts. All right, let’s go back. Teo Kiffin, Tiffany Couch and financial fraud. All right, So these are great stories. What, you’re you’re on the phone with the part where you’re there in the office, even and they excuse themselves to the bathroom and then they’re never seen again. Correct. Wow. Alright, they grab their purse or their, you know, sometimes leaving their personal effects at the office and they leave it. He’s a cellphone behind. That’s more evidence. Oh, yeah. Or or try to sit there and try and figure out how much I’ve got in to convince me how wrong I am. Right? You’re the Robert Mueller of Trump doesn’t know how much he has. The more he says, the more deeper he digs himself. We don’t depart, no comment. I don’t do politics. So Okay, so we got the check. Only I’m sorry you got the cash skimming. We got the personal bill payment. What’s another year writing checks to themselves with various method just writing checks. That’s is not it again, I said I was asking, What’s another nefarious method to carry out these desperately no payroll? All right, just I write myself more payroll or I call in more payroll to the Carol service if we have an outside payroll service. Um, and so I’m basically paying myself more than you have authorized as the border as the executive director and so I made because I have too much control over that payroll process. I either pay myself more salary, give myself more hours. I don’t My taxes out of my check. I just pay myself extra check. I mean, it’ll come back to xero. Taxes is not so bad, is it? Is that Is that really illegal? Is that really bad? Yeah. Yeah. All right, I suppose. Okay, I know. I know it is. All right. So those who are most common, you know, in a non-profit we could see other things, like, you know, corruption schemes where folks have an inappropriate relationship. Maybe they’re on the board, and so they’re able because they’re a boardmember and have a business, They’re able to get a contract with the non-profit. And we see schemes like that where, you know, we don’t have those arms length transactions between the board are Excuse me. Between the non-profit and the vendor, um, and WeII do see those sorts of things. They’re a little bit more rare, but they do happen, and I’ve seen them happen and again, these smallest churches. I saw this happen and and and larger organizations as well. So I don’t want to discount those conflicts of interests or kickback schemes. They do happen. But I like to focus folks on the, you know, the vast majority or ninety percent of all frauds, which are those ones we listed? I just skim your cash or divert your cash before you make it to the bank. I pay my own. Um, you know, I just write myself checks or use your banking account like my own. I pay myself more payroll. I used your credit card on Victoria’s secret or to take my family on vacation. And and if we focused, if a non-profit focused their attention on that, those few things which are the most simple Teo, either avoid or tohave oversignt over, they’re going to reduce their risk by my, you know, greater than eighty percent. Okay, okay. We’ll focus on the main the main areas. I’m still thinking about that tax one. I’m not sure that’s so bad. Actually, I think you’re rationalizing over there. I’m fantasizing. I’d love to. Not. Okay, maybe maybe you and I will talk. Yeah. I mean, you know how to get around that You know how to avoid the you know how to avoid the people like, you know, very true. You do. You do? I don’t know how I know, but yeah, I know who they are. You want to. But I I come across the girl next door will turn you. I’m going to turn you to the dark side. Oh, yeah? I’LL make it worth your while. I’ll make it worth your while. You’d be surprised what I pay in taxes. You’d be surprised. I’m telling you you know how much money and that would have to take. You don’t know how much. I don’t know how much money I make. That very alright. Alright now certain dark side. So All right. What? Um okay, so in the payroll scheme so since we we’ve we’ve talked about what the problem is and then howto had prevented, or at least minimized the risk of it on the payroll side. What do you do there? Toe toe? Make that very light. Very unlikely toe happen in the event of heroes processed outside, which I think most folks are returning to now they’ve got an outside payroll service, you know, running their payroll that make sure those pay those processed payroll reports are sent over to again, You know, the boardmember or the executive director. Somebody who is not the person calling in payroll or having the or the person who’s processing payroll and the reason being is I can. It’s a great example of a scheme where they where my client said Hand I approved payroll. I said, Great, When do you approve payroll? While I prove it, when everybody turns in their timecards and they’re, you know, PTO requests and and I I approve it and send it over to Sally. Well, then what happens? Well, Sally calls it into the payroll system, and I said, Great. Well, then, what happens? I don’t know things because he never looked at the payroll after Sally called it in. And what was Sally doing? Sally was paying herself more pay. We’re all giving herself over time and paying her daughter, who wasn’t even working there. And so so it. Had anybody been looking at those payroll reports after payroll is processed, they would have picked up on that right away. And so again, very simple. All of this sounds very simple, but it’s truly once those perpetrators understand what you’re looking at and most importantly what, you’re not looking at it. And they’re going to sign the opportunities to, um, you know, potentially geever your money. And again, not necessarily because they intend Teoh right at the get go. Although some people do, they might just be dealing with something difficult their life and decide well, they need a little bit month of money to get through. Well, that’s still a conscious choice. I thought very true. I I thought you were going to say, they make a mistake and it doesn’t get caught and know that the great. And then they realize, Hey, I could do this on a regular basis. Forget the mistakes. So I’ve talked to a couple of, you know, big time fraudsters through some of my work with the association of Certified Front examiners. And a couple of them have absolutely explain just that, that they made a mistake. The mistake didn’t get caught, and they realized that a loophole existed and they took advantage. They waited like they’re wait a few months to see or they weighed a quarter. If they’re really smart. I’ve thought this through thiss tax thing is, I’m working on this with you So now they wait. They wait a good amount of time. If they’re smart, they’ll do it right away. You wait and nothing happens. One quarter of full quarter goes by a couple of board meetings. The the audit committee has met, and whatever. Whatever you think might be an obstacle. And nothing happened. Who? Okay, all right, so so a lot of what you’re saying, All of what you’re saying is is the, uh, the prophylactic. Uh, what involves another person? But suppose we have to suppose you have to. Bad actors collusion. Yeah, but that’s just means we have another. Okay. So we have different levels of weight or collusion a CZ we all know in throughout this country. Now, collusion is not a crime, but could Pearcey is we’ve learned that from Rudy Giuliani, So s o the crime would be conspiracy, but But you could have a couple of bad people, right? I mean, how how protected do you need to be? Um, you know, that’s going to be much more rare, because it’s some point somebody’s going to tell somebody’s going to break, so it’s not going to go on forever, so I will be honest collusion is really hard to uncover because you’ve got, you know, potentially two people uncovering or excuse me, two people working together to cover up something nefarious. So that’s really where we have to have that I am a big proponent of having those outside boardmember, especially those who don’t have access to the money or to the contracts of that sort of thing, to really be providing that oversight, that that has teeth, that we’re not just looking at financial statements that somebody’s prepared and knowing that that’s what you’re going to look at. So they make it look like anything that they want but that you are actually identifying what force documents. There’s a few of them here that are key that would help us uncover, whether it’s one one bad actor or to, um, you know, how can we in engender the bee work of usually it’s the board members to provide that oversignt okay. All right, So somebody outside the office, correct. And we’re not relying on the auditors, by the way, because the odd on ly for percent of fraud they’re found from a financial statement on it. Really? Alright, I hold that point we got to take another break. Save that. Save that one. Tell us can use more money. Don’t don’t get it The way I’m describing. Don’t don’t do The purpose of today’s show is to prevent fraud, not to encourage it, so don’t turn this around one. Eighty. All right. But if you do need a legitimate new revenue source legitimate now you get it from Tell us Get that long stream of passive revenue as cos you refer Process credit card transactions through teller dafs. Watch the video, then send those potential cos there to watch the same video. And it is that tony dot m a slash Tony Tello’s Let’s do a little live listener love which I can’t do can’t do city and state because we’re not live with pre recorded with Tiffany couch today. But the live love goes out. You know it, You hear me? Say it Live Love goes out to each of our live listeners and the podcast pleasantries. The vast majority of our audience over thirteen thousand people listening in the time shift pleasantries to you. I’m grateful that you’re with us. Thank you. Pleasantries. Alright, enough now. Okay, let’s go back to Tiffany Couch different. You were able to hear what I was saying right about. Did you hear what I was just saying about turning them, Turning this backwards and saying, Well, these are good ideas. I could do. I could make some money this way. All right. Well, yeah, it’s very true. I always have to be very careful because And I realize I absolutely realized that when I teach people how to prevent fraud, I am by default. Potentially, there are some bad actors in the audience. I hope not. But we have to assume that there could be We have better actors were listening. I’m sure we have thirteen thousand. Way. Definitely. We definitely have. Bad actors could develop, just got laid off. And I can’t make my Morgan. Oh, my gosh. Coach him to raise your hand right now. Put castles or are you out there? Call in right now. And you are here because we know you’re out there. Okay. True. Alright. We have we have some maybe, like one half of one percent. Would you say I Well, I think at least ten percent. Yeah. Ten. Thirty for-profit baizman bad listeners. Oh, my God. All right. I want you people to stop listening. If you’re the bad act, if you’re if you’re one of the one hundred thirty stoploss sinning. All right, now we’re safe now. The ten percent is no longer Listen, I think you have a great Ani, and tonight your numbers are way lower. Well, I’d like to think so, but we you know, we represent a cross section, but now we’re safe because the bad actors, I just admonished them. They’re not listening. And they’re not here anymore, and they’re not. Listen, So the audience size just strength by ten percent. Thirteen ten percent. That’s thirteen hundred. No, wait. Come back, Come back! No. Forget what I said. I hope they didn’t listen to me. Nobody listens to me. Nobody listens to this show. Nobody listens to me. So don’t worry about that. No, I’m sure they didn’t leave ten percent. That’s thirteen hundred, not one hundred thirty. But see, this is why I’m not a forensic accountant. One hundred thirty one percent. You should have caught me on that fifteen hundred. I don’t want to go down to eleven thousand seven hundred. Listeners know I don’t either. I think we were gonna bump you up to twenty as a result of it, because everybody’s gonna say, Want to say what? Right? I can make a lot of money. Listen to the show. Yeah. No, no, no, no. I know. All right, but bad actors stay with us. Do not unsubscribes keep listening. Okay. Um, all right. So where the heck are we? We’re talking on it. Oh, I asked you about multiple multiple people and and and you said only four percent of, uh, crimes. Fraud is found by an audit correct on ly auditors. Buy-in If we look at the statistics in terms of how fraud gets uncovered, the most common way is by a whistle blower tip. Somebody see something and says something about forty percent of all frauds or uncovered that way with the lowest right right around the lowest. About four percent. It’s actually like three point six or eight percent of frauds being uncovered by a financial statement. Bought it. Because a financial statement on it is not designed to uncover fraud. It’s there to make sure that the financial statements are reasonably stated reasonably. And it’s a fair and accurate assessment of right before noon, and they’re looking at number one there, looking at materiality. So they’re looking at transactions that are other hyre level on. And we all know are we all should know that fraud happening, usually at a lower level. Number two. The auditors are taking a random sample, so they’re not quote. Looking at everything is a common misconception that the auditors air looking and everything, and then I always say, the auditors air are wearing the Scarlet Letter A under their blazers. A’s for auditor, of course, because just like a non-profit, auditors tend to be actually contrary to popular belief, Really nice people who go around thinking that, you know, I’m a nice guy and I’m a trustworthy guy. The people I’m dealing with it at the non-profit er are people I can trust. And so they’re going to be just human nature, more likely to believe what somebody tells them rather than go get that stand of evidence they need. And so, you know, it just becomes this this unfortunate misconception that, you know, auditors, we’re looking at everything. And if there was fraud, they would find it when in reality, it’s the honor system. So I don’t want those folks out there saying Oh, well, number one, we have great employees That could never happen to me. And oh, by the way, we have a clean audit every year, which means there must be no fraud. The Dow non-profit I’m dealing with where where It was all on the front page of the bank statement and went on for six years. Clean on it every year? Yes. Lots of years. Okay. You say stop. You say substantiative. I say substantive. Is that really a West Coast? Could be. I just went to law school in Philadelphia. Uh, maybe that’s I don’t know, but substantively, I would’ve said substantive. I almost didn’t. I don’t look up the word you said substantiate. What? Where does that? But I assisted out. Forensics did. Out. Okay, There you go. All right. So what are some things that we should be looking for? Let’s move to that with red flags with you. Will you explain some, But But let’s go into Should we do that? Let’s do a couple of red flags, and then we and then we got a couple of the ones that are just the most comic the most common. The one that I hear over and over and over and over again. Tiffany, did you see? You should have seen what she warned us. Tow work everyday. Or you should have seen where they took their vacations. Or you should have seen the car she was driving. I’ll never forget. It was It was a non-profit. Um, I just can’t I did what they did, but they they provided a really wonderful service to our community. And I caught this woman stealing a lot of money. And this was one of those cases where I interviewed her. She got red, she literally turned purple and she and left. She ran out of the interview room, grabbed her purse on her way out. And me and the was one of the people that were very key in the organization. We and they were very. They were highly trained professional before they retired and became a non-profit volunteer. Or really, they were getting paid. You were. You were. You were volunteering for this organization. I can’t remember. I think I probably wass or, you know, they they had hired me for for a very small amount. And so we We stood there like with our mouths gape as she ran out and got into her brand new Lexus. And I mean ah, brand new, beautiful Lexus. You would if it was just gorgeous car. And this guy says, Do you see what she’s driving? And I said, Yeah, we should mark that down. Did you tell me she only works part time and that she’s a single mom? Yes, she works part time. She’s a single mother. She has three children at home who are teenagers. We all know how expensive teenagers are. And he said, Look at that car out there and it was just old Toyota, you know, probably one hundred thousand miles on it, he goes, You see that car out there and I said yes and he goes, That’s in my car. And so it’s just an example that people will observe that the persons lifestyle doesn’t make sense, especially when we know what we’re paying them, and especially what we if we know what their circumstances are at home or what their spouse makes or something like that. It is a huge red flag, and people are often too embarrassed or two. You know, they don’t even know how to deal with it. And I want everybody to be able to ask questions about how come that person has that. And do they have access to our money? And can that lead you to, you know, look at some things that need to be looked at? This is Tiffany This way. This is the number one red flag. The number of people want people’s lifestyle just doesn’t. But they’re very doesn’t fit there. It does not fit their what everybody knows about either what they make or just there. You said no, right? We kind of know it. I know. You know, if people are have a spouse or significant other and what that person does or if there’s a single mom or they’re going through a divorce like we know when we work with people every day, kind of what’s going on in their life. I got you. Okay. Okay. A big red flag. Number two, if they will know when. This is when we have the one bookkeeper with all of the control or the one treasurer with all over the control, and they will not give you basic financials on a timely in a timely manner. It is the year twenty nineteen we should, with a press of a button, be ableto print a financial statement, get online and get a bank statement, get online and get a credit card statement in any sort of delay in giving you basic financial information, especially if it’s coupled with How dare you question my integrity? Or that should just be a huge red flag and should not be tolerated. Okay, like, eighteenth month case that you were talking. I say, you know, three days. I mean, it should be, like, ten, ten or fifteen minutes. Really? Shit. All right, we gotta take our last break. Okay? Let’s do it. Text to give. Can you use more money? Don’t do it. The way I talked about with Teller this, please. For God’s sake, do not turn this thing on its head. I’ll never be. I’ll never forgive myself if we lose more than ten percent of the audience from more than ten percent of the audience goes south. Ten percent. I could live with thirteen hundred. I guess, uh, I guess we got to write them off. Okay. Um, legitimate revenue source here’s another way. Mobile giving. I can learn about it with text. Gives five part email many course. You’re only five emails away from raising money legitimately through mobile e-giving Easy, many course to start it. Text NPR to four, four, four, nine, nine nine. Okay, Tiffany, we still got several more minutes too. And if you and that’s a really interesting red flag, OK, the first one especially, but I just got the second one to the delay. You should be ableto way. Should be able to provide documentation within a couple minutes. Really, really fast for. Okay. Um, now, there’s one incongruity I got. I can’t I can’t let this go. You said that the people don’t take vacations because they have to have control over things so they don’t. They won’t go on vacation. But then you said they take lavish vacations. It’s very true. So you’re very right. The one of the big red flags is first oneto work last. When they leave, they don’t take vacation. If they’re afraid that, you know, while they’re gone, something could happen. They won’t take a vacation than okay. You’re still going to see lifestyle issues like I’m dealing with a woman who didn’t take a vacation in ten years. But she warned brand new clothes every day, shopped all the time, had beautiful things. And it didn’t make sense with making twelve dollars an hour. Alright, so other so. But vacations for somebody who does take vacations and usually will happen is there’s so efficient, so wonderful They’ll button up their desk and they’ll leave and nobody will touch it, right? Because they’re the trust of book he burned. We could go a week or so without the bookkeeper. Then you might see that they do take a vacation, but they’re never gonna have any cross training or let anybody touch any of them the money or the book or the financial. All right, all right. We gotta move. Teo, what to do when you when you do discover something on now, is something that we talked about earlier. You said questioning whether you should even go forward. Does that? Does that mean questioning whether you should even investigate? Well, here’s the best. The non-profit in the nonprofit world. We have this reputational risk. If somebody finds out that I’m the victim of a fraud, they’re never going to doe donate their money here. And so these boards are dealing with this scarcity issue in this fear. And when I was trying to explain it, the beginning is, I understand the fear and I I understand the reputational risk. But I want you guys to understand that that is not necessarily going to be what happens to you. Because on the flip side, when you take care of business, when you say this doesn’t happen on our watch, when you go back to your by-laws and realise that your by-laws actually say that you have to investigate, I have to protect your assets, then people actually want that right. People want the board or the executive director’s they want you guys taking care of business. And so number one that’s important. And number two guess what everybody else is looking at in the organization. Oh, I could steal. And then I get away with it. Great. I’m going to steal, too. Do we want to send that message, or do we want to send the message? Hey, lists and not on our watch. And here’s what’s goingto happen. We’re going to call the police were going to call our insurance company. Um, you know, this is going to be a reputational risk for the perpetrator and we as the border going to take care of business and not only make sure it never happens again, but send the message to our community and to our organisation. This is not acceptable. So I just want to make sure that everybody understands that I understand that reputational risk. I understand the fear, but usually the opposite is what happens. Okay. I see. All right, um, and your advice for what to do when it’s first uncovered. I was surprised that the first thing you do you that this wasn’t the first thing you said call the police. And then and then, In fact, later, you suggest maybe you shouldn’t call the police. Yeah, so actually, I don’t recommend calling the police right away. And here’s why what you can You can get a You can get a police number, but the police in most jurisdictions are not going to investigate a white-collar crime because white-collar crime is paper intensive. It’s time intensive, and they don’t. I usually have the resources to do that. And so what I recommend is that they either call a forensic accountant or they use their resource is in house under the under sort of the supervision of a forensic accountant to put their case together for the police. Because then it’s going to be much more likely that the police are going to investigate because you’re handing it over to the police. Why, I always say with a pretty pink bow on top, I actually asked for two things. If somebody calls me Number one, do you have, Ah, employment law attorney? Do we call an attorney? Let’s just make sure you’re doing everything right in regards to that person’s employment and been number two. Do you have employees? Dishonesty? Insurance? I please. Everybody out there. When you get off of this podcast, make sure you have at least six figures of employees. Dishonest. E. I haven’t heard of that one. Employees decided it’s going to probably only cost a few hundred dollars a year for a premium, but the average lost to a non-profit for a fraud scheme is ninety thousand dollars. That’s average on, and I am eats usually much more in my experience, and so I want to make sure you have six figures of employees dishonestly insurance. So actually, the second call, I’m asking you to make it to your insurance broker to figure out what your coverage is. Our because not only is probably going to help you recoup your money from the insurance company, it may or may not pay for my feet. Okay, okay. We have to leave it there. OK, I’m gonna do it. I’m I’m going to ask Tiffany if she can spend five minutes with me because we’re going to shoot an insider video because there’s mme. Or to talk about what to do when you discover it. So this is why you need to be an insider. And hopefully we’re going to get this with with different Tiffany. Thank you very much. You will find her. The company is at acuity forensics dot com and she is at the Tiffany couch. Tiffany, thank you again. Thank you so much, Tony. My pleasure. Next week, Jane Takagi returns with diversity in HK Clu, jh in and governance. If you missed any part of today’s show, I beseech you, find it on tony martignetti dot com. We’re sponsored by pursuant online tools for small and midsize non-profits data driven and technology enabled. Tony dahna slash Pursuing Capital P by Wagner. CPS Guiding you Beyond the numbers regular cps dot com by Telus Credit card and Payment Processing your passive revenue stream Legitimate Tony dahna slash tony Tell us, and by text to give mobile donations made easy. Another legitimate revenue stream Text NPR to four four four nine nine nine ah. Creative producers Climb Meyerhoff. Sam Liebowitz is the line producer. The show’s Social media is by Susan Chavez. Mark Silverman is our Web guy and this music is by Scott Stein of Brooklyn, New York You with me next week for Non-profit radio Big non-profit ideas for the other ninety five percent. I still think I still think it’s substance to go out and be great hyre. You’re listening to the talking alternate network. You’re listening to the talking alternative network. Are you stuck in a rut? Negative thoughts, feelings and conversations got you down. Hi, I’m nor in Sumpter potentially ater. Tune in every Tuesday at nine to ten p. M. Eastern time and listen for new ideas on my show Yawned Potential live life Your way on talk radio dot n Y c. Hey, all you crazy listeners looking to boost your business? Why not advertise on talking alternative with very reasonable rates? Interested? Simply email at info at talking alternative dot com. If do you like comic books and movies? Howbout TV and pop culture. Then you’ve come to the right place. Hi, I’m Michael Gulch, a host of Secrets of the Sire, joined every week by my co host, Hassan, Lord of the Radio Godwin. Together we have over fifteen years experience creating graphic novels, screenplays and more. Join us as we bring you the inside scoop on the pop culture universe you love to talk about. Wednesday nights eight p. M. Eastern Talk radio dot in wives. Thie. Best designs for your life Start at home. I’m David here. Gartner, interior designer and host of At Home. Listen live Tuesday nights at eight p. M. Eastern time as we talk to the very best professionals about interior design and the design that’s all around us right here on talk radio dot N. Y. C. You’re listening to talking Alternative Network at www dot talking alternative dot com. Now broadcasting twenty four hours a day. Dafs are you a conscious co creator? Are you on a quest to raise your vibration and your consciousness? Sam Liebowitz, your conscious consultant. And on my show, that conscious consultant, our awakening humanity. We will touch upon all these topics and more Listen, live at our new time on Thursdays at twelve Noon Eastern time. That’s the conscious consultant, Our Awakening Humanity. Thursday’s twelve noon on talk radio dot N. Y. C. You’re listening to the talking alternative network. Hyre.

Nonprofit Radio for March 7, 2014: Society-Level Giving & Fraud!

Big Nonprofit Ideas for the Other 95%

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Page Bullington & George Durney: Society-Level Giving

Page Bullington and George Durney
Page Bullington, Tony Martignetti and George Durney

Page Bullington and George Durney, both with Blackbaud, reveal tactics for setting donors’ sights to your society giving level, whether that’s $250 or $2500. (Recorded at bbcon 2013)

 

 

 

 

 

Gene Takagi: Fraud!

Gene Takagi
Gene Takagi

“Diversion of charitable assets” can hurt you badly and embarrass you terribly. Where are the vulnerabilities and how do you protect your nonprofit? I’ll walk through it with Gene Takagi, our legal contributor and principal of the Nonprofit & Exempt Organizations law group (NEO).

 

 

 


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