March is Fraud Awareness Month, a perfect time for small business owners and volunteer-led groups to consider how to prevent fraud from occurring in their organizations.
Detective Constable Dana Drover of the Halifax Regional Police/RCMP Integrated Financial Crime says he has seen it all when it comes to the types of fraud that can occur within small businesses and volunteer-led groups like churches, amateur sports clubs and youth groups.
“We’ve seen everything from internal thefts to people cooking the books,” the seasoned financial crime investigator says. Other crimes that small businesses and volunteer-led organizations can face are quite sophisticated, including false invoicing, payroll fraud and falsifying financial records.
“Typically these types of frauds happen because organizations don’t have the proper financial controls in place,” says D/Cst. Drover. But small businesses and volunteer-led groups don’t have to be vulnerable to fraud.
D/Cst. Drover offers these tips to help prevent frauds from happening to your organization:
– Ensure a separation of duties, proper oversight and checks and balances as it relates to your organization’s financial responsibilities. For example, have more than one person doing receivables and payables. The same person shouldn’t do both of these jobs. When one person has total control over cash that’s coming in and going out, it subjects you to potential abuse.
– If your organization issues cheques, ensure they require two signatures rather than just one. You should also have receipts for cheques that are disbursed. Transparency is vital; your organization should regularly provide bank statements to members so everyone’s informed of financial matters.
– Use a recognized financial/accounting program to document your finances rather than creating internally- generated spreadsheets and documents.
– Hire someone who’s educated and/or trained in finance/accounting responsible for your organization’s finances. A lot of responsibility comes with a financial role so you need the right person with the right qualifications to handle your payroll, taxes and GST remittance.
– If you’re filling a book keeping or accounting role, know what to look for in a resume. Is the person a graduate of a recognized school with related skills? Are there any unexplainable gaps on their resume? Ask prospective employees for a criminal records check, follow-up on their employment history, thoroughly check their references and get good answers about any employment gaps. Remember, you’re placing a great deal of trust in this person.
– Have an external auditor review your books regularly to ensure they’re accurate and nothing’s amiss.
The bottom line? Don’t cut corners on your organization’s finances. Whether you own a small business or are volunteering with your child’s baseball team, you want to start out on the right financial foot. Don’t wait to become a victim of fraud to put these measures into place.