Category Archives: Internal control

“4 Tips to Prevent Fraud at Faith-Based Organizations”…

Photo courtesy of DollarPhotoClub.com

Photo courtesy of DollarPhotoClub.com

… is the title of a great article by James B. Jordan to help churches and other faith-based charities protect their contributions from theft and protect volunteers from temptation.

Setting up internal controls is difficult in small organizations, even more so for local churches. The place churches routinely have the most difficulty is keeping control over contributions between the time gifts go into the collection plate until a deposit is ready for the bank.

Mr. Jordan’s tips:

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Looking for ways to beef up internal controls in a small organization?

Image courtesy of DollarPhotoClub.com

Image courtesy of DollarPhotoClub.com

Small charities usually cannot afford enough staff to put in place great internal controls. If you want a few ideas on how to make modest improvements at low cost, Charles Hall suggests How to Lessen Segregation of Duties Problems in Two Easy Steps.

(Cross post from my other blog, Nonprofit Update.)

Second set of eyes on bank statements

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“Once Upon Internal Control” fable now available in multiple formats

I just published my short book, “Once Upon Internal Control” at Smashwords, which means it is now available in several formats:

  • Epub – readable on your iPad, Nook, Sony Reader and lots of other e-reading devices
  • Kindle
  • PDF
  • RTF

You can preview 30% of the book for free.

What’s this book about? Continue reading →

Price cut on my newest e-book, “Tragedy of Fraud”

Price reduced to only $0.99, now available here.

“Tragedy of Fraud – The Ripple Effects from Fraud and the Wages Earned” describes the tragic consequences from fraud.

There are ripple effects that spread out to harm innocent bystanders. The perpetrator draws a wide range of well-deserved wages that will be paid in full.

The book looks at two fraud incidents to learn what happens after a fraud is discovered. One took place in a local megachurch and the other in the mayor’s office of a small city.

This book is a compilation of blogs posts that have been previously published at Nonprofit Update and Attestation Update. The posts have been edited slightly and reorganized for easier reading.

Major sections of the book:

  • Tragedy of Fraud – The Ripple Effects from the Embezzlement Fraud in a Local Church.
  • Wages of Fraud – Consequences from the Corruption Fraud in a Mayor’s Office.
  • Why is it Difficult to Find Fraud? – The lack of documentation inside an organization makes it even more difficult to identify a fraud scheme.
  • The Fraud Triangle – A discussion of the three sides of a fraud triangle. That’s the idea that three components need to be present for a fraud to take place – opportunity, motivation, and rationalization. Great danger is in play when all three factors are present.

The other book I have available at Amazon is Once Upon Internal Control.

‘Tragedy of Fraud’ in e-book format – soon to be released

(Cross posted from my other blog, Nonprofit Update.)

Tragedy of Fraud – The Ripple Effects from Fraud and the Wages Earned will be released soon in Kindle format. This is a compilation of blog posts about the damage caused by fraud. It will also discuss the fraud triangle.

The sections of the book are: Continue reading →

Some traps church business administrators need to avoid

(cross-post from my other blog, Nonprofit Update.)

The urgency of things that must be addressed now can take focus away from bigger issues that have long-term payoff.  Verne Hargrave, CPA, of PSK has started a good series on traps that business administrators can fall into because of tyranny of the urgent.

Looks to be a very helpful series. Would be worth your time to visit his blog regularly. Maybe even set it up on your RSS feed.  I’ll highlight it occasionally.

Ten Things to Avoid  in Church Administration starts the discussion. Mr. Hargrave points out a few problems that can arise if tyranny-of-the-urgent takes over your life: Continue reading →

“Once Upon Internal Control” is available on Kindle platform

My tale on internal control done well and poor at two churches is now available in Kindle format at Amazon.

Price is $0.99.

You can read the book on your Kindle device, on any smart phone with a Kindle app, or on your computer using the Kindle-for-PC application.

At Amazon, search for my name, Ulvog, or the book title, Once Upon Internal Control.

Or click here to go directly to the book.

Keep track of your church’s equipment and property – how and why

(cross-posted from my other blog, Nonprofit Update.)

A local church should keep track of its equipment, improvements to property, and building.

You will definitely need that information if you have an audit, review, or compilation of your financial statements.

A far more common reason to accumulate that information is for insurance purposes. In the event of a tragedy such as earthquake, tornado, or hurricane, you will need to have some detail records to present to you insurance company to get full recovery for your loss. Continue reading →

Sad example of the need for disbursements controls

(previously posted at my other blog, Nonprofit Update)

 See this article for a sad illustration of disbursement fraud.  The specific technique was opening credit card accounts in the name of the company and then using the account for personal expenses. 

Continue reading →

Fraud Triangle

People who study fraud tell us there is a “fraud triangle”. Remember discussing the fire triangle when you were in Boy Scouts or Girl Scouts? Just like you need to have heat, fuel, and oxygen to kick off a fire, you need to have opportunity, motivation, and rationalization to kick off a fraud incident.

I have written a series of posts on my other blog, Nonprofit Update, about the fraud triangle.

I combined the posts into one page so you can see all the discussion together. See the Fraud Triangle.

Simple way to improve internal controls over disbursements

(previously posted at my other blog, Nonprofit Update)

What could you do when there aren’t enough staff to have someone other than the bookkeeper prepare the bank reconciliation?  Bank recs are complicated.  For many small organizations, the staffing is so thin that there is no one other than the bookkeeper who has the skills to prepare them.  What to do when you just can’t split up those duties?

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Illustration of internal control from the Scriptures – one good example and one not so good

(cross-post from my other blog, Nonprofit Update)

Maintain dual control over the offering! You hear that unending refrain from us accountants.

Document those disbursements!  Another routine comment you hear.

One story in scriptures has a good illustration of the first control along with missing the boat on the second idea.  Jehoiada, the priest during the reign of King Joash, did a good job on the dual control over the offering and not so great on accountability for the disbursements.

Continue reading →

Tragedy of Fraud

The impact of a fraud incident in a local church is devastating. The repercussions spread out like the ripples of a rock thrown into a calm pond.

I have written a series of posts on my other blog, Nonprofit Update, about a major fraud at a church near me. I have a number of friends who worship there, so this disaster is quite real to me.

I combined the posts to one page so you can see the discussion chronologically. This series is called the Tragedy of Fraud.

Free book for pastors of local churches

UPDATE: Offer will expire on December 31, 2011.

I stopped the free book offer at the end of 2011.  This short fable is the basis for the cartoons you see on this blog. The book is now available at Amazon in Kindle format for $0.99. Click here.

 

Update:  This book is now available on Amazon for $USD 0.99.  Free offer will expire on December 31, 2011.

Essentials of Internal Control – full article

 

Here is the full text of my article, Essentials of Internal Control, appearing in Church Management News from Bank of the West.  The online article is here.

The article discusses three key ideas:

  • The bookkeeper should not sign checks
  • Trust is NOT an internal control
  • Review unopened bank statement by someone outside of accounting

Essentials of Internal Control

By James L. Ulvog, CPA

The business administrator of a nearby church has been formally charged with embezzling close to $1 million over four years, according to a recent newspaper article. Few details are publicly available. I have friends who worship there, so this hits close to home. I grieve for my friends, the congregation, believers whose faith has been shaken, and even the accused man and his family.

Last year, the bookkeeper of a women’s shelter in my area was sentenced to one year in prison for embezzlement. The executive director of the center was quoted in a newspaper article as saying the shelter had to sell one of their several houses in order to keep operating. The director said eighty women and their children were denied services.

I was going to start this article with a rational appeal to logic as the way to encourage more emphasis on internal controls in our churches. Instead, I would like you to ponder the devastation that follows in the wake of a disaster that can arise from a breakdown in internal controls. The previous reports are only two examples. One of the main goals of developing internal control is to prevent these situations. I could tell you of many more tragedies. A few moments of searching the internet will find dozens of stories.

Continue reading →