Frequent Frauds Found in Governments and Not-for-Profits

Chapter 2 CASE 2: MISAPPROPRIATION OF BENEFITS

LEARNING OBJECTIVES

After completing this chapter, you should be able to do the following:

•     Determine how benefits might be misappropriated in a fictitious not-for-profit (NFP) entity.

•     Use the fraud triangle in light of operations at offsite locations in a fictitious NFP.

BEFORE WE START

Management and auditors may sometimes overlook fraud risks associated with benefit programs because there is typically no physical asset relating to the benefit. Program benefits provided by NFPs that may be provided to beneficiaries not qualifying for the benefit or not qualifying for the level of benefit provided include the following:

•     Unemployment

•     Food stamps

•     Housing assistance

•     Financial aid

•     Health care

•     Legal assistance

•     Child care

•     Membership

Program benefits might be misappropriated when the following indicators are present:

•     Copies of missing application forms and underlying supporting documentation

•     Participant files lacking required information (for example, interview sheets, tax returns, and so on)

•     Decentralized intake centers or centralized intake centers with little or no monitoring by management or supervisory personnel

•     Inadequately trained or supervised program personnel

•     Inadequate or ineffective controls over program assets

•     Lack of periodic physical inventories of program assets

BACKGROUND

Healthy Families is a large regional NFP organized ...