Are You Ripe For Fraud? (3 of 7)

This is a 3rd part posting of understanding fraud and the implications on the organization. In part 1, we discussed that churches, just like any organization, is susceptible to fraud. In an April 23, 2001 article by Christianity Today headlined "Jury Convicts Greater Ministries of Fraud," five leaders were convicted in Federal Court on 72 counts of conspiracy, wire and mail fraud, and money laundering, in one of the largest church fraud schemes in American history.

Is your organization's environment ripe for fraud?

First, if management or other employees have an incentive or are under pressure, this provides a reason to commit fraud.

Second, do circumstances exist -- for example, the absence of/or ineffective accounting controls, or the ability of management to override controls -- that provide an opportunity for a fraud to be perpetrated?

Third, are the individuals involved able to rationalize committing a fraudulent act?

The greater the inventive or pressure, the more likely an individual will be able to rationalize the acceptability of committing fraud.

How can management prevent these things from happening? We'll talk about preventative controls in post #4.