Lead by Example

Fraud Prevention Tip #9: Every Executive, Manager and Supervisor Must Lead by Example

In building an anti-fraud culture, clear strong policies are important. But policies without consistent daily example by leaders will leave employees, suppliers and others confused when making critical decisions.

Here are four attributes of leading by example.

1. You protect your signature and everyone knows it.

Before you approve any transaction, you spot check details, ask questions and demand answers. And you do it efficiently to keep the paperwork moving

Fraud Prevention Tip #9: Every Executive, Manager and Supervisor Must Lead by Example

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forward on time. Your team knows that you’ll check for accuracy and completeness before signing, and as a result they make sure that supporting documentation and explanations are in order before submitting anything for you to approve.

You have a reputation for quality in all that you oversee, and you coach your subordinates to act in the same manner. Others in the organization see you and your team as the example of how to prepare, review and approve all transactions. Result: fraud does not happen on your watch. Mistakes are just as rare.

2. You want to know about problems – right away.

As a confident leader, you want to know about what might go wrong. You want to anticipate potential problems and address them quickly. You tell your team this regularly. You leave know doubt. Your team knows they can come to you without fear because you have created a work environment where others know you want to hear about potential issues right away.

Let’s face it. We never really want to hear bad news. But despite this natural resistance, you say, “You are our first line of defense against fraud. Come to me with anything doesn’t look or feel right to you. Come to me with your concerns. Come to me with some suggestions for fixing those issues, as well.”

It’s a delicate balance that needs to be struck in soliciting people’s input about the risks and concerns they face. Especially when it comes to fraud. But you err on the side of asking for their help. That’s what strong leaders do.

3. You coach your employees on fraud risks.

Few employees start their career with a deep knowledge of fraud risks. It’s just not a core skill. Strong leaders compensate for this gap by proactively teaching their staff about what can go wrong in what they see and handle. Open brainstorming is the norm, not the exception.

You know you are on the right track when they start to say, “I think this could go wrong.” Then you need to help them think through:

Could it really happen?
• Is it happening?
• What would it look like in the documents we see every day?
• What can we do to be more effective in preventing it?
• How would we catch it immediately before harm is done?

4. You eliminate bends in the system.

Leading by example includes eliminate the bends in the process. Bends in the manufacturing environment occur whenever liquid is pumped through a pipe and hits a 90-degree bend. That bend in a pipe slows down the flow – requiring more energy and pressure to be consumed to keep the process ‘flowing’.

The same is true in process flow in your department. Every ‘bend’ or step that slows things down wastes energy. It requires your team to expend more pressure and energy to keep your work processes flowing.

Strong leaders are constantly looking for anything that slows down their team’s processes – and leaders take action to make processes more efficient. Result: greater free energy for important tasks including spotting hidden problems like fraud. We need leaders who want to eliminate the bends that get in the way of an orderly process for fraud risk management.

How do you stack up against these four criteria? Do you lead the fight against fraud by your words and your actions? Does your team see it and follow the example you set every day?

John J. Hall, CPA

John J. Hall, CPA

John J. Hall, CPA, is an author, speaker and results expert who presents around the world at conventions, corporate meetings and association events. Throughout his 35-year career as a business consultant, corporate executive and professional speaker, John has helped organizations and individuals achieve measurable results. He inspires audience members in corporations, not-for-profit organizations and professional associations to step up, take action and “do what you can.”

 

 

Fraud Prevention Tip #8: State Anti-Fraud Expectations

Fraud Prevention Tip #8: State Anti-Fraud Expectations

This simple no-cost tip is missed by the majority of organizations. From the CEO down to first level supervisors, anti-fraud expectations must be said out loud.

Make it a requirement that during a staff meeting every supervisor share their personal expectations with their subordinates.

While discussion tailored to each supervisor’s own beliefs works best, here are some ideas to help them get started. Tailor this list to your own environment and distribute the result. Include examples to make the each talking point come alive.

I expect everyone to:

1. Know the fraud exposures in your areas of responsibility. For example…

Fraud Prevention Tip #8: State Anti-Fraud Expectations

SEMINAR BY JOHN HALL | Selling Audit Ideas and Getting Managers to Act | Auditors are expected to master many skills – including communications, data testing, cause diagnosis, and motivation. But are these expectations reasonable? Is it fair to assume that every internal auditor should be a master at surfacing hidden problems and unexplored opportunities? And when issues are identified, is it really the auditor’s job to convince managers to act? Unfortunately for many auditors who are unprepared, most executives believe that the answer to these questions is a resounding “Yes!” This seminar teaches participants how to enhance the likelihood that the real cause of issues is identified – while dramatically increasing the probability that the management team will take corrective action.

2. Know what it would look like if it happened. For example…

3. Use best-faith efforts to minimize the chance of fraud or other wrongdoing on your watch. Examples include…

4. Make sure the transactions you personally approve are not fraudulent. Here’s an example of what I mean…

5. Personally monitor for those frauds that only you are in a position to detect. For example…

6. Question and challenge the unusual. Here’s are some examples from our reports to illustrate this…

7. Set an example of honest behavior by personal example and by not tolerating dishonest or unethical behavior in others. For example…

8. Prevent fraud in your area by minimizing the exposures and reducing the opportunities and temptation. Here a few things we can do every day…

9. Immediately refer suspected wrongdoing to [Internal Audit, Legal, Security, other department] for investigation. For example…

Here are some instructions that will help:

1. Frame the discussion to include questions staff members will have.

2. Stress the importance of a balanced message – tie your request for help to the listener’s normal pride in their work.
3. Be explicit. Don’t beat around the bush. Tell them EXACTLY what you expect and what you need them to do as a result.

4. Use a positive tone. Make it a ‘call to arms’ that starts with, “I need your help to fight this problem.”

5. Include examples of what could go wrong in your area, including what it would look like in reports, variances, complaints and other indicators of a problem.

Openly discussing anti-fraud expectations may just be the most important step managers can take to fight fraud. It’s free. It’s easy. It’s critical.

John J. Hall, CPA

John J. Hall, CPA

John J. Hall, CPA, is an author, speaker and results expert who presents around the world at conventions, corporate meetings and association events. Throughout his 35-year career as a business consultant, corporate executive and professional speaker, John has helped organizations and individuals achieve measurable results. He inspires audience members in corporations, not-for-profit organizations and professional associations to step up, take action and “do what you can.”

 

 

Questions Not-for-Profit Boards and Advisors Should Ask About Fraud

Questions Not-for-Profit Boards and Advisors Should Ask About Fraud

Not-for-Profit Boards provide the critical governance, oversight and guidance needed to steer the organization in the correct direction. This includes awareness and advice on risks including fraud risks.

The challenge is that most NFP Board members have little if any knowledge of fraud beyond what they read in the papers and see on TV. It’s simply not their core

Risk Management

Fraud Issues & Answers for Not-for-Profit Organizations | The not-for-profit business environment has many unique fraud risks – including fund raising pressures, proper use of donated funds and government grants, the need to report positive program results, and plain old theft and abuse. The need to balance a mission focus, public scrutiny, inherent trust, and limited staffing all combine to create exposures to wrongdoing that demand vigilance. As a result, many not-for-profit Board members, managers and staff are finding they simply don’t have the skills (or time!) necessary to fulfill these responsibilities. Leaders are waking up to this shortfall in skills and teaching everyone what they need to know to handle fraud challenges. This program does just that – shows participants how to manage their fraud risks in the not-for-profit business environment.

skill. They just don’t know what can go wrong with any depth.

Result: management and staff are deprived of needed guidance, and are often confused about what’s expected and how far to go – especially in not-for-profit organizations.

Two actions help compensate for this gap. First, know what questions to ask – and ask them! Second, find Board Advisors who can assist with building, implementing, and sustaining an effective Anti-Fraud Campaign.

Let’s look at these two critical actions.

First and foremost, Board members must step up and become personally familiar with the risks of fraud specific to the organizations they serve. This isn’t extra

work for Board members – it’s core work. That takes personal commitment, a little research, and an awareness of the questions Boards should be asking of the management team, internal and external auditors, and any advisors who serve the Board.

For example, here are five great questions Board members should ask to get the Fraud Risk Management dialog going.

1. What are the top ten fraud risks we face?

Fraud risk assessments are the flavor of the month right now. Much attention is placed on the format of the assessment often at the expense of the quality and depth of this important anti-fraud foundation step.

Fraud Risk Assessments should include the risk of manipulation in financial and non-financial results, theft of assets including information, risks from known and unknown third-parties who target the not-for-profit, and anything else that comes up from brainstorming meetings. Of course, include the 2015 favorite risk – cyber and other information technology fraud.

Assemble the needed brainstorming team and get started on open discussions that ask and answer, “What Can Go Wrong?”

2. How well prepared are we today to deter, prevent or promptly detect fraud?

The answer to this question should include the formal control infrastructure in place and the competency, awareness, interest, and attention level of managers and staff. Formal controls are often very thin in not-for-profits, and when we combine thin controls with staff lacking anti-fraud skills – well, the formula for disaster is set.

Board members should assess the organization’s structure from the top down to ensure it is properly aligned with mission and includes a working system of effective checks and balances.

Helpful questions include:

• What specific exposures should the Board itself be looking for and monitoring each month, including the accuracy of financial information and the risk of management override of controls?
• In support of Board anti-fraud responsibilities, is there an Audit Committee chaired by an independent director with real anti-fraud oversight skills?
• Do both the external and internal audit functions report to the Audit Committee both operationally and administratively? Do these audit and controls specialists identify and report areas of weakness?
• Is there a response protocol in place for handling tips?
• Do executives and managers really know how to minimize fraud risks? Do they monitor to ensure anti-fraud controls and behaviors are operating?
• Do staff members have the skills to recognize fraud and other wrongdoing in the documents and transactions they handle every day? And do they know they must speak up when something looks funny to them?

3. Is there a safe direct line of communication to the Board for anyone with concerns about suspected wrongdoing, misconduct or outright fraud?

Formal reporting hotlines are always a great idea – especially when administered by qualified third parties. But regardless of whether a formal mechanism is in place, do employees, suppliers, volunteers, donors and others know how to get directly to Board members when wrongdoing is suspected?

4. Is the Executive Director or equivalent position visible and vocal in leading the organization’s anti-fraud efforts?

I see it every day in business organizations confronting fraud risks. If the number one executive doesn’t lead the charge and get personally involved, it doesn’t

Fraud Issues & Answers for Managers and Key Control Employees

Fraud Issues & Answers for Managers and Key Control Employees |
Organization leaders who are serious about managing the risks of wrongdoing, misconduct and fraud are waking up to the fact that most supervisors and employees simply lack the necessary skills. This ‘how to’ program fills in that gap – it shows participants exactly what to do to manage the fraud risks in their areas of responsibility. In this interactive workshop, executives, managers, supervisors and employees will learn the specific steps to take to prevent wrongdoing as part of their daily duties. And when prevention efforts occasionally fail, they’ll find issues faster and handle them more effectively.

happen. Not number two; number one.

Visible vocal support includes stating their anti-fraud expectations clearly so that every employee, manager, Board member and volunteer understands. It includes issuing a Policy on Anti-Fraud Responsibilities that requires everyone to pitch in and help by knowing what can go wrong in their areas, paying attention, and speaking up right away.

Fighting fraud is a campaign, not an event. Number one must commit to leading that campaign until resulting anti-fraud daily behaviors become the new ‘muscle-memory’ of every employee and manager. Chief executives must be both visible and vocal, and they must personally recruit the troops to help.

5. Are employees trained in anti-fraud skills?

Employees will quickly pledge their willingness to fight fraud and protect the NFP organization where they work. But most lack the skills. Intentions without skills simply doesn’t work – not when fighting fraud is the goal.

Employees need real, useable, transaction-based skills for fighting fraud. Turn-by-turn instructions so there’s no possible chance for misunderstanding of what fraud looks like in documents they see, and exactly how and when to respond.

Employee willingness and anti-fraud competency are often the first and last line of defense in not-for-profits. The Board should make certain that the organization and employees are set up for success. Skills training is the critical missing link in most NFP’s and just about every other organization everywhere.

The second anti-fraud action great Boards take is to find and engage qualified Board Advisors who can fill in the gaps in Board anti-fraud skills. Board Advisors may include internal audit leaders, CPAs, legal and compliance staff or consultants, security and IT knowledge leaders, and anyone else needed to show the Board how to put effective action behind their anti-fraud intentions.

There is a new organization seeking to develop and certify Board members, candidates and advisors on issues of governance and risk management. Fraud Risk Management is right at the top of the list of priorities. It’s the perfect time to get in on the ground floor of this new organization created specifically to raise the bar on any Board’s ability to manage fraud and similar risks.

Find out more about the Center for Strategic Business Integrity.

Granted the ideas in this article aren’t the entire answer, but they are a good place to start. Break through the inertia that has prevented Boards, advisors and not-for-profit executives from bringing Anti-Fraud Campaigns to life. Start by taking the actions listed here. Build a head of steam in 2015, and make your goal beating fraud exposures once and for all.

Let me know if I can help. Just say the word and we’ll kick around ideas.

John J. Hall, CPAJohn J. Hall is a CPA and Certified Board Advisor. He brings 35 years of Fraud Risk Management experience to every client consulting engagement and training event. Since 1990, John has led over 2,000 live programs on fraud prevention, quick detection, and efficient incident response.

Positive Work Environment

Fraud Prevention Tip #7: Build a Positive Work Environment

Here are nine things every employee expects and deserves when they come to work. These are the essentials of a positive environment, and they are the checklist items I use in my consulting work when I evaluate whether the environment is positive and supportive, or negative or in need of an overhaul.

As you review the list, keep score. How do you stack up?

  • Are employee, supervisor, manager and executive reward systems consistent with the organization’s core mission and ethics?

    Positive Work Environment

    SEMINAR BY JOHN HALL: HOW TO GET AHEAD @ WORK | This seminar teaches managers, supervisors and employees at all levels the secret keys to measurably better performance and career advancement. Offered in a one-day summary or multi-day intensive deep-dive format, this program addresses skills enhancement in critical areas.

This is a high-level assessment of whether compensation systems support or discourage strategic and daily decisions consistent with statements about the organization’s mission and ethics.

  • Are job requirements clear?

    Performance requirements should be in writing and kept current for every position. Result: employees and their supervisors know exactly what’s expected.

  • Is job performance measurable in an objective manner?

There’s always management’s subjective input, but employees must feel that overall they are measured in an objective manner.

  • Is equal opportunity a reality in the workplace?

Equal opportunity under the law is the minimum. Real equal opportunity for all based on performance and skills is the higher-level target of a positive work environment.

  • Where appropriate, are decisions made in a collaborative manner?

We all appreciate when our input and opinions are considered. Employees and managers work in the front lines. Relevant input from them should be actively considered as decision options are evaluated. Of course, not all business decisions can go out to the staff for input. But input opportunities should always be considered where quality results and a positive work are the goal.

  • Do employees receive clear, relevant communications?

Uncertainty breeds confusion. Confusion creates to flawed beliefs about expectations and ineffective actions. Employees at all levels need clear information that is relevant to their work. Keep them positive; keep them informed.

  • Do employees receive meaningful training and skills development?

Meaningful employee training goes beyond awareness sessions; it builds skills needed in the job. Anti-fraud skills training should be a required for every employee.

  • Do employees feel empowered consistent with their job responsibilities?

Employees at all levels must feel they can double check details and speak up when something doesn’t look or feel right to them. Expectations and limitations should be made crystal clear. Balance is the key.

  • Are there trusted mechanisms to obtain advice and report concerns?

Employees must feel that there’s a safe way for them to speak up when something concerns them. Fraud hotlines are part of the answer. But at a higher level, leaders must create and support an environment where speaking up is encouraged. Safety and confidence are the key.
Don’t over-think or over-analyze these nine questions. Your first impression is usually right on the mark.

Effective Anti-Fraud Campaigns demand that employees at all levels come to their jobs finding a safe, supportive, honest work environment. People who feel good about their work, who feel good about the organization, are much more likely to pay attention to things that don’t look right and to speak up.

John J. Hall, CPA

John J. Hall, CPA

John J. Hall, CPA, is an author, speaker and results expert who presents around the world at conventions, corporate meetings and association events. Throughout his 35-year career as a business consultant, corporate executive and professional speaker, John has helped organizations and individuals achieve measurable results. He inspires audience members in corporations, not-for-profit organizations and professional associations to step up, take action and “do what you can.”

 

 

Fraud Prevention Tip #6: Blow-Up Flawed Beliefs

Fraud Prevention Tip #6: Blow-Up Flawed Beliefs

Just before lunch at a full-day Fraud Risk Management Skills training program, Jackie raised her hand. And boy did she raise a tough point!

All she said was, “Most of our managers simply don’t believe we have a problem with fraud. They believe that’s a problem other companies have. Not us. What can we do to help them believe the threat is real?”

We held off on further discussion until we returned from our meal. And then took the issue of ‘flawed fraud beliefs’ head on. Here’s why:

Beliefs lead to actions. Flawed beliefs lead to flawed actions.

Here are five beliefs I hear far too often in my work with clients.

SEMINAR BY JOHN HALL| How to Prevent Business Fraud: 8 Ideas That Work | The goals of anti-fraud efforts are prevention and immediate detection. While no anti-fraud system is foolproof, the 8 ideas in this program are critical to managing fraud risks in your business. And there is a cumulative effect – the more of them you apply in your business, the greater the chance of success. Providing turn-by-turn instructions for business leaders and owners, this program is short on theory and long on practical ‘how-to’ instructions on what you should do and what gets in the way. You’ll benefit by building a stronger defense against the risks of wrongdoing, misconduct, theft and outright fraud. Using the tools, checklists, talking points, and sample anti-fraud policies included in the program, you’ll be able to apply the ideas right away with minimal cost and maximum effect.

SEMINAR BY JOHN HALL| How to Prevent Business Fraud: 8 Ideas That Work | The goals of anti-fraud efforts are prevention and immediate detection. While no anti-fraud system is foolproof, the 8 ideas in this program are critical to managing fraud risks in your business. And there is a cumulative effect – the more of them you apply in your business, the greater the chance of success. Providing turn-by-turn instructions for business leaders and owners, this program is short on theory and long on practical ‘how-to’ instructions on what you should do and what gets in the way. You’ll benefit by building a stronger defense against the risks of wrongdoing, misconduct, theft and outright fraud. Using the tools, checklists, talking points, and sample anti-fraud policies included in the program, you’ll be able to apply the ideas right away with minimal cost and maximum effect.

  • “It will never happen here. We don’t need to worry about fraud.”

When you don’t believe you have a problem, what’s the likelihood you’ll pay any attention to it? Your management team must believe – and we have to show them why. Just because they don’t know it has happened doesn’t mean that it hasn’t. When I ask anti-fraud experts how much organizational misconduct and wrongdoing goes undetected, they say the same one-word answer: MOST! Follow the wisdom of these leaders. Assume there’s fraud, prove there isn’t. As my clients have found for over 30 years, you’ll be surprised by the results.

  • “Our controls will prevent fraud.”

While this may be a comforting thought, it simply isn’t true. At best, controls deter some types of fraud, and strong controls cause someone intent on committing wrongdoing to go elsewhere and victimize others. But prevent? Not even close. Here’s why: everyone who has ever committed wrongful acts has found a way around controls. And that’s a fact.

  • “Our people know what to do.”

Perhaps they do. Perhaps they don’t. If they do, congratulations! You’re in the very small minority of organizations. Less than five-percent. But the fact is most employees have never been told what to do. Not in a detailed manner that shows them exactly what wrongdoing and fraud looks like in the documents they see on the job. Show them what it looks like, use specific examples, and make sure they know what to do when anything looks funny to them. Skilled employees are our best line of defense. Give them the information they need to be effective.

  • “We can’t talk about fraud risks. It will scare everyone.”

This one is my favorite flawed belief. In 25 years of interviews and over 1,500 fraud prevention skills training sessions, employees say the same thing. “Why did our leaders take so long to talk to us about this?” Or worse, “Why did they wait until we had a major crisis to bring it up and ask for our help?” Know this one thing to be true: employees everywhere want to help. All we have to do is ask.

  • “Most people would never commit fraud.”

This belief is absolutely flawed. I’ve researched it. I’ve talked to hundreds of fraud experts. And I’ve handled too many cases to count. Here’s what I have to report to you. All people and organizations change over time. All have the inherent potential to commit wrongdoing when placed under enough pressure. Aren’t you always surprised when one of the trusted long-term employees or suppliers is the one who does it? Shouldn’t you be surprised it’s them???

Have you heard these or similar thoughts expressed by your managers or clients? If so, don’t sit quietly: you have to blow up flawed beliefs with facts.

Give examples, provide statistics, engage in fact-based discussion about what has or could go wrong. Debunk flawed belief about fraud risks. Break down the belief barriers that block effective anti-fraud action. Get started today.

John J. Hall, CPA

John J. Hall, CPA

John J. Hall, CPA, is an author, speaker and results expert who presents around the world at conventions, corporate meetings and association events. Throughout his 35-year career as a business consultant, corporate executive and professional speaker, John has helped organizations and individuals achieve measurable results. He inspires audience members in corporations, not-for-profit organizations and professional associations to step up, take action and “do what you can.”

 

 

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