Misappropriation of Assets
Posted on Wednesday, April 19, 2017
Internal fraud can be divided into two separate categories – fraudulent financial reporting and asset misappropriation.
Misappropriation of assets involves the actual theft of an entity’s assets. This can be accomplished by common theft or the following.
- Causing an organization to pay for goods and services not actually received (for example fictitious vendors or employees).
- Using an organization’s assets for personal use.
- Embezzling receipts.
There are several different types of misappropriation of asset frauds. Some of the more common ones are as follows.
- Skimming – theft of cash before the funds have been recorded on the books.
- Credit card abuse – using the organization’s credit cards for personal use or using the credit card numbers of donors.
- Fictitious vendor schemes – setting up a company and submitting fake invoices to the organization for payment.
- Ghost employees – issuing payroll checks for nonexistent employees.
- Overstatement of hours worked – employees claiming extra hours worked on timecards.
- Fictitious expenditures – submitting nonexistent expenses for reimbursement.
- Theft – outright theft of the organization’s property (cash, blank checks, equipment, supplies, etc.).
- Personal use of the organization’s assets – use of computers, software and printers for personal use; personal long-distance phone calls; copying personal documents on the organization’s copy machine.
Circumstances that may indicate misappropriation of assets is occurring include the following.
- Missing or out of sequence blank checks.
- Significant bank reconciling items without reasonable explanation.
- Second payee or unusual endorsement on checks.
- Missing cancelled checks.
- Unusual disbursements or transactions lacking sufficient supporting documentation.
- Complaints from vendors.
- Missing, unusual looking or altered time an attendance records.
- Time and attendance records signed by someone other than the usual supervisor.
- Unusual vendor names and addresses.
- Copies of invoices, purchase orders or receiving documents rather than the original.
- Orders for material or supplies already on hand in sufficient quantities or that are not consistent with the organization’s mission.
See our previous blogs for information on fraudulent financial reporting and more information on preventing and detecting fraud within your organization.
Posted by: Carrie Minnich, CPA
Posted in Mission Minded Nonprofits
Disclaimer: The information contained in Dulin, Ward & DeWald’s blog is provided for general educational purposes only and should not be construed as financial or legal advice on any subject matter. Before taking any action based on this information, we strongly encourage you to consult competent legal, accounting or other professional advice about your specific situation. Questions on blog posts may be submitted to your DWD representative.