Fraud in Small-Medium Entities

Fraud can happen to anyone. We would like to think that in a small entity where there is closer management interest, fraud wouldn’t happen. In a not-for-profit entity, we would hope that their charitable mission would mitigate some instance of fraud.  In governmental entities, many would believe there are well established controls and checks and balances to keep fraud from occurring.

 

In reality, smaller entities, not-for-profit entities and governmental entities all have unique characteristics that make them susceptible to inappropriate activity or fraud. These characteristics pose intriguing questions that we will explore within this segment.

 

As with any entity, understanding components of the fraud triangle are important to discovering the areas at-risk in your organization.  The fraud triangle depicts three elements that are characteristics of the white-collar fraudster.  Those include pressure, opportunity and rationalization.  In a not-for-profit, governmental or small entity; these components may have a more unique or personal attribute to them.  To mitigate inappropriate activity, you must be able to put yourself in the shoes of the individual who would perpetrate the fraud and ask “Why”.

 

In this course we explore many facets that make fraud in a not-for-profit, governmental or small business unique from their for-profit counterparts.  We examine the basic characteristics of each of these entities, and then dissect the fraud triangle and examine what unique forces may be at play for these organizations.  We also examine some of the highest risk fraud areas for these organizations and discuss some control alternatives to consider when establishing your fraud fighting processes.