Reposted from the This Week in Nonprofit Fraud Blog – July 7, 2014
An Anti-violence Initiative Gone Wrong
Photo courtesy of nymetroparents.com
June 25, 2014: A new report finds Illinois Governor Pat Quinn at the center of a scandal involving his (now defunct) Neighborhood Recovery Initiative, a state anti-violence program designed to assist juvenile and young adult ex-convicts reintegrate back into society. In April 2011, one of the initiative’s lead grantees – The Healthcare Consortium of Illinois – sub-contracted with a nonprofit organization – Project Hope, Inc. – and provided them with $15,770 to carry out re-integration services in Thornton Township. By August 2011, the Healthcare Consortium had canceled the remainder of its contract after determining that Project Hope was not performing the services it was contracted for and no re-entry program actually existed at the location stated in their application. After further investigation, it was discovered that the address for Project Hope actually belonged to a day care center in a neighboring town.
See more on this case at The Chicago Sun Times
- A more extensive vetting process would have likely turned up the fact that this inmate re-entry program was in fact operating out of a day care center.
- The good news in this case is that the Healthcare Consortium had strong contract monitoring procedures in place, and was therefore able to minimize their potential losses by terminating the contract quickly when it became evident that Project Hope was not fulfilling the contract terms.
Raffa Forensic Practice Tips:
- Fraud is unavoidable, since there is no such thing as a perfect preventive control system. Organizations must also have strong detection controls in place to ensure that frauds are minimized.
- Does your organization have formal procedures in place to monitor contractor and grantee performance for red flags of fraud?
It’s Fun to Play at the YMCA
July 5, 2014: An investigation is underway in Manatee County, FL after an audit was unable to account for $175,000 in county funds paid to the Manatee County YMCA for youth programs from 2011 to 2013. The audit concluded the improprieties may have involved the falsification of records, official misconduct and theft. For instance, the Manatee County YMCA billed the county for programs they claimed took place on school grounds on school holidays such as Christmas and Thanksgiving, which would be impossible. Manatee County YMCA officials admitted to “flaws” in their record-keeping procedures and stated that they had fired one employee who improperly altered documents. The YMCA maintains that all services and programs they received county funding for were carried out and are currently conducting an internal audit. The audit also noted that Manatee County staff did not monitor the contracts in a timely manner; some records were reviewed for a full year. Manatee County officials, the Sheriff’s office and other agencies are currently reviewing the audit’s findings to decide on the next steps.
See more on this case at The Herald Tribune
- Again, we see the important of strong monitoring for contractor performance! Manatee County staff waited far too long to review records from the local YMCA – a timely review might have caught improprieties before more funds were paid out!
- It is paramount for an organization to keep accurate records to support billings and grant expenditures.
Raffa Forensic Practice Tips:
- Review all documentation provided by contractors and grantees in a timely manner, and make sure these reviews aren’t just “rubber stamps” for approval.
- Does your organization have an effective payment approval process, and are have the reviewers been trained to spot anomalies in documentation?
DON’T BE THE NEXT VICTIM OF FRAUD!
The Raffa Forensic Accounting Services Practice offers a wide variety of fraud prevention and detection services including Fraud Risk Assessments, Background and Workplace Investigations, Fraud and Internal Investigations, Transactional Due Diligence Investigations, Anti-Fraud Consulting and Training, and Computer Forensic Analysis.
For more information on the Raffa Forensic Accounting Services Practice please visit us at www.raffa.com/ProfessionalServices/Forensic/ and the Nonprofit Fraud Prevention Institute at www.raffa.com/Fraud.
You can also contact the following Raffa professionals with any questions or if your organization needs assistance in fraud prevention: