Diligent management of public funds is always a priority for those on the frontline. During economic difficulties, diligence is of the utmost importance to minimize fraudulent actions. When economic conditions exponentially suffer, additional scrutiny is required by both the Treasurer and the School Board.
Remember how the fraud triangle provides a framework to understand the motivation or justification to commit fraud. The three main forces of fraud are Opportunity, Rationalization, and Pressure.
So why is extra scrutiny so important during economic downturns? When vendors and employees face difficult economic challenges, “pressure” increases exponentially even for non-offenders. During our current unprecedented times, the amount of people experiencing significant economic and personal life-altering impacts is astronomical. In fact, our experts predict that the effects of the COVID-19 calamity will force a dynamic shift in the Fraud Triangle as we have never seen before. We can expect to see this shift or over-inflation in the “pressure” side of the fraud triangle.
How do we manage this increase in pressure? Unfortunately, we can’t. But we can counteract the out-of-balance pressure by reducing opportunity. To reduce opportunity, one must establish additional protection and financial controls in the following manner. Review your controls and add capabilities to ensure your organization is protected. When staff capacity is limited, look for helpful tools to establish automation of the following tasks:
- Automate controls and review all payments for compliance, manual errors and potential fraud.
- Define and demonstrate segregation of duty.
- Create a checks and balance process to manage small staff
- Continuously monitor and review 100% of payment and payroll transactions
- Establish a positive tone at the top by establishing sound and required validation processes
With the recent economic changes, the protection of your organization’s public funds is even more important than ever. Start by looking for manual improvements while searching for affordable automation that can help your organization to monitor and prevent all aspects of the fraud triangle. Now, more than ever, these capabilities are necessary to counter-act the effects of increased pressure.
Tom Mitchell is CEO at Bonefish Systems.
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