Board Governance: What is your role in fraud prevention?

Fraud Internal Controls

Fraud is the act of deceiving someone or misrepresenting information to obtain personal or financial gain. Fraud occurs in organizations of all sizes, types and purposes, and when it occurs, it can have significant consequences, such as the loss of money or assets, a damaged reputation or uncertainty about future operations.

The Board of Directors has a key responsibility to establish the “tone from the top” through its attitudes, actions and communications. This tone defines the organization’s culture and influences the behaviour of employees, customers, lenders, funders and other stakeholders.

“Tone from the top” may be demonstrated by:

  • Policy and procedure manuals: define ethical behaviour, acceptable and unacceptable behaviour and the consequences thereof.
  • Maintaining a system of internal controls: define standard operating practices, which should include segregation of duties and appropriate review.
  • Effective hiring practices: clearly outline expectations of the role, perform verification of qualifications and background checks.
  • Addressing concerns or allegations promptly: follow up complaints of wrong doing, or poor employee performance promptly.
  • Identification of key fraud risks: identify the areas where fraud could occur, establish appropriate authorization limits and reporting.
  • Conflict of interest policy: define when a conflict is perceived to exist, and how the conflict will be resolved.

In addition to setting the tone, the Board is responsible to monitor activities and outcomes to ensure they are consistent with policy, strategic plans, budget, etc. If any activities appear to be out of line with expectations, the Board is responsible to follow up and resolve any issues. One of the most important roles of the Board is to be alert and ask questions – if something doesn’t seem accurate or doesn’t make sense, ask more questions until you are satisfied with the answers.

Join us June 9th to learn what your organization can do to reduce the risk of fraud? Details below.

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