Private Clubs Newsletter

Fraud Prevention and Detection: Understanding Managements Responsibility

The prevalence of fraud today, whether it concerns financial reporting or misappropriation of assets, appears to be on the rise. Reports of individual and corporate fraud are becoming common and more brazen on a daily basis. The effects of fraud are far reaching for a private club and include reputational as well as financial risk.
Pat Halloran phalloran@odpkf.com (914) 381-8900

Management and those charged with governance are responsible for the prevention and detection of fraud. Accordingly, management must have strong policies and procedures in place that are supported by a culture of honest and ethical behavior. Those charged with governance should provide the oversight of these policies and consider possible override by management of internal controls. While there are many different types of fraud, the signs that private clubs need to be aware of continue to be the same: incentive or pressure to commit fraud, a perceived opportunity to commit fraud, and some rationalization for committing an unethical act. Some key items to be aware of when considering the possibility of fraud include: Undue pressure to achieve an expected target or financial outcome Severe consequences for failing to meet financial goals Employees living beyond their means Internal controls that can be overridden or are perceived to be weak An attitude, character, or set of ethical values that allow employees to knowingly and intentionally to commit a dishonest act An opposition to change and improvement of internal controls A history of tolerance toward unethical behavior The above items are not an all-inclusive list of signs of potential fraudulent behavior; however, identification of these factors may be useful reminders for management and those charged with governance in identifying and preventing possible unethical acts.

Clare Cella ccella@odpkf.com (914) 867-8000

Chris Casini ccasini@odpkf.com (201) 712-9800

Al Fiore afiore@odpkf.com (203) 323-2400

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