Charity & Corporate Fraud

Worldwide reports suggest that fraudulent activities have long troubled the Not for Profit sector and that their incidence in on the rise…In Australia charities rely on good governance to prevent fraud but what systems are in place to ensure that the whistleblowers are protected.

Concerns about the performance of board members from both inside and outside the board can be more complicated. Where to make complaints even more unsettling.

Consider the following statistics.

The US Association of Certified Fraud Examiners 2002 Report to the Nation – Occupational Fraud and Abuse” highlights the following:
 Certified fraud examiners estimate that 6% of revenues will be lost as a result of occupational fraud and abuse.
 The most common method of detecting occupational fraud is by a tip from an employee, customer, vendor or anonymous source. The second most common method is by accident.
 Organisations with fraud hotlines cut their fraud losses by approximately 50% per scheme.
 The average fraud scheme lasted 18 months before it was detected.

The 2002 KPMG Fraud Survey of Australia and New Zealand reported:
 Excluding financial services fraud (credit cards) 59% of all fraud was undertaken by people within the organisation (directors, managers, supervisors, contractors and employees.
 Where employee fraud is dissected, 72% of the number of frauds are undertaken by non-management employees and 28% by management. However the average value of frauds reported were $18,118 per non-management employee (33% of value) and $96,732 per management employee (67%)
 Again the most successful method of reporting fraud was from internal notification.

The spectacular corporate collapses of recent times has lead Melbourne law firm Abbott Stillman & Wilson to consider the issues of good governance and the effectiveness of the governing body as being critical to an organisations success.

Law firm partner Colin Hiles says regulators continue to set rules and processes under the mantle of compliance, but this will not prevent collapses in the future.

Hiles says it’s the people on the board working effectively as a board and with senior management which will make organisations successful. This goes for government authorities, for profit and Not for Profit organisations.

Abbott Stillman & Wilson have produced a free booklet called Seeing Beyond Compliance : A Guide for the Effective Board. The booklet has a chapter on whistleblowers and disclosure.

In particular it points to the setting up of Whistleblower Protection Programs as set down by the Australian Standards Association.

Hiles says Telstra is one of the few major corporations that has adopted a whistleblower program, engaging an external and anonymous channel through to the organisations company secretary and ethics committee to handle employee complaints.

Hiles says there is no reason why a Not for Profit should not include this program in it’s own risk management policies.

Former Victorian police commissioner, Bob Falconer has set up a business called STOPline which provides the conduit between the organisation and the whistleblower to make anonymous complaints and it operates the Telstra program.

STOPline CEO Wayne Bruce believes that both the public and private sector should regard whistleblower protection as being essential to good governance.

Most importantly he says the program must be independent, impartial and anonymous.

Abbott Stillman & Wilson have also developed a self-governance audit to enable organisations to measure their own governance practices against recommended good governance models and procedures.

The law firm says this will provide board members with an overview and enable them to identify areas that need to be developed such as a whistleblower protection program.

Abbott Stillman & Wilson are offering Pro Bono Australia readers a special discounted rate for the self-governance audit of $350 (including GST).

You can order the free booklet Beyond Compliance: A Guide to an Effective Board or the self-governance audit via email at governance@asw.net.au or call 03 9243 8520.

STOPline can be contacted on 03 9882 4550 or admin@stopline.com.au. The website is www.stopline.com.au.