Weak financial management systems

Cash management, payment, accounting and controlling systems are insufficient.

Risk type: Cause

Risk driver: Internal

DESCRIPTION

Weak financial systems make it easier to circumvent procedures and delegated authority, which in turn increases the risk of theft and misappropriation of funds. This is further aggravated if fraudulent documentation, accounting, and reporting by those managing finances are not uncovered through proper controls and audits.¹

RED FLAGS

• No or inadequate quarterly revenue and expenditure statements and comparisons with original budget figures³
• No indicative balance sheet with detailed information about current and long-term assets in addition to short- and long-term liabilities³
• No key performance indicators on financial management³
• Inadequate payment documentation, e.g. missing supporting documents for payments
• Questionable invoices
• Lots of corrections in manual cash books or pristine records – i.e. a manual cashbook that looks as if all entries were written on the same day

KEY GUIDING DOCUMENTS

Greene, C. L., 2013. Focus on Employee Fraud — Purchasing Frauds, http://www.mcgoverngreene.com/archives/archive_articles/Craig_Greene_Archives/Focus-Employee_Frauds-Purch.html, accessed 10.11.2015

ICAC, no year, Cash Handling, Independent Commission Against Corruption New South Wales (ICAC), http://www.icac.nsw.gov.au/preventing-corruption/knowing-your-risks/cash-handling/4909, accessed 15.10.2015

Asís, M. G. de, Leary, D. O., Ljung, P., and Butterworth, J., 2009, Improving Transparency, Integrity, and Accountability in Water Supply and Sanitation, World Bank Institute and Transparency International

FULL REFERENCES

1. Greene, C. L., 2013. Focus on Employee Fraud — Purchasing Frauds, http://www.mcgoverngreene.com/archives/archive_articles/Craig_Greene_Archives/Focus-Employee_Frauds-Purch.html, accessed 10.11.2015
2. Asís, M. G. de, Leary, D. O., Ljung, P., and Butterworth, J., 2009, Improving Transparency, Integrity, and Accountability in Water Supply and Sanitation, World Bank Institute and Transparency International