Salvation Army falls victim
TORONTO, ON—In the wake of a multimillion-dollar fraud allegedly committed against The Salvation Army in Canada by a former employee, the Canadian Council of Christian Charities (CCCC) says having accountability measures in place doesn't just provide protection for churches and charities, but for their employees as well.
The CCCC is a national agency of Christian charities that monitors organizational integrity and financial accountability. Vice-president of member services Heather Card says it's prudent for churches and charities to take a critical look at their internal controls related to accounting practices.
While some Christian charities have a concern that "if they're checking up and putting accountability [measures] in place" they will be perceived as not trusting their own people, she says, her organization's view is "accountability is a protection for people."
Citing examples of what she labels "best practices," Card explains that even simple measures like dividing up duties, having regular external audits and external evaluations of an organization's internal controls can help provide protection against the potential for employee fraud.
Even for very small charities, having a lower level of review (called a "review engagement") can mean greater accountability, she says.
In a January 13 open letter to members, employees and supporters, The Salvation Army in Canada first publicly revealed it had become the victim of "a significant fraud."
An organizational news release two weeks later states that Ming Wa, a former employee who worked in the national headquarters finance department in Toronto from January 20, 2003 to December 16, 2005 as a property accountant, was arrested and charged with fraud over $5,000 and falsification of books and documents by Toronto Police Services.
A Globe and Mail report cites court files obtained by the newspaper, in which the charity indicates it was the victim of a phony invoice scheme, paying more than $2.3 million "to two non-existent companies." The report indicates it was Wa's job to review invoices and ensure they were paid.
According to Salvation Army national public relations director Andrew Burditt, "immediately after the fraud was discovered," the charity consulted external auditors and is now "undertaking a complete review of all of [their] accounting and auditing practices.
"Our controls are strong," says Burditt. "But of course, when anything like this happens, you want to take a look at things and make sure you've got as strong controls as you can have."
Other Christian charitable organizations contacted by ChristianWeek explained some of the protective internal measures they have in place.
At the Canadian Bible Society, director of finance Nesa Gulasekharam says the society's internal controls include division of duties, "meaning you divide different functions between different people so that one person doesn't have full authority to do everything," Gulasekharam explains.
"The person who signs the cheque doesn't prepare the cheque. Payment has to be approved by another manager and then two people have to sign the cheque. Our internal controls are also reviewed by our external auditors when carrying out their audit annually."
The society also has a "whistle-blower" system to ensure that even the lowest-level employee has access to the highestgoverning office of the organization the board of governors.
Karen Homer, director of public relations for World Vision Canada, says the organization also operates with internal controls; controls she describes as "tight measures to see that our donors' money is protected and that gets to the children and families we're serving."
Those controls include a full-time internal auditor and policies that prohibit any single staff member from having sole authority to both approve and make payments.
World Vision Canada uses Dun and Bradstreet, an independent corporate information service to check out all companies with whom they conduct significant business to ensure those companies are legitimate operations. Homer says they are also "in the process of developing an international whistle-blower program" that will be implemented in all of the countries in which World Vision works.
While such measures may be beyond that ability of some smaller organizations to implement because of the associated administrative burden, Card says the best protection against employee fraud is simply "to have an appropriate system with accountability in place and to have an external review."
While Burditt says he doesn't know whether the former employee charged in relation to the alleged fraud had authority to both approve invoices and prepare cheques, he says The Salvation Army in Canada is doing "everything possible to get back what was taken.
"We do carry insurance so we're protected against these types of situations. As a result, none of the programs we run or projects that are underway will suffer. Everything will be ongoing."
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