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EisnerAmper Blog

Not-for-Profit Trends and Tips Blog

City of Philadelphia -- OCDEL Rescinds Requirement Regarding Audits

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October 2, 2014

By Brian Collins, CPA


Collins_BrianThe City of Philadelphia Department of Behavioral Health (DBH) and Intellectual Disability Services (IDS) Office of Child Development and Early Learning (OCDEL) issued Announcement EI-2010 #01 on September 25, 2014, which was addressed to executive and fiscal directors of all agencies participating in the Early Intervention Program (EIP).  The announcement stated that, effective for fiscal year ending June 30, 2014, OCDEL had rescinded requirements for EIP fee-for-service vendors to provide a Single Audit, Yellow Book, or Compliance Attestation.  Accordingly, DBH/IDS audit requirements for EIP fee-for-service providers were rescinded as well.  This announcement pertains only to agencies that provide direct services whose reimbursements are based purely on a fee schedule.

Five BASIC Steps to the Truth (Part 2 of 2)

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September 25, 2014

 

By Brian Collins, CPA


Collins_BrianAt the recent American Institute of Certified Public Accountants (AICPA) Not-for-Profit-Industry Conference in Washington, D.C., Nancy Young, of accounting firm Moss Adams, gave a presentation on “Fraud: Spotting the Liar” which discussed steps for obtaining the truth from an untruthful suspect who may be perpetrating a fraud.

In Part 1 of this blog series, we discussed the nine clues to spot a liar that Young shared with us.  Now we will explore Young’s Five BASIC steps to the truth, also shared during her presentation.  As opposed to “Nine clues to deceit” that rely on an individual’s expressions and body language, five steps to the truth can be used by an interrogator to divulge the truth when speaking to a suspect believed to have committed a fraudulent act.

The 5 BASIC steps to the truth are:

  • Baseline Behavior – When sitting down with a suspect whom during an inquiry about a possible fraud, you want to get a feeling for their normal mannerisms and speech before you ask probing questions related to the possible fraud.  You should start with basic questions such as “How long have you been with the organization?” or “What are your duties within the organization?  While asking these questions, observe the suspect’s body language and speech pattern and compare to the suspect’s reaction when asking more probing questions.  These questions can also help put the suspect at ease and help give you a feel for their baseline behavior.
  • Ask Open-Ended Questions – You want to go into the discussion asking questions that help you get to the truth.  You don’t want to receive one word responses to your questions.  Open-ended  questioning engages people to tell their story through a conversation. You are more likely to find out what you want to know rather than receiving “yes and no” responses.
  • Study the Clusters – During a conversation, watch the suspect’s facial, behavioral, and verbal clues.  Also look for when there are inconsistencies between verbal and nonverbal behavior, the nonverbal is generally the more accurate.
  • Intuit the Gaps – Young recommends being aware of gaps in the suspect’s statements, logic, behavior, and emotion.  It may be helpful to have two people conduct an interrogation so that one person can monitor gaps in the suspect’s statements and logic and the other can look for gaps in the suspect’s behavior and emotion.
  • Confirm – A suspect’s story should be validated and revalidated.  This can be done by asking the same fact seeking question repeatedly but differently.  Young recommends having the suspect repeat details of their actions backwards to see if they line up with their first report of their story.

It is important to note these “Nine clues to deceit” and ”Five BASIC steps to the truth” are not only useful when trying to detect fraud in the workplace, but they can also be useful at home when trying to  figure out if your kids did their homework.

Nine Clues to Spot the Liar (Part 1 of 2)

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September 10, 2014

By: Brian Collins, CPA


Collins_BrianAt the recent American Institute of Certified Public Accountants (AICPA) Not-for-Profit-Industry Conference in Washington, D.C., Nancy Young, of the accounting firm Moss Adams, gave a presentation on “Fraud: Spotting the Liar” which discussed methods for spotting the untruths that a suspect may reveal when perpetrating a fraud.

Young pointed out that the average adult can distinguish truth from fabrication only 54% of the time.  The main factor that limits our detection of the truth is our bias towards perceiving events as true, and that detecting deception requires mastering a skill without a clear indicator of success.

To help sharpen our skills of detecting dishonesty, Young provided nine clues that can help identify when someone is not being fully truthful.  Young called them the “Nine clues to deceit”.  They are:

  • Micro-expressions – These are involuntary expressions that appear across a person’s face in as little at 1/25 of a second.  The person’s true reaction can be in that micro-expression.
  • Squelched expressions – These are expressions performed on purpose to cover up other expressions, such as a smile or grimace.
  • Reliable muscle patterns – These are expressions are not easy to control but can reliable indicators of the truth.  For example, only genuine happiness can produce a genuine smile.
  • Blink rates – A person lying will mostly blink more often than they do when telling the truth.
  • Pupil dilations – Large pupils could indicate a fear or other emotions that cannot be concealed as dilation cannot be controlled.
  • Tears – They show that someone is feeling strongly about something and should not sway you.
  • Asymmetrical expressions – These occur when expressions on the left and right side of the face are not the same. These usually show that the expression is being made deliberately.
  • Timing – The timing of facial expression in relation to other body and vocal expressions should be in sync.
  • Duration – Genuine expressions should not continue longer than five to ten seconds.

Many of these nine clues to spot the liar are related to facial expression recognition which can provide the most reliable clues as to whether someone is lying.  However, recognizing facial expressions and properly interpreting them is a skill many of us may not have so before trying to read someone’s facial expressions you should understand the facial details of different emotions.  For example, when persons express contempt one corner of their mouths rise, like a sort of half-smile or when they express fear their eyebrows rise and the lower lip will fall.  So, research and practice your facial expression recognition skills so you can be able to spot the liar.

In the second installment of this two part series we will discussion Young’s 5 BASIC steps to the truth

Not-For-Profits and Credit Card Fraud

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August 26, 2014

 

By: Brian Collins, CPA


Collins_BrianNot-for-profits and credit cards can be a bad combination when the right internal controls and oversight are not in place.  A Philadelphia non-for-profit learned this lesson the hard way when a federal grand jury indicted its former chief operating officer and former chief program officer on federal embezzlement charges.  The charges allege the two suspects were using mission-directed funds as well as the not-for-profit’s credit cards to pay for personal expenses, including overseas vacations, expensive meals, and even a personal trainer.  Authorities claim the two suspects charged a combined $350,000 in personal expenses on the not-for-profit’s credit cards during their employment.

If this not-for-profit had the right combination of internal controls and oversight this credit card fraud could have been deterred.  The not-for-profit could have simply adopted a formal credit policy which would have outlined the internal controls and oversight necessary to enforce proper usage of the credit cards.  A formal credit card policy, clearly written and easy-to-understand, should be implemented by the board and management, and communicated to all employees.  The policy should stipulate that supporting receipts be submitted for all charges with the purpose of the expense clearly documented, and the policy should limit the use of the credit card for certain specified transactions.  An independent board member or manager should carefully review all credit card activity on a monthly basis before payment is authorized.

Get more information on protecting your not-for-profit from credit card fraud.

FY 2014 Data Collection Form Submission Notice

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Brian CollinsIf your not-for-profit is required to have an OMB Circular A-133 audit, also known as a Single Audit, you are required to submit your not-for-profit’s Single Audit reporting package to the Federal Audit Clearinghouse (FAC) via the Data Collection Form.  The FAC has posted a notice on its website regarding the submission of FY 2014 Data Collection Forms.  The notice states that “in order to ensure the accurate and timely collection of the FY 2013 audit submissions, the FAC will begin accepting single audit submissions for audits with fiscal year end dates in 2014 on October 20, 2014. The Office of Management and Budget (OMB) granted an extension until November 30, 2014 for any 2014 forms due on or before November 30, 2014. The extension is automatic and there is no approval required. Single audit submissions with a December 31, 2013 fiscal year end date are due no later than September 30, 2014.”

View the Federal Audit Clearinghouse website to stay up to date on any further announcements.

Have You Paid Your Patient-Centered Outcomes Research Institute Fee?

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Brian CollinsThe Patient Protection and Affordable Care Act of 2010 imposes a fee on issuers of specified health insurance policies and plan sponsors of applicable self-insured health plans to help fund the Patient-Centered Outcomes Research Institute (PCORI), an independent, not-for-profit organization created to conduct research for patients and caregivers with an eye toward improving health care outcomes.  The fee, required to be reported only once a year on the IRS Form 720 and paid by its due date, July 31, is based on the average number of lives covered under the policy or plan.  For the purposes of a health reimbursement arrangement (HRA), an employer is allowed to count only employees and disregard the count for dependent family members when calculating the fee.  The fee applies to policy or plan years ending on or after Oct. 1, 2012, and before Oct. 1, 2019.

Is your not-for-profit organization a sponsor of a self-insured health plan, including health reimbursement arrangements and health flexible spending arrangements?  If so, then your not-for-profit organization may be liable for the PCORI fee.

If you have any further questions about the PCORI fee, please contact a member of the EisnerAmper Not-for-Profit group or Employee Benefit group.

For additional information:
Patient-Centered Outcomes Research Institute fee
Form 720 instructions

EisnerAmper Team to Speak at AICPA National Not-for-Profit Program

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EisnerAmper’s Not-for-Profit Services Group will be well represented at the AICPA National Governmental and Not-for-Profit Training Program in the fall. Senior Manager Candice Meth is a member of the Conference Committee and, along with Partners Julie Floch and Ed Martin, will be speaking at the event which takes place in Las Vegas October 20-22, 2014. Candice and Julie will present a session entitled “IRS Workplan: What’s New for the Form 990 Series?” on October 21. “Internal Controls in Small Environments” is another seminar Julie will participate in that same day.  Candice and Ed will present “Asset Diversion – Fraud” and “Fraud Case Studies,” also on October 21.
 
To learn more and to register, please visit the 2014 AICPA Governmental & Not-for-Profit Training Program website.  As part of the AICPA’s peer discount program, you can also receive a $100 discount off of registration by using discount code USC when you sign up.
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