Art Creed, a tax expert, belonged to a congregation called The House of Worship (THW). THW needed to raise funds for a new building wing and asked to help organize an art auction as a fundraising event. THW was located in an affluent area.
Tony Thanks, a fellow congregant, referred Creed to an art dealer specializing in this sort of fundraiser. Creed was assured by Thanks that his contact from Art for Charity Deduction (ACD), Tina Seller, would raise a significant amount of money on THW’s behalf.
The design of the auction was simple. THW would provide the venue, market the event to members and others, and receive 10 percent of the proceeds from the sale in the form of a donation from ACD. Before the auction, ACD provided certified appraisals of the fair market value of the art to be offered at the auction, and it also handled all of the other aspects of the auction.
Many people who purchased art at the auction thought it was a great deal, since they were able to purchase pieces at around 50 percent of the appraised value stated on the certificates. Seller told them they could write off the full fair market value as well, even if they paid less than the appraised amounts, because the appraisals were conservative, and if they held the piece, it would appreciate. The auction was a tremendous success and raised $100,000 for the building addition.
THW’s bookkeeper calls you and asks how to record a receipt for the $100,000 raised at the fundraiser. In addition, she asks you to come to the office to review IRS audit notices given to her by Creed regarding some of the buyers of the art.
Have any inappropriate activities taken place? What are the proper recordings? Was ACD legitimate? Could THW have exposed its reputation by doing business with a company that might have used the church’s goodwill to perpetrate fraud?
- Develop an understanding of the organizational and individual ethical tones of the people involved.
- Identify the organization business process being examined and the value (cash or cash-convertible) involved
- Map out the organization, its people, and those who have access to its value.
- What are people’s jobs?
- How do the departments operate?
- What do you think about the problem the mystery is trying to exemplify?
- What is the process in the mystery?
- What accounts have the potential to be circumvented?
- What are the policies of the organization? Where are the distractions in the process?
- Where are the diversions in the process?
- Where is the division in the process?
- Who are the people of interest? The enablers? The detractors?
- Who are the responsible parties overseeing the business process controls?
- What are the potential overlapping responsibilities that require the segregation of duties with access to organizational value?
- When was the last time any person of interest took a vacation?
- What potential conflicts exist?
