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FRAUD DETECTION, INVESTIGATION AND PREVENTION ...

FRAUD DETECTION, INVESTIGATION AND PREVENTION ...

All issued checks should

All issued checks should be non-negotiable to protect the issuer andrecipient. Forbid the signing of blank checks. No responsible employee maysign checks without the corresponding supporting documentation. Reconciliation for all the bank accounts needs to be performed atleast on a monthly basis. This will minimize any fraud that may beperpetrated by any individual. The cheques issued by the SACCO need to be accompanied byrespective Cheque Payment Vouchers which should clearly stipulatethe reason behind such payment. The cheque books should be kept in a secure and protected place.Before the issue of check books to the accounts staff, all chequeleaves need to be counted, confirmed and acknowledged by signing. All counterfoils must be documented as a true copy of the originalcheque and all void cheques must be crossed and must also berecorded in the system as void.LOANSLoans represent the highest percentage of a SACCO’s assets. They are alsoprone to risks including fraud. SACCOs loans needs to be monitored notonly to make sure that they perform but also to ensure that no fraud isperpetrated using loans.Among other checks; The SACCO needs to clearly define in the loan or credit policy onthe procedure for issuing out loans. A credit scoring mechanism needs to be performed to ensure nomember who does not qualify for a loan gets one.

On awarding the loans, it should be clear that any loan that isapproved should be in accordance with the established policywhereby an analysis has to be done based on risk based lending. The loan review function should be independent of the creditadministration and loan approval. The Management should also look to establish a policy to look intoinsider loans. These are loans to the officials who act as Board ofDirectors or Management or their close friends or relatives. There isneed to eliminate the instances where loans could have beenapproved where in normal circumstances it could not have were itnot for the aforesaid relationship. The management should address any conflict of interest and howsuch loans can be approved and disbursed. The loan review personnel should have the knowledge andconfidence to challenge transactions that look suspicious, especiallyif the transactions have been executed by an executive officer orboard member. There is need too during the audit or investigation for one to checkthe real existence of the loan and also its performance. The loan hasexist and also there should be interest being recognized and actuallyreceived from that loan. Since the loan has been awarded based on the 5 C’s of Credit, thecollateral should be one that can be realized by the SACCO in theevent of non-payment of the loan. There is the need to also monitor the employment practiceswhereby people with qualifications occupy office. This will ensurethat proper loan analysis is done before its award.OTHER ASSESTSOwnership – There should be proper documentation of the ownership ofthe assets of the SACCO. Depending on the type of assets, there will belog books for vehicles, title deeds for land, and share certificates for shareinvestments. The persons handling the ownership documents need also beclearly defined.Depreciation and Amortization – The BOD should be able to set a clearamortization and depreciation policy so that assets are not written down

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