CAP Fraud Detection & Prevention 3

Question 1

A nonprofit's executive director approves vendor invoices, signs checks, and reconciles bank statements. Which best practice is violated?

Accepted Answer

Segregation of duties

Answer

Allowing one person to authorize, execute, and reconcile transactions removes essential checks and creates a high fraud risk.

Question 2

Which type of charity scam involves fraudsters collecting donations but never distributing them to intended beneficiaries?

Accepted Answer

Phantom charity fraud

Answer

Phantom charities appear legitimate but exist solely to collect donations without providing any charitable benefit.

Question 3

When evaluating a charity for a major gift recommendation, a CAP advisor should prioritize reviewing which document?

Accepted Answer

Form 990 and audited financial statements

Answer

Form 990 and audited financials provide objective data on revenue, expenses, executive compensation, and governance practices.

Question 4

A fundraiser asks a donor to make a check payable to the fundraiser personally rather than the organization. This is:

Accepted Answer

A major fraud red flag indicating possible misappropriation

Answer

Legitimate charities always direct donations to the organization itself; requests to pay individuals are a clear fraud warning sign.

Question 5

What is 'ghost employee' fraud in a nonprofit context?

Accepted Answer

Paying salaries to fictitious or former employees to divert payroll funds

Answer

Ghost employee schemes involve adding nonexistent people to payroll and redirecting their wages to the perpetrator.

(CAP) Certified Philanthropic Advisor Practice Test