Fraud Detection & Prevention Flashcards
7 cards from real CAP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Fraud Detection & Prevention flashcards as text
Which federal agency oversees the investigation of mail fraud involving charitable solicitations?
Answer: U.S. Postal Inspection Service
The U.S. Postal Inspection Service investigates fraud conducted through the mail, including fraudulent charitable solicitation campaigns.
What is the primary purpose of a nonprofit's conflict of interest policy?
Answer: To identify and manage situations where personal interests could improperly influence organizational decisions
Conflict of interest policies require disclosure and recusal when a decision-maker's personal interests could bias their organizational decisions.
A charity solicits donations for a specific named fund but commingles those funds with general operating revenue. This practice is:
Answer: Potentially fraudulent and a breach of donor intent
Restricted gifts must be used for their designated purpose; commingling and misuse constitutes a violation of donor intent and may constitute fraud.
Which due diligence step is most important before a CAP advisor recommends a gift to an international charity?
Answer: Confirming U.S. tax-deductibility status and anti-money-laundering compliance
International gifts require confirming deductibility (often via a U.S. fiscal sponsor) and compliance with OFAC and anti-terrorism financing rules.
A nonprofit board member notices that expense reimbursements have increased 300% without a corresponding increase in activity. The best next step is:
Answer: Requesting a detailed expense audit and documentation review
Unexplained spikes in reimbursements are a classic fraud indicator requiring immediate documentation review and audit.
What is 'lapping' in the context of nonprofit cash receipts fraud?
Answer: Stealing a payment then covering it with a subsequent receipt from another donor
Lapping involves stealing an incoming payment and using a later receipt to cover the shortage, creating a revolving concealment scheme.
Which element makes a whistleblower protection policy particularly effective at deterring fraud in nonprofits?
Answer: Providing anonymous reporting options with no fear of retaliation
Anonymous, retaliation-free reporting channels encourage insiders with knowledge of fraud to come forward without personal risk.