A fraud occurred at Seattle Children's involving the former Controller. The Seattle children's previous controller diverted $96000. Auditors didn't find out about this until the controller actually bragged about it. And this was completely a fraud. He took advantage of some of the weaknesses in the system, especially with vendor setup. There was a weak new vendor setup and approval procedures. Also, lack of system controls put in place to enforce authorization limits and segregation duties. He was the requestor and treasurer for his church. They were building a new church in the retina area. He found a way to get the vendors paid through Seattle children. The problem was that he brought a new vendor into the system and the system didn't require any approval. Also, he was able to pressure the account payables department to hurry up. As a result, 40,000 checks were delivered for funds.

Q: Frauds can have a long-lasting impact on the reputation of the company. Seattle Children's keeps its doors open based on the generous donations of thousands of people every year. Without these donations, Seattle Children's would not exist. If a potential donor heard about this fraud in the management team, would that impact

1. Potential donor decision to donate anything?
2. Potential donor decision on the amount you would be willing to donate?

Q: What a Board member of Seattle Children's Hospital would expect from Management to ensure that this situation does not happen again?