usan Purdu " Sue has been WISE's executive director for 4 years. "She was selected for the position by WISE's founder, Otto Krattic, who is now chairman of the board. Sue and Otto work well together and confer frequently about policy. During Sue's tenure membership has risen over 220% revenue from fundraising and grants is up over 350% administrative costs have dropped from 20% to 8% of the annual budget o o o total staffing has increased by 150% while administrative staffing has only increased by 15% Sue is responsible for all hiring and firing decisions including all purchasing and contracting: but she delegates most of what she considers "administrative minutia tasks." Everyone-particularly the board of directors-agrees that Sue has done an outstanding job of meeting the organization's mission goals and objectives. Robin is a retired senior manager from a CPA firm, Hay, Wood, Jubussoff& Company WISE's executive director, Susan Purduper, hired Robin shortly after she joined WISE 4 years ago. When Robin started, the books and the accounting systems were a mess; he quickly brought order to what had been chaos. As WISE grew, Robin helped Sue manage the growth, and became a trusted and key advisor to her Robin helped Sue keep administrative staff levels and costs low by expanding his duties as WISE grew. Robin does essentially all of the accounting work; and Sue delegated to him the authority to serve as WISE's purchasing and contracting officer Robin works long hours during the week and on most weekends, he is always cheerful; a true team player ays been very satisfied with the modest annual pay increases Sue has recommended for him over the years. Everyone agrees that Robin does a terrific job; Sue always gives him a great deal of the credit for WISE's success; Robin is very happy working for WISE and has, in fact, tuned down offers to work for larger organizations for substantial pay increases Helen Joined WISE three years ago, after the executive director, Susan Purduper, met her at a national conference put on by her then employer, the National Association of Association Conference Planners and Directors. Helen immediately implemented a plan to increase WISE's conference attendance and publications sales. Helen did an analysis that revealed that the country's two most popular conference locations are Las Vegas and Atlantic City. After she moved WISE's 4 major conferences to these locations, conference attendance increased by 30%, although on-site registration stayed about the same, even declining slightly Publication sales at conferences initially increased along with the increased attendance, but then leveled off and started declining slightly . Helen even added two more conferences to WISE's annual schedule "Helen's success in expanding WISE's conference programs has been recognized by both the board and the executive director Otto is a former senior Federal executive and gained prominence for his groundbreaking work in advanced situational ethics applications. Otto founded WISE eight years ago and initially served as both executive director and board chair Otto hired Susan Purduper as executive director 4 years ago so that you could spend more time speaking at conferences and consulting on political campaigns Otto has semi-annual Board meetings at which the executive director and the programs director give updates on operational and programmatic activities and achievements, and the CFO gives updates on financial matters, primarily focusing on the annual budget and tracking actual-to-budget performance Due the WISE's success and growth under Susan's management, the Board has given her great latitude in day-to-day management and decision-making. Susan makes all hiring and firing decisions and is responsible for all purchasing decisions. Sal joined WISE three years ago. His previous job was as a senior IT manager for Hay Wood, Jubussoff&Company, a CPA firm. When Sal arrived, the WISE IT structure was a mess. Most of the organization's computers were obsolete, the network was slow and inefficient, and WISE was not even using a broadband internet connection. WISE did not even have any sort of virus protection system; Sal found all of the entity's PCs infected with multiple viruses. Within the first six months, Sal upgraded all of WISE's systems to state-of-the-art hardware and software, installed appropriate firewalls and virus protection, and arranged for a high- T-1 connection Sal also implemented severa linked databases that integrate accounting, fundraising, Sal prepared a report that estimated that the cost savings from the more efficient systems The executive director, Susan Purduper, has been very pleased with Sal's work, and membership, and conference registration information. more than offset the additional IT budget costs. WISE has given Sal generous performance bonuses the past two years. Lew is considered to be a rising star in the field of situational ethics, having gotten his start working as campaign manager for Camelia Elion, who ran for the senate seat in New York. Lew met Otto Krattic, WISEs founder, at a conference where Lew had delivered a talk entitled IfIt Sounds Good, Say It!" After Otto asked Lew to join the WISE board six months ago, Lew quickly immersed himself in WISE details Lew has asked many questions about WISE operations: o Why are we spending so much on information technology? o Why is publications expense rising faster than publications re venue? o Why have on-site conference registrations decreased so drastically in the past two years? o Why can't the programs director or the IT director or the CFO give me straight answers to any of my questions? Why doesn't the board meet monthly? o o and so forth. Otto, who was initially supportive, seemed to become impatient with Lew. At Lew's first board meeting three months ago, Otto said to Lew "Maybe you should take a few months to get to know the organization better." Everyone laughed. Susan, however, has been very patient with Lew's questions. At the board meeting, she directed staff to get answers to each ofLew's questions "immediately, if not sooner." Talia is outgoing, talkative, effervescent, and pleasant at all times. Callers and visitors often comment to the executive director, Susan Purduper, about Talia's cheery attitude, pleasant manner, and helpfulness. Talia was hired by the WISE founder, Otto Krattic, not long after WISE started In addition to answering the phones and greeting visitors, Talia manages office supplies, and coordinates deliveries. Talia also opens and sorts the mail, including invoices from vendors. She also keeps a log of accounts payable and, when she mails out checks, she notes accounts as "paid." Worldwide Institute for Situational Ethics Selected Financial Information 012 to 2016 2016 Anboun % of Rev. 2015 moust Members Dues Revenues Pregram &Grant Revenue Conferences Revenues Pre-registrations On-site Registrations Publicatioms Total Revens Fundrasing Costs s67,091.750 8257% SMA30,196 82.02% ssa.465.s00 80.45% $3.4 44.450-7527% SMA 12,250-7188%! 43,575 9,359,587 859,03 104% 256098 0.57% 239.075 058% s.l02.3SS: s.765,419 80,981 7.307,543 SAS,322 7,208,734 764,097 1751% 1.NV%. 6.18% 10000% is47%, 062% 410% 40% 12.93% 11.56% "99% 12.92% 16..6% 1.20%| 1.39%, 1 06% 3.90 SND,965,119 $16.772,ss 818,268 46,5ss,27x . 2.752.730 ,583,493 100001% 2012% 1.01% s734% 340%. 937% samom 'co00% 2051% 099% 5338% 344% 9.71%; ,n2.7 12,327 $12616,450 648.707| 31,om,722| 2.3s,464 6649,415, 1000tr% 20.11% 103% 50.53%| 3.735. 1000% S45212,493 SUILL13 20.342 20,.04208 2,155,333. 4,012,642, 100) 00% 1882% 059% 4445% 4779. 1334% s41,167,165 $7,00,0ni 255,K10 17,71,312, l.se,S43 5,320,987 $15,107,ss 731,K35 , 40,7%)24: 2.537,156 , 7,153,519, Pregram&Grant Espeases Resarch Cests Publicntioes Cont Conferences Costs Adasinistrative Costs Salaries Expenses IT Costs Total Expenses SurplusDeficie --RA 7 . 1,141,335+-1.41%| 5.11% 48% 100 00% -0.03% 1,102,404 5, 167,589, ISU% -7.01% 49% 100 03% 1,06,472 6,733,733. 1.70% 1,024,541 6246310, 227% l3.81%). 1 .93% 9995% 0.05% 98SMO 6,848,948. 230% 4.137,348. 10.73% 1.57% 16.64% 0.97% 9987% 0.13% 84 100 00% S45 $4111,14, 000% 5210 ss.017 20,200)--0.03% Using the information provided in the attached descriptions of the individuals and the abbreviated financial information, brainstorm ways that fraud might be happening at WISE Consider: internal control problems, the 3 fraud risk factors, and any analytical results you may have from the financials. List three internal control weaknesses, and possible frauds that could come from them 2. Using an analysis of the financials, develop three possible reasons for the decline in operating surplus. 3. Based on the above, identify the TWO most likely perpetrators of fraud at W.I.S.E Note. This case study modified from one by Dave Cotton, CPA, CFE, CGFM Cotton & Company LLP