XYZ Public Charitable

Trust
Forensic Audit Report
2016
 NS & ASSOCIATES
CHARTERED ACCOUNTANTS
147, G.T Road Kolkata – 700 001
Email: singhneha2608@gmail.com Contact No.: 9163639702

11/09/2016

PRIVATE & CONFIDENTAL

To,

The Trustees

XYZ Public Charitable Trust

24 M.G Road Kolkata 700001

Dear Sir,

Ref: Engagement Letter no. FAFP/08/2016 dated 22/08/2016

Sub: Submission of Investigation report on donations received by the XYZ

Public Charitable Trust

Please find attached our report on the above referred engagement with reference to the above named
company. Our report is based on the information and documents provided to us during the course of
investigation. Our procedures were performed with the due diligence. Our conclusions and findings
are in confirmatory of our engagement letter. Our analyses and observations are based upon
information provided to us as of the date of this report. It is possible that additional information may
become available following the date of our report and, if so, our analysis and observations could be
affected by such information.

We are happy to discuss any questions at your convenience.

Yours faithfully,
For NS & ASSOCIATES
CHARTERED ACCOUNTANTS

(Neha Singh)

NS & Associates
Chartered Accountants
Membership no - 309861 Private and Confidential 147, G.T Road, Kolkata - 1
 Forensic Audit Report of XYZ Public
Charitable Trust
Date of report: 11th September, 2016

Contents

Background ........................................................................................................................................... 1

Scope and Objectives ............................................................................................................................ 1

Use of Report ........................................................................................................................................ 2

Limitations on Scope ............................................................................................................................ 2

Methodologies....................................................................................................................................... 2

Findings................................................................................................................................................. 3

Conclusions and Recommendations ..................................................................................................... 4

NS & Associates
Chartered Accountants
Membership no - 309861 Private and Confidential 147, G.T Road, Kolkata - 1
 1. Background

1.1 XYZ Public Charitable Trust, a very renowned Public Trust in South India, established in
the year 2004. The charitable trust was set up for assisting the poor, providing medical relief,
and other noble causes. The trust was very popular and thus created tremendous goodwill
during the last 25 years and, therefore attracted substantial donations. It collected large sums,
exceeding crores of rupees through cash collection boxes kept at different public places such
as shops, airports, malls, departmental stores etc. Collections were retrieved at least twice a
week by sending cashiers to those particular locations and boxes were used to be opened at
the trust’s office.

1.2 The managing trustee noticed decline in the collections and received some disturbing reports.

1.3 The managing trustee then informed the matter to the Chief trustee of the trust Mr Jay
Narayan about the decline in the collections in addition to several anonymous complaints.

1.4 The Chief trustee then decided to appoint a forensic auditor to further investigate. And
appointed our firm NS & Associates vide Engagement Letter no. FAFP/08/2016 dated
22/08/2016 to investigate the collection procedures and trap the fraudster where it was
believed that cash was being removed from donation boxes.

2. Scope and Objectives

2.1 The scope and objective of the forensic audit were:

i) To investigate whether there is any siphoning of funds involved.

ii) To trap a fraudster where it was believed that cash was being removed from donation
boxes.

iii) To make recommendations for improvement in collection procedures.

iv) To suggest implementation of internal control wherever required.

NS & Associates
Chartered Accountants
Membership no - 309861 Private and Confidential 147, G.T Road, Kolkata - 1
 3. Use of Report

3.1 We are required to provide only 3 original copies to the Trust, one for the XYZ Public
Charitable Trust, one for all its trustees and one for the Chief Trustee. The sole purpose of
this report is to know whether there is any siphoning of the cash collections received as
donations. Our report is to be used for this limited purpose only.

4. Limitations on scope

4.1 We have primarily relied on the information, documents and systems provided by the trust. If
any additional information or documents are revealed after submission of our report such
revelations might lead to conclusions different from findings arrived by us in our report.

5. Methodologies

We started with checking the collection procedures of the trust and had reported that the collection
procedure was weak. We delegate some of our staff the responsibility to visit the places where the
collection boxes were kept just to have a close watch on the boxes and to analyse how much is the
collection on an average.

Tampering of the boxes and pilferage of some part of the collections was suspected.

After going deep into the matter we came to a conclusion which confirmed the worst fears of the
managing trustee. Someone who is at a very senior level of management is likely to be involved or
perhaps it may be possible that even one of the trustees might be involved in it.

Since we knew that the conventional audit procedures had some limitation therefore we used
extended procedures to trap the fraudster.

We thought of laying a trap which would at least detect the fraud even if that will not reveal the
identity of the fraudster. And for this we had taken the permission of the Chief trustee and the audit
committee. And accordingly it was announced in the next trustees’ meeting, that the auditor would
test the collection system. It was explained in the meeting that the auditor would arrange to drop,
thousand rupee notes in which there would be a red tick mark in the left corner of the note (at the
top), in all the cash collection boxes at the various locations during the following week. If the
thousand rupee note was missing in any of the cash collection boxes, then that would have been
tampered with and would automatically identify the cashier involved. All the trustees agreed and
the auditor was asked to proceed with the same.

NS & Associates
Chartered Accountants
Membership no - 309861 Private and Confidential 147, G.T Road, Kolkata - 1
 We then take the legal expert advice in this matter whether the same is within legal parameters.
After receiving all the clearances, a week later we announced that the thousand rupee notes had been
dropped in the cash boxes at all the locations and the cash boxes could now be opened to determine
whether any of them were missing.

6. Findings

Surprisingly what we saw was:

Among all the cash boxes only one of them had the thousand rupee note with a red tick mark at
the top of the left corner of the note. Did it mean that all the other collection boxes were
tampered??

What we answered was ‘NO’

In fact the cash box where the thousand rupee note was found was the one where the
pilferage was now confirmed. We then announced that we had not dropped any thousand rupee
notes in any of the boxes. Infact, instead of thousand rupee notes in the cash box, we had
actually dropped in each of the cash boxes, a foreign currency note of 10 pounds with a red
mark. And the only cash box which did not have such 10 pound notes was the one where this
thousand rupee note was found.

This meant that the collection cashier for that particular cash box must have emptied a part of
the cash proceeds in which that 10 pounds note must have been taken off and inserted a
thousand rupees notes with a red tick mark at the top of the left corner of the note.

We sent the fingerprints on the thousand rupee note with a red tick mark which were examined
and compare with that of the cashier and the store manager where the box was kept. They
matched and they were turned to the police for further proceedings. The stores manager turned
out to be a relative of one of the trustees i.e. of Mr A. And he surrendered himself by admitting
that he has siphoned Rs. 2.5 crores in the last four years from those cash boxes.

The cashier also confessed that the involved trustee Mr A had provided him with a duplicate set
of keys and with the help of stores manager, a part of the box was emptied before it was taken to
the trust’s office.

NS & Associates
Chartered Accountants
Membership no - 309861 Private and Confidential 147, G.T Road, Kolkata - 1
 7. Conclusions and Recommendations

Based on the work conducted by our team from the commencement of this mandate up until 11th of
September 2016, our conclusions are as follows;

i) The cashier, the store manager and the trustee Mr A was involved in the fraud. They were
the main culprit and were siphoning the funds from last 4 years.

ii) Moreover, the internal control procedure of the trust was also very weak.

Our Recommendations:

i) The cash boxes should be under CCTV coverage.

ii) The cashier should not be same for any particular locations. They should be changed
frequently. Each time a different cashier should be sent for collecting the cash boxes of a
particular location.

iii) The keys of the cash boxes should be under the control of any authorised trustees and not
with each and every trustees.

iv) The trust should take an undertaking from all the trustees that the store manager or any
other incharge of the places where the cash boxes would be kept are not their relatives.

NS & Associates
Chartered Accountants
Membership no - 309861 Private and Confidential 147, G.T Road, Kolkata - 1