Short Essay. Harborview Youth Outreach is a nonprofit organi…
Short Essay. Harborview Youth Outreach is a nonprofit organization funded largely by government grants that require expenses to stay within approved budget categories. Falling outside those limits can delay reimbursements and create cash-flow problems. James Carter is the accounting supervisor. He maintains the vendor master file, initiates electronic payments, and prepares grant expense reports. Due to staffing shortages, he also performs bank reconciliations. The executive director reviews only summary financial reports and focuses mainly on whether grant spending stays within budget. During the year, Harborview faced increased pressure to manage administrative costs to avoid grant reimbursement delays. At the same time, James experienced personal financial strain related to unexpected family expenses. To “help with cash flow,” James began processing payments to several small consulting vendors for “grant compliance support.” The expenses were coded to allowable grant categories and helped keep reported grant spending within budget. The invoice amounts were small and consistent with prior consulting costs. In reality, the vendors were fictitious, and the payments were deposited into bank accounts controlled by James. He believed the situation was temporary and planned to repay the organization once his personal finances improved. He also felt justified because the organization continued to receive grant funding and he believed no one was being harmed. The issue was discovered when a board member requested a detailed listing of consulting vendors used during the year. What type of fraud, misappropriation of assets or fraudulent financial reporting, is present here? Explain what led you to your determination. Describe all the possible motivations for James Carter to commit the fraud. List all the opportunities to commit the fraud you think are present. List all the rationalizations James Carter is making to commit the fraud.