Red Flags of Fraud. What we will cover. Solutions Conference. Sarah L. Jennings, CPA, CFE Principal Maner Costerisan. The Problem Defined

Transcription

1 Red Flags of Fraud Solutions Conference Sarah L. Jennings, CPA, CFE Principal Maner Costerisan What we will cover The Problem Defined What Fraud Looks Like How to Identify Red Flags Now What 1

2 What is fraud? Wrongful or criminal deception intended to result in financial or personal gain Oxford Dictionary The crime of using dishonest methods to take something valuable from another person Merriam Webster Dictionary What is fraud? A false representation of a matter of fact whether by words or by conduct, by false or misleading allegations, or by concealment of what should have been disclosed that deceives and is intended to deceive another so that the individual will act upon it to her or his legal injury. The Free Dictionary 2

3 What is fraud? Wrongful or criminal deception intended to result in financial or personal gain Oxford Dictionary The crime of using dishonest methods to take something valuable from another person Merriam Webster Dictionary What is fraud? A false representation of a matter of fact whether by words or by conduct, by false or misleading allegations, or by concealment of what should have been disclosed that deceives and is intended to deceive another so that the individual will act upon it to her or his legal injury. The Free Dictionary 3

4 What Does FRAUD Look Like? REALLY What Does it Look Like? Fraud by Position 42% employee ($75,000 median loss) 36% manager ($130,000 median loss) 19% owner/executive ($500,000median loss) Fraud by Gender 67% male ($185,000 median loss) 33% female ($83,000 median loss) Fraud by Tenure 6.8% under 1 year ($51,000 median loss) 40.7% 1 5 years ($100,000 median loss) 27.3% 6 10 years ($200,000 median loss) 25.2% over 10 years ($220,000 median loss) 4

5 REALLY What Does it Look Like? Fraud by Department 5.2% Finance 7.2% Purchasing 7.7% Customer Service 11.8% Executive/Upper Management 12.5% Sales 15.3% Operations 17.4% Accounting 22.9% All Other Departments 52% of Fraudsters between 31 and 45 years old, older fraudsters tend to cause larger losses No REALLY What are the RED Flags? 92% of Frauds HAD Red Flags! 64% of Frauds HAD More than 1 Red Flag! Report to the Nations on Occupational Fraud and Abuse 5

6 Financial Red Flags Balance Sheet Statement of Financial Position Cash Accounts receivable Inventory Deferred revenue 6

7 Financial Red Flags Income Statement Statement of Activities Bad debt Black holes Unexpected trends Now What? Determine high risk areas in your organization Know YOUR key indicators Look for the RED Flags Develop policies Educate your workforce 7

8 Risk Assessment Employee/Volunteer Assessment Physical Controls Knowledge and Assessment of the Schemes Vulnerability Assessment Receipts Disbursements Payroll Who has access, who approves, who reviews??? Key Indicators Performance measurement Evaluates the success of the organization Varies by organization type, industry and leadership goals Should be determined at the beginning of the year, during the budget process, it should drive the budget process 8

9 RED Flags Remember most perpetrators are NEVE charged or convicted be aware Policies and Considerations Policies and Procedures Manual Conflict of Interest Policy Fraud Prevention Policy Document Retention Policy Expense Reimbursement Policy 9

10 Education Definitions Know the schemes Tone at the Top Report abuse Perpetrator to authorities Scheme to colleagues Repeat annually or with any turnover KEEP CALM AND KEEP YOUR EYES OPEN 10

11 Questions? Sarah L. Jennings (517)