4/18/2013. Identifying Theft & Preventing Dishonesty. Christian Brothers Risk Management Services OPENING PRAYER

Transcription

1 2013 Spring Webinar Series 2013 Christian Brothers Services, Romeoville, IL. All Rights Reserved. No part of this presentation may be reproduced, stored in a retrieval system, or transmitted by any means without the written permission of Christian Brothers Services. Christian Brothers Risk Management Services Identifying Theft & Preventing Dishonesty April 18, SPRING WEBINAR SERIES OPENING PRAYER Creator God, through your world and people that surround us, we pray that we may grow more aware this day of your life giving presence. Open our minds and hearts to apply the knowledge from today s webinar for the good of all. We ask these things in Jesus Name. Amen 1

2 Christian Brothers Risk Management Services Identifying Theft & Preventing Dishonesty Randy M. Grundy Executive General Adjuster RGA Claims Management Inc SPRING WEBINAR SERIES Identifying and Preventing Employee Fraud Disclaimer Any coverage information and exposure examples outlined in this document include just a few examples of exposure and do not include, list or examine all the liability or property coverage's and exposures your organization could encounter. Our goal here is to help you recognize that employee fraud is a true risk to any organization. It is strongly recommended that you consult your insurance representative to assure you are aware of your exposures and have the proper coverage's in place. 2

3 GOALS I. Understanding who is at risk and the most common types of Employee Fraud/Dishonesty. GOALS I. Understanding who is at risk and the most common types of Employee Fraud/Dishonesty. II. How to protect your organization from Employee Fraud/Dishonesty. GOALS I. Understanding who is at risk and the most common types of Employee Fraud/Dishonesty. II. How to protect your organization from Employee Fraud/Dishonesty. III. Introduction to the fraud triangle. 3

4 GOALS I. Understanding who is at risk and the most common types of Employee Fraud/Dishonesty. II. How to protect your organization from Employee Fraud/Dishonesty. III.Introduction to the fraud triangle. IV. We ll review some claim scenarios to give insight as to how employees commit fraud. THE FACTS REGARDING EMPLOYEE FRAUD Employee Dishonesty costs US Businesses 7% of revenue accounting for $660 billion in losses annually. THE FACTS REGARDING EMPLOYEE FRAUD Employee Dishonesty costs US Businesses 7% of revenue accounting for $660 billion in losses annually. 1 in 4 employees has committed or witnessed workplace fraud. 4

5 THE FACTS REGARDING EMPLOYEE FRAUD Employee Dishonesty costs US Businesses 7% of revenue accounting for $660 billion in losses annually. 1 in 4 employees has committed or witnessed workplace fraud. Only 1 in 3 witnesses to workplace fraud bother to report it. THE FACTS REGARDING EMPLOYEE FRAUD Employee Dishonesty costs US Businesses 7% of revenue accounting for $660 billion in losses annually. 1 in 4 employees has committed or witnessed workplace fraud. Only 1 in 3 witnesses to workplace fraud bother to report it. 1 in 4 employees that commit workplace fraud have been with their employers for more than 10 years. THE FACTS REGARDING EMPLOYEE FRAUD Employee Dishonesty costs US Businesses 7% of revenue accounting for over $600 billion in losses annually. 1 in 4 employees has committed or witnessed workplace fraud. Only 1 in 3 witnesses to workplace fraud bother to report it. 1 in 4 employees that commit workplace fraud have been with their employers for more than 10 years. The Association of Certified Fraud Examiners reports that the median employee fraud losses are $200,000. 5

6 THE FACTS REGARDING EMPLOYEE FRAUD Employee Dishonesty costs US Businesses 7% of revenue accounting for $660 billion in losses annually. 1 in 4 employees has committed or witnessed workplace fraud. Only 1 in 3 witnesses to workplace fraud bother to report it. 1 in 4 employees that commit workplace fraud have been with their employers for more than 10 years. The Association of Certified Fraud Examiners reports that the median employee fraud losses are $200,000. Employee fraud schemes frequently continue for years before they are discovered. MOST COMMON TYPES OF EMPLOYEE FRAUD Theft of cash/skimming MOST COMMON TYPES OF EMPLOYEE FRAUD Theft of cash/skimming Forgery of checks 6

7 MOST COMMON TYPES OF EMPLOYEE FRAUD Theft of cash/skimming Forgery of checks Purchases with Corporate credit card MOST COMMON TYPES OF EMPLOYEE FRAUD Theft of cash/skimming Forgery of checks Purchases with Corporate credit card Phantom vendors MOST COMMON TYPES OF EMPLOYEE FRAUD Theft of cash/skimming Forgery of checks Purchases with Corporate credit card Phantom vendors Theft of inventory or supplies 7

8 HOW CAN YOU PROTECT YOUR ORGANIZATION FROM EMPLOYEE FRAUD? Establish strong, enforceable internal controls - Separation of Duties - Documentation of actions/transactions - Frequent review and supervision audits - Anonymous whistleblower reporting procedure Purchase Employee Dishonesty Coverage CHARACTERISTICS OF AN EMPLOYEE THAT COMMITS EMPLOYEE FRAUD Typically older- on job 10 years or more. Appears stable in family life Educated No prior criminal convictions Well liked In a position of trust Good worker Rarely takes vacation or sick day THE FRAUD TRIANGLE Incentive Fraud Triangle Opportunity Rationalization 8

9 CLAIM EXAMPLE # 1 20 year employee in a high School Business Office steals $330,000 over a five year period. She was responsible for cashiers window where students pay tuition, fees and collection of funds for events. They utilized numbered carbonless three part receipts. White copy was given to the student, pink copy went with the deposit and yellow copy in the student file. How did she circumvent what appear to be good internal controls? CLAIM EXAMPLE # 2 Secretary in the Business Office forges checks made payable to herself, cash or petty cash. Over a six year period the following amounts were stolen: 2007 $ 1, $18, $29, $67, $72, $62, Total amount stolen came to $185,650.95! CLAIM EXAMPLE # 3 Using a company credit card and a PayPal account, the Director of Food Services for a retirement home was able to charge the company credit card over $200,000 for purchases never made! Each month the employee would submit her credit card statement along an online order review form from a retailers web site to document the purchases. 9

10 CLAIM EXAMPLE # 4 Business Manager for College steals over $700,000 over a 5 year period leasing copy machines, purchasing copy machine supplies and maintenance. IMPORTANT COVERAGE CONSIDERATIONS The Trust will indemnify the Beneficiary for loss that would have been covered by prior coverage, except that the time to discover the loss has expired, and which would be covered by this Benefit Schedule had it been in effect when the acts or events causing loss or damage occurred. This coverage is limited to the lesser of the limits applicable to the prior coverage or the limits of this employee Dishonesty Benefit Coverage. IMPORTANT COVERAGE CONSIDERATIONS Exclusions: In addition to Crime Exclusions, and the General Policy Provisions, there is no coverage under Employee Dishonesty for: (a) Any part of loss involving any Employee occurring after discovery of any fraudulent or Dishonest Acts committed by the Employee whether before or after being employed by the Beneficiary. This includes discovery by the Beneficiary in collusion with the Employee; (b) Legal expenses or any indirect loss. 10

11 Bibliography Report to the Nation on Occupational Fraud & Abuse, Association of Certified Fraud Examiners, Reference Material on Employee Dishonesty: Gerard M. Zack, Fraud and Abuse in Nonprofit Organizations: A Guide to Prevention and Detection, SOX for Nonprofits and Charitable Organization - free download at:: and_ethical_practice.pdf For questions regarding identifying theft & preventing dishonesty contact: Randy Grundy RGA Claims Management Inc. 800 W Roosevelt Road E Ste 400 Glen Ellyn, IL rgrundy@rga.bz 11

12 For questions regarding risk management services contact: Jeff Harrison at x 2543 For the link to the handouts from today s webinar cbs.webinars@cbservices.org QandA.webinar@cbservices.org 12

13 Thank You 2013 Christian Brothers Services, Romeoville, IL. All Rights Reserved. No part of this presentation may be reproduced, stored in a retrieval system, or transmitted by any means without the written permission of Christian Brothers Services. 13