protect your organization from fraud embezzlement: stories from the trenches

1. Protect Your Organization From Fraud & Embezzlement: Stories From the Trenches Presented by Angela Morelock, CPA, CFE, ABV, Certified Forensic Accountant� Hale House United Way of America Enterprise Foundation Cheyenne Mt. Zoo Hale House United Way of America Enterprise Foundation Cheyenne Mt. Zoo

3. Cost of Fraud & Abuse $652 billion annually 5% of revenues 42% recover nothing after fraud is discovered

9. Damages to Victims go Beyond Dollars & Cents Reputation Loss of donors Detrimental to attracting new potential donors Damage to relationships Sagging staff morale Distraction from the mission

10. The Fraud Triangle

11. Research -- The Typical Perpetrator White male College-educated Intelligent Married Most loyal employee

12. Profile of Fraud Perpetrator Male or female No prior criminal history (<8%) Well liked by co-workers Likes to give gifts/compulsive shopper Gambling problems not unusual Long-term employee Rationalizes: Starts small or �borrows� Lifestyle clues

14. Education Billing fraud was the most common type of asset misappropriation identified in the 73 cases we received from the education industry, followed by non-cash theft, expense reimbursement fraud, and skimming.

15. Cash Schemes Stealing cash funds processed or on hand Not recording & stealing the cash receipts Underringing & stealing the difference in cash receipts Altering bank deposits

17. Accounts Receivable Schemes Lapping Forging checks received Altering credit card receipts Granting bogus credits Bogus bad debt write-offs or account adjustments

18. Inventory & Fixed Assets Theft of business assets Selling the assets

19. Accounts Payable & Purchasing Personal bills Fictitious suppliers Kickbacks Ordering personal items Petty cash funds Employee expense accounts Credit cards

20. Payroll Schemes Ghost employees Manipulated time records Unclaimed payroll checks Writing extra payroll or bonus checks Withholding fraud W-2 fraud

21. Symptoms of Fraud Unusual bank statement items Increases in refunds or write-offs Missing documents Things that don�t make sense Complaints Employee tips Out-of-balance conditions Large adjustments

22. If You Suspect Fraud Follow up immediately Keep it quiet Don�t tip off suspect

23. What to Do When Fraud has Occurred Act swiftly & quietly Gather documentation Contact your attorney Get fraud specialist involved Interview the suspect Report to regulatory authorities Terminate employee

24. What to Do WhenFraud has Occurred Potentially make a deal File fidelity bond claims Perform additional investigation Law enforcement Prosecutor Expert witness Civil action

25. Protect Your Organization Assess your risk Internal controls Proper environment External review Reporting mechanism Hire right Fidelity bonding

29. What is Fraud Prevention? �Fraud prevention requires a system of rules, which, in their aggregate, minimize the likelihood of fraud occurring, while maximizing the possibility of detecting any fraudulent activity that may transpire. The potential of being caught most often persuades likely perpetrators not to commit the fraud. Because of this principle, the existence of a thorough control system is essential to fraud prevention.� ACFE Fraud Examiners Manual

30. Fraud Prevention is About . . . Being proactive rather than reactive Continually reinforcing concepts that support the anti-fraud effort Thinking about fraud risks & solutions Dialoguing about fraud & its prevention Having a board & audit committee that talks about and emphasizes ethics Pushpins � increase likelihood of detection

31. Antifraud Program � 14 Steps Creating a Culture of Honesty & High Ethics Tone at the top Creating positive workplace environment Hiring & promoting appropriate employees Training Confirmation Discipline AICPA Management Antifraud Programs and Controls

32. Antifraud Program � 14 Steps Evaluating Antifraud Processes & Controls Identifying & measuring fraud risks Mitigating fraud risks Implementing & monitoring appropriate internal controls AICPA Management Antifraud Programs and Controls

33. Antifraud Program � 14 Steps Developing Appropriate Oversight Audit committee or board Management Internal auditors External auditors Certified fraud examiners AICPA Management Antifraud Programs and Controls

34. The Answer Remove the opportunity Create awareness Achieve the support of employees

35. Questions?

36. Contact Information Angela Morelock, CPA, CFE, ABV, Certified Forensic Accountant� BKD, LLP 901 E. St. Louis Street Springfield, MO 65801-1190 Phone: 417-865-8701 Fax: 417-865-0682 E-mail: amorelock@bkd.com