SAFEGUARDING YOUR ASSETS AND PREVENTING FRAUD

1. SAFEGUARDING YOUR ASSETS AND PREVENTING FRAUD • Internal Controls • Segregation of duties • Audit, Review or Compilation • Preparation of bank reconciliation • Proper approval of vendor invoices/original copies • Training/cross-training Senior Mgmt & Employees • Screening & background checks of new hires • Rotation of personnel in clerical positions • Mandatory vacation • Observe employee behavior • Periodic review of procedures • Warning Signs • No vacation taken; first to arrive, last to leave • Employee lifestyle • Employee protection of their work • Lack of internal controls • No sharing info between Senior Mgmt or employees • Bank statements not reconciled promptly • Check stock in open areas and not secured • New vendors added without proper controls • Promotions/transfers declined by employee • Fire drill mentality to complete a report • Vendors call re: lack of payment/service change • Frequent bank calls for transaction verification • Preventative Measures • Engage outside professional to test controls • Engage outside accounting firm for audit • Hire management company • Separate bank accounts • Bank products-positive pay, alert technology • Security features on checks and documents • More than one Senior Mgmt involved • Proper control to add new vendors • Review insurance for Fidelity, Crime, Cyber • Protection of computer hardware & software • Update and review procedures • Cyber Security • Protect computer hardware & software • Dedicated PC-no personal use/open (WiFi) areas • Back-up files/Controls to limit access • Proper use of passwords, token authentication • Use of firewalls, spyware & virus programs • Monitor internet activity • Update software promptly/Unload unused software • Scan PC regularly for spyware & viruses • Use audit trail in bank programs • Use separate user accounts • Create continuity/recovery plan

2. SAFEGUARDING YOUR ASSETS AND PREVENTING FRAUD Steps to Take if a Fraud Occurs • Quick & rapid response necessary • Engage a forensic accountant • Seek legal counsel • Contact insurance company or broker/agent • Contact banker • IT personnel should not try to find problem • Maintain integrity of data • Close bank accounts/open new accounts • Call law enforcement (if advised by legal counsel) • Implement new controls/prevent more losses • Cancel credit cards, if necessary • Maintain the integrity of documents • Secure computers used by the perpetrator • Implement continuity/recovery plan, if needed • Cancel personnel who can approve EFT’s • Take action/perpetrator has consequences • Communicate with employees at proper time • Send Form 1099 to the perpetrator Tips to Remember • Fraud is a crime of opportunity • Fraud can make anyone a victim. • Fraud occurs for many reasons-be aware • Something sounds too good to be true, it probably is • Perpetrators take the path of least resistance • Anyone can be a perpetrator-be aware • Don’t become complacent • Be proactive. Reaction is too late • Behavior is a key point-be cognizant of it • Read all monthly reports • Research other parties in transactions • Never let your guard down • Be aware of emails from unknown senders • Create a positive work environment • Train your employees • Don’t be lazy-investigate all incidents • Be sure there are checks and balances • Tone at the top-lead by example