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Fraud Happens Everywhere



Rough financial times could trigger an employee to embezzle to stay afloat.

Rough financial times could trigger an employee to embezzle to stay afloat.

National news programs report financial crimes from all around the world, every day. As we listen to these stories in our homes across Western and Central Michigan, it’s hard to imagine embezzlement or fraud happening in our small business. But, it does happen more frequently, and goes on for perhaps longer than we think.

In August, Mlive reported that Eileen Louis Dove, a 6-year employee of Viking Tool & Engineering Inc., was charged with embezzling $31,000 (some speculate that figure is actually closer to $280,000).  The alleged forged check-cashing scheme occurred from late 2011 through May of 2012. Checks were allegedly forged and cashed at banks right here in West Michigan (in Muskegon and Newaygo counties).

In March, the 9&10 News reported that Jason Artnz, of Union Township, allegedly embezzled over $500,000 in electronics, appliances and tools from his employer, Auto Owners Insurance.  Artnz is accused of padding customers’ insurance claims and then keeping the excess for himself.

So why do people embezzle from their employers? In many cases, you may be dealing with an otherwise loyal and very good employee. It’s not uncommon for me to hear people say, “I never thought {embezzler} would steal from us!” It’s important to note that good people can do bad things. Many things could be going on in your employees’ personal lives that could trigger them to take desperate measures, such as, extraordinary medical expenses or gambling problems.

It’s crucial to be on the look out for behavioral red flags. You also need to be especially careful to monitor the following:

  • Journal entries affecting cash
  • Receipts and revenues being less than your expectations
  • Bank reconciliations noting outstanding deposits or checks
  • Notices of payroll taxes due from governmental authorities
  • Questions from customers regarding their accounts receivable balances

There are many steps you can take to prevent fraud from happening. It’s imperative to have the proper controls in place. A fraud assessment conducted by H&S Fraud Division can identify weaknesses in your system and put controls in place to help prevent fraud.

To learn more about preventing fraud in your business, contact Kit Powell.

Kit Powell
Certified Fraud Examiner
616.735.3104
kitp@hscompanies.com



After An Employee Embezzles…



Ways Fraud is Discovered

Tips for preventing fraud, as well as, the top ways fraud is typically detected.

Embezzlement has been the number one financial crime for the past 30 years.  If an employee embezzles, then the employer has already lost. Of those losses the employer suffers a financial loss, a loss of trust, and additional revenue loss from litigation matters that follow the embezzlement. To avoid embezzlement embarrassment, employers have to move quickly, as the financial impact will likely have a greater effect than was first suspected. The employer has to stop the damage quickly and conduct a fraud examination.  If stockholders are involved then the employer has the responsibility to investigate and recover the losses. If you have an embezzlement issue come up, follow these three steps in order:

Contact Legal Counsel and Your Insurer

Contacting legal counsel is an important first step because sometimes the employee’s rights can be violated even though they were the one who committed the crime. Contact your insurer also because failure to do so could void potential losses from being covered.

Secure Data

A fraud auditor will know what information and data to secure and back up. A good start for an employer is to do the following:

  • Create a mirrored hard drive of the employee computer
  • Secure electronic backups in the network and local drives of original data
  • Secure CDs, disks, thumb drives, etc.
  • Search the offending employee’s desk and office for any sensitive information (review handbook policies with attorney first)

Deal with the Employee

Management should follow their legal counsel’s advice in dealing with the employee as swiftly as possible.

Remember, fraudulent activities are easier to prevent than to detect. Make sure you have a plan in place, and know what to do should fraud occur in your business.

To learn more about preventing fraud in your business, contact Kit Powell

Kit Powell
Certified Fraud Examiner
231.924.8035
kitp@hscompanies.com



In The News: Former Assistant Principal Pleads Guilty to Embezzlement



Segregate Duties

Simply segregating duties between various team members can help reduce the chance of fraud occurring.

According to an article in theDetroit Free Press, Samuel Craig, a former assistant principal, was convicted of embezzling more than $36,000 from his union.

Craig was able to embezzle the money in his role as treasurer of his school’s union. He used blank, pre-signed checks, which officials believed would be used to pay bills, for his own use. Additionally, Craig opened a debit card linked to union funds and authorized electronic fund transfers to his personal bank account.

This story highlights the importance of implementing procedures to prevent fraud. Officials should review financial statements regularly, rotate financial duties if possible, and segregate duties to prevent one person from having too much power.

To learn more about fraud in business, read:
Small Businesses & Fraud – What you need to know
Fraud Happens. Learn the Facts.

Source: Former Highland Park assistant principal pleads guilty to embezzling from union by Melanie Scott Dorsey



Fraud Happens. Learn the Facts.



Even your most trusted employee could be tempted to commit fraud under the right circumstances. Make sure you know how to prevent that from happening.

We’ve written a lot about the fact that fraud happens in small businesses. Often times people think, “it could never happen to me”, but it does and recovering the money is no easy task.

According to the ACFE’s Report to the Nation, more than 3/4s of the frauds reported in their study were committed by employees who worked in one of the following six departments: accounting, operations, sales, executive/upper management, customer service, or purchasing. In 2012, employees were found to be the fraudsters 43% of the time, managers 34.3%, owners/executives 18.5%, and others 4.2%.

Ensuring that you have a system of checks and balances between departments and between position levels can help deter fraud. Just because someone is your most trusted employee doesn’t mean they couldn’t or wouldn’t commit fraud. According to the report, fraud by employees resulted in a median loss of $50,000; managers, $150,000; owners/executives, $373,000; and others, $86,000.

And remember, there could be more than one employee involved in the scheme. The study found that in 2012, 32.9% of US cases involved two or more perpetrators, which resulted in median losses of $175,000. Try to segregate duties as much as possible or rotate job duties to try to deter fraud schemes.

To learn more about ways to prevent fraud in your business contact Kit Powell, Certified Fraud Examiner.

 

Kit Powell
Certified Fraud Examiner
231.924.8035
kitp@hscompanies.com



Small Businesses & Fraud – What you need to know



Don’t let a fraudster break your bank. (Photo Credit: office.microsoft.com)

In the 2012 Report to the Nations, the Association of Certified Fraud Examiners surveyed their membership and reported on 1,388 cases they investigated. The findings shed light on the most prevalent forms of fraud across the world (this survey provides information from nearly 100 countries on six continents), and we feel can help guide business owners in what they should be watching for in their own companies.

One of the more disturbing findings, showed that small businesses suffered the largest median losses. According to the survey, 49% of organizations that fell victim to an occupational fraud scheme did not recover any money. Furthermore, 87% of the perpetrators had never been charged or convicted of a fraud-related offense. 87% of cases in the study were asset misappropriation schemes, which are things like falsifying wages, overstating expenses, taking multiple reimbursements, stealing cash on hand, etc.

Preventing fraud, or catching it early, should be a small business owner’s goal. We understand implementing such systems can be costly and overwhelming but they are worth it. Here are three easy things you can do to help prevent fraud in your organization:

  • Implement a confidential employee tip line. According to the survey, employee tips are the most common way occupational fraud is detected. Make sure your employees have a safe way to report suspicious activity should they see it.
  • Educate employees and managers on what constitutes fraud. Most people want to do the right thing, make sure they know what that is.
  • Assess the areas in your organization that are the most susceptible to fraud, and then work on investing further to protect those areas.

 

For more information and tips on preventing fraud, check out these additional resources:


A simple fraud risk assessment — performed by Kit Powell, Certified Fraud Examiner — will give you a detailed report with recommendations on how to strengthen internal controls to prevent fraudulent activity. Contact Kit today to schedule an appointment for your fraud risk assessment.

 


231.924.8035
kitp@hscompanies.com



Small Businesses & Fraud – What you need to know




Don’t let a fraudster break your bank. (Photo Credit: office.microsoft.com)


In the 2012 Report to the Nations, the Association of Certified Fraud Examiners surveyed their membership and reported on 1,388 cases they investigated. The findings shed light on the most prevalent forms of fraud across the world (this survey provides information from nearly 100 countries on six continents), and we feel can help guide business owners in what they should be watching for in their own companies.
One of the more disturbing findings, showed that small businesses suffered the largest median losses. According to the survey, 49% of organizations that fell victim to an occupational fraud scheme did not recover any money. Furthermore, 87% of the perpetrators had never been charged or convicted of a fraud-related offense. 87% of cases in the study were asset misappropriation schemes, which are things like falsifying wages, overstating expenses, taking multiple reimbursements, stealing cash on hand, etc.
Preventing fraud, or catching it early, should be a small business owner’s goal. We understand implementing such systems can be costly and overwhelming but they are worth it. Here are three easy things you can do to help prevent fraud in your organization:

  • Implement a confidential employee tip line. According to the survey, employee tips are the most common way occupational fraud is detected. Make sure your employees have a safe way to report suspicious activity should they see it.
  • Educate employees and managers on what constitutes fraud. Most people want to do the right thing, make sure they know what that is.
  • Assess the areas in your organization that are the most susceptible to fraud, and then work on investing further to protect those areas.

 
For more information and tips on preventing fraud, check out these additional resources:


A simple fraud risk assessment — performed by Kit Powell, Certified Fraud Examiner — will give you a detailed report with recommendations on how to strengthen internal controls to prevent fraudulent activity. Contact Kit today to schedule an appointment for your fraud risk assessment.

 

231.924.8035
kitp@hscompanies.com



Small Businesses & Fraud – What you need to know




Don’t let a fraudster break your bank. (Photo Credit: office.microsoft.com)


In the 2012 Report to the Nations, the Association of Certified Fraud Examiners surveyed their membership and reported on 1,388 cases they investigated. The findings shed light on the most prevalent forms of fraud across the world (this survey provides information from nearly 100 countries on six continents), and we feel can help guide business owners in what they should be watching for in their own companies.
One of the more disturbing findings, showed that small businesses suffered the largest median losses. According to the survey, 49% of organizations that fell victim to an occupational fraud scheme did not recover any money. Furthermore, 87% of the perpetrators had never been charged or convicted of a fraud-related offense. 87% of cases in the study were asset misappropriation schemes, which are things like falsifying wages, overstating expenses, taking multiple reimbursements, stealing cash on hand, etc.
Preventing fraud, or catching it early, should be a small business owner’s goal. We understand implementing such systems can be costly and overwhelming but they are worth it. Here are three easy things you can do to help prevent fraud in your organization:

  • Implement a confidential employee tip line. According to the survey, employee tips are the most common way occupational fraud is detected. Make sure your employees have a safe way to report suspicious activity should they see it.
  • Educate employees and managers on what constitutes fraud. Most people want to do the right thing, make sure they know what that is.
  • Assess the areas in your organization that are the most susceptible to fraud, and then work on investing further to protect those areas.

 
For more information and tips on preventing fraud, check out these additional resources:


A simple fraud risk assessment — performed by Kit Powell, Certified Fraud Examiner — will give you a detailed report with recommendations on how to strengthen internal controls to prevent fraudulent activity. Contact Kit today to schedule an appointment for your fraud risk assessment.

 

231.924.8035
kitp@hscompanies.com