Fraud, it does happen.

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• Fraud, it does happen.
• September 18, 2008

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ACFE 2008 Report to the Nation

• U.S. organizations lose 7 of annual revenues to
  fraud.
• Median loss is 175,000 per incident.
• Median time until scheme detected 2 years.

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Government Fraud Stats

• Second highest incidence of fraud reported
  (banking/financial svcs).
• Ranked nineteenth in median loss incurred -
  93,000.

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Government Fraud Case Breakdown

• Corruption 26.4
• Billing schemes 24.5
• Non-cash 17.9
• Skimming 17.0
• Cash on hand 14.2
• Expense reimbursement 13.2

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Government Fraud Case Breakdown

• Check tampering 10.4
• Cash larceny 9.4
• Payroll 9.4
• Fraudulent statements 3.8

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Corruption

• Conflicts of Interest
• Purchase schemes
• Bribery
• Kickbacks
• Bid rigging.
• Illegal Gratuities
• Extortion

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Billing Schemes

• Personal purchases with government funds.
• False invoicing through shell company.
• False invoicing through a vendor.

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Non-cash schemes

• Misuse of government property.
• Asset requisition.
• False sales and shipping.
• Purchasing and receiving.
• Asset misappropriation.

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Skimming

• Off book fraud.
• Unrecorded sales.
• Understated sales.
• Theft of checks received.
• Lapping schemes.
• Account adjustments.

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Expense reimbursement

• Mischaracterized expenses.
• Overstated expenses.
• Fictitious expenses.
• Multiple reimbursements.

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Check tampering

• Forged maker.
• Forged endorsement.
• Altered Payee.
• Concealed checks.

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Payroll schemes

• Ghost employees.
• Falsified wages.
• Misclassification of hours reported.

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Initial Fraud Detection

• Tips 50.3
• Internal audit 26.8
• Internal controls 19.7
• Accident 16.6
• External audit 9.6

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Detecting Fraud

• Recognize the problem exists, and probably exists
  in your entity.
• Educating employees and vendors.
• Set a positive tone from the top.
• Data analysis, screening and testing.
• Aggressive investigation.

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Deterring Fraud

• The single greatest deterrent to occupational
  fraud is the belief that a perpetrator will be
  caught and prosecuted.

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Behavior Red Flags

• Living beyond means 38.6
• Financial difficulties 34.1
• Wheeler-dealer attitude 20.3
• Control issues 18.7
• Divorce/family issues 17.1
• Close with vendor 15.2

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Kessler Survey

• 66 of employees will steal if they see others do
  it without consequence.
• 13 will steal regardless.
• 21 will not steal under any circumstance.

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Transactional Red Flags

• Unusual variations in revenues, expenses or
  performance statistics.
• Large number of adjustments and book entries.
• Large number of voided checks.

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Transactional Red Flags

• Large number of customer complaints regarding
  posting of payments.
• Large number of book entry adjustments near the
  end of an accounting period.

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Questions?
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Contact information

• Heinz Ickert
• 280 North High Street
• Suite 800
• Columbus, OH 43215
• 614-464-3343 888-427-2227

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