NATIONAL FRAUD STATISTICS

1

• Financial Fraud Audit System (FFAS)

• NATIONAL FRAUD STATISTICS
• 400 billion is lost annually due to occupational
  fraud (9 per day per employee)
• Asset misappropriation is the largest category
  within occupational fraud
• Median loss of employee fraud is 60,000 per
  occurrence
• Average time until the fraud is detected is 18
  months
• Internal fraud is most commonly detected through
  tips or by accident

2

• Financial Fraud Audit System (FFAS)

• BUSINESS OBJECTIVE
• TO
• Reduce inappropriate employee/vendor related
  Company disbursements
• IN A WAY THAT
• The Special Investigations and Internal Audit
  department has access to historical financial
  data
• Identifies potential processing errors, fraud or
  abuse
• Helps validate the effectiveness of existing
  controls
• Uses a technology that is compatible with
  corporate infrastructure and future technological
  direction
• SO THAT
• The Company can improve financial performance
  (Profitable Growth).

3
CONTINUOUS MONITORING Methodology

• Keep It Simple!
• Identify High Risk Expense Types Models
• Use Changeable Formulas Or Limits
• Establish Automatic Notification Of Soft
  Targets
• Establish User-Friendly Drill Down/Up Research
  Process To Identify Hard Targets Rule Out
  False Targets
• Review Original Expense Reports Receipts For
  All Hard Targets
• Obtain Approval For Code Of Conduct Investigation

4
FRAUD AUDIT Analysis List (29 Active)

• Meals between 14 15
• Frequent High Entertainment Expense
• Cell Phone gt Average
• Frequent High Lodging Expenses
• Same Merchant Test - Lodging
• Frequent use of Miscellaneous Expense Type
• Multiple Analysis Hits

5
Available Reports
6
All Expenses by Employee
7
All Expenses by Employee - Cell Phone / Business
Phone by Month
8
All Expenses For Prior 12 Months
9
Ad hoc query - Phone Expenses in descending order
10
Financial Fraud Audit System (FFAS)

• FUTURE ACTIVITIES
• REQUIREMENTS GATHERING FOR VENDOR APPROACH
• ANALYSIS DESIGN
• Duplicate Payments
• Employee Or Producer Match With Vendor
• Vendor Address Validity
• Sequential Invoice Numbers
• High Transaction Numbers Between Approver
  Vendor
• Quantity Ordered Vs. Area Or Department Size

11
Questions?

• Jeff Woodward - Internal Audit 351-3736
• Blake Cole - Special Investigations 351-2671